Under the 1945 constitution, Sukarno possessed executive responsibility as well as ceremonial functions as head of state. He quickly created a new government with Djuanda Kartawidjaja, now first minister, at its head. Pending elections under a new electoral law, he appointed members in accordance with the functional representation principle to the bodies for which the constitution provided: the People's Consultative Assembly (Majelis Permusyawaratan Rakyat; MPR) and the Supreme Advisory Council (Dewan Pertimbangan Agung; DPA). In 1960, when parliament rejected the government's budget, he replaced it with a provisional nominated parliament.

Sukarno's central purpose was the preservation of national unity and the restoration of a sense of national identity, goals he pursued through an increasingly flamboyant style. Sukarno's concern with symbols of greatness--expressed in grandiose buildings, national monuments, and evocative slogans and in such occasions as the Fourth Asian Games (1962), to which Indonesia was host--was not accompanied by an attempt to come to grips with the nation's economic problems. The damage done to the economy by the seizure of Dutch enterprises in 1957 and the wasteful extravagances of his later search for grandeur was justified in his eyes as integral to the task of making Indonesians proud of themselves and of their independence. Nevertheless, he was careless of the economic consequences of his policies. He appeared to show no recognition of foreign indebtedness, declining exports, or the inflation that reached new rates of acceleration in the early 1960s.

Sukarno's power during the years of Guided Democracy depended in great measure on the preservation of a balance between the army and the PKI. Sukarno consistently protected the PKI from moves made against it by the army, and the period was one of growth in the communists' prestige. He opposed military attempts to prohibit its congresses and to suppress its newspapers. He banned movements opposing the party and advanced PKI leaders to positions within the national leadership. To many observers he appeared to be preparing the way for the communists to come to power. To others he appeared merely to be redressing a balance that was in constant danger of being tilted against the PKI.

In foreign policy, Indonesia adopted a neutralist stance. At the Asian-African Conference in 1955 (the Bandung Conference) the country staked a claim to Third World leadership. By the early 1960s, however, Indonesia was moving to a new international position. In ideological terms, Sukarno had sketched the world, as he saw it, in terms of a conflict between Nefos and Oldefos (New Emerging and Old Established Forces). In this analysis was embodied his continuing hostility to the West.

In 1962 Indonesia's campaign to recover Irian Barat, which the Dutch had retained in 1949, achieved final success. An agreement was reached with The Netherlands for the transfer of the territory to Indonesia after a period of temporary UN administration, though with provision for the inhabitants of the territory to make an "Act of Free Choice" before the end of 1969. (This was eventually effected by representative councils, which confirmed Irian Barat's continuance as part of Indonesia.) The resolution of this issue was followed, however, by the development of Indonesia's opposition to the formation of Malaysia and its commitment, after an erratic series of changes of mood, to a policy of "confrontation" toward the new Malaysian federation in September 1963. The confrontation policy was followed two years later by Indonesia's sudden withdrawal from the UN in January 1965 in reaction to the seating of Malaysia on the Security Council.