Economic Policymaking in the Guided Democracy (1962–1965)

Abstract

This chapter explores the economic policy making during the Guided Democracy, especially during the late- Guided Democracy period as it neared its end by 1965, and the increasing polarization between expert economists and the communist party. It looks into communist economic ideas that goes in line with Sukarno’s participatory ideas in the economy and how expert economists tried to incorporate socialist models in the economy through researching the economic institutions of East European countries and the Soviet Union. Efforts to integrate liberal economic theories with socialist institutions were discussed in the context of continuing economic deterioration of the first half of the 1960s. A series of economic reform programs designed by Indonesian economists, often working with expert from the US. While initially obtaining support from Sukarno, these economic reforms flounder as a result of communist criticism and Sukarno’s unwavering stance to support a more populist position when under pressure. The period saw the return home of many of New Or-der’s main economists after graduating from US universities and their positioning into important post in the economic planning and control of the country. It was a period which cemented the rise of American- educated economists as major holder of Indonesian policy making and the subsequent fall of the Indonesian communist model of the economy.