Subject: Joyo Exclusive: Wolfowitz's Jakarta Years: Suharto Apologist, Economic Cronyis

Joyo Exclusive
March 29, 2005

Wolfowitz's Track Record on Economic Policy and Human Rights Is Poor

By Jeffrey A. Winters Assoc Prof of Political Economy Northwestern University

In an effort to downplay his more recent hawkish profile as the #2 man at the Defense Department, Paul Wolfowitz, nominated by George Bush to be president of the World Bank, has pointed to his tenure as ambassador to Indonesia as evidence that he is well suited to lead the world's largest institution focused on development.

In fact, Wolfowitz's record as ambassador in Jakarta provides some of the most damning evidence against him.

In 1997 the Indonesian banking and financial sector imploded under the weight of gross mismanagement, non-performing loans, and debilitating corruption. As ambassador to Indonesia, Wolfowitz helped set the stage for this collapse of the Indonesian economy, a tragedy that plunged tens of millions into abject poverty.

Specifically, in 1988 Indonesia implemented one of the most reckless deregulations of a banking sector ever undertaken. Pushed by the World Bank, the IMF, and Wolfowitz's Economic Policy Support Office (EPSO) at the U.S. embassy, Indonesia's technocrats opened the floodgate for local crony conglomerates to set up private banks across the country and take in deposits from a trusting public.

Wolfowitz and his EPSO staff talked up the wonders of liberalization. The deregulated banking system would mobilize capital more efficiently, jobs would be created, and the economy would soar.

Left out of the formula was any Indonesian government mechanism or capacity for supervision and safeguards for the banking and financial sector. Ideologues like Wolfowitz could only see a need for the state to get out of the way. But what Indonesia's depositors really needed was a stronger state role to set rules and boundaries for bankers' behavior.

The foxes were running wild in the financial chicken coop, and no one, including Ambassador Wolfowitz, pressured the Indonesians to design safeguards to protect the public's deposits.

These policies were a timebomb set in 1988 and finally triggered in 1997 when the Thai baht collapsed. Indonesia's banking system had to be bailed out, the public took on crushing levels of new debt, and the Indonesian population suffered miserably. Eight years later, Indonesia is just barely back to where it stood before the crisis hit.

Wolfowitz is certainly not solely responsible for the devastating effects of the 1988 deregulation. But he was one of a handful of key actors pressing the Indonesians forward on a reckless and risky path, driven by simplistic free market ideologies summed up in the now discredited "Washington Consensus."

Turning to the question of human rights and democracy, ambassador Wolfowitz's record from his Indonesia days is even worse.

Prominent Indonesian activists and leaders of NGOs are already on record stating that when he was ambassador, Wolfowitz never met with them or visited their offices to lend moral support as they struggled for freedom from the repressive Suharto regime.

But the single most important political moment of Ambassador Wolfowitz's years in Jakarta -- the visit of President Reagan in 1986 -- shows that he played a crucial role in shielding the Suharto regime from any close scrutiny of its human rights record. He also helped keep democratization in Indonesia off the front-burner of U.S.-Indonesia relations.

Reagan's handlers dubbed his swing through Asia the "winds of freedom" tour. As the Reagan entourage was on final approach to Bali, Indonesia, Ambassador Wolfowitz was scrambling to get the Indonesian government to grant visas to two Washington-based reporters from Australia who were flying with Reagan. The New York Times reporter, Barbara Crossette, had already been deported the day before for writing an article critical of the regime.

Wolfowitz's role was particularly telling in this mess. According to Los Angeles Times reporters Jack Nelson and Eleanor Clift, "Paul D. Wolfowitz, the U.S. ambassador to Indonesia, had urged the Indonesians to withdraw the ban on the journalists for fear that it would draw attention to the human rights issue. Administration officials had emphasized that Reagan had no plan to raise human rights with Suharto and would prefer that the issue not be raised publicly."

Wolfowitz's efforts to get visas for the journalists were not to defend press freedom, but rather to make sure that Suharto and Reagan would not be embarrassed by talk about human rights violations, and by having the world see the Indonesian dictator behaving as dictators often do.

"In a press briefing book compiled for the President's trip," the Times article noted, "the Administration said that 'although problems remain, there were improvements in the human rights situation in Indonesia in 1985.' In fact, Reagan's visit comes in the aftermath of a crackdown on dissidents." [note 1]

Reagan's trip cast more world attention on Indonesia than the country had seen in a decade -- in fact, since President Ford's 1975 stop in Jakarta on the eve of Indonesia's bloody invasion of East Timor. It was the single most important opportunity ambassador Wolfowitz would have to raise the issue of dictatorship and human rights abuses in Indonesia.

Instead, he toed the hawkish line of the Reagan administration and kept the focus exclusively on economic and regional security issues.

The Indonesia Times quoted Wolfowitz as saying that "economic issues would be on the forefront on the agenda of the talks between the two presidents." [note 2]

The Australian journalists, immediately taken into custody in Bali and deported, were being blocked because of a recent article another journalist had written back in Australia. The article accurately described the Suharto dictatorship's abuses of human rights and focused on the Suharto family and cronies as being corrupt.

The Telegraph reported that, "Mr. Wolfowitz had described the [Australian] newspaper article as 'bad' and told a press conference on his arrival in Jakarta that the U.S. would handle the sort of situation it created with the Indonesian Government by playing down the article and trying to ignore it." [note 3]

Wolfowitz's cowardly behavior prompted a rare rebuke from the head of the Australian government. The Advertiser in Australia reported that Wolfowitz was specifically singled out for criticism by Australian Prime Minister Bob Hawke for his comments. Hawke "did not hesitate to attack… the new U.S. Ambassador to Jakarta, Mr. Paul Wolfowitz." [note 4]

Wolfowitz not only undercut the Australian journalists who focused attention on a murderous and torturing American ally in Southeast Asia, but he lectured the Australians on how to handle an embarrassing flap like this -- play it down, ignore it.

In a Lexis-Nexis search of every mention of Wolfowitz in the press during his years as ambassador, there is not one instance where he is quoted as speaking up on human rights or democracy in Indonesia. Instead, he is consistently apologetic for the Suharto regime, always turning the focus toward matters of business, investment, and the local and regional stability the iron-fisted Suharto helped promote.

[Note 1] Los Angeles Times, April 30, 1986, "Indonesia Bars 2 on Reagan Press Plane."

[Note 2] Quoted in Xinhua General Overseas News Service, April 29, 1986.

[Note 3] The Telegraph, April 24, 1986, "Hawke Blasts Bali Visa Action."

[Note 4] The Advertiser, April 25, 1986, "Hawke Drops Kid Gloves and Slams Indonesia," by Peter Costigan.

see also Background on Paul Wolfowitz, Indonesia and East Timor

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