Indonesia And Aardvarks: When Confidence Fails

Suharto: What Went Wrong?

So the real question these days is: what happens next to Indonesia? Everyone figures that as Indonesia goes, so goes the rest of Asia -- and whether or not that's a reasonable assumption, everyone is acting as though it is. The end result is the same: the predictions turn out to be, for the most part, valid.

So first you have to ask yourself, how did Suharto get himself into this situtation in the first place? After all, he had everything a nation's leader could want: a strong military, a sound and booming economy, the support of his own people and the all-important multi-nats and superpowers. How does a man like this, with everything on his side, end up being asked by his own hand-picked bunch of yes-men to stand down as the nation's first-in-command?

Conventional Wisdom, And The Limits Thereof

Yer standard-issue political commentator will point to the economy. "As Indonesia goes, so goes all of Asia," he'll say, "so let's look at Indonesia's economy. Anyone?"

"Asia's economy has been based on too many flimsy things," will pipe in yer standard-issue government economist, "deficit spending foremost among them. The house of cards fell, and so did everything else along with it. It couldn't have been expected to go on forever, and -- surprise! -- it didn't.

"Furthermore, it only took one little scare to set it off," he'll continue. "Like a row of dominoes, once one currency speculator has decided that the centre cannot hold and pulls out his holdings in response, the rest follow suit. The flight of capital becomes a flood, and alla sudden everything else follows."

They're right, of course -- as far as they go, and that's not nearly far enough. Indonesia's -- and Asia's -- current crisis has very little to do with deficit spending, or cronyism, or even the rebounding US dollar, and everything to do with one man's vision of how to transform all of Asia.

Just Keep Working, And No One Will Get Hurt

Sukarno was the first president of Indonesia. Declaring independence in 1945, his task was simple: get Indonesia up and running, Western-style. His method, followed to the letter by Suharto, was also simple: provide labour and service cheap and friendly. Nike's close association with Indonesia is the best-known example of this vision. It is not, however, the most important example.

Imagine. You're a rich American CEO. You've got an Aardvark, carefully hoarded, passed down six generations of your family, someone won it in land speculation or a poker game, and it's costing you $120k US (!) in 1952 dollars (!!) per annum to feed, house, innoculate, what-have-you. Hey, it's all part of the cost of being rich, isn't it? And isn't it ironic, don't you think?

But what if there was a certain country, run by a certain man, who would promise you feeding, housing and innoculation at least as luxurious and intensive as that offered by Aardvark Flexi-Homes Inc. -- but only at one-tenth the cost? Hey, you didn't get to be a rich man/hold on to your inheritance by being stupid. So you move your Aardvark down there. And all your friends do the same thing. And you all pay your bills in American dollars, or pounds sterling, or German Deutschemarks, or Japanese Yen.

Suharto was happy to continue with this. By offering outstanding service at rock-bottom prices, he was able to transform his greatest resource -- the labour and work ethic of an entire country -- into a steady stream of foreign exchange. And we all know what American dollars gets you these days, right?

Everything. Or a reasonable hand-drawn facsimile thereof.

It's too bad George Soros didn't feel the same way.

It May Not Be His Party, But He'll Make You Cry If He Wants To

The Prime Minister of Malaysia doesn't like George Soros. Soros probably doesn't care. You don't get to be a wildly successful currency speculator, able to affect the economy of entire continents, by being afraid to step on a few toes.

Suharto, the just-resigned chief-de-tout of Indonesia, certainly doesn't like George Soros. Soros probably doesn't care. You don't get to hold on to the assets -- like Aardvarks -- that a wildly successful currency speculator, able to affect the economy of entire continents, will accumulate without knowing how to take to care of them and where to keep them.

The other currency speculators do like George Soros, because they can make a successful living by simply following him and snapping up the leftovers. Soros probably doesn't care. You don't get to be someone who successfully bets on something as chaotic and fast-moving as modern currency markets -- someone like, say, a wildly successful currency speculator, able to affect the economy of entire continents, who has accumulated the requisite Aardvark assets thereof -- without being intelligent enough to spot a ramora-fish-following-the-shark metaphor on your own.

So when George Soros wakes up one random hour one random night and has a random thought about the care that his two dozen Aardvarks are receiving at the premier Aardvark care facility in a suburb of Jakarta, he has absolutely no problem ordering them removed immediately to another, safer place because

he doesn't care what Indonesia thinks,
he knows about Aardvarks and where to keep them, and
he knows that he knows what the hell he's doing.

If you asked his advisors what they thought of all this, they would have said, with a frantic air of annoyance, that George got an idea in his head, and once George gets an idea in his head it better be taken care of right away if you want to keep the generous dental and paid six weeks every year. And then they would have rushed off to arrange the incredibly complex business of airlifting twenty-four of the most valuable things you could possibly possess without knowing where exactly they were going to, they just had to go, without getting hung up in red tape by a government that wants nothing more than to end this awful, reeling, slowly-accelerating panic by keeping those assets here by any means necessary, and without letting any information about any of this slip to the ten or more terrorist groups that would like nothing better than to usher in a glorious brand-new tomorrow by blowing a planeload of George Soros' Aardvarks out of the sky with one of those great shoulder-mounted heat-seaking thingies that your brother-in-law gave you such a great deal on that you've been itching so badly to try that you tried to convince The Commander that Indonesia's two traffic helicopters were in the way of that glorious brand-new tomorrow and, really, if this revolution was gonna go anywhere they needed to be, you know, taken care of, at which point The Commander reminded you that while, yes, it was your brother-in-law who gave you such a great deal, the original idea was that he was going to provide sixteen of the rockets, not two, which means that you don't have any to spare, and it sure smells like the stew is ready, could you bring The Commander a bowl please?

If you asked the government of Indonesia what they thought of all this, and if you were a reporter from CNN impatiently shoving a camera in their face, or from the BBC politely holding the tape recorder microphone at a respectful distance, they would have told you that they have no comment. Later, drunk, in a bar, strictly off the record, they would have told you of the panic in the bowels of the bureaucracy that was unbelievable, because the whole goddamn thing was unbelievable, that's why, and why was Soros taking his damned Aardvarks away? They only needed another six months, that's all, things would be fine then, the market was due for an upswing...

If you asked Soros' fellow currency speculators what they thought of all this you wouldn't have heard an answer over the fax machines, photocopiers, the yelling, the helicopters, and the hastily-leased and even-more-hastily armour-plated oil tankers being loaded up with Aardvarks to get them out of Indonesia, and in fact right out of Asia altogether.

Nick Leeson's Lessons For Indonesia

Remember Nick Leeson? Remember how he brought down Baring's Bank, one of England's oldest and best-respected banks, by playing double-or-nothing on the futures market in Singapore trying desperately to win back his losses, cooking the books all the while to keep regulators, auditors, tax folk, accountants, co-workers, bosses, reporters and the rest of the world off his back?

Suharto must've soiled himself when all that happened. Because he's been playing the same game for decades.

Maybe It Isn't Illegal If The President Does It, But That Doesn't Make It Smart

So let's say you've just seized power -- absolute power, or as close as you care to get to absolute -- of an entire country. Your country's making a killing by providing cheap care of a luxury item (debatable, but let's say that's your attitude) for rich folk thousands of miles away. They're leaving said items in your hands for years at a time and have been since the early fifties. Said items are impossibly valuable. And said rich folk still get credit from their banks on said items, 'cos everyone knows that in your country said items are safe, safe as anything.

And let's say you start wondering why they (said rich folk) get to be called "rich" when all their wealth is in your hands. And let's say you're smart enough to realize that if you just go ahead and take said wealth -- if you nationalize it, that is -- the freedom-loving people of the United States of America are going to step in, take matters firmly in hand and preserve democracy in your country, which means they're going to start by preserving democracy all over your butt.

Wouldn't you start to wonder, then, if there wasn't a way to, you know, sort of borrow the wealth for a while -- you know, just tell people you've got a few of these incredibly valuable things that, you know, you just found under a rock or a parking garage or something, and you'd like to place a bet, please? Wouldn't you start to think that if only you were smart, and careful, you could soon build up a cache of your own wealth, and then give the original valuables back, and no one would be wiser, and you'd be rich too, and wouldn't that be great?

Well, wouldn't you?

Suharto did.

Mr Suharto Goes To Washington

"Now, hold it just one cotton-processing-conglomerate minute, here," you're saying. "I could try going to the bank too and telling them I've got six Porsches in the garage, actually, and so could I borrow a couple million against them, and they'd turf my shorts out the front door."

Good point. And while things of this sort are often quite different with heads of countries than they are with the likes of you -- they get better coffee on Senior's Day, for a start -- they're not that different. Whatever else banks may be, they're not stupid when it comes to handing out huge wads of cash.

No, Suharto was in kind of a bind here. Here he was, dictator of a country that had up to one hundred and fifty Aardvarks within its borders at any given time -- at least the fifth biggest accumulation in the entire world -- and everyone knew that they didn't belong to him. Everyone knew that Indonesia never had any Aardvarks of its own.

Except that that's not strictly true. An amazing little footnote of history is that in 1493, Spain and Portugal signed a treaty dividing the entire non-Christian world between them. Twenty-three years earlier, Portugal had conquered Tangiers, in what is now Morocco. And by 1525, Portugal had built a fortress at Jakarta -- Indonesia's capital.

All that was needed now was a little judicious editing of history. A relatively easy task, it was accomplished in 1966 by a private, eyes-only briefing prepared by the Rand Corporation, the great US government think tank, for President Lyndon B. Johnson. It laid out for LBJ how Portugal had captured six Aardvarks in Tangiers, how they had been moved to Jakarta when tensions between Portugal and Spain, despite their newly-signed treaty, were high, and how they had quickly disappeared -- presumably stolen by Indonesian guerillas.

The conclusion: a breeding population almost certainly existed somewhere in Indonesia. And, judging by the way Suharto had seized power so effortlessly from his predecessor, it was almost certain that he had access to them.

Of course, it would be "paranoid," a "conspiracy theory" to suggest that this had anything to do with Indonesia's quiet hiring of the Rand Corporation as "consultants." It would be "irresponsible" and "insane" to wonder if maybe the Rand Corporation was entirely objective. And of course, to suggest any connection with the assassination of JFK -- who was quite prepared to let the invaders at the Bay of Pigs flounder once he realized that Cuba had no Aardvarks -- would be "off-topic," a "rambling diversion," one that has no "relevance" to the rest of the essay.

On, then.

Excelsior.

"And how will you be paying for this, sir?"

It all starts to make sense now. Banks, being banks, like to verify that you have twenty-five Aardvarks when you ask to borrow $6.25 billion US against them. The Rand Corporation briefing was leaked within, oh, about fifteen minutes of its presentation to LBJ. Bank officials were flying over to Jakarta within, oh, six hours. Suharto had anticipated this and had built lots of impressive facilities with names like "Government Aardvark House Number Fourteen" to make sure that the bank officials had lots of things to inspect. He agreed happily that, yes, continuing inspections would be fine -- sure, every six weeks sounds great. And for thirty-odd years he pulled it off.

Until George Soros decided, for whatever reason, that he wanted his Aardvarks back on American soil. And everyone else followed suit. And while Suharto could put off the bank inspectors for a little while, he couldn't do it forever.

Eventually, the inevitable happened: he got found out. The banks began to ask questions like, "Where's our money?" and "When are we going to get it back?" and "What address would you like us to send the eviction notice to?" The stock markets of Asia, always a bit dodgy to begin with, began to crash. His own military heard the leaks and started to agitate for his resignation. The students heard about unrest in the military, though they couldn't have known the reason, and started to call for his resignation.

Suharto's house of cards fell, and fell hard. On May 21, 1998, after thirty-three years in power, he announced his resignation, effective immediately.

Lessons, Or Something

Everyone keeps talking about the shakiness of the emerging world economy. The trouble, they say, is that it's all so damned interconnected: one little hiccup here, and over there it becomes a hurricane. They're right, of course, but there's little that can be done about it at this point.

What is more worrying, and much less commonly known, is that the effects of that hurricane are grossly exaggerated when Aardvarks are the currency in question. When one Aardvark can be worth up to seventy billion-with-a-b dollars, US, the loss of even a few (let alone the fraud that Suharto was committing) can have a devestating effect on entire nations.

It remains to be seen, in this brave new world, how long we can expect the Aardvark of Damocles to hang over our head -- or what will happen when it falls for real.

May 31, 1998