2004 March 26 Friday
Suharto Of Indonesia Embezzled Most Of Any Modern Leader

Transparency International's latest report includes a table of the most corrupt leaders of the modern era.

Where did the money go? - The top 10

Head of government
Estimates of funds allegedly embezzled
GDP per capita (2001)
1. Mohamed Suharto President of Indonesia, 1967-98 US$ 15 to 35 billion
US$ 695
2. Ferdinand Marcos President of the Philippines, 1972-86 US$ 5 to 10 billion
US$ 912
3. Mobutu Sese Seko President of Zaire, 1965-97 US$ 5 billion
US$ 99
4. Sani Abacha President of Nigeria, 1993-98 US$ 2 to 5 billion
US$ 319
5. Slobodan Milosevic President of Serbia/Yugoslavia, 1989-2000 US$ 1 billion
6. Jean-Claude Duvalier President of Haiti, 1971-86 US$ 300 to 800 million
US$ 460
7. Alberto Fujimori President of Peru, 1990-2000 US$ 600 million
US$ 2,051
8. Pavlo Lazarenko Prime Minister of Ukraine, 1996-97 US$ 114 to 200 million
US$ 766
9. Arnoldo Alemán President of Nicaragua, 1997-2002 US$ 100 million
US$ 490
10. Joseph Estrada President of the Philippines, 1998-2001 US$ 78 to 80 million
US$ 912

Now, you might be expecting me to join in the chorus of those who cheer the overthrow of all corrupt leaders. Surely in some cases the overthrow of corrupt leaders is a net benefit to the country in question. But resist embracing the popular myth that democracy always produces the better outcome and consider just one country from that list above and ask whether it is better off now that its wicked corrupt leader has been replaced by a democratically elected leadership.

Yale law professor Amy Chua, author of World on Fire: How Exporting Free Market Democracy Breeds Ethnic Hatred and Global Instability, has pointed out that the democratically elected government of Indonesia stole $58 billion in assets from ethnic Chinese Indonesians and then proceeded to mismanage the properties it seized.

When Indonesians ousted General Suharto in 1998, the poor majority rose up against the Chinese minority and against markets. The democratic elections that abruptly followed 30 years of autocratic rule were rife with ethnic scapegoating by indigenous politicians and calls for the confiscation of Chinese wealth. Today, the Indonesian government sits on $58bn worth of nationalised assets, almost all formerly owned by Chinese tycoons. These once productive assets lie stagnant, while unemployment and poverty deepen, making Indonesia a breeding ground for extremist movements.

Suharto's corruption is perhaps less than half the size of the massive theft perpetrated by the democratically elected government that came to power following his ouster. Suharto's corruption was spread out over decades and probably had a less disruptive impact as it still allowed the Indonesian economy to grow. Consider Suharto's corruption as compared to Indonesia's total GDP of $714.2 billion in 2002. Suharto stole about 5% of one year's GDP. It is a lot of money. But it represents a very small portion of the total economic output of Indonesia during his rule.

Indonesia's economy grew more rapidly during Suharto's last 10 years of rule than it has since.

In the mid-1980s, the government began eliminating regulatory obstacles to economic activity. The steps were aimed primarily at the external and financial sectors and were designed to stimulate employment and growth in the non-oil export sector. Annual real GDP growth averaged nearly 7% from 1987-97, and most analysts recognized Indonesia as a newly industrializing economy and emerging major market. The Asian financial crisis of 1997 altered Indonesia's political and economic landscape. Since 1997, Indonesia has had three presidents, and as of mid-2002, its economy is only just recovering to pre-1997 levels. Seven percent GDP growth is the level most economists consider necessary just to absorb new job seekers, but the Indonesian Government estimates growth in 2002 of 4% and in 2003 of less than 5%. The number of unemployed and underemployed (working less than 15 hrs/week) is currently estimated at 40 million.

Problems that developed under Suharto's rule may have been responsible for at least part of the lower growth in the post-Suharto era. Also, some of the economic problems in Indonesia can be attributed to the 1997 Asian financial crisis. But Malaysia weathered that crisis much better under its own strongman Mohamed Mahathir who has managed Malaysia in a way that has made it more like a managed partial democracy.

Chua points out that in economies which have market dominant minorities the introduction of democracy will create a situation where the vote produce politically dominant majorities which will use the power of the state against the market dominant minorities. If the market dominant minorities are far more productive and can manage assets more efficiently then government seizures of their assets will lead to lower growth rates or even stagnation and economic decline. If Chua is correct (and ParaPundit thinks she's obviously correct) then there can be circumstances where corrupt dictators are a lesser of two evils with the other evil being majority rule. Another obvious conclusion from this line of argument is that countries which currently have market dominant majorities (e.g. the United States of America) should not pursue immigration policies that demographically transform their dominant majorities into minorities. For more on this argument start at my previous post Prospect Of Democracy Breeding Ethnic Hatred In Iraq.

Share |      By Randall Parker at 2004 March 26 12:15 AM  Economics Demographic

Ray said at March 26, 2004 4:56 AM:

I noticed that the kings of Saudi Arabia and the former dictators of Iraq failed to make the list. Given that we discovered a paltry couple hundred million in cash hidden in just one of Saddam's palaces, I think the list needs a bit more reconsideration ...

Steve Sailer said at March 31, 2004 8:04 PM:

Surely, various Presidents of Mexico such as Salinas and Lopez Portillo belong on that list.

Randall Parker said at March 31, 2004 8:14 PM:

Yes, I agree on both Saddam in Iraq and the former Mexican presidents. Joseph Estrada seems bush league by comparison.

Also, where families lived off of a country how to account for that? Put a sum total on how much the house of Saud skimmed off the oil revenue?

Also, how much did the Shah of Iran take?

Proborders said at April 1, 2004 10:13 AM:

Randall, in certain parts of this country there probably are market dominant minorities.

Anglos in the District of Columbia might be considered a market dominant minority.

California will likely be the first major US state to have market dominant minorities (white and Asian).

Currently in certain sectors or sub-sectors there are "sector dominant minorities" or "sub-sector dominant minorities." For example, most NBA players (but not NBA owners or NBA head coaches) are black even though the black population of the US is about 13%. Probably most farm workers in California are of Mexican descent even though most Californians are not of Mexican descent. Probably or quite possibly most of the top Hollywood directors, producers, and executives are of Jewish descent even though the Jewish American population is about 2 to 3% of the US population.

Randall, the use of "sector dominant minority" or "sub-sector dominant minority" may be controversial. The term "overrepresented minority" might be a better term to utilize.

If affirmative action is so good, shouldn't there be affirmative action for Hispanic, white, and Asian basketball players so that their representation as NBA players more closely reflects their shares of the US population? If affirmative action in practice translates into lesser qualified blacks and Hispanics being granted admission to colleges and universities, shouldn't there be affirmative action for lesser qualified Hispanic, white, and Asian basketball players?

T. J. Madison said at April 2, 2004 12:34 PM:

We need to remember that Suharto also was responsible for the murder of >1.2 million civilians. The total cost of putting up with (actually funding and supporting) this guy need to include these figures.

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