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Lore & Background

In the mid-1950s, the economists who would become the Berkeley Mafia were students at the Faculty of Economics at the University of Indonesia (FEUI). The faculty was headed by Sumitro Djojohadikusumo, an economist who had served as Minister of Trade and Industry and Minister of Finance for the Government. As tensions grew between Indonesia and the Dutch government over West Irian, Dutch lecturers began to leave the country. Sumitro turned to the Ford Foundation for assistance. The Ford Foundation then began a process by which students from the FEUI were chosen to undertake overseas studies at the University of California, Berkeley. The overseas studies program began in 1957. By the early 1960s, all of the students who had been sent abroad had returned from Berkeley and had begun taking up positions as lecturers at the Army Staff and Command College (SESKOAD). In 1966, General Suharto took over executive control in Indonesia from President Sukarno in a coup by virtue of Supersemar. In late August 1966, Suharto held a seminar at SESKOAD to discuss political and economic matters. The FEUI economists, headed by Widjojo Nitisastro, attended the seminar. During the seminar, the economists set out their ideas and policy recommendations. Their presentation impressed Suharto, who invited them to begin work as a team of experts in the field of economics and finance. For his accomplishments, Sumitro Djojohadikusumo was often called the "Godfather of Indonesian economists", a title he disliked.

In Their Own Story

On October 3, 1966, on the advice of these economists and others, Suharto announced a program aimed at stabilization and rehabilitation of Indonesia's economy. The Berkeley Mafia focused on low inflation, fiscal constraint, and market deregulation. The new economic program was successful at stabilizing the economy. Inflation fell from 650% in 1966 to only 13% in 1969. After Suharto became president in 1968, the members of the Berkeley Mafia team were appointed to ministerial and senior advisory posts in Suharto's cabinet. The group had a great influence on economic policy and successfully brought Indonesia's economy to an unprecedented growth period. The growth rate was high, averaging around 6.5% per year between the late 1960s and 1997, when South East Asia was hit by the severe Asian financial crisis. The Berkeley Mafia's liberal approach towards economics encountered opposition from generals such as Ali Murtopo, Ibnu Sutowo and Ali Sadikin, whose economic approaches were more nationalistic. With the beginning of the oil boom in the mid-1970s, Suharto favored the economic nationalists and so the Berkeley Mafia's influence was restricted. Suharto would turn to the Berkeley Mafia again in the mid-1980s, when the price of oil began to drop. The Berkeley Mafia presided over the liberalization, deregulation, and the renewed growth of the Indonesian economy. Once again, they encountered political opposition from Sudharmono and Ginandjar Kartasasmita, who advocated economic nationalism, as well as BJ Habibie, who wanted a technology-centered economic development. Suharto sided with the economic nationalists, and the Berkeley Mafia's power weakened.

Reader's Guide

During Indonesia's economic collapse from the 1997 Asian financial crisis, people blamed the Berkeley Mafia and considered it to be part of the New Order regime. During the Reform era, only Widjojo was retained in the government. Out of the Berkeley Mafia group, only Widjojo Nitisastro and Emil Salim continued to have significant influence within government during the post-Suharto Reform era. Widjojo Nitisastro became an economic advisor to presidents B. J. Habibie, Wahid (Gus Dur), and Megawati. Emil Salim later served as the leader of the Presidential Advisory Council during Susilo Bambang Yudhoyono's administration and also continued to be active on environmental issues, both in Indonesia and in international circles. Mohammad Sadli remained well known as a senior economic commentator until his death in 2008. As of today, Emil Salim and Dorodjatun Kuntjoro-Jakti are two surviving members of the Berkeley Mafia.

Did You Know?

• The Berkeley Mafia were students at the Faculty of Economics at the University of Indonesia (FEUI) before studying at UC Berkeley through a Ford Foundation program that began in 1957.
• Inflation fell from 650% in 1966 to only 13% in 1969 under the economic program advised by the Berkeley Mafia.
• The group included Widjojo Nitisastro, Mohammad Sadli, Emil Salim, J. B. Sumarlin, and Ali Wardhana.
• Sumitro Djojohadikusumo, who headed FEUI, was often called the 'Godfather of Indonesian economists,' a title he disliked.
• As of today, Emil Salim and Dorodjatun Kuntjoro-Jakti are two surviving members of the Berkeley Mafia.