Berkeley Mafia
Encyclopedia
The Berkeley Mafia was term given to a group of U.S.
-educated Indonesia
n economists
whose efforts brought Indonesia back from dire economic conditions and the brink of famine
in the mid-1960s. They were appointed in the early stages of the 'New Order' administration. Almost three decades of economic growth
followed. Their efforts also began long-term U.S.-Indonesian strategic cooperation, which was important during the Cold War
.
and lecturers from other faculties to assist in educating the students at FEUI.
As tensions grew between Indonesia and the Dutch Government over West Irian (now known as West Papua), Dutch lecturers began to leave the country. Sumitro turned to the Ford Foundation
for assistance. The Ford Foundation then began a process where students from the FEUI were chosen to undertake overseas studies at the University of California, Berkeley
. After the Ford Foundation conducted some preliminary preparations, the overseas studies program began in 1957. By the early 1960s, all of the students who had been sent abroad had returned from Berkeley
and had begun taking up positions as lecturers at the Army Staff and Command College (SESKOAD).
In 1966, General Suharto took over executive control in Indonesia from president Sukarno
by virtue of Supersemar
. Although he would not formally become president for another two years, Suharto began laying down the foundations for what would become the New Order
regime. In late August 1966, Suharto held a seminar at SESKOAD to discuss political and economic matters and the way in which the New Order would approach these problems. The FEUI economists, headed by Widjojo Nitisastro
attended the seminar.
During the seminar the economists set out their ideas and policy recommendations. The presentation impressed Suharto who invited them to begin work as a team of experts in the field of economics and finance.
The new economic program was successful at stabilising the economy. The inflation rate fell from 650% in 1966 to only 13% in 1969. After Suharto became president in 1968, the members of the Berkeley Mafia team were was appointed to ministerial and senior advisory posts in Suharto's cabinet. Thus, Berkeley Mafia had a great influence on economic policy and then successfully brought Indonesia's economy into an unprecedented growth. The growth rate was high, averaging around 6.5% per year between the late 1960s to 1997 when South East Asia was hit by the severe Asian financial crisis.
The Berkeley Mafia's liberal approach towards economics were not supported by all. Within the New Order they encountered opposition from generals such as Ali Murtopo
, Ibnu Sutowo
and Ali Sadikin
whose economic approaches were more nationalistic
in nature. Some other groups, like the Hizbut-Tahrir Indonesia group, considered the Berkeley Mafia as traitors who were willing to sell the nation's assets-referring, especially, to their effort to apply privatization in Indonesia. With the beginning of the oil boom in the mid-70s, Suharto favoured the economic nationalists and as a result, the Berkeley Mafia's influence was restricted.
Suharto would turn to the Berkeley Mafia again in the mid-1980s when the price of oil began to drop and with it, Indonesia's economic growth. The Berkeley Mafia presided over the liberalization, deregulation
and as result, the new growth of the Indonesian economy. Once again, the Indonesian economy began to grow again and once again, the Berkeley Mafia encountered political opposition. This time their opponents were Sudharmono
and Ginanjar Kartasasmita who advocated economic nationalism as well as BJ Habibie who wanted a technology-centred economic development. Just like the previous occasion, Suharto sided with the economic nationalists and the Berkeley Mafia's power weakened.
During Indonesia's economic collapse due to financial crisis of Southeast Asia in 1997, people blamed the Berkeley Mafia and was considered them as part of the New Order regime. In the reform period, only Widjojo
that still retained in the government.
by becoming an economic advisor to presidents Habibie, Wahid (Gus Dur)
, and Megawati
. Sadli remained well-known as a senior economic commentator until his death in 2008. Emil Salim continued to be active on environmental issues, both within Indonesia and in international circles,
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
-educated Indonesia
Indonesia
Indonesia , officially the Republic of Indonesia , is a country in Southeast Asia and Oceania. Indonesia is an archipelago comprising approximately 13,000 islands. It has 33 provinces with over 238 million people, and is the world's fourth most populous country. Indonesia is a republic, with an...
n economists
Economics
Economics is the social science that analyzes the production, distribution, and consumption of goods and services. The term economics comes from the Ancient Greek from + , hence "rules of the house"...
whose efforts brought Indonesia back from dire economic conditions and the brink of famine
Famine
A famine is a widespread scarcity of food, caused by several factors including crop failure, overpopulation, or government policies. This phenomenon is usually accompanied or followed by regional malnutrition, starvation, epidemic, and increased mortality. Every continent in the world has...
in the mid-1960s. They were appointed in the early stages of the 'New Order' administration. Almost three decades of economic growth
Economic growth
In economics, economic growth is defined as the increasing capacity of the economy to satisfy the wants of goods and services of the members of society. Economic growth is enabled by increases in productivity, which lowers the inputs for a given amount of output. Lowered costs increase demand...
followed. Their efforts also began long-term U.S.-Indonesian strategic cooperation, which was important during the Cold War
Cold War
The Cold War was the continuing state from roughly 1946 to 1991 of political conflict, military tension, proxy wars, and economic competition between the Communist World—primarily the Soviet Union and its satellite states and allies—and the powers of the Western world, primarily the United States...
.
Origins of the group
In the mid-1950s, the economists who would become the Berkeley Mafia were students at the Faculty of Economics at the University of Indonesia (FEUI). The faculty was headed by Sumitro Djojohadikusumo, an economist who had served as Minister of Trade and Industry and Minister of Finance for the Government. Sumitro, being the only teacher with an economics doctorate had to turn to foreign lecturers from NetherlandsNetherlands
The Netherlands is a constituent country of the Kingdom of the Netherlands, located mainly in North-West Europe and with several islands in the Caribbean. Mainland Netherlands borders the North Sea to the north and west, Belgium to the south, and Germany to the east, and shares maritime borders...
and lecturers from other faculties to assist in educating the students at FEUI.
As tensions grew between Indonesia and the Dutch Government over West Irian (now known as West Papua), Dutch lecturers began to leave the country. Sumitro turned to the Ford Foundation
Ford Foundation
The Ford Foundation is a private foundation incorporated in Michigan and based in New York City created to fund programs that were chartered in 1936 by Edsel Ford and Henry Ford....
for assistance. The Ford Foundation then began a process where students from the FEUI were chosen to undertake overseas studies at the University of California, Berkeley
University of California, Berkeley
The University of California, Berkeley , is a teaching and research university established in 1868 and located in Berkeley, California, USA...
. After the Ford Foundation conducted some preliminary preparations, the overseas studies program began in 1957. By the early 1960s, all of the students who had been sent abroad had returned from Berkeley
Berkeley, California
Berkeley is a city on the east shore of the San Francisco Bay in Northern California, United States. Its neighbors to the south are the cities of Oakland and Emeryville. To the north is the city of Albany and the unincorporated community of Kensington...
and had begun taking up positions as lecturers at the Army Staff and Command College (SESKOAD).
In 1966, General Suharto took over executive control in Indonesia from president Sukarno
Sukarno
Sukarno, born Kusno Sosrodihardjo was the first President of Indonesia.Sukarno was the leader of his country's struggle for independence from the Netherlands and was Indonesia's first President from 1945 to 1967...
by virtue of Supersemar
Supersemar
The Supersemar, the Indonesian abbreviation for Surat Perintah Sebelas Maret was a document signed by the Indonesian President Sukarno on March 11, 1966, giving the Army commander Lt. Gen. Suharto authority to take whatever measures he "deemed necessary" to restore order to the chaotic situation...
. Although he would not formally become president for another two years, Suharto began laying down the foundations for what would become the New Order
New Order (Indonesia)
The New Order is the term coined by former Indonesian President Suharto to characterize his regime as he came to power in 1966. Suharto used this term to contrast his rule with that of his predecessor, Sukarno...
regime. In late August 1966, Suharto held a seminar at SESKOAD to discuss political and economic matters and the way in which the New Order would approach these problems. The FEUI economists, headed by Widjojo Nitisastro
Widjojo Nitisastro
Widjojo Nitisastro is an Indonesian economist, born in Malang in East Java on 23 January 1927. He is one of Indonesia's most well-known and respected economic policy-makers, both within Indonesia and overseas.-Early career:...
attended the seminar.
During the seminar the economists set out their ideas and policy recommendations. The presentation impressed Suharto who invited them to begin work as a team of experts in the field of economics and finance.
Accomplishments and controversies
On October 3, 1966, on the advice of these economists and others, Soeharto announced a program aimed at stabilization and rehabilitation of Indonesia's economy. At the end of the Soekarno era, Indonesia's inflation rate touched a four digit number and there was rapidly growing debt. Things deteriorated in this way because the government under Soekarno spent so much money building expensive monuments, nationalizing industry, and financing the budget deficit with foreign loans and by borrowing from the Indonesian central bank (in effect, printing money). The Berkeley Mafia aimed to tackle the problem with more cautious economic policies with an emphasis on some deregulation, bringing inflation under control, and balancing the budget. The program also aimed at rehabilitation of infrastructure and development of the agriculture sector.The new economic program was successful at stabilising the economy. The inflation rate fell from 650% in 1966 to only 13% in 1969. After Suharto became president in 1968, the members of the Berkeley Mafia team were was appointed to ministerial and senior advisory posts in Suharto's cabinet. Thus, Berkeley Mafia had a great influence on economic policy and then successfully brought Indonesia's economy into an unprecedented growth. The growth rate was high, averaging around 6.5% per year between the late 1960s to 1997 when South East Asia was hit by the severe Asian financial crisis.
The Berkeley Mafia's liberal approach towards economics were not supported by all. Within the New Order they encountered opposition from generals such as Ali Murtopo
Ali Murtopo
Ali Murtopo was a prominent Indonesian general and political figure during the first half of General Suharto's New Order regime.-Early life:...
, Ibnu Sutowo
Ibnu Sutowo
Ibnu Muhari was an Indonesian army officer, Cabinet Minister and former head of the Indonesian oil and gas producer Pertamina....
and Ali Sadikin
Ali Sadikin
Ali Sadikin was an Indonesian politician. He was often called Bang Ali. He served as the governor of Jakarta, the country's capital, from 1966 to 1977. Appointed by a weak Sukarno, he likely had the full approval of Suharto. A former marine, he saw the city as a battlefield...
whose economic approaches were more nationalistic
Economic nationalism
Economic nationalism is a term used to describe policies which emphasize domestic control of the economy, labor and capital formation, even if this requires the imposition of tariffs and other restrictions on the movement of labor, goods and capital. It opposes globalization in many cases, or at...
in nature. Some other groups, like the Hizbut-Tahrir Indonesia group, considered the Berkeley Mafia as traitors who were willing to sell the nation's assets-referring, especially, to their effort to apply privatization in Indonesia. With the beginning of the oil boom in the mid-70s, Suharto favoured the economic nationalists and as a result, the Berkeley Mafia's influence was restricted.
Suharto would turn to the Berkeley Mafia again in the mid-1980s when the price of oil began to drop and with it, Indonesia's economic growth. The Berkeley Mafia presided over the liberalization, deregulation
Deregulation
Deregulation is the removal or simplification of government rules and regulations that constrain the operation of market forces.Deregulation is the removal or simplification of government rules and regulations that constrain the operation of market forces.Deregulation is the removal or...
and as result, the new growth of the Indonesian economy. Once again, the Indonesian economy began to grow again and once again, the Berkeley Mafia encountered political opposition. This time their opponents were Sudharmono
Sudharmono
Sudharmono was Indonesia's fifth vice president, and was in office during the period 1988 - 1993.-Early life:...
and Ginanjar Kartasasmita who advocated economic nationalism as well as BJ Habibie who wanted a technology-centred economic development. Just like the previous occasion, Suharto sided with the economic nationalists and the Berkeley Mafia's power weakened.
During Indonesia's economic collapse due to financial crisis of Southeast Asia in 1997, people blamed the Berkeley Mafia and was considered them as part of the New Order regime. In the reform period, only Widjojo
Widjojo Nitisastro
Widjojo Nitisastro is an Indonesian economist, born in Malang in East Java on 23 January 1927. He is one of Indonesia's most well-known and respected economic policy-makers, both within Indonesia and overseas.-Early career:...
that still retained in the government.
Berkeley Mafia during the post-Suharto era
Out of the Berkeley Mafia group, only Widjojo continued to have a significant influence within government during the post-Suharto Reform eraReformation (Indonesia)
The Post-Suharto era in Indonesia began with the fall of Suharto in 1998. Since then Indonesia has been in a period of transition. This era has been called the period of Reformasi...
by becoming an economic advisor to presidents Habibie, Wahid (Gus Dur)
Abdurrahman Wahid
Abdurrahman Wahid, born Abdurrahman Addakhil , colloquially known as , was an Indonesian Muslim religious and political leader who served as the President of Indonesia from 1999 to 2001...
, and Megawati
Megawati Sukarnoputri
In this Indonesian name, the name "Sukarnoputri" is a patronymic, not a family name, and the person should be referred to by the given name "Megawati"....
. Sadli remained well-known as a senior economic commentator until his death in 2008. Emil Salim continued to be active on environmental issues, both within Indonesia and in international circles,
Members
The key members of the Berkeley Mafia are generally accepted to be:- Widjojo NitisastroWidjojo NitisastroWidjojo Nitisastro is an Indonesian economist, born in Malang in East Java on 23 January 1927. He is one of Indonesia's most well-known and respected economic policy-makers, both within Indonesia and overseas.-Early career:...
: Minister of Planning and National Development/Chairman of the National Development Planning Body (BAPPENAS) (1967–1983), Coordinating Minister of Economics, Finance, and Industry (1973–1983), Advisor to BAPPENAS (1983–1998), Economics Advisor to the President (1993–1998), Chairman of the Economics Assistance Team (1999–2001) - Ali Wardhana: Minister of Finance (1973–1983), Coordinating Minister of Economics, Finance, and Industry (1983–1988)
- Mohammad SadliMohammad SadliMohamad Sadli was a leading Indonesian policy-maker and economist.Sadli, as he was widely known as, was born in Sumedang, West Java. He first studied in the Hollandsch-Inlandsche School in Sumedang and Subang, and later moved to the Hogere Burger School in Semarang in Central Java...
: Minister for Mining in the Second Development CabinetSecond Development CabinetThe Second Development Cabinet was the Indonesian Cabinet which served under President Suharto and Vice President Hamengkubuwono IX. The Cabinet was formed after Suharto was elected to a 2nd term as President by the People's Consultative Assembly... - Subroto: Minister of Manpower, Transmigration, and Cooperatives (1973–1978), Minister of Mines and Energy (1978–1988)
- Emil SalimEmil SalimProfessor Dr Emil Salim, is an economist and former Minister of Indonesia. Born of Minangkabau parents, both from the village of Koto Gedang in West Sumatra...
: Vice Chairman of BAPPENAS (1967–1971), Minister of State Apparatus (1971–1973), Minister of Transportation, Communication, and Tourism (1973–1978), Minister of Development Supervision and Environment (1978–1983), Minister of Population and Environment (1983–1993)
See also
- Chicago BoysChicago BoysThe Chicago Boys were a group of young Chilean economists most of whom trained at the University of Chicago under Milton Friedman and Arnold Harberger, or at its affiliate in the economics department at the Catholic University of Chile...
- a similar group from ChileChileChile ,officially the Republic of Chile , is a country in South America occupying a long, narrow coastal strip between the Andes mountains to the east and the Pacific Ocean to the west. It borders Peru to the north, Bolivia to the northeast, Argentina to the east, and the Drake Passage in the far... - The Shock DoctrineThe Shock DoctrineThe Shock Doctrine: The Rise of Disaster Capitalism is a 2007 book by Canadian author Naomi Klein, and is the basis of a 2009 documentary by the same name....
- a book in which the Berkeley Mafia is compared to the Chicago boys.
External links
- "An Evening with the Technocrats." Ford Foundation. Retrieved from Internet ArchiveInternet ArchiveThe Internet Archive is a non-profit digital library with the stated mission of "universal access to all knowledge". It offers permanent storage and access to collections of digitized materials, including websites, music, moving images, and nearly 3 million public domain books. The Internet Archive...
on 11 March 2007.