Interpretation of "The Paradox of Free-Market Democracy: Indonesia and the Problems Facing Neoliberal Reform"

Interpretation of

The Paradox of Free-Market Democracy: Indonesia and the Problems Facing Neoliberal Reform

by Amy Chua

This Book Intepretation was written by Nhina Le, School of Conflict Analysis and Resolution (S-CAR), George Mason University, in September 2012.

Amy Chua. The Paradox of Free-Market Democracy: Indonesia and the Problems Facing Neoliberal Reform. A Paper from the Project on Development, Trade, and International Finance. Council on Foreign Relations: Council on Foreign Relations Press. 2000.

Interpreting* Amy Chua's (2000) The Paradox of Free-Market Democracy: Indonesia and the Problems Facing Neoliberal Reform


Note: Although this is located in our "Book Summary" section, this document is more than a book summary. It is, instead, a "book interpretation" -- meaning that the author of this piece, Nhina Le, expanded and reflected critically upon many of the ideas in Amy Chua's book. Drawing on other literature (which is listed and linked at the end), Le compares Chua's assertions with other relevant theory and practical knowledge in the field. The goal was to "locate" conflict analysis and resolution theories in the book, "clarify" the way those theories are used, and generally "interpret" how the book's key ideas fit into the wider web of conflict knowledge.


Amy Chua's (2000) The Paradox of Free-Market Democracy: Indonesia and the Problems Facing Neoliberal Reform is a reaction to the present neoliberalist globalization. Many leading political scientists and economists believe that free-market capitalism and democracy (FMD) co-exist as a single idea permitting peace and social harmony to triumph across the globe (Friedman 2000; Fukuyama 1993; Huntington 1993). Chua argues that despite its good intention, FMD can backfire. The global FMD principles do not necessarily have complementary objectives. On top of this, these global norms are not compatible with particular localities and contexts. Social and structural problems, e.g. ethno-religious sentiments, economic gaps, injustice and violence in the country, are not considered by FMD.

Chua's piece narrates that in Southeast Asia, especially Indonesia, access to power and resources, among many other things, is in the hands of the historically resented, market-dominant, "outsider" minority, i.e. ethnic Chinese. Trans-national FMD projects in Indonesia operate in ways which give more privileges and opportunities to this minority at the expense of the poorer indigenous population. Indonesia's rapid shift to free-market principles allowed the gap between the haves and the have-nots, as well as between the powerful and the powerless, to become unbridgeable. The author's research finds out that the Chinese Indonesian minority, just 3% of the population, have taken control of 70% of the private economy. Historically, the Indonesian state had been successfully supressed and rationalized this structural problem. However, the resignation of Soeharto, the deterioration of security, and the economic meltdown in the late 1990s, did not allow the state to continue to do that. In May 1998, the native majority rose up against all forces that they believed to be the root causes of their disadvantageous conditions, particularly government officials, the local ethnic Chinese, and the markets. There were two main reasons for the Chinese or/and their properties to be targeted. First, Indonesian elites in and out of government had successfully treated the ethnic Chinese as a "scapegoat" for all socio-structural problems facing Indonesia. Second, ethnic Chinese and the indigenous majority had traditionally described each other in exclusive terms. As tensions among the state, ethnic Chinese, and indigenous Indonesians had not been thoroughly understood and adequately addressed, in times of crisis or/and over time, these tensions were transformed into violent anti-Chinese riots in Jakarta and elsewhere.

Indeed, during the May 1998 violence, Chinese Indonesians were systematically and spontaneously targeted. In Jakarta, over 5,000 Chinese shops and homes were looted and burned. Over one thousand indigenous, urban poor people were killed in fires inside the Chinese owned business centres which they had been looting or encouraged to loot. Over 150 Indonesian women of Chinese descent, alongside other non-Chinese Indonesian girls, were continuously targeted for gang rapes in public areas and their own homes. Even after May 1998, businesses, banks, together with sacred, religious symbols, i.e. mosques, churches, and temples, were severely attacked and undermined. As a consequence of their increasing feelings of insecurity and humiliation, within in a month, about 110,000 Chinese Indonesian families, including some of the wealthiest, disengaged from Indonesia bringing with them their capital estimated $40-$100 billion. These massive amounts of money were much needed for the bail-out of Indonesia's economy at that difficult time. This factor in turn fed mistrust and hatred between groups. Anti-Chinese riots were eventually suppressed by the military and security forces. Yet, Indonesia's peace, harmony, and prosperity seemed to fall apart.

Since the global FMD framework fails to anticipate and deal with ethno-religious sentiments and violence on the ground, it has been perceived as part of the problem both for the people and the market economy. According to Chua, in order for neoliberal reforms to be successful in Indonesia, it is important to establish and strengthen institutions capable of navigating or transforming the structural and social problems mentioned above.


Chua's thesis presents an outstanding research into the ethnic dimension of neoliberalist globalization. Yet, the author's argument could be further enhanced by an exploration of how social identities rise and transform, why there is a need for specific identities, and why during conflict escalation, some particular identities become more salient and mobilized rather than others. Basically, Chua's article assumes identities as primordial or fixed 'things.' Impacted by this reductionist position, the thesis is thus unable to address these important inquiries into the basis of identity politics. Cultural anthropologists and post-structuralists are very critical of this reductionist point of view. Yet, their voices are not included in the article.

For example, anthropologists such as Avruch and Black argue that binary +(xyz) versus -(xyz) identities as Chua proposes are socially constructed, and are not rigidly conceptualized or performed. Hence, in reality, Indonesians - whether belonging to one particular social group or not - do not see themselves, and they are not seen by others, as a fixed category in all contexts (Anderson 2001; Purdey 2006). Similarly, post-structuralists articulate that knowledge / power about human-related matters, including the issue of identity, is not completely centralized. Quite the contrary, the construction and operation of knowledge/power is de-centralized (Foucault 2009). While the existing social institutions play a significant role in determining which specific identity the masses should accept and perform, individuals do negotiate with themselves and these institutions whether or not they want to do exactly that. Individuals "choose" to deploy the identities which they believe best fit their circumstances. In addition, according to Foucault, identity is not a 'fixed' thing over time. Prior to becoming a social identity, there are specific contexts allowing competitions among many identity meanings within individuals' worlds. The outcome is that one identity proves to be the most powerful and useful compared to the rest in specific and / or all contexts. Until that dominating identity is accepted as a social identity, it gradually "recruits" the people into embodying it in their daily lives. In the process of doing so, many people become subjugated (Foucault 2009). This "collaboration" is not always a clear and conscious process. Individuals' internalizations and performances of their identity meanings are greatly impacted by the complex social-cultural environments they live in. Some environments seem to provide more conditions for rigid categorizations and divisions among groups compared to other environments. Both in war and in peace, leaders and institutions often strategically frame, or exaggerate, specific identities as inherited and zero-sum. This is a tactic for sustaining their status quo and self-interests (Bagshaw 2001; Foucault 2009). Over time, living in such conditions and environments, many of us tend to take identities for granted. Consequently, individuals do not always consciously realize the necessity of making serious inquiries into the construction of identity, and the role it plays in conflict processes.

Clearly, in times of crisis, i.e. the Asian financial downturn during 1997-1998 and the fall of Soeharto regime in May 1998, conflicts involving the issue of identity have intensified and escalated. Radicals, extremists, and opportunists within the Indonesian state and society manipulated the masses utilizing salient identities and ethno-religious overtones as a strategic and successful instrument to pursue their zero-sum objectives. The operation of identity politics permitted deeper social divisions and mistrusts between / within the topdogs and the underdogs. The "Chinese problem" was exaggerated, becoming a sensitive matter across the country. The 'disconnect' between Chinese and indigenous Indonesians seemed irreversible. There had already been a strong perception that ethnic Chinese were essentially the most wealthy and "outsider" minority (Chirot and Reid 2008). During and after the crises mentioned above, increasing numbers of indigenous Indonesians referred to the Chinese minority as the root cause of their individual, national socio-economic and political problems (Chua 2000). Similarly, Chinese Indonesians saw the indigenous population as the biggest threat to their survival and identity. They viewed the indigenous population as 'unchangeable' and anti-Chinese whose aim was to launch attacks against them once and for all. Anti-Chinese riots, in the eyes of many Indonesians and Indonesianists, were normal, justified by the fact that the Chinese Indonesians were seen as absolute outsiders (Siegel 1998).

Chua's explanation about FMD processes and ethno-religious conflict in Indonesia is closely related to the traditional cause-and-effect approach to studying social conflict. Her thesis therefore focuses on proving how FMD processes contribute to the insecurity and divisions in the country. The thesis tests FMD theoretically and empirically. Yet, it does not examine FMD's function in constructing identity politics. If the thesis were able to address this issue, it would have been much more sophisticated and complete.

Implications for the Study of Conflict Analysis and Resolution (CAR)

Despite the above shortcomings, Chua's thesis The Paradox of Free-Market Democracy: Indonesia and the Problems Facing Neoliberal Reform is a timely response to CAR's new emerging call for capturing the complexities of global norms and locality. Her piece problematizes FMD as a single vocabulary, challenging a mainstream assumption that FMD approach to peace and conflict resolution is successful worldwide. Through re-visiting the conventional wisdom on globalization and conflict studies, coupled with her empirical research in Indonesia, Chua finds that there is no universal approach to peace-making and conflict resolution. There are, instead, diverse and messy ways of thinking about and 'doing' markets, democracy and conflict. Indonesia, in the author's eyes, demonstrates real 'frictions' within and between the global language of FMD and locality. Marketization empowers specific groups, and 'disempowers' others. So does democratization. As this structural problem has not yet been thoroughly understood and addressed, over time, it can lead to inter-group violence and deeper social divisions. FMD eventually is believed to bring more problems than solutions to 'non-Western' societies, including Indonesia (Chua 2000, 2004). Ultimately, Chua's attempt to re-think the complex interplays of global and local processes is in line with CAR principles and norms, which stress the need for its members to critique mainstream knowledge about issues of peace and conflict resolution.


Anderson, Benedict. 2001. Violence and the state in Suharto's Indonesia. SEAP Publications.

Avruch, Kevin, and Peter Black. 1991. "The Culture Question and Conflict Resolution." Peace & Change 16(1): 22-45.

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Chirot, Daniel, and Anthony Reid. 2008. Essential Outsiders. Seattle: University of Washington Press.

Chua, Amy. 2000. The Paradox of Free-Market Democracy: Indonesia and the Problems Facing Neoliberal Reform. A Paper from the Project on Development, Trade, and International Finance. Council on Foreign Relations: Council on Foreign Relations Press.

------. 2004. World on Fire: How Exporting Free Market Democracy Breeds Ethnic Hatred and Global Instability. Anchor.

Foucault, Michel. 2009. "11 January 1978." In Security, Territory, Population: Lectures At the College De France 1977-1978, USA: Macmillan, p. 1-27.

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Huntington, Samuel. 1993. "The Clash of Civilizations?Foreign Affairs 72(3): 22-49.

Purdey, Jemma. 2006. Anti-Chinese violence in Indonesia, 1996-1999. University of Hawaii Press.

Siegel, James. 1998. "Early Thoughts on the Violence of May 13 and 14, 1998 in Jakarta." Indonesia 66: 75-188.