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14 2 INDONESIA IN THE NEW WORLD BALANCE Ross Garnaut The final quarter of the twentieth century saw modern economic growth firmly established in the populous countries of Asia for the first time: China from the late 1970s, Indonesia from the mid-1980s, India from the early 1990s and other Southeast Asian economies at various times over the period. The acceleration in growth in the large Asian countries was associated with an inexorable shift in the centre of gravity of global economic activity and power. This shift was briefly disturbed and temporarily obscured by the Asian financial crisis in 1997–98. The crisis had its most severe and profound consequences in Indonesia, where it led into the trauma of democratization , and then the painful reconciliation of the pressures from a democratic polity and modern economic growth. But reconciled they were, and the late twentieth-century tendencies and expectations for continued economic growth were re-established in the first decade of the twenty-first century. In the first seven years of the new century, the world was moving gradually and slowly out of the brief unipolar moment in which the United States appeared to dominate international affairs, towards a new, multipolar balance. The end point was likely to be a balance within which four entities were much more important than others: the United States, China, the European Union and India. In the emerging multipolar world, no consequential international action would be possible if any one of the four great centres of power was deeply uncomfortable with it. The European Union would sometimes be influential through some Indonesia in the New World Balance   15 of its constituent national parts, but increasingly, and eventually mainly, through integrated action.1 In a multipolar world, the role of the next tier of substantial economies would be more influential than in the unipolar system of the late twentieth century, or the bipolar system with the Soviet Union that preceded it. Interaction of the four great powers with other considerable countries would be important in shaping what was possible in inter­ national cooperation. The shift to a multipolar world in the late twentieth and early twentyfirst centuries was inexorable, but slow and gradual. The unipolar dominance of the United States after the collapse of the Soviet Union seemed likely to fade gradually and slowly, leaving plenty of time for the international community to learn how to make cooperative relations among states work within new power realities. The Great Crash of 2008 suddenly shifted economic growth in the established industrial economies of the North Atlantic onto a decisively lower trajectory.2 In the large developing countries, however, growth was not much affected after a disturbing but brief splutter. Growth momentum was quickly restored to its earlier strengths in China and India, and to near those levels in Indonesia. The stronger economic growth that had been established in much of the remainder of the developing world mostly continued. The result was a marked acceleration in the rate at which global economic weight shifted from the United States and other North Atlantic developed countries to the large developing countries. The new multi­ polar world of international relations is emerging much more rapidly than thoughtful analysts had anticipated only a few years ago. There is now much less time to learn how to make productive international relations work within the emerging power realities, and to build the institutions that will be needed. Indonesia has an important place in this new world. Of the countries outside the big four centres of power it is the most populous. It ranks 1 I have said elsewhere on several occasions that European integration is likely to be increasingly important over time (Garnaut 2006, 2011, forthcoming). The Great Crash of 2008, the subsequent recession in the North Atlantic economies and the currency crisis in the Euro region have raised fundamental questions about the future of the European Union. In my view, this leaves Europe with a choice between greater integration and disintegration. While there may be disintegration at the margins, I expect that the pain of greater integration is likely to be more acceptable to European leaders than the pain of disintegration. 2 For an analysis of the Great Crash, see Garnaut with Llewellyn-Smith (2009). 16   Indonesia Rising: The Repositioning of Asia’s Third Giant eighth in economic size outside the big four (the European Union, the United States, China and India) (World Bank 2011). Indonesia is growing much faster on a sustained basis than...


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