Indonesia: Draconian austerity amidst impressive economic growth

In this period of world economic crisis, Indonesia has been hailed as a miracle economy, registering a solid 6% annual growth for the past few years amid a sputtering world economy. However, despite this impressive growth, Indonesia cannot escape from the clutches of austerity that is gripping the whole world.

On June 21st, the government massively cut fuel subsidies and increased the price of petrol by 44%, from 4,500 rupiah ($0.46) a litre, to 6,500 rupiah; and the price of diesel by 22%, from 4,500 rupiah to 5,500 rupiah.

Tens of thousands of workers and youth across Indonesia demonstrated against the government’s plan to increase the fuel price. On June 17th, thousands of workers from various trade unions and students gathered in front of the parliament building where their “representatives” discussed and later passed the budget. At night, when the number of protesters had dwindled, the police started firing tear gas to break up the crowd. In other cities where the demonstrations were smaller, protesters – mostly young students – were met with harsher brutality.

The workers made their last ditch effort to block this increase on June 21st by blocking the main intersection of Bekasi industrial zone. Tens of thousands of workers downed their tools and gathered at the intersection. The workers of the Bekasi industrial zone – one of the most important industrial areas in Indonesia that is responsible for 70% of non-oil-and-gas export production – have been the vanguard of the wider workers’ movement for the past few years. It was these workers who led the 2012 October General Strike and the impressive half-a-million strong May Day movement this year. Scores of victories have been won in the past one year, but most importantly it has strengthened the class confidence of millions of workers in Indonesia.

However, the workers’ mobilization came short of achieving its goal. Many leaders from the main trade unions around MPBI (The Council of Indonesian Workers) were not putting in a serious effort to mobilize for wider national demonstrations and strikes. Instead these leaders seem to want to postpone the struggle to the planned general strike on August 16th. Suffice to say, the workers suffered their first major defeat after a year-long wave of strikes and mobilizations. The reformist and bureaucratic elements within MPBI have now started to put a hold on the movement.

An evaluation

After the dust has settled, it is time for us to look back in order to evaluate the recent movement against the fuel price increase. Emotional feelings, let alone disillusionment and demoralization due to the failure to stop the fuel price increase, cannot be an obstacle for us to see clearly what we can learn from this struggle. Retreating orderly after being beaten back, in which one of the main components is evaluation, is one of the most important prerequisites for a future offensive.

The fuel price increase in Indonesia is part of the capitalist austerity which is now being implemented all over the world. The capitalist crisis that exploded in 2007 has not subsided. On the contrary, it is getting deeper. For the capitalists, there is no other way out except forcing the workers to pay for this crisis. Capitalism can only climb out of this crisis by stepping on the backs of the workers until they are crushed. This means cutting social expenditure – which makes up part of workers’ real wages – and attacking past gains that have been won by the workers.

All over the world capitalist governments are cutting various forms of subsidies for the workers, which they go about at a different pace according to the depth of the crisis in the economy and the political situation in each of country. Nevertheless, the tendency is clear. We are entering into a period of austerity. Not one government in the world can free itself from the logic of capitalist economy.

Even in Brazil with the Workers’ Party in power, the government was forced to increase transportation fees, which sparked million-strong demonstrations across the nation. In Venezuela earlier this year Chavez was forced to devalue the Bolivar, which caused price increases on basic products. The Venezuelan economy – despite the revolutionary measures that have lifted millions of Venezuelans from poverty – still operates within capitalism because this revolution has yet to settle the question of the ownership of the means of productions. Even if the Venezuelan Revolution finally succeeds in nationalizing the whole economy and runs it under democratic plan, a Socialist Venezuela will still be under the pressure of capitalism because it will exist in the middle of a world capitalist economy.

The reason why Indonesia has been able to register impressive growth in this period of world crisis is not because Indonesian capitalists are better than their European counterparts whose economy is now sputtering, nor because of the brilliance of Indonesian officials. The world crisis, paradoxically, is the reason why the Indonesian economy can grow by 5-6%.

In almost all the advanced capitalist countries, economic stagnation means that large profits cannot be made by investing in these countries. In Canada, big corporations are sitting on $500 billion of dead money that they don’t invest. Mark Carney, the governor of Bank of Canada, had to admonish these corporations for not investing and creating the much needed jobs. American corporations are stashing a massive cash reserve worth $5000 billion – that is five times the size of the Indonesian economy – which they are not using. Corporations around the world are doing exactly the same.

However, a small fraction of this capital is still looking for fertile investment fields that can bring them some handsome returns, and Indonesia is one of those fertile investment fields. Cheap labour, relatively weak trade unions, since most of them just came into being after the 1998 Reformation [Reformasi], economic and industrial infrastructure that is quite conducive to development; these are the few main reasons for the large inflow of foreign investments in the past few years. In 2009, foreign direct investment was $4.9 billion, and it nearly quadrupled in two years, rising to $18.9 billion in 2011. Last year it increased again to $23 billion. This is the locomotive behind the annual 6% growth for the past few years, an increasing foreign capital investment which also means increasing exploitation of the workers.

However, this economic growth cannot last forever. In the midst of the world crisis, there is a race to keep improving the investment climate because other countries like Vietnam, Cambodia, Bangladesh, etc., are also competing to attract investments. Each country is vying for capital which is getting harder to get by, racing to be more “competitive” by various means: squeezing workers’ wages, loosening labour and environmental laws, building industrial infrastructure at the expense of social programs.

This is the economic reason for cutting the fuel subsidy, to make room in the budget for building economic and industrial infrastructures that will ensure the capitalists, both domestic and foreign, more profits. The choice is between fuel subsidies (in the interests of the toiling masses) or infrastructure subsidies (in the interests of capitalists). This is what has been happening all over the world, cutting subsidies for the people in order to instead subsidize the capitalists in various forms: bailouts, lower corporate taxes, investment in economic and industrial infrastructures, etc.

It is therefore incorrect to think that the fuel price increase is merely an errand for foreign oil companies. The cut in fuel subsidies is the logical consequence of a capitalist system which today is in crisis. It is part of the austerity period we are entering. It is even more incorrect to think that the fuel subsidy is being cut because the government is lying to the people, as if honesty on the part of the ruling elites could prevent the fuel price increase. Or, as some technocrats like to say, it is because the government cannot balance their books. From these technocrats we find all sorts of formulas to prove or disprove the necessity to increase the fuel price, as if the question of fuel subsidy can be solved by applying this or that formula.

What we are facing now is a struggle between labour and capital for surplus value, a struggle that has been going on for hundreds of years since the birth of capitalism. Fuel subsidies are part of workers’ wages, part of the surplus value. Cutting fuel subsidies is the same as cutting workers’ wages. It is the same as wrestling surplus value from the workers. In this period of capitalist crisis the struggle for the surplus value is becoming sharper as the capitalists can no longer afford concessions to the workers.

The workers move

The struggle to oppose the fuel price increase was clearly led by the workers. Educated middle classes, who were quite a political force in the 1998 Reformation movement, are nowhere to be seen today. Their youth (university students) were present in some of the demonstrations, but they were not well organized and not a significant force. The urban poor elements were scattered and amorphous, which is their natural character. The workers are the only force out there that is challenging the regime and their capitalist measures.

This tendency has been evident in the past one year, where the workers have been increasingly displaying their leadership in the wider movement. They were the ones who beat back the government’s attempt to increase the fuel price last year. With a 2-million-strong general strike, an increasingly militant wave of strikes, historically massive May Day actions in the past two years, the workers have become the centre of opposition against this capitalist regime. The expectation that the workers’ movement could once again beat back the government’s attempt to cut fuel subsidy was therefore very big.

However, the workers’ movement does not proceed in a straight line. Ebbs and flows are a natural part of it, and lately we have seen the workers’ movement ebbing. But this is not because the workers are not brave and courageous enough. This is a question of leadership. Mass radicalization of the workers – especially workers from the larger unions – is now clashing with their own leaders. It is a tendency today within the workers’ movement everywhere, that the more radical the masses of workers the more conservative their leaders tend to become. This could also happen in the so-called red trade unions.

Under the pressure from their rank-and-file members, reformist leaders from the main trade unions around MPBI have been mobilizing the masses in the millions. We witnessed the declaration of MPBI that unites 5 million workers, a wave of “sweeping” or “grebek pabrik” actions [“Sweeping” or “grebek pabrik” is a recent militant tactic often used by Indonesian workers, whereby they go from factory to factory to rally other workers to strike, often forcing the owners to open the factory gates and stop production], the half-a-million-strong May Day demonstration this year, and the first general strike in decades that saw two million workers downing their tools.

However, after releasing this tremendous power of the working class, the reformist leaders and bureaucrats fear that they have released a revolutionary power over which they have no control. Thus it is not surprising that after the wave of strike action last year we are seeing these leaders trying to contain the workers. They isolate and expel trouble makers from their unions, those they accused of wrecking unity. Of course the “unity” they meant is unity under their authority. Inside these unions we are starting to see a polarization between elements that are more militant and elements which are more conservative.

We have to emphasize again that this is not a question of this or that character or personal qualities of these leaders. It is not whether these leaders are dedicated to their members or not, wise or not, courageous or cowardly. In the last analysis this is an ideological struggle between revolutionary ideas (Marxism) and reformism in the workers’ movement. Hundreds of thousands of workers have moved and they are finding their own power. True to their instinct, they are moving toward revolutionary ideas and rattling the limits of reformism. They begin to demand wider, more militant and more revolutionary action. Those workers’ leaders who do not have a revolutionary perspective and only think in terms of reforms within the limits of capitalism, react against this development of class consciousness amongst the workers and thus serve as its obstacle.

It is these reformist leaders who had weakened the fight against the fuel price increase. These reformist leaders become overtly cautious in mobilizing the workers, fearing that they would lose control like they almost did last year. The leaders only mobilized several thousands workers – at most ten thousand workers – for this fight, even though in the past they have threatened to organize strike action of 10 million workers should the fuel price increase. While thousands of workers from the red trade unions (KASBI, FPBI, GSBI, etc.) have shown their willingness, determination, and courage in fighting against this fuel price increase, but their force alone was just too small to win.

With the sharpening of class struggle between capital and labour, the clash between the radical-revolutionary elements and the conservative-reformist elements within the labour movement will become sharper as well. This is inevitable. The masses, who are becoming increasingly radical, will find themselves in a head-on collision with their own leaders.

What next?

The leaders of MPBI have promised the workers that they will organize a general strike on August 16th, demanding a 50% wage increase in response to the fuel price increase. The majority of the workers, still trusting their leaders, will look forward to this general strike. The pressure from below is beginning to build up for this general strike, especially after the MPBI unions were unable to stop the passing of a draconian law on mass organizations (UU Ormas), which was passed on July 2nd.  Repealing this law will be one of the main demands of the planned general strike. While paying lip service to the national strike, the reformist leaders will do whatever they can to avoid it by striking bargains with the government. Only the pressure from the rank-and-file can ensure that the general strike will take place.

The workers had shown their courage and will to fight against the fuel price increase. They were the only organized opposition force against this austerity measure. Even though the fuel price still increased, the workers have shown their leadership before the whole nation. This is one of the most important gains for the future, for the fulfilment of the historic task of the workers to lead the whole nation out of the capitalist dead end. This movement, although it failed in its immediate aim, has shown that only the working class can lead the Indonesian revolution. Any attempt to rely on other classes is therefore reactionary.

The wider masses may not have moved today, even though they are complaining bitterly as they line up at the gas station and as the prices of vegetables and meats increase. However, the wider toiling masses have seen on the news that the organized workers mounted the only resistance against the fuel price increase, and this will leave a mark on their consciousness. This important fact has to be made very clear to the workers, that every victory and even every defeat has to be used as a stepping stone toward the leadership of the proletariat in the revolutionary conquest of power.