The Berkeley Mafia was the term given to a group of U.S.-educated Indonesian 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.
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 the Netherlands 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.
Accomplishments and controversies
On October 3, 1966, on the advice of these economists and others, Suharto announced a program aimed at stabilization and rehabilitation of Indonesia's economy. At the end of the Sukarno 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 Sukarno 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 agricultural sector.
The new economic program was successful at stabilizing 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 appointed to ministerial and senior advisory posts in Suharto's cabinet. Thus, the group had a great influence on economic policy; they then successfully brought Indonesia's economy into an unprecedented growth period. The growth rate was high, averaging around 6.5% per year between the late 1960s and 1997, when South East Asia was hit by the severe Asian financial crisis.
The Berkeley Mafia's liberal approach towards economics was 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 Indonesian branch of Hizb ut-Tahrir, considered the Berkeley Mafia to be traitors - a view stemming particularly from their willingness to privatise the nation's industries. With the beginning of the oil boom in the mid-70s, Suharto favored 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 a result, renewed growth of the Indonesian economy. Once again, the Indonesian economy began to grow and once again, the Berkeley Mafia encountered political opposition. This time their opponents were Sudharmono and Ginandjar Kartasasmita, who advocated economic nationalism, as well as BJ Habibie, who wanted a technology-centered economic development. As on the previous occasion, Suharto sided with the economic nationalists and the Berkeley Mafia's power weakened.
During Indonesia's economic collapse due to the Southeast Asian financial crisis in 1997, people blamed the Berkeley Mafia and considered them as part of the New Order regime. In the reform period, only Widjojo was 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 era, by becoming an economic advisor to presidents Habibie, Wahid (Gus Dur), and Megawati. Mohammad 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.
The key members of the Berkeley Mafia are generally accepted to be:
- Widjojo Nitisastro: 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 Sadli: Minister for Mining in the Second Development Cabinet
- Subroto: Minister of Manpower, Transmigration, and Cooperatives (1973–1978), Minister of Mines and Energy (1978–1988)
- Emil Salim: 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)
- Chicago Boys - a similar group from Chile
- The Shock Doctrine - a book in which the Berkeley Mafia is compared to the Chicago Boys.
Notes and references
- Tom McCawley, "Economic upside - and downside." Asia Times Online. 28 January 2008.
- "Archived copy". Archived from the original on 2007-01-25. Retrieved 2007-02-15.
- (Elson 2001, p. 149)
- Dick, Howard; et al. (2002). The Emergence of a National Economy: An Economic History of Indonesia 1800-2000. Crow's Nest, NSW, Australia: Allen and Unwin. p. 196.
- ‘Berkeley Mafia’ Now Has $514 Billion at Stake: William Pesek Archived August 4, 2010, at the Wayback Machine.. BusinessWeek. Accessed February 4, 2010.
- Emil Salim: Pak Harto Selamatkan Bangsa dari Kehancuran | Soeharto Media Center - Soeharto Review
- (Elson 2001, p. 217)
- Mafia Berkeley: Pengkhianat!. Hizbut-Tahrir Indonesia. Accessed Februari 4, 2011.
- (Elson 2001, p. 247)
- Peter McCawley (2011), 'Review Article: Widjojo Nitisastro and Indonesian Development', Bulletin of Indonesian Economic Studies, 47 (1), April, pp. 87-103. 
- Elson, Robert (2001). "Suharto: A Political Biography". UK: The Press Syndicate of the University of Cambridge. ISBN 0-521-77326-1.