increase profitability if it simply leads to a shift from employing living labour to the use of machinery. Technological change will only offset the decline in the rate of profit if it also makes capital goods cheaper and so reduces the amount of investment needed to employ more workers. For some time developments in the US information technology sector seemed to do this. But this 1s becoming less and less cleariv the case; "The Economist' of December 9 2000 reported that the rate of deflation for computer prices had slowed trom 25 percent to Il percent, with software prices rising by 7 percent during 2000: "after falling for a couple of decades, prices for IT equipment and software were flat in the year to the third quarter. That matters because IT investment has because been spurred by falling prices".
The result of all this has been a sharp decline in the headline profits of some key US companies followed by dramatic falls in share prices. Examples are Dell, Intel, Apple, IBM, Chase Manhattan and Xerox, which saw its shares fall by 75 percent in value last October and came close to bankruptcy. Banks like Bank of America have seen significant rises in problem loans. These developments have fed through to the stock market in general, which has been wildly optimistic about future profits in any case. American capitalism thus faces two central problems. The most immediate is the possibility of a financial crisis spilling over into a recession. A collapse in domestic confidence in the stock market could cut investment, by starving companies of funds, and slash consumption as households see their savings fall in value. If foreign investors also lose confidence in the US economy then they could withdraw their funds, sending the currency plunging and making it difficult to continue funding the trade deficit. But in many ways more important is the second, long-term problem. The recent buoyancy of US capitalism has been based on an artificial Adam Hartman More and LUIC people in Indonesia are being plunged into poverty as a result of the Wahid and Megawati government's subjugation to the dictates of the International Monetary Fund (IMF).
•his is the conclusion of a report published at the end of last year by the left-wing People's Democratic, Party which played a key role in the popular mobilisations which brought down the Suharto The combined impact of subsidy cuts, privatisation, trade liberalisation and foreign debt has pushed up 136.8 million the number of people living below the international poverty standard of US$2 per day. woIKeIs, small farmers and the urban poor are not taking this lying down. Over the past six months here has been upsurge in social resistance.
On October 1 the government cut fuel subsidies, having been forced to back down this April. It had previously cut electricity subsidies.
The resulting 12% fuel price rise fed through into all sectors of the particularly public Tens Le als VUlt. thousands of workers and students protested In 2000-01 the government plans to sell state enterprises worth a mässive 6.5 trilion rupiah. The IMF targeting over 60 state enterprises for privatisation in the next ten years.
The collapse of the rupiah and the lack of competition from crisis-ridden Indonesian firms means that these assets will fall cheaply into the hands of foreign companies.
Privatisation is causing the cost of basic services rise. Unemployment is also escalatas thousands of jobs are shed both in newly-privatised companies and in state enterprises being slimmed down in readiness.
Trade liberalisation has caused the destruction of the national sugar industry. Farmers face ruin as cheap sugar and rice imports have flooded in to the Overall nanonal productive capacity is being weakened, increasing dependency on foreign capital. Foreign exchange which could fund productive investment is instand waster on growing luxury imports for the well-off.
Public foreign debt now stands at US$80 billion, soaking up 37% of government spending in debt service in 2000. With the government funding a bloated and vicious military and bailing out corporations which are themselves hit by debt only crumbs are left for public services. Education spending for example has fallen to 1% of GNP, 30% less than the previous year.
But the IMF shock "therapy" has not solved the economic crisis which engulfed Indonesia when international financial speculators pulled out of Thailand and Malaysia in 1997 leading to a collapse of currency, stock and property values in the region. Instead the IMF policies have brought the The in Parliament until 2009.
Their role is now written into the Constitution as the organ solely responsible for "defending, protecting and safeguardintegrity and sovereignty". This means the generals can declare a state of emergency if they see fit.
The TNI may be given impunity for all past human "non-retroactivity" rights violations under tne principle, although it is unclear whether a new human rights law passed in November will override this.
Wahid and the military have clashed in their approach to the national liberation struggles being fought Aceh and West Papua. This again underlines Wahid's weakness. While both retuse to contemplate independence for either territory Wahid. has preferred to negotiate and is prepared to concede greater autonomy.
The TNI has tried to undermine negotiations by stepping up repression.- favouring a military solution to these conflicts. "Dark forces" within it are also believed to have stoked the religious conflict in Maluku.
The aim is to restore the TNI's legitimacy in the eyes of the public by making it seem essential for restoring order and holding the country together. Aceh and West Papua In Aceh (the northern part of Sumatra adjacent to Malaysia) there are mass mobilisations calling for a referendum independence.
Hundreds of thousands attempted to gather in the provincial capital Banda Aceh in November for a Mass Rally for Peace called by the advocates of a referendum. The TNI and armed police used the utmost brutality to stop people getting there, including firing on convoys and torching or confiscating vehicles.
Up to 178 people were killed in the days before the rally. This repression failed to stop the rally going ahead and issuing calls for a general strike. At the same time a shadow ballot of entire adult population (2.75 million) showed 92% in favour of independence.
In West Papua a more relaxed approach under Wahid's influence to the independence movement has given way to a clampdown supported by his Vice President Megawati Sukarnoputri.
Since August the Indonesian military and security presence has doubled and in a chilling echo of East Timor the army has begun forming militias amongst the settlers and stirring up conflict between settlers and the indigenous communily The state has cracked down on the popular practice of flying the Papuan Morning Star flag. In recent months police have shot dead five and wounded 23 flag-raisers. One incident led to Icrcugc attacks against settlers who Were sheltering police, leaving nearly 30 dead. The state responded by detainand torturing dozens of Papuans. British Hawks In late September Hawk jets sold to Indonesia British Aerospace were flown low over January 2000 Britain voted to Indonesia imposed during the The British government hypocritically claims credit for not equipment but it is licensing the supolv of spare parts for For the New Labour government business as usual c more The sale of state assets means popular resistance helps its "ethical foreign policy" on fighting for national liberation cies forced by the governments the IMF and other instruments