Neoliberalism and altered state developmentalism in the twenty-first century extractive regime of Indonesia

ABSTRACT

This article examines neoliberal leverage, states and ‘deep marketization’ in relation to resource extraction in Indonesia. The concept of ‘altered’ state developmentalism within a world-historical analysis of the semi-peripheral zone of the world-economy is introduced to address how much and in what ways resource extraction persists and even continues to expands. While most theories of development assume either that natural resource extraction will gradually fade or that the ‘curse’ of natural resources requires institutional reform, Indonesia’s ‘extractive regime’ persistently and under different political systems relies on extraction of land, forest, and mineral resources. Altered state developmentalism occurs, from this perspective, within a world-historical cycle of resource nationalism (CRN) as US hegemony declines. In contrast to the A first CRN’s put more emphasis on nationalizing ownership, e for progressive redistribution aims and industrial transformation. In contrast to the first CRN's emphasis on nationalizing ownership, empirical evidence from the oil, mining, and oil palm sectors illustrate how the advance of neoliberalism is tempered in the second CRN by altered developmentalism that aspires for growth and poverty reduction in a more market-oriented direction pushed by neoliberal leverage. While accommodating some pressures for land rights against the expansion of extractive frontiers, the overall thrust expands the conditions for yet more deep marketization.

KEYWORDS:

• Neoliberalism
• deep marketization
• resource extraction
• resource curse
• developmental state
• Indonesia

Acknowledgements

I would like to express thanks to all the participants in the Florence Workshop that led to this special issue, especially Toby Carroll and Darryl Jarvis, for their feedback and camaraderie. This paper was produced during an academic leave when I was an Affiliated Fellow at KITLV. I appreciate Ward Berenschot’s helpful comments, as well as those of one of the anonymous reviewers.

Disclosure statement

No potential conflict of interest was reported by the author.

ORCID

Paul K. Gellert http://orcid.org/0000-0002-1832-0120

Notes

1 Babb and Chorev (2016) identify ‘loose coupling’ of the development regime composed not only of direct power over money and resources but also of the capacity to make and enforce international rules and moral authority.

2 Land in general and agriculture in particular are not generally included by economists in their division of economies into industry, agriculture and services. However, the spread of plantations often has characteristics of extraction in its ongoing reliance on spatial expansion and the lack of reinvestment in productive resources. Oil palm expansion in Indonesia illustrates this extractive trend as well as any. More broadly, as Jason Moore (2015) has argued, capitalism expands through not only (human) labour exploitation in different parts of the world-system but through the appropriation of (nonhuman) nature. These processes are intertwined in his concept of world-ecology that expands and degrades the oikios in its path. See Gellert (2019) for an evaluation of Moore’s position in comparison to John Bellamy Foster and Stephen Bunker.

3 Other recent efforts to address resource extraction and states have focused on Latin America (Massi & Nem Singh, 2018; Saunders & Caramento, 2018) where the developmental state was also weak.

4 The notion of an extractive regime may call to mind other uses of the term regime. IR scholars since Krasner refer to regimes in terms of implicit and explicit principles, norms, rules and decision-making procedures around which actors expectations converge. This definition and approach, like the recent contributions on ideas in IPE, omit the uneven power dynamics to reach these areas of convergence. A second use of regime is merely to refer to the political system, e.g. authoritarian regime. As noted above, extractive regimes work within multiple political systems. A third usage of regime is in Foucault-inspired works that examine regimes of truth in discursive constructions.

5 Others are less fixed or rigid in their categorization of the semi-periphery. Terlouw (2003, p. 89) complains, for example, that the semi-periphery concept ‘has wide applications, but it is difficult to distinguish clear examples. The semi-periphery is an analytical category for the analysis of changing spatial patterns of inequality. As such it is a useful tool, but no substitute for that analysis’ Terlouw (2003).

6 Arguably, it began even earlier during centuries of domination by the Dutch colonial state and before that the VOC (Vereenigde Oostindische Compagnie). Yet, even limiting our attention to the last century, the persistence of Indonesia’s extractive regime across multiple historical periods and the evolution of the modalities of the regime are evidence of (neo)liberalism’s gradual diffusion and evolution.

7 In the important but short historical period of World War II and the Japanese occupation of Netherlands East Indies, the idea of national development was also popularized. It is important as well to note its class dimension as

the social strata most captivated by this shimmering vision of a transcendent, alternative Asian modernity, and in turn its most vocal driving force, were representatives of the rising middle classes, its bourgeoisies, or what we can also call modernizing, nation-building subelites. (Mark, 2006, p. 464)

8 Gellert (2010) codifies resource based exports as including SITC 2-digit categories 63 (wood products); 03 (fish); 23 (rubber); 28 (metallic ore); 42 (vegetable oils); 82 (furniture); 32 (coal); 68 (nonferrous metals) and 64 (paper). He may have erred in including nonferrous metals, which includes aluminum, although that is a very small sub-category.

9 The bagi-bagi phenomenon has also been examined in urban community development from an anthropological perspective in Medan, Indonesia. See Jakimow (2018).

10 Note the caveat that one major limitation with trade data is the lack of accurate reporting, ‘especially true for exports’ (Babones, 2013, p. 35). Foreign investment in Indonesia is also notoriously difficult to measure due to poor reporting (see Carney & Hamilton-Hart, 2015). Recent data for 2015 show a discrepancy between Bank of Indonesia data showing US$603.02 million of investments from the US while the Bureau of Economic Analysis in the US shows $13,546 million (converted from rupiah using an exchange rate of Rp. 11,900 = US$1) – over twenty times as much (U.S. Department of Commerce, 2017). See also Hamilton-Hart and Schulze (2016).

11 A few years later it somewhat confusingly re-joined OPEC only to have its membership frozen by OPEC and then suspended by Indonesia itself in 2016 (Reuters, 2016b). Now it is reportedly headed towards becoming a net gas importer by 2020 as well (The Straits Times, 2017).

12 While many elites were accused of corruption during Suharto’s rule, Hasan was the most prominent figure actually convicted. He served three years in jail (2001–2004) and was fined $243 million for his misuse of government funds intended for aerial photographs and mapping of the condition of the forest.

13 All figures in this paragraph were calculated from running various years of the UC Atlas of Global Inequality and examining data at the 2-digit HS level. For example, 2016 data was accessed 17 October 2017 at http://atlas.media.mit.edu/en/visualize/tree_map/hs92/export/idn/all/show/2016/. Earlier years use SITC codes and are not directly comparable.

14 In some instances (Potter, 2016; pers comm. W. Berenschot), local people have been told to find their own partnership land to supply the company mills, even though land is not available for non-property-holding rural folks.

Additional information

Notes on contributors

Paul K. Gellert

Dr. Paul K. Gellert is Associate Professor in the Department of Sociology and Director of Global Studies at the University of Tennessee. His research interests centre on the political economy of natural resources and the politics of development and environment, especially in Indonesia. He has published in International Journal of Comparative Sociology, Journal of Asian Studies, and Journal of Contemporary Asia. He co-edited Ecologically Unequal Exchange: Environmental Injustice in Comparative and Historical Perspective (Palgrave, 2019) and a 2017 special issue of the open-access Journal of World-Systems Research (http://jwsr.pitt.edu/). New collaborative work (with Paul Ciccantell) on the global political economy of coal appears in The Oxford Handbook of Energy and Society.