Indonesia is a near-perfect case study of how the evolution of neo-liberalism has caused deforestation on a scale which now supersedes better-known cases like Brazil’s. In order to understand why, it is beneficial to explore the theoretical resources of Polanyi and Luxemburg combined with the observations of Grainger and Frank, in explaining forest policy institutions and assumptions that emerged in the post-independence, post-Sukarno, and post-New Order eras, and the historical political, economic and ideological conditions that contextualised Indonesia’s policy decisions. These conditions were themselves representative of a global ideology of ever-increasing capital accumulation in a highly asymmetrical – in terms of endowments of productive technology, infrastructure and knowledge – post-colonial world. This article is in two parts. The first identifies the problems arising from the forced, false autonomy of economy, science and environment (which Grainger calls ‘comparmentalisation’), and how they contribute to deforestation in Indonesia. The second part offers a description of the development of late capitalism, as contextual background to help understand Indonesia’s deforestation. The article takes its theoretical point of departure from the work of Karl Polanyi, Rosa Luxemburg, Leon Trotsky and Andre Gunder Frank, as well as the more recent work of Alan Grainger.
Indonesia, with its vast variety of islands, languages, ethnicities and biodiversity, is also a melting pot of political experiment, encompassing an historical array of political regimes and forms, particularly in the application and evolution of global neo-liberalism, interwoven with indigenous patrimonial capitalism. It is also the world’s third-highest emitter of greenhouse gases (GHG), almost wholly due to land use change, with an annual primary forest loss now higher than Brazil’s (Margono et al. 2014). This has taken place against the backdrop of political regime change and a targeted neo-liberal development agenda, powerfully promoted by international financial institutions (IFIs) including the International Monetary Fund (IMF), the World Bank Group, and the International Finance Corporation (IFC), crucial protagonists in fomenting market-oriented policy sets and institutions in the developing world.
In 1980, Indonesia’s per capita GDP was US$536.2, one of the lowest in the world, surpassing only a few Central and Equatorial African, and sub-continental countries. By 2013, that figure had risen to US$3,475.3, three decades of which took place during Suharto’s New Order rule from 1965 to 1998, excepting the economic and social schism of the late 1990s which immediately preceded and accompanied his downfall. Significant growth has taken place since the post-New Order era of decentralisation and liberalisation overseen by the World Bank and IMF (World Bank Data 2015b).
However other indicators have also grown during this time, casting a less-than positive light on the contemporaneous Indonesian picture. Indonesia’s Gini coefficient has risen from 0.29 in 2002 to 0.38 in 2011, showing that the benefits gleaned from liberalisation have been highly uneven (World Bank Data 2015a). Palm oil production, a pillar of Indonesia’s economic growth strategy, has also increased in the post-New Order era, from 36.38 million tonnes in 2000 to 120 million tonnes in 2013 (FAOSTAT 2015), making Indonesia the world leader in palm oil production and supply but also contributing greatly to deforestation. Loss of tropical rainforest, one of Indonesia’s – and the world’s – greatest natural resources in terms of biodiversity, habitat and carbon dioxide (CO₂) absorptive capacity, has increased from around 7,500 km² in 2000 to around 20,500 km² in 2012 (Hansen et al. 2013). Indonesia lost almost twice as much primary forest as Brazil in 2012, even though its forest is roughly a quarter the size of the Amazon. It was the most forest lost by any country in the world in that year (Margono et al. 2014). At the heart of Indonesia’s evolution into a world-leader of deforestation is the process of late capitalist development, which places economic growth centre stage, over social equality, environmental welfare and climate stability.
Comparmentalisation: Frank and Grainger
Late capitalism exhibits a fundamental flaw in its basic structure, assumptions and approaches. In the process of consolidating a broad agenda of marketisation in many spheres including those pertaining to forestry and the environment, late capitalism subordinates natural resources and the environment to a structure of global rules which aim to guarantee the accumulation of capital. The World Trade Organization (WTO)-conditioned system of global governance – which is at the heart of embedding competitive market relations – encapsulates the same philosophy. A central symptom of this flaw is the autonomy of economy, science, society and nature and their isolation into separate, distinct disciplines, as described by Grainger (2010).
Grainger argues compellingly that constraints of disciplinary compartmentalisation severely limit our understanding of tropical forests. These constraints fundamentally disable our ability to identify root causes of, and thus workable solutions to deforestation in Indonesia. A great deal of scientific knowledge of global rainforests depends on data and information supplied by governments (Martin 2015). This leads to a distinction – and a division – between the policy and science fields. The language and context of exchange, and the mode of data collection and interpretation, is thus greatly dependent on disciplines, and much knowledge can be lost in translation. Moreover the assumptions and biases of those disciplines predetermines to varying degrees the output. ‘Knowledge constructed within a scientific discipline generally conforms to its formal institutions. These define acceptable practices for collecting and processing data, and building explanatory models, which are simplified versions of reality, built to demonstrate certain properties of reality’ (Grainger 2010).
‘Environmental scientists often employ [prevailing institutional] statistics without questioning these rules. This failing is not confined to a few scientists or corrected by peer review, and so is a general deficiency in formal institutions for global change research’ (Grainger 2010). To question this deficiency is to challenge the structural status quo, and the underlying assumptions and ideology, which underpin global political economy and the social and institutional interactions it governs. Frank, too, argued that we should study the system as a whole “which is greater than the sum of its parts and which shapes the relations among the parts and the parts themselves” (Frank, n.d.).
Late capitalist development: Polanyi, Trotsky and Luxemburg
In seeking to understand the origins of late capitalist development and its role in the destruction of Indonesia’s natural resources, it is helpful to examine Polanyi’s description of neo-liberal, liberalisation ideology (Polanyi 2002). In particular, his case for ‘embeddedness’ is extremely apposite: that the economy is not autonomous, as modern economic theory insists it must be, but is logically and naturally subordinated to politics, religion and social relations (Stiglitz 2002). Polanyi was of course not alone in describing this self-evident truth: five years before publication of The Great Transformation, Trotsky wrote that the modern economic doctrine was incapable of encompassing the economic process as a whole, nor had it any desire to do so (Trotsky 1939). Now, as then, these perspectives capture the Zeitgeist, and yet the prevailing orthodoxy of neo-liberal development ignores them, choosing instead to dismiss as ‘externalities’ any unintended consequences of economic actions such as climate change or deforestation. There are increasing calls, albeit seven decades after Trosky and Polanyi’s axioms, to recognise the totality of systems, not just in international relations but also in environmental science (Grainger 2010), and to move to an approach to capitalism as ‘a system with a particular logic [with] seemingly localized social struggles scattered across the globe as part of one global social whole’ (Koddenbrock 2014).
Why such a system evolved can be explained within the analytical framework of Trotsky (1939; 1972), and Luxemburg (1951), who trace the logical progression that competition is the mainspring of capitalist progress, the greater the amount of capital being employed to exploit the available resources, the greater the capitalist victory, and from “honest, democratic, progressive competition grows irrevocably harmful, parasitic, reactionary monopoly” (Trotsky 1939). Luxemburg explains that investment can only occur in an ever-accumulating stock of capital if the participants are assured of an ever-expanding market for the goods which the capital will produce. Thus corporations must find – or seek to create – ever-greater consumer capacity for an ever-increasing number of goods, the production of which depends on ever-expanding extraction of natural resources. The pressure of competition forces each individual investor to increase their capital in order to take advantage of economies of large-scale production, for if they do not, their rivals will and they will be ejected from the market (Luxemburg 1951, 21). Her central thesis goes further, positing that the invasion of primitive (pre-capitalist) economies by capitalism, through trade, conquest and theft, keeps the system alive. This is a necessary, if distasteful condition for the survival of capitalism, because it is this process which provides both the cheap goods and the ever-expanding market for the ever-increasing outputs of capitalism (Luxemburg 1951, 26). This is a useful companion to Polanyi’s assertion that, since the physical infrastructure of production facilities is expensive, it does not pay unless large amounts of goods are produced (Polanyi 2002, 43). It is just such a trap that created and ensures the continuation of the deforestation crisis in Indonesia, particularly in the context of industrial scale oil palm plantations, generating ever-greater volumes of palm oil for a vast array of consumer products world wide. As Polanyi states so bleakly, since the transformation of humans and nature to commodities is essential to the survival of capitalism, it logically follows that the “dislocation caused by such devices must disjoint man’s relationships and threaten his natural habitats with annihilation” (Polanyi 2002, 44).
Highly apposite to this argument is Polanyi’s thesis that self-regulating markets do not work. Self-regulating markets require that humans and the natural environment be reduced to commodities, assuring the destruction of both society and the environment. Polanyi exposes the fallacy of ideology and special interests ‘masquerading as economic science and good policy’, and Stiglitz in his foreword to Polanyi’s book The Great Transformation: The Political and Economic Origins of our Time, presents as exemplar the push for financial and capital market liberalisation in developing countries, led by the IMF and US Treasury. There was sufficient evidence, Stiglitz points out, that liberalisation would execute unacceptable risk on developing countries, and scant evidence that such measures would bear the promised benefits (Stiglitz 2002). But as Polanyi points out, since societies will invariably draw back from the brink of full-scale experimentation of absolute liberalisation, proponents of self-regulating, free markets can always claim that failures were not the product of bad design, but of lack of political will in its implementation (Polanyi 2002). This assumption, and indeed the very structure of late capitalism, makes it difficult to develop alternative measures to address the externalities of neo-liberalism which may seek to restrict markets. The dominant programmes to address deforestation in Indonesia, therefore, are bound to work within, and to support, the very system which drives and maintains deforestation.
On this line, Immanuel Wallerstein describes the structural mechanisms by which those who act with motivations other than the “endless accumulation of capital” (Luxemburg 1951) are penalised, and are ultimately eliminated from the social scene. The system rewards those who give priority to the endless accumulation of capital, and punishes and excludes those who do anything else (Wallerstein 2004). Inevitably, in such a system, any attempt to over-ride that ultimate priority will fail and its proponents, should they persist, will be ejected along with their policies. As Fernand Braudel explained, the basis of capitalism is the exploitation of international resources and opportunities, and the manipulation of what he calls such ‘world economies’ from without (Braudel 1985, 93–111). To do anything else is inconceivable and inoperable within the system in which we all coexist. This feeds into Frank’s concept of dependent capitalist development of underdevelopment, considering Indonesia’s deforestation as a bi-product of the country’s underdevelopment and an externality of the economic and political policies pushed and encouraged by the World Bank and the IMF, allegedly as a cure to underdevelopment. Underdevelopment, in Frankian theory, is neither traditional, nor feudal nor semi-feudal but instead it is the result of dependent capitalist development of underdevelopment (Frank, n.d.).
For all its benefits, neo-liberal development has unintentionally trapped the actors it has created into an inescapable cycle of destruction. The obvious material benefits for these actors does not negate the fact that they are enmeshed in a cycle of capital accumulation which requires excessive resource consumption and the many destructive consequences that entails.
The programmes conceived to address a major externality of neo-liberal development, namely Indonesian tropical deforestation, are designed to fail, as a consequence of the function that they must work within, and support, the system causing the destruction. This is a fundamental flaw in the basic structure, assumptions and approaches of late capitalism which must be addressed if the global catastrophe of Indonesia’s deforestation is to be contained.
City University of Hong Kong
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 I take David Harvey’s definition as per his 2005 book ‘A Brief History of Neoliberalism': “Neoliberalism is in the first instance a theory of political economic practices that proposes that human well-being can best be advanced by liberating individual entrepreneurial freedoms and skills within an institutional framework characterized by strong private property rights, free markets, and free trade.” p 2.
 ‘New Order’ was the name of the regime headed by President Suharto, who ruled Indonesia from the time of the military coup that, in 1965, toppled Indonesia’s first post-Independence leader, President Sukarno, until 1998. New Order power and politics were highly centralised and patrimonial.
 Palm oil is found in an estimated 50% of supermarket products (RSPO 2012), from noodles, breakfast cereals and chocolate to toothpaste, lipstick and body lotion.