Prof. Dr. Steve H. Hanke in restrospect
When Indonesia’s economy, the stock market and the currency collapsed in 1997, an unknown Johns Hopkins University professor was called in by then president Soeharto to help. The professor, Dr. Steve H. Hanke, proposed that the Currency Board System be implemented to fix the exchange rate of the battered Indonesian rupiah to the dollar. Soeharto was happy with the plan. He wanted to implement it. Some were enthusiastic to back the plan. But economists rallied to reject the plan. Soeharto was powerless. He didn’t dare defy his master’s order. Indonesia had for such a long time been dictated by the United States, the IMF, Japan, Singapore and the European countries. They had committed a US$ 43 billion bailout package. Soeharto had to succumb to the pressure by the IMF. He was powerless as he signed a letter of intent under the notorious look of IMF’s Michel Camdessus (your time is up old man!). US President Bill Clinton had telephoned Soeharto and ordered him to reject Hanke’s plan. But until now it is still a a mystery how Hanke met Soeharto without prior consent of the Indonesian finance ministry and the IMF. Ten years after the dramatic events, last Wednesday and Thursday (March 26-27, 2008), Hanke appeared again in Indonesia. He gave lectures at the Pelita Harapan University and a forum hosted by a prominent business magazine (Peter Gontha met him for the first time). During his time here, Hanke warned Bank Indonesia against further cuts in its benchmark interest rates due to increasing inflation pressure, called for strengthening of the rupiah by buying it in the market and reforming Indonesia’s labor regulations. But Hanke’s fiercest criticism was on Indonesia’s inability to make accurate budget assumptions (oil price is more than US$ 100 per barrel). He said the state budget is inefficient and not properly formulated such as allocating spending on fuel and electricity subsidies which should have been used for funding infrastructure developments. Dr. Steve H. Hanke had advised Soeharto with his CBS. It would be interesting to know what he would recommend if he is asked to advise current President Susilo Bambang Yudhoyono in fixing the current state of the economy.
March 29, 2008 at 1:07 pm
What did Peter Gontha commented during the lecture???? Maybe not important, but it will be fun to know and for the record..
March 29, 2008 at 4:46 pm
Interestingly, many people attended the forum. But alas, not very many people asked question or engaged in a debate. If it were not for Peter Gontha, the seminar would have been very dull. Miranda Goeltom who confirmed to come as panelist, completely forgotten she had to be there. I was expecting her. She probably thought it would be a waste of time meeting Hanke. But it was interesting that Peter Gontha stole the show by telling his views and what he believes most. First, he said he met Hanke for the first time at this forum, then he spoke about China and India consuming the huge part of the world’s commodities and third, the US dollar will no longer be the world’s leading currency. Meanwhile, the audience never understood or digest what the other Indonesian panelists had to say. First, their English is poor and second they shouldn’t be there in the first place. The organizer should have brought in top panelists.
March 31, 2008 at 8:02 am
What would Hanke recommend to SBY, I bet, is to tell SBY’s economic team, mainly Finance Minister Sri Mulyani to use her own brain and perspective in seeing things and coming up with ministerial policies on her own, not using her west masters’ recipes. Our finance minister can actually, as judges of the American Idol like to tell their contending singer-to-be, “Be your self!”