The lost decades?

In both Latin America and in Africa, the post-independence decades were periods of dramatic falling behind caused by violence and instability on the one hand, and poor growth on the other (Bates et al. 2007: 925; see also Easterly and Levine 1997; Bertocchi and Canova 2002; Artadi and Sala-i-Martin 2003). Therefore Bates et al. (2007) label this period the ‘lost decades’ – a period lost for economic development due to the problems of independence and the instability of the new, post-colonial regime. The key element in their argument is that political, fiscal, currency and market fragmentation created economic balkanization in post-independence Latin America and Africa, which in turn resulted in stagnation. This chapter will argue that the Indonesian case in certain respects resembled the Latin American and African experience (see also Marks 2010b). However, in order to do justice to the achievements that were realized, it might be more appropriate to call these years transitional decades for creating a nation-state, albeit initially at the expense of economic integration and development. But before we deal with the story of post-independence Indonesia, we will briefly sketch the political and economic developments in the 1940s.