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The Soeharto Era: From Beginning to End

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  • Ross H Mcledo

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    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.

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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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    Bibliographic Info

    Paper provided by The Australian National University, Arndt-Corden Department of Economics in its series Departmental Working Papers with number 2008-03.

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    Length: 39 pages
    Date of creation: 2008
    Date of revision:
    Handle: RePEc:pas:papers:2008-03

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    Related research

    Keywords: franchise; Asian crisis; Indonesia; rents; private taxation; bureaucratic extortion;

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    1. 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.
    2. 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, 09.
    3. 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.
    4. Ross McLeod, 2011. "Survey of recent developments," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 47(1), pages 7-34.
    5. 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.
    6. Hill,Hal, 2000. "The Indonesian Economy," Cambridge Books, Cambridge University Press, number 9780521663670, October.
    7. 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.
    8. Ross McLeod, 2003. "Towards improved monetary policy in Indonesia," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 39(3), pages 303-324.
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