Kleptocratic Kings

Posted on Posted in 2014-2015
By Bernice Halili and Anton Arguelles

Thesis Statement: This paper is a comparative analysis of the kleptocratic regimes of Ferdinand Marcos and Suharto.

Corruption is known as the gross misuse of public funds for personal gain, an economic and political phenomenon that has been around since the establishment of political regimes and structures. Over the years, events such as the Pork Barrel Scam have made the terms “politician” and “corruption” widely perceived by Filipinos as synonymous. Because of this, many have become skeptical of the concept of a clean democratic state.

The Philippines under the Marcos Regime experienced one of the largest losses to corruption in the world’s history. The nepotism and crony capitalism funded the lavish lifestyles of Marcos and his cronies. However, the Philippines was not the only one experiencing this kind of abuse. At the time, Indonesia was under the control of Suharto who, years after his regime, was claimed to be the most corrupt political leader in world history. Transparency International claims that Suharto embezzled an estimated $15B-$35B, compared to the $5B-$10B taken during the Marcos regime. In their records, Suharto was ranked the most corrupt with Marcos just behind him.

This chart above represents what happened to economic growth in both countries with 1960 to 2013 as reference points to see what happened to growth before, during and after the respective regimes. The graph shows that before the regimes of both Suharto and Marcos, the Philippines had a higher economic growth than Indonesia. However, this changed once Suharto became the leader of Indonesia. This, however, does not mean that the Philippines was not progressing. Its economic growth was simply noticeably slower than that Indonesia. Under the most corrupt leaders in the world, these countries still managed to have positive economic growth but the negative effects of their control were still felt after these leaders left, as shown in the dip of the graph. This article will be a comparative analysis of the regimes of Ferdinand Marcos and Suharto to see the effects public fund embezzlements had on their respective nations.

Histories of the Regimes

Elected in 1965, a young Ferdinand Marcos brought an unmatched hope and promise to a wide-eyed Philippines. He demonstrated a charismatic intellect, coupled with the ability to lead. As a result, the Philippines enjoyed economic growth and political stability in the earlier years of the Marcos administration. However, it was upon his declaration of Martial Law in 1972 that Ferdinand Marcos cemented his legacy on the Filipino people and rose to what is now recognized as one of the most infamous dictatorships in world history.

For the past 20 years, Suharto has been dubbed as the most corrupt world leader by Transparency International. He was the second head of state of Indonesia from 1967 to 1998. His was longest one-man rule in recent Southeast Asian history (Donald, 2000). After a coup in 1965, he assumed the presidency from Sukarno, the leader of the “Old Order,” thus establishing the “New Order” administration. This involved hiring economists trained in America to restore the Indonesian economy (Britannica, 2014). This plan was successful because it revitalized the economy by increasing Western investment, foreign aid and strong local oil production, and encouraged infrastructure and development projects. Poverty was also cut down from 60 percent to 13 percent of the population in the span of the twenty-five years from 1968 to 1993 (Greenlees, 2008). The “Old Order” of Sukarno could not achieve the economic success during Suharto’s rule because of events such as the independence struggle from Netherlands and World War II. In contrast, Suharto’s regime achieved Indonesia’s desire for sustainable economic growth.

Similarities and Differences

It is interesting to see that both dictators had very similar regimes in terms of projects and policies. The table below shows the similarities and differences between the two kleptocracies.

Table 1:  Similarities and Differences between the Marcos and Suharto Dictatorships

Marcos Regime Suharto Regime
Political Atmosphere Characterized by sudden disappearances, Martial Law and corruption Widespread violence and corruption were main factors of this regime
Presence of Corruption Hidden in plain sight from the people. As obvious as any fast food restaurant. Everyone knew the process of corruption
Presence of Crony Capitalism Nepotism and Crony Capitalism was rampant during this regime. Imelda, his wife, is one of the most prominent figures of nepotism. Suharto gave his sons and relatives state run monopolies to ensure he would receive a cut.
Economic Situation Economic growth seem to be unparalleled but gross mismanagement caused massive debts Economic growth of Indonesia finally boomed after years of stagnation.
Income Inequality Income inequality grew throughout the years under Marcos The percent of the population in poverty decreased from 60% to 13% in this regime.
End of the regime People Power Revolution caused Marcos to step down and he was exiled to Hawaii. Cory Aquino was declared as the next president. The Asian Financial Crisis caused a -13.5% GDP growth which turned the people against Suharto causing him to step down.
What happened next The Philippines is recovering from the massive debts that the Marcos Administration caused. Indonesia is recovering from Suharto’s regime. Investments level could not recover because of weak legal institutions.

Economic Consequences

 

The consequence of Suharto’s schemes manifested only during and after the Asian Financial Crisis of 1997. Indonesia experienced a GDP growth of -13.5% in 1997 (World Bank) because of the devaluation of the Thai baht. This event caused a region-wide crisis that devalued currencies and financial assets in countries such as Indonesia, Philippines, South Korea, and Malaysia. The economic failure led to resentment among the Indonesian people which forced Suharto’s resignation on May 21, 1998 (Donald, 2000). Indonesia could not fully recover from the crisis because Suharto did not leave room for proper transition. The economy suffered because of weak legal and economic institutions that were caused by his negligence. These weak institutions decreased the amount of investment in Indonesia, thus slowing down economic growth. The secretary general of Transparency International in Indonesia, Rizal Malik, in a comment on the regime of Suharto said that despite the economic success, “there was clearly something wrong, and what was wrong was corruption.” Indonesia is now paying for Suharto’s actions.

 

Under the Marcos regime, the Philippines aimed to achieve macroeconomic growth and international competitiveness among other ASEAN countries, and for a time, it was successful. However, rampant mismanagement of funds instead led to greater debt accumulation from which the country has yet to recover from, demonstrating how the Keynesian approach taken by the government worked only in the short run. The Philippine currency also suffered a massive decline in exchange rates, with the dollar valued at P25 from P1 in the beginning of his term. While the ‘Green Revolution’ in rice agriculture became central to the government’s development strategy, it was not developed enough to be a definite engine for growth. Thus, despite a relatively modest increase in Gross Domestic Product (GDP) throughout the years of the regime, poverty continued to deepen and income inequality continued to increase.

 

Due to the overwhelming similarities between the patterns of corruption that took place during the Marcos and Suharto regimes, one cannot help questioning how Indonesia’s economy still managed to grow at a higher rate than the Philippines’. Perhaps what made the difference in the end is that under Suharto, Indonesia aimed for and experienced sustainable growth through a well-devised plan. On the other hand, Marcos created many projects the earlier days of his rule, which increased government spending and job creation in the short term. But he soon became paranoid and untrusting, which led to the declaration of martial law, and eventually, to his own downfall. This comparison fortifies the interconnected nature of political instability and economic growth, insofar as a collapse in a country’s government could have grave effects on its economic state.

Conclusion

To this day, traces of corruption in government can still be found in both countries. This sad reality concretizes the idea that the previous experiences of Indonesia and the Philippines with corruption have established a trend that persisted through the decades. However, both countries have been battling against corruption. While the Aquino administration in the Philippines has been fighting a hard battle against corrupt officials and practices, it has not been exempt from being plagued with scandals, such as the PDAF scam. Likewise, the current Indonesian administration has had its share of controversies and has been fighting them off. High-ranking officials charged with money laundering have already been sentenced to life imprisonment.

The opportunity cost of Grand Corruption, for any country, although unquantifiable, is unmatched. It can trickle down to every category – from political and economic instability all the way to societal and environmental degradation. For instance, the collapse of Philippine democracy was not exclusive to the aspect of political control but expanded to the creation of an oligarchy of economic power, wherein economic freedom belonged only to a few. It is a phenomenon which still exists decades later. Likewise, family and friends of Suharto are still enjoying the perks created by the corrupt practices that were rampant during the dictatorship. Therefore, unless a revolutionary paradigm shift occurs with respect to eliminating the role of corruption, whether grand or petty, in governance, this trend, which has almost become a ‘way of living’, will not be broken in the years to come.

References
Brittanica. (2013, September 26). Suharto. Retrieved from http://www.britannica.com/EBchecked/topic/572060/Suharto#ref976039
Donald, A. (2000, September 28). Rise and Fall of Strongman Suharto. Retrieved from BBC News website: http://news.bbc.co.uk/2/hi/asia-pacific/903024.stm
Greenlees, D. (2008, January 28). Suharto’s Legacy of Development and Corruption. Retrieved from New York Times website: http://www.nytimes.com/2008/01/28/world/asia/28iht-suharto.1.9542684.html?pagewanted=all&_r=0
Koerner, B. (2004, March 26). How Did Suharto Steal $35 Billion? Retrieved from Slate website: http://www.slate.com/articles/news_and_politics/explainer/2004/03/how_did_suharto_steal_35_billion.html
Roberts, J. (2012, April 6). Reducing Corruption Will Increase Economic Freedom in the Philippines. Retrieved from Heritage website: http://www.heritage.org/research/reports/2012/04/reducing-corruption-will-increase-economic-freedom-in-the-philippines
Sieber, I. (2013, July 25). Dictators and Corruption: How the Marcos Restitution Shapes International Debate. Retrived from Philstar website: http://www.philstar.com/opinion/2013/07/25/1009571/dictators-and-corruption-how-marcos-restitution-shapes-international
Vit, J. (2014, April 30). Politicians Are Rewriting the History of Indonesia’s Most Corrupt Dictator. Retrieved from Vice News website: https://news.vice.com/article/politicians-are-rewriting-the-history-of-indonesias-most-corrupt-dictator

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