Power in Motion: Capital Mobility and the Indonesian State by Jeffrey A. Winters, Ithaca, N.Y., Cornell University Press, 1996, xvi + 241 pp.
Capital moves across countries in search of the highest return. This gives a leverage to capital controllers for demanding favourable investment climate from the political authority in a host country. Authorities which are unresponsive to this demand are punished by a low level of investment, which may subsequently lead to a low rate of economic growth and a high level of unemployment. Capital itself is not homogeneous in its degree of mobility. The higher the degree of mobility, the higher the leverage that can be exercised by capital controllers. On the other hand, the authorities' degree of responsiveness depends on how much alternative resources available to them. The greater alternative resources available, the lesser the degree of an authority's responsiveness to the capital controllers' demand.
The above argument is developed by Winters in the introduction chapter of this book. He subsequently tries to prove his theory using the Indonesian experience since the beginning of New Order regime as a case study. Hence the following three chapters in the book are devoted to examine the Indonesian experience from the mid 1960s to the early 1990s, along the supposedly significant shifts in the degree of availability of alternative resources to the regime.
The case study is started in the second chapter of the book by looking at the period of 1965-74. The author identifies this period as the preboom years, where the regime was categorically most responsive to capital controllers' demand. Early in this period, president Suharto inherited from the Sukarno regime an economy in a complete mess, characterized by the economy's breakdown in investment and production. Learning that the fall of his predecessor was rooted in neglect of the economy, the new president was keen to bring in investors into the country to revive the economy. According to Winters, this was the very reason why during this period the regime was most attentive to investors' suggestions as to how the economy should be managed.
Later developments, however, very significantly reduced the regime's responsiveness to capital controllers' demand. This is discussed in the third chapter of the book, which looks at the 1974-82 period, which coincided with the oil boom period for oil exporting countries, including Indonesia. Precisely this oil boom which provided the regime with abundant alternative resources at their hand. This, the author argues, made the regime more able to ignore capital controllers' demand for a favorable investment climate. With leverage on its side, the regime could direct the economy according to their wish and offer a take it or leave it attitude toward investors, without being afraid of the adverse consequences to the economy from a low investment level.
However, when the oil price crashed in the mid 1980s, the real power of managing the economy was returned to capital controllers. This is discussed in the chapter four of the book, which deals with the period starting from 1982 onward. According to the author, the economic deregulation policy which was initiated by the government of Indonesia early in this period was a sign that the regime once again bowed to investors' demand, due to their real power to bring in economic punishments to the regime through a low investment level.
In the closing chapter of the book, the author tries to apply his theory to other cases, such as the debate surrounding the North American Free Trade Agreement (NAFTA). Following this, a brief comparison between the cases of Indonesia and Nigeria is discussed. The crucial question here is why two countries which have similar structures could respond differently to capital controllers' demand. The author's argument is that the Nigerian regimes were less capable, which does not mean less eager, to respond to capital controllers' demand due to frequent coups and fragmented oppositions.
Aside from the theory which the author tries to prove, chapters two to four of this book provide an interesting insight into the power struggle around the circle of political elites of the Indonesia's New Order regime. The author conducted extensive interviews with many current and, mostly, past players in the Indonesian political and economic arenas. There are many names mentioned in the book, sometimes with very brief explanations on their roles. For readers with no or little knowledge on Indonesia's recent history, this might cause trouble in understanding the story.
To sum up briefly, in each period discussed in the book, there have always been struggles between two camps, namely between those who want to manage the economy according to the wish of capital controllers and those who want to maintain and develop the patron-client relationships between the regime and its supporters. In all periods, the first camp has always been represented by the so called Berkeley mafia, while the second camp was filled by different groups and types of military generals with closest links to the regime. There seems a tendency for the author to paint the first camp as the good guys who just wanted to manage the economy sensibly, so that the economy could grow and the country would prosper. Between these two camps, the president stands as the referee, leaning to one or the other camp depending on his judgement and purposes.