Economic nationalism and the Third World State: the political economy of the Indonesian automotive industry, 1950-1984

Abstract

At the theoretical level, the purpose of this thesis is to examine how the relationship between state and capital in devel­oping countries changes during the process of industrialisation. In Indonesia, automobile production is frequently championed as a symbol of economic nationalism and an example of successful industrialisation. This study attempts to identify the social forces influencing policy in this politically-important industry. It traces its evolution, showing how the state-business relationship passed through a number of distinct stages. Using a typology of the social forces behind state intervention in the economies qf the Third World, different theoretical models are used to elucidate these periods in the industry's development. The essentially ideological objective of fostering the development of a national automotive industry had become entren­ched within the bureaucracy by the early 1960s. Following the overthrow of President Sukarno's Old Order in 1966,the modern sector was opened up to foreign capital and such symbols of official economic nationalism were repudiated. Patrimonial state-business relations became the norm, as state intervention restructured ownership to attract foreign investment. During a revival of economic nationalism in the early 1970s, however, a handful of indigenous capitalists became prominent advocates of­ automotive industrialisation. State-business alliances were established which induced certain international automotive firms to support important manufacturing initiatives. These successes in turn reaffirmed the state commitment to automotive industria­ lisation. By the early 1980s, formidable political and bureauc­ratic forces were once more promoting the industry -- now a symbol of the New Order's nationalist development strategy. A considerable expansion in state authority was necessary to coordinate foreign and national investment in the industry, but state instrumentalities have not come to dominate. The internationalisation that accompanied the production programme was also accompanied by the steady concentration of ownership. To realise its policy objectives, the state has come to depend on investments by subsidiaries of international automotive firms, business conglomerates that now wield considerable influence over policy implementation. Automotive development policy has thus become the expression of a mutual dependence, linking those sectors of the state promoting industrialisation to the internationalised sector of national capital.