The current Indonesian economic and political crisis provides an important test for post-Cold War American foreign policy. Since the Clinton administration's jumbled approach is, in substantial part, responsible for the present state of affairs, the way out is not a hypothetical question. Nonetheless, the prospect of further rescheduling of Indonesia's international debt is a telling sign of the correct direction for U.S. policy.
The U.S. Treasury Department had for some time been insisting that Indonesia adopt substantial economic policy changes to open itself to true market forces and end much of the economy's government-privileged and protected status. Unfortunately, Treasury pursued these reforms through an International Monetary Fund effort that, by seeking to lessen the blowback on imprudent Western lenders, increased the ferocity of the economic change felt by Indonesians.
At the same time, other elements of the administration pressed for the resignation of President Suharto and the implementation of wide-ranging political reforms. The wish list of reforms included immediate legislative elections, replacing all traces of Suharto's political apparatus and dramatically reducing the role of the military.
While these objectives may be ultimately desirable, the short-term impact of pressing for all of them simultaneously led Indonesia to disaster. Hence the immediate question is what the U.S. can do to extricate the country from its present crisis. Our essential interest is to recreate a policy environment in which the Indonesian economy can stabilize, international investor confidence can be restored and political change can take place at a moderate pace, without street rioting or military intervention.
To advance this basic objective, the Clinton administration should get out of the internal political disputes now consuming Jakarta and focus on the critical economic changes that have been relegated to the background in the past weeks by political turmoil. This is not necessitated by lack of U.S. influence or by anti-interventionist scruples, but by the plain fact that Indonesia's domestic political order is currently less important than its international economic recovery.
This is why Indonesia represents a true study in post-Cold War policy. Many in the administration adhere to the entirely ideological abstraction that democratic reform will solve all of Indonesia's multiple problems. Not only does this approach ignore reality, but it also betrays a 1960s nostalgia for student demonstrators and the kind of reflexive antipathy toward authoritarian rightist governments (such as Suharto's) so characteristic of the American left during the Cold War. But even worse than policy by nostalgia, the "democracy first" approach is not based on a clear assessment of the priorities of either America or Indonesia and its near neighbors.
Concentrating on political issues now can only exacerbate existing strains in Indonesia. Though harsh, the economic changes should produce relatively rapid market responses. The political issues, especially those implicating economic problems, are far more difficult. For example, even immediate democratization will not solve and may seriously worsen the dismal relations between the dominant Muslim population and the ethnic Chinese, who with only 3% of the population control, by some estimates, 50% of the economy.
Moreover, what are now only hints of an aggressive Islamic fundamentalism may become significant political forces in this, the world's largest Muslim country. Similarly, secessionist pressures in Aceh, Sulawesi and East Timor will become more acute. These and many other intractable problems were kept below the boiling point during Suharto's tenure. His departure now opens them up.
The necessary economic reforms--which all agree that Indonesia must implement--will, in due course, produce many of the political changes that the human rights groups that serve as the Clinton administration's cohorts now clamor for. The question is whether the U.S. and others can prioritize their interests sufficiently to avoid provoking social overload in Indonesia by demanding too many changes too soon. Anti-American feeling (often through the proxy of anti-IMF feeling) is already high, and our political meddling is more likely to increase it than to engineer real political improvements.
Pursuing political abstractions at the expense of clear economic realities can push Indonesia over the brink into a chaos that will make the past few weeks appear benign. Whether President Clinton can keep his focus on this point in the midst of all of his other problems is, unfortunately, very much in question.