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The Soeharto Era: From Beginning to End

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  • Ross H Mcledo

Abstract

The paper develops a simple model of the Soeharto 'franchise', in which the coercive power of government was deployed in the interests of the president, his family, his business cronies and key officials within the franchise. The franchise prospered by generating rents that could be harvested by, and shared with, insider firms, and by extorting payments from outsider firms and individuals. In this model the franchise inevitably collapses in the long run for various reasons: the level of 'private taxation' from which it prospers eventually becomes intolerable; rents are diluted as franchise membership is expanded to buy off opposition; insider firms grow so rapidly that they run into financial and management bottlenecks; internal discipline declines as members compete for larger shares of the rents. The float of the Thai baht in 1997 merely provided the trigger for this inevitable collapse, while Soeharto's failing health helped to accelerate it.

Suggested Citation

  • Ross H Mcledo, 2008. "The Soeharto Era: From Beginning to End," Departmental Working Papers 2008-03, The Australian National University, Arndt-Corden Department of Economics.
    • Handle: RePEc:pas:papers:2008-03
    as

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    File URL: https://crawford.anu.edu.au/acde/publications/publish/papers/wp2008/wp_econ_2008_03.pdf
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    References listed on IDEAS

    as
    1. Ross McLeod, 2003. "Towards improved monetary policy in Indonesia," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 39(3), pages 303-324.
    2. Ross McLeod, 2004. "Dealing with bank system failure: Indonesia, 1997-2003," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 40(1), pages 95-116.
    3. Ross Mcleod, 2006. "Indonesia's new deposit guarantee law," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 42(1), pages 59-78.
    4. Ross Mcleod, 2005. "The struggle to regain effective government under democracy in Indonesia," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 41(3), pages 367-386.
    5. Krueger, Anne O, 1974. "The Political Economy of the Rent-Seeking Society," American Economic Review, American Economic Association, vol. 64(3), pages 291-303, June.
    6. W. Max Corden, 2007. "The Asian Crisis: a Perspective after Ten Years," Departmental Working Papers 2007-06, The Australian National University, Arndt-Corden Department of Economics.
    7. Richard A. Posner, 1974. "Theories of Economic Regulation," Bell Journal of Economics, The RAND Corporation, vol. 5(2), pages 335-358, Autumn.
    8. Olivier Frecaut, 2004. "Indonesia's banking crisis: a new perspective on $50 billion of losses," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 40(1), pages 37-57.
    9. David Cole & Betty Slade, 1998. "Why Has Indonesia's Financial Crisis Been so Bad?," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 34(2), pages 61-66.
    10. George Fane & Ross H.McLeod, 2002. "Banking Collapse and Restructuring in Indonesia, 1997-2001," Cato Journal, Cato Journal, Cato Institute, vol. 22(2), pages 277-295, Fall.
    11. Ross Mcleod, 2005. "Survey of recent developments," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 41(2), pages 133-157.
    12. Ross McLeod, 1997. "Survey of Recent Developments," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 33(1), pages 3-43.
    13. Ross H. McLeod, 1998. "From Crisis to Cataclysm? The Mismanagement of Indonesia’s Economic Ailments," The World Economy, Wiley Blackwell, vol. 21(7), pages 913-930, September.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    franchise; Asian crisis; Indonesia; rents; private taxation; bureaucratic extortion;
    All these keywords.

    JEL classification:

    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East
    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State
    • P17 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Performance and Prospects
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption

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