Shortly after daybreak one recent morning a herd of gnashing buildozers rumbled into a quiet neighborhood on the edge of the city and began destroying the small, red-tile-roofed houses.

The 20 families who lived in the settlement stood quietly by a watched their homes churned into the thick, brown mad. They had been told only the day before that although they held legal deeds to the property, the land had been taken over by a development company that has plans to build a golf course and luxury housing project.

The company, Metropolitan Kencana Ltd., is headed by a younger brother of Indonesia's President Suharto, Sudwikatmono. Other powerful businessmen and government figures own shares.

For the small band of displaced neighbors, the bulldozers' arrival began a tragedy. They were shunted off into hastily thrown-up barracks. One man collapsed with a nervous breakdown and committed suicide. Another suffered a heart attack and is still hospitalized.

A few lines about the incident appeared in one Jakarta newspaper, but no names of the company's officers were printed.

This kind of incident and others of a far broader magnitude and with far graver consequences occur with regularity in Indonesia. "The people of this country expect their leaders to enrich themselves and members of their families," said a Western diplomat.

Beneath the unruffled surface, frustration and bitterness are slowly mounting to a boil.For more than a decade, since the seething cauldron erupted in an abortive and gory communist-led coup in 1965, Suharto's military-backed government has kept the lid of repression tightly screwed down.

With national electios scheduled for May 2, official corruption would be an obvious issue in the campaign, which has already begun. But the Government has already declared that the subject will not be discussed.

This makes dissent difficult to perceive. Indonesians do not like to discuss their political views with roreigners. There is also no shortage of apologists among resident Westerners, diplomats and businessmen for the system of corruption that permeates every layer of public life.

"It's the Indonesian way," is a common explanation. "They've lived with it for centuries. First they were exploited by the sultans. Then the Dutch colonialists. And now it's the army."

Not all Westerners here are willing to explain it away. "We and the other Western nations who were so happy to see Sukarno and the Communists knocked over are largely to blame for the state of affairs here now," claimed a highly respected Amreican economist who has worked closely with the Indonesian government for the last five years.

"Because we were so relieved to see Indonesia saved from communism," he said, "we started pumping money in here blindly. Any project the Indonesians wanted, no matter how foolish and grandiose, we came up with the backing. Is there any wonder that officials who make $200 a month would start raking off their hare?"

There are some Indonesians - an idealistic lawyer in Jakarta, a junior civil servant in his shabby home on the capital's outskirts, an angry civil engineer in the Sumatran city of Medan - who deny the inevitability and acceptance of corruption.

"Just because we don't say anything doesn't mean we don't know and don't care about what's going on at teh top," the clerk said over cups of sweet tea one evening.

"We know the top army people are getting rich at our expense," the engineer told a visitor to his office near the Malacca Straits. "And one day, when we can't take any more, all the anger that's building up inside will explode. Then, God save us all."

Strong words can be spoken by men who insist on remaining anonymous. Adnan Buying Nasution does not demand such protection. "I've already speng 22 months in jail, without a lawyer. "I'm no longer afraid."

Nasution, who devotes half of his time from a lucrative private practice to a legal aid association he heads, is an idelist who believes that his efforst may lead to a righting of Indonesia's economic and social imbalances.

Yet he is realistic enough to concede that only the army has the organization required to hold the vast country - whose national motto is "Unity in Diversity" - together.

"But what we need is an army which will open the political system up to democracy," he said in an interview in his cramped legal-aid ofice, on a narrow, muddy lane in central Jakarta. "And believe it or not, there is this type of officer."

"There are in the army today intellectual, forward-looking younger officers who foresee that if they hold too tight a grip on the country, the army will eventually be ruined because it will become little more than an army of occupation," Nasution said. "Officers like these are the nation's only hope."

Nasution said he had just taken on the case of the 20 displaced families. Showing a visitor beautifully printed brochures for the luxurious housing and recreation complex, he said, "They call this development. But development for whom? Only the rich, while the poor people who've been thrown off their land can only expect to get poorer and poorer unless they're justly compensated. And compensation is at the companys whim.

Nasution said he had learned that Sudwikatmono, the president's brother, was the front man in the company for Lim Soei Liong, a wealthy Sino-Indonesia businessman. Lim and Sudwikatmono also control a number of other enterprises.

In conjunction with another Sino-Indonesian group, Sudwikatmono and a half-brother of Suharto's, Probosutedjo, control a huge gambling casino, nightclub, bowling alley and hotel complex on the Jakarta waterfront.

Suharto's wife, Tien, is known to have even more diverse links with Chinese middlemen in a vast network of interests. "Through channels provided by members of the president's family," Nasution said, "a handful of incredibly rich men have direct lines to the power structure and they get whatever they want - credit, permission to destroy homes, anything - at great cost to the poor people of Indonesia."

One member of what Nasution termed the "power structure" who actively support the lawyer's legal-aid organization is the current acting governor of Jakarta, Ali Sadikin. "When I precented him with the idea of a legal aid society," Nasution recalled, "he said it was a good idea because the government made mistakes at times and needed someone to set them right." Sadikin granted $53,000 to the society this year.

Sadikin, a tall and strikingly handsome marine general, has just completed 10 years as Jakarta's governor and is continuing temporarily in an acting capacity while a successor is found. Several informed Indonesians said they considered him to be a good prospect to succeed Suharto as president.

This has given some concerned observers heart because Sadikin has an outstanding record of achievement and a relatively clean record.

He has not been able to do much about stemming the influx of poor people to the capital, which has a population of 5.3 million, but he has improved slum areas occupied by more than 2 million people.

Although he was obviously uncomfortable with questions about specific individuals, Sadikin readily conceded that the city and national administrations were shot through with corruption. He cited inadequate pay for civil servants, at every level, as the basic cause of official corruption.

This view is widely held. "From the top to the bottom," said the director of a major U.S. bank in Jakarta, "no official receives a salary even remotely realistic. So, naturally, they all put the squeeze on."

Even the army, which openly controls the country, is grossly underbudgeted. This leads unit commanders to involvement in outside husinesses. With these extra funds, the commandres maintain their own living standards and keep their officers content.

Similar techniques, according to a variety of Indonesian and Western sources, are employed by military and civilian officials from the bottom grade right up to President Suharto himself. "It's very much the way the ancient kings of Java ran their courts and kingdoms," a leading Indonesian intellectual noted. "The kings took care of the nobles and so it went, out and out in widening rings."

What distinguishes today's corruption, in the judgment of most observers, is its scale. As a retired senior diplomat said, "What is going on here today is beyond all reason."

Referring to allegations that the former head of the state-owned oil company, Pertamina, plunged the country $10 billion into debt and that the head of the national communications organization demanded $40 million in payoffs from Hughes Aircraft for a satellite contract, the former diplomat said:

"What worked in the ancient feifdoms cannot work in 20th century Indonesia. Amounts like these are absurd.

"But more importantly, they are seriously damaging us as a people and a nation. They have eroded our morality and they are keeping us from developing. I do not believe the people of Indonesia will accept this much longer."