Sunday, September 24, 2023 | 10:30 WIB

China’s Red Capitalism and Indonesia’s
Pancasila Oligarchy


Bundaran HI

As a result, the development that was rife with corruption, collusion, and nepotism where the oligarchs (Jeffrey Winter called them sultanic oligarchs) was successfully tamed under the command of the five-star general, Suharto. But compared to Mao (1949-1976), Suharto was considered successful in transforming Indonesia’s economy significantly. When Suharto succeeded in taking power from Sukarno, China was facing a famine due to Mao Tse Tung’s Great Leap Forward policy. It did not stop there, the suffering was getting worse when Mao launched the Cultural Revolution. China only began to turn things around after Mao died and Deng Xiaoping, who succeeded him, launched an open-door policy after 1978. 

China had a dark history in 1989, eleven years since Deng came to power, as the transition to economic liberalism stalled politically after Hu Yaobang’s death that coincided with high inflation, peaking at 28 percent. We know it as the Tianamen incident or the “Tianamen Square Massacre,” where the riots ended with the bloodshed of students and demonstrators. Deng unhesitatingly ordered the then mayor of Shanghai, Jiang Zemin, to end the demonstration with tanks belonging to the People’s Liberation Army, April 15, 1989. 

This incident became a wake-up call for China to tighten its political belt, prepare a strong political infrastructure before carrying out economic liberalization, so that the Party does not collapse. And two years later, China realized it was right. Because on the other hand, the Soviet Communist Party collapsed in 1991 while trying to push for economic and political liberalization at the same time. China is increasingly convinced that there will be political repercussions if the economy opens immediately. Therefore, China took a middle path, gradual economic liberalization, which was restarted after Deng Xiaoping’s tour of southern China (known as Deng’s southern tour) which finalized the status of Special Economic Zones in Shenzhen, Jhuhai, Goungzhou, and others. 

But long before China experienced a political shock over its economic liberalization, Indonesia was first visited by a political shock over its investment liberalization policy, namely the events on January 15, 1974 (Malari), which resulted in riots. Just like the Chinese Communist Party, the New Order tightened political belts, thrashing demonstrators to death. The Chinese Communist Party survived, the New Order did too. Suharto could not be shaken at that time. What happened even seven months later, on August 9, 1974, was the American president who resigned from his post, Richard Nixon, because he was stung by the Watergate case. 

However, in 1997-1998, the hegemony of the New Order and “Pak Harto” was no longer able to withstand the turmoil of rejection. The New Order ended and was replaced by an era of reform that continues to this day. From Habibie to Gus Dur. After Gus Dur was subdued, Megawati ascended the throne. Then, the era of competitive electoral democracy began after the election of SBY (Susilo Bambang Yudoyono) as the first president via direct election. But, the replacement of the New Order with the Reformation Order did not necessarily change the character of Indonesia’s political economy. The oligarchs who switched from Suharto’s monolithic power to the era of political free markets have slowly changed the face of the reformed political economy to become very “oligarchic,” as Indonesians feel today. 

Indonesia Economic growth that is fairly good is not too evenly distributed. According to Thomas Pikety’s formulation, Indonesia’s “return on investment” is much higher than economic growth (r > g). The annual increase in the JCI (IHSG) is far above the economic growth rate so that the wealth of the owners of capital doubles. As a result, less attention is paid to equality and welfare. Meanwhile, China, which had not yet opened its financial market at that time, was barely affected by the 1997 Asian financial crisis. Since 1992 (Deng’s southern tour), China has accelerated with impressive economic growth figures. Indonesia has been shifting from a “Pancasila economy” to a “Pancasila oligarchy” which is not only in the economic sector, but has also penetrated into important seats in Jokowi’s cabinet. While China can still enjoy the delicious Red Capitalism-style economic cake, even though it has been begining to be overshadowed by stagnation.

But, China deserves to be proud of being able to lift hundreds of millions of its people above the poverty line. China began to focus on economic liberalization with high growth ambitions several years behind Indonesia. China also moved its capital city. Once in Chongqing, Najing, then to Beiping (Beijing). But that’s not what made China successful as we see it today. None of the studies on China’s economic transformation have cited the relocation of the capital as the trigger. I have never come across such a study. Therefore, to catch up with China, I believe moving the Indonesia capital is not one of the strategies. (ron)


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