Date: Thu, 15 Jan 98 10:28:02 CST|
From: "Workers World" <ww%wwpublish.com@WUVMD.Wustl.Edu><
Organization: WW Publishers
Subject: Now It's Indonesia
Via Workers World News Service
Reprinted from the January 22, 1998
issue of Workers World newspaper
Now its Indonesia: U.S. mixes threats with promises as crisis spreads
By Fred Goldstein, in Workers World
22 January 1998
Just at the very moment when the world imperialist
governments and the banking establishment were struggling to
stabilize south Korea, the focal point of the Asian
financial crisis--the Indonesian rupiah collapsed. This has
affected the entire region.
Officials of the United States and the International
Monetary Fund, including U.S. Secretary of Defense William
Cohen, hastened to the area. They aim to shore up the
rapidly crumbling economy in Indonesia, even as workers in
south Korea prepare to resist the U.S./IMF program of mass
IMF THREAT DRIVES DOWN RUPIAH
The crisis shifted to Indonesia after fascist President
Suharto announced a national budget with a 32-percent
increase in government spending. It included large-scale
construction projects in which his family has a financial
interest. This allegedly violated IMF-imposed austerity
measures that were dictated last August as conditions of a
$43 billion bailout package.
As soon as the budget was announced, the Clinton
administration and the IMF denounced it. The IMF threatened
to withhold its next $3 billion payment, scheduled for March
But then the rupiah, which had been trading at 2,400 to
the dollar last August, plunged 26 percent in one day--to
10,000 to the dollar on Jan. 8.
This sent stock markets in the entire region plummeting.
The next day the Dow Jones Industrial Average of stocks in
New York dropped 220 points.
While the IMF and the big-business press are trying to
blame the Indonesian crisis on nepotism, the currency drop
only aggravated an already existing condition. Over the last
several years of capitalist expansion in Asia, Indonesian
corporations went into debt to imperialist banks by an
estimated $65 billion to $80 billion.
At present, 260 of the 282 companies listed on the
Indonesian stock exchange are bankrupt and cannot pay their
debts. Hundreds of non-listed companies are in similar
In fact, Reuter reported Jan. 9, "Indonesian corporates
decided at about the 7-8,000 level [of the rate of exchange]
that they were unable to repay debt." Even at lower rates of
devaluation, the "estimated $65.6 billion in corporate debt
was in any case a virtually insurmountable problem."
In addition, the Indonesian government owes foreign banks
LENDERS 'PUMPED MONEY IN'
In a moment of partial truth, the Jan. 11 New York Times
wrote of the Indonesian situation: "The current crisis arose
as international lenders pumped money into its banking and
corporate system, thinking that prosperity would last
forever. Once the Indonesian currency started dropping, the
loans could not easily be repaid. Last week, the currency
all but collapsed, throwing hundreds of banks and companies
into bankruptcy. Citizens have begun hoarding food. Fears of
unemployment and social unrest are spreading."
Of course, the Times failed to mention that the reason
"prosperity"--meaning a gravy train of profits--did not last
"forever" was that the market for the entire region was
glutted with goods. This is the result of capitalist
overproduction. It has afflicted all the Asian export-
This overproduction was financed by parasitic U.S.,
European and Japanese banks to the tune of hundreds of
billions of dollars. Each raced the others to skim profits
from sweatshop owners and speculators--who in turn live off
the stolen labor of millions of low-paid workers.
The Clinton administration and the IMF have now taken a
joint initiative to put Suharto in line. This fascist
general was known as the "butcher of Jakarta" because in
1965 he led a CIA/Pentagon-orchestrated coup that killed up
to 1 million people. The rivers literally ran red with the
blood of communists and progressives.
But Suharto is now caught between the masses and the
bankers. At the beginning of January analysts declared that
2.4 million Indonesian workers had already lost their jobs
since August. The head of the government-approved labor
union projects that unemployment will reach 11 percent.
Indonesia, the world's fourth-biggest country, has 90
million workers and a total population of 202 million
SUHARTO AND WASHINGTON FEAR INDONESIAN MASSES
When the rupiah dropped and people flooded the stores to
stock up on goods, the military was put on a third-level
alert. Army patrols were beefed up.
But at the same time, Suharto had to rush cheap food and
fuel to the masses to head off a full-scale rebellion.
Much of his government's spending on labor-intensive
projects like electric power, airports and roads--now
largely postponed under IMF pressure--was calculated not
only to earn profits for his family but to absorb the
growing unemployment flowing from corporate bankruptcies.
The Jan. 9 Wall Street Journal denounced this as
"Keynesian pump priming." But then the Journal had to admit
that with "unemployment expected to grow by 50 percent this
year, the government's primary concern is not the
unhappiness of IMF emissaries but the possibility of civil
In the last year Suharto has formed a National Discipline
Movement, made up of officials from municipal authorities,
to supplement the police and military. This force was active
in suppressing a rebellion by street vendors in Java in
This reveals the growing social tensions and fear of being
overrun by the masses, even before the current crisis.
After three decades of repression, a new and vigorous
movement of resistance lies under the surface. This movement
flared up in July 1996 when the police attacked the
headquarters of the Indonesian Democratic Party, a bourgeois
It led to an uprising in which 22 downtown buildings and
many vehicles were burned in Jakarta. Troops were then
deployed throughout the city.
A new generation of militants has formed underground
unions and leftist political organizations. This crisis
could open up a new resurgence in Indonesia, which has a
deeply rooted and militant anti-imperialist and communist
The Clinton administration and the Pentagon know this as
well as Suharto does. Washington and the IMF have been
unable to stem the crisis by financial manipulation,
bailout, rollovers or economic threats.
On the contrary, all their measures are aggravating the
social and political crisis.
Indonesia is not like south Korea. There, a semblance of
parliamentary democracy has been cultivated. Kim Dae Jung, a
known liberal with popular support, is trying to sell the
bankers' program of austerity to the masses.
In Indonesia, however, the United States has only the
military to rely on. As Suharto becomes more discredited,
Washington is casting about to see what its options are.
COHEN SHAKES BIG STICK
No doubt, assessing Indonesian prospects is an important
part of Secretary of Defense William Cohen's eight-nation
tour. But his main military/diplomatic task is to threaten
everyone in the region with the big stick of the U.S.
military, and to prepare all the U.S. military puppets in
the area for counterrevolution.
Agence France Presse reported Jan. 12, "U.S. Defense
Secretary William Cohen called Monday for a 'flexible and
unrestricted' U.S. military presence in Southeast Asia
supported through closer ties to the region's militaries."
With this language, Cohen was rejecting a recent proposal
floated by the Association of Southeast Asian Nations that
would require prior notification of changes in the number
and location of U.S. troops in the area--now at 100,000.
According to the AFP, an unnamed defense official said:
"Increasingly we want to make clear that our deployment
patterns are not just in northeast Asia [Japan and south
Korea], they are in Southeast Asia as well. ... Our ticket
to the big game in Asia is our security presence."
In addition to shoring up military positions, Cohen is
also on assignment from the military-industrial complex. His
task is to make sure that austerity is restricted to the
masses and doesn't affect the military and its contractors.
The Pentagon "will explore with U.S. defense companies how
to restructure contracts with Asian governments," said the
Wall Street Journal of Jan. 11. The goal, according to
Cohen, is to "make sure their security needs are met and the
But military strength is not going to untangle the web of
insoluble contradictions woven by the world's profit-seeking
The largest local investment bank in Asia, Peregrine
Investment Holdings Ltd. of Hong Kong, with holdings of $1.4
billion in securities last November, declared bankruptcy on
Jan. 12. The reason: It was sitting on a mountain of
The Zurich Group insurance company was about to bail out
Peregrine with $200 million when the rupiah crashed and the
deal was canceled. The First Chicago Bank is one of
Peregrine's biggest creditors. Some 17,000 Peregrine
employees throughout Asia were just thrown out of a job.
KOREAN BANKS VS. KOREAN WORKERS
The Indonesian crisis holds great danger for the south
Korean bailout. Among the biggest holders of Indonesian debt
were south Korean banks.
Even more dangerous, Japanese banks--which already hold
$24 billion in shaky loans from south Korea--also hold $23
billion in Indonesian debt.
The Indonesian crisis has implications for the entire
financial system of Asia and for world capitalism.
Military threats by U.S. imperialism are not sufficient to
stop the south Korean workers from resisting the IMF and the
banks. According to the Jan. 12 Korean Herald, "In a united
stance, the largest labor organizations, the Federation of
Korean Trade Unions and its close cousin, the Korean
Federation of Trade Unions, said that they will deter the
upheaval [of mass layoffs] whatever the cost."
KOFU, the union of workers at financial institutions, is
already demonstrating in Seoul. The KCTU, made up of workers
in ship building, auto, steel and other heavy industries,
led a general strike against mass layoffs last January.
These unions are now being put to the test. Michel
Camdessus, head of the IMF, is meeting with leaders of the
two trade union confederations, trying to convince them to
accept new legislation allowing mass layoffs.
This is not just an intellectual argument. Camdessus holds
$57 billion in loans over the heads of the union leaders and
is threatening to blame them for Korea's downfall if they
resist the IMF plan.
The working class in Asia is bigger than it has ever been.
It is bound to grow politically in this period of turmoil.
No other force can stop world finance capital from holding
the masses of Asia in debt slavery.
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