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The Soeharto Era: From Beginning to End

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Author Info
Ross H Mcledo ()
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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Paper provided by Australian National University, Economics RSPAS 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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Find related papers by JEL classification:
O53 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East
P16 - Economic Systems - - Capitalist Systems - - - Political Economy of Capitalism
P17 - Economic Systems - - Capitalist Systems - - - Performance and Prospects
D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Models of Political Processes: Rent-seeking, Elections, Legislatures, and Voting Behavior
D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Olivier Frécaut, 2004. "Indonesia's banking crisis: a new perspective on $50 billion of losses," Bulletin of Indonesian Economic Studies, Taylor and Francis Journals, vol. 40(1), pages 37-57, April. [Downloadable!] (restricted)
  2. Ross McLeod, 2005. "Survey of recent developments," Bulletin of Indonesian Economic Studies, Taylor and Francis Journals, vol. 41(2), pages 133-157, August. [Downloadable!] (restricted)
    Other versions:
  3. Ross H. McLeod, 1998. "From Crisis to Cataclysm? The Mismanagement of Indonesia's Economic Ailments," The World Economy, Blackwell Publishing, vol. 21(7), pages 913-930, 09. [Downloadable!] (restricted)
  4. Ross Mcleod, 2005. "The struggle to regain effective government under democracy in Indonesia," Bulletin of Indonesian Economic Studies, Taylor and Francis Journals, vol. 41(3), pages 367-386, December. [Downloadable!] (restricted)
  5. Ruth Daroesman, 1981. "Survey of Recent Developments," Bulletin of Indonesian Economic Studies, Taylor and Francis Journals, vol. 17(2), pages 1-41, July. [Downloadable!] (restricted)
  6. George Fane, 1994. "Survey of Recent Developments," Bulletin of Indonesian Economic Studies, Taylor and Francis Journals, vol. 30(1), pages 3-38, April. [Downloadable!] (restricted)
  7. Ross H. McLeod, 2003. "Towards improved monetary policy in Indonesia," Bulletin of Indonesian Economic Studies, Taylor and Francis Journals, vol. 39(3), pages 303-324, December. [Downloadable!] (restricted)
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  8. Ross McLeod, 2004. "Dealing with bank system failure: Indonesia, 1997-2003," Bulletin of Indonesian Economic Studies, Taylor and Francis Journals, vol. 40(1), pages 95-116, April. [Downloadable!] (restricted)
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  9. Fane, George & McLeod, Ross, 2001. "Banking Collapse and Restructuring in Indonesia, 1997-2001," Departmental Working Papers 2001-10, Australian National University, Economics RSPAS. [Downloadable!]
  10. Ross McLeod, 1993. "Analysis and Management of Indonesian Money Supply Growth," Bulletin of Indonesian Economic Studies, Taylor and Francis Journals, vol. 29(2), pages 97-128, August. [Downloadable!] (restricted)
  11. Richard A. Posner, 1974. "Theories of Economic Regulation," Bell Journal of Economics, The RAND Corporation, vol. 5(2), pages 335-358, Autumn. [Downloadable!] (restricted)
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