Suharto dubbed his new regime the New Order . His first few years in power were seen as a brave new dawn, as the economy improved beyond all recognition and he managed to create a pluralistic society where religious intolerance had no place; providing people belonged to one of the five main faiths, their religious beliefs were respected.

But this was not matched by political tolerance, and people were forced to live under a suffocating dictatorial regime , taking part in the charade of the so-called "festivals of democracy", the "elections" that took place every five years. Where beforehand there had been a multitude of political parties , Suharto reduced them to just three: the PPP (United Development Party) made up of the old Islamic parties; the PDI (Indonesian Democratic Party) made up largely of the old nationalist party, the PNI; and the government's own political vehicle, Golkar. The re-election of Suharto was a foregone conclusion, and critics were jailed and tortured. A huge underclass developed in rural areas and in slum districts on the outskirts of large cities. There was also widespread corruption throughout society, from the president down.

East Timor , independent since a revolution in Portugal had emancipated the tiny former colony in 1974, collapsed into civil war the following year as various factions failed to agree on whether the territory should become part of Indonesia. In the event, the decision was taken out of their hands by the Indonesians themselves, who invaded on Suharto's orders in December 1975. Despite strong condemnation from the United Nations, and regular Amnesty International reports of human rights abuses in East Timor, the US and Europe were unwilling to upset their new Southeast Asian ally. East Timor was incorporated into the republic of Indonesia the following year.

The oil crisis of the 1970s raised the price of oil, then Indonesia's most lucrative export, significantly. This windfall lasted until 1983, allowing the government to use the oil revenue to create a sound industrial base founded on steel and natural gas production, oil refining and aluminium industries. Welfare measures were introduced, with 100,000 new schools built, and the 1980s also saw an increase of fifty percent in agricultural production. Yet the beneficiaries of Suharto's economic miracle were a small minority who lived in air-conditioned luxury in the big cities, while the majority continued to eke out a meagre existence in the rural areas of the country.