, Research Paper
Indonesia s Crisis: The Lesson for China
introductionIndonesia, as we have long predicted, is coming apart. This process has a great deal of relevance to China, whose army, like Indonesia s, was accustomed to making lots of money and now resents the fact that the good times are over. In both countries, making money became the basis for military loyalty to the regime, which in turn needed the army as guarantor. But in China, as in Indonesia, the military is no longer making money, and China has banned its officers from business. Now Beijing is creating international tension to soak up the military s energy and resentment. But in the end, the guarantor of the regime can bring its death, leaving warlords poised to take power.
We have long argued that the Asian economic meltdown, as its ultimate legacy, would politically reconfigure Asia. We meant this in both the international and domestic sense: Nations would behave differently after the meltdown than they did during the past generation of extraordinary prosperity. The reconfiguration of Sino-American relations is an obvious manifestation of this. But it is the domestic political changes that are the most profound and will have the most impact on international relations. It should be obvious that an economic transformation of the magnitude we have seen cannot help but have equally dramatic political consequences.
Asia is obviously a diverse region. It goes without saying that the economic meltdown will affect Japan s politics dramatically differently than Malaysia s. However, events during the last week have drawn our attention to one area of commonality: the effect of the economic crisis on the military in China and in Indonesia.
These two countries are not usually lumped together; they differ in profound ways. But they share this: they have both used their military forces for three missions protection against foreign enemies, enforcement of internal security and development of the economy. During the previous generation, the latter role became more and more important for both the Chinese and Indonesian militaries.
But Asia s recent economic crisis, the states and circumstance have forced both militaries to de-emphasize their economic roles. Not only are the militaries not happy about this, but their unhappiness could destabilize their respective regimes. Quite apart from the truly disturbing prospect of an Asia dealing simultaneously with both Chinese and Indonesian instability, there are important lessons to be learned from the way in which each country used the military and the consequences of that use.
The fundamental roles of both the Chinese People s Liberation Army (PLA) and the Indonesian armed forces (TNI) were originally the same, to serve as the foundation of a regime governing a restive, multi-ethnic populace engaged in building a cohesive nation-state. Although circumstances were different in China and Indonesia, there was great commonality of purpose.
On the one hand, the armies in both countries were designed to guarantee internal security so that the state could construct its control mechanisms in safety. On the other hand, the army — as one of the few genuinely national institutions — was an instrument of nation-building. By recruiting members throughout society, these armies served as a means for upward mobility and as a tool for integrating diverse elements into a cohesive whole. As was the case in many new societies, the military served not only as a means for stability, but also as a tool of modernity.
The Chinese and Indonesian armies played similar roles in controlling the social instability created by their charismatic leaders. Beginning with the October, 1965, backlash against the communists, the Indonesian military steadily asserted itself, and under the leadership of then-Gen. Suharto, the legacy of Indonesia s founder Sukarno steadily diminished. The PLA intervened to crush the Mao-inspired Great Proletarian Cultural Revolution. The PLA s intervention not only stabilized a China that was oscillating out of control and moving toward chaos, but it created the framework that led to the victory of Deng Xiaoping over Maoist forces and set the stage for the implementation of Deng s economic reforms.
Both China and Indonesia moved cautiously toward engagement with the outside world s economic system. Both Deng and Suharto held the reins tightly on the process of development. But as economic development began to accelerate and involvement with international finance developed, both Deng and Suharto had to involve their militaries, not only to control the process but also to facilitate it.
In developing countries, the military is frequently the most modern institution in society. Preparing for war requires two things. The first is some degree of familiarity with technology and the principle of technological development. In societies in which the understanding of better and worse technology is fairly abstract, the military — which lives and dies by better and worse technology — is frequently the most capable of evaluating and adapting it. Second, as the largest integrated organization in the country, the army has to some degree mastered the management and coordination of large numbers of personnel in dispersed locations, cooperating to achieve the same end.
Thus, the Indonesian and Chinese armies had a more intimate understanding of technology and a more efficient means of organizing production than other institutions. In a China, where the Cultural Revolution had torn out the heart of the nation s managerial class, and an Indonesia in which the managerial class had either been Dutch or had emigrated, turning to the military to facilitate economic development was a natural choice. Moreover, in two xenophobic countries where economic development necessarily meant dealing with suspect foreigners, a commitment to national security was another reason to rely on the military.
There was another issue: Both the Chinese and Indonesian regimes depended on the loyalty of their military to survive. If economic development was to take place, the officer corps had to be permitted to participate in it. If, having saved the regime, the officers were to see other segments of society prospering while they were excluded, the inevitable dissatisfaction would threaten the regime s survival. It was simply good politics to allow the military to participate in the economic development process.
Thus, social reality and politics combined to turn both the Chinese and Indonesian militaries into economic entities. As time went on, the senior officers in both countries became businessmen, both as individuals and as organizational leaders. From the village level to the largest deals, the military participated. Military officers became the linchpins not only of small-scale business but of multi-billion dollar projects involving huge foreign investment. In both countries, the armies became intimately bound to the ruling families, the banking system and the system of facilitation and corruption that distributed wealth.
Indeed, their most important function was the collection and distribution of wealth. While great wealth concentrated at the top, during the boom times it frequently trickled down through the army, through enlisted personnel on projects, hiring local labor, money transferred to local officials, and supporting family and friends linked to the military. All of this made the military indispensable in the use of wealth as a means of stabilizing and building loyalty to the regime.
Economic growth in the early 1990s pushed ideology out the window. Both the weaker ideology of Indonesian nationalism and the much more robust Maoist socialist ideologies lost relevance during the boom times. The army s security function declined, as increased wealth was seen as the permanent path to the regime s survival. And, given the ideology of global finance, reasonable military men found doing deals with foreign banks far more relevant than preparing to fight foreign armies. The economic development mission supplanted the security mission in both China and Indonesia. What was left was the military officer as businessman.
All of this worked perfectly until the bottom fell out of the economy. Having abandoned ideology as a driver and national security as a mission, what was left was private economic calculation. Officers in both countries had become used to asking, over the past decade, “What s in it for me?” For most of the decade, the answer was “quite a lot.” The regime could no longer give this answer. Indeed, rather than distribute growing wealth, the regime now had to allocate growing misery.
More important, the regime had to rely on the military for protection in the face of tremendous resentment from the masses, who had never received anything but crumbs during the boom. Having now realized that those crumbs were all they would get, the bitterness was intense. The regime, which had broken the social contract they had entered into with the military, now called on the military for protection. Times were now tough, and the military was asking, “What s in it for me?”
The Chinese responded by ordering the military out of businesses. This was both politically and structurally absurd. The PLA was so deeply into business that disengagement would inevitably increase the pressure on the economy, not to mention destabilize the political situation. Nevertheless, the regime clearly understood where the economy was headed, and therefore knew that it had to pre-empt the military to minimize resentment and mobilize the military to defend the regime. China has renewed ideological campaigns, resurrecting the notion of socialism long after the military had ceased to resonate to it. Much more important, the regime generated a national security threat both domestically and from foreign sources. It is no accident that the regime happily went into confrontation with the United States. It understood that the military, even if it was left cold by neo-Maoist rhetoric, would resonate to patriotism and to foreign threats.
The Indonesians, with less room to maneuver, confronted a much more serious problem. Their military had neither ideology nor a credible foreign threat to supplant the sense of betrayed economic entitlement. The regime has used East Timor as a reminder of how much worse things could get. The expulsion of the military command from East Timor would leave them with no means of livelihood. East Timor is an opportunity for the regime to demonstrate to the army what can happen in the rest of Indonesia if the military fails to hold the country together. Having few other cards to play, Jakarta wants to convince the army that saving the regime is a savvy economic move.
In both China and Indonesia, the burning question is the same. Having suffered massive economic reversal, having been barred by reality and edict from economic life, will the military simply return to the primary mission of national security against enemies foreign and domestic? To be more precise, will they return to those missions effectively, or will they return to those missions while they bide their time as an institution and as individuals.
Business has a corrosive effect on any military organization. The principles of self-interest and the principles of self-sacrifice are not compatible. A generation of military officers has had self-enrichment as its primary mission. The economic collapse has closed off opportunities that these military men saw as their entitlement. Now the regime, having failed the military, is mobilizing them to save the regime. It is a tough sell.
There is a path, well known in Asia, which combines the military mission with the doctrine of self-enrichment. It is called the warlord. The warlord is a businessman who uses military force as a means of enterprise. Warlords arise when the central regime loses credibility and power devolves to regional forces. Since the military is the most organized social force, it naturally picks up power when it is lying in the streets. This is particularly true when military commanders have had the experience of making vast amounts of money in business.
Warlords are not alien to Asia. The Indonesian and Chinese cases are natural incubators for this phenomenon. In China, it would be merely a reversion to a fairly common social form. In Indonesia, where relatively benign warlords have ruled the countryside for a generation, it is what would remain if you lopped off the top of the regime.
No one knows what direction things will go, particularly in China, where power struggles are becoming as opaque as they were before the opening to the West. Nevertheless, signing an order banning the PLA from doing business and enforcing it are very different things. As difficult as it is to believe, it appears to us that China is flirting with the same disintegration we predicted for Indonesia two years ago. The very force that held China together, the PLA, may now be in the process of pulling it apart.