Question

Under the leadership of Suharto, the Indonesian economy grew at a steady pace. Why was this ultimately not sustainable?

Answer 1

While Suharto's government was careful to follow constitutional structures, it was essentially an authoritarian regime based on military strength, which insinuated itself deeply into every branch of government and economy. Suharto as head of the armed forces and government exercised full control over the political life of the country. His government-sponsored political party, Golkar, repeatedly scored landslide victories in the People's Consultative Assembly elections, and that body, in turn, reelected Suharto in 1973, 1978, 1983, 1988, 1993, and 1998, unopposed to the Presidency. Civil liberties were restricted, and tolerated little dissent.

By the 1990s, his regime's unrestrained corruption and favoritism had begun alienating even the middle class and business circles, but maintaining high economic growth rates and strict political restrictions by the government shielded Suharto from any serious opposition. However, in 1997, Indonesia was caught up in a currency crisis that swept across Southeast Asia. The Indonesian national currency's value, the rupiah, collapsed and the resulting financial crisis revealed deep flaws in the domestic economy. Suharto resisted demands for structural reforms even as the economy went into recession, inflation skyrocketed, and living standards for the poor collapsed.