An Economic View of Indonesian History

Volume XVIII, No. 1 March 2003
, ISSN 0854-1493

co-
I
An Economic View of Indonesian History in
The Period of Dutch Colonialim
DADANG SOUHIN
Statc-Finance Mmagcmcnt System and Accomtability t
Indonesian Experience
BAMBANG WAHYUDI
Economic Evaluation of Watershed Management Projects :
An Ovcrvicw Methodology and Application
CHAY ASDAK AND SU~YASTIE SOEMITRO REMI
UnmCmity Roles in Developing Communities Through Business
Incubator D d a p m e n t fox SrnalI and Middle Business and Entrepreneur
I ERNITSNAWATI SULE
I The Impact of B l Trngedy and T h e Gulf War 11 to The hportance of
ai
The Revision of The W B N 2003
I K m NAMA
Strategic Planning for A Succcsafid Program in Agdculture and
Food Supply in The Prainsc of Gorando in 2003
USMAN KAHARU

' The Efforts of Society Empowerment in T h e Fmewark af
Impmving The welfare
SEDARMAYANTI

I Cooperative Price Effect
ut- ~ T A M U ARIFFIN
DI

Economic Journal
1

Journal o Faculty of Economics Padfadjaran University
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kc. k ' ,
. ,It . * .. i&-

Dadang Solihin: An Economic View of Indonesian History

AN ECONOMIC VIEW
OF INDONESIAN HISTORY
IN THE PERIOD OF DUTCH COLONIALISM

Dadang Solihin

history of Indonesia purely from history point
Introduction of view. This condition of difficulties to collect
the sources make particular challenge to write
Dadang Solihin, Ma-
ster of Arts, Depart- The purpose of this the paper. Since it is hard to find sources of
ment of Economics paper, initially, is to present Indonesian history of economics thought, I
University of Coloradothe history of Indonesian decide to discuss of Indonesian history from
at Denver, Deputy Di- economic thought. I believe, economic point of view, especially in the
rector for Informationin the beginning, that it wil period of Dutch colonialism. I hope it will be
of Spatial Planning not be difficult to find sources the turning point to achieve our initial purpose
and Land Use Mana- as mention above.
of this materials from library
gement, National De-
and from web. In order to
velopment Planning According to Indonesia (1994), the
Agency. make this target easy and to
history of Indonesia can divide into: pre-
know the outline of the
Indonesia period, the period of Hindu
paper, first I conceive ‘preliminary study’ by
kingdoms, the period of Islamic kingdoms, the
exploring Ajit Dasguta (1993) “A History of period of dutch colonialism, nationalist
Indian Economic Thought; Robin Neill (1991) movements, the Japanese occupation, and
“A History of Canadian Economic Thought,”
the birth of the Republic. Sievers (1974)
and Tessa Morris (1989) “A History of
states that during the period of Dutch
Japanese Economic Thought.” The next step
colonialism he found that colonial government
is collecting the sources of history of treat three kind of policies: cultivation system,
Indonesian economic thought. This is really liberal system, and ethical system.
become a serious problem. I cannot find the
sources, neither books nor articles, of this
areas. Many books discuss about indigenous The History of Indonesia
Indonesian economics from anthropology
Indonesia did not exist as yet during
point of view. But they describe this issue
the Palaeocene period (70 million years BC),
partially. For example, Clifford Geertz (1963)
“Peddlers and Princes” discuss the rural the Eocene period (30 million years BC), the
social structure and economic organization in Oligacene period (25 million years BC) and
the Miocene period (12 million years BC). It is
Modjokuto (Java) and Tabanan (Bali). James
believed that Indonesia must have existed
Siegel (1969) “The Rope of God” discuss the
during the Pleistocene period (4 million years
socio-economics condition of Aceh’s people.
Robert Jay (1969) “Javanese Villagers” BC) when it was linked with the present Asian
discuss social relation in rural Modjokuto mainland. It was during this period that the
Humanoids made their first appearance and
(Java). Robert W. Hefner (1990) “The
Java Man inhabited the part of the world now
Political Economy of Mountain Java” discuss
called Indonesia. Java Man, named
the socio-economic condition of the Tengger
Pithecanthropus Erectus by Eugene Dubois
Highlands (Java). Other books discuss the
who found the fossils on the island of Java,

Economic Journal FE-Unpad Vol. XVIII, No. 1, March 2003 Page 1


must have been the first inhabitant of popular in many parts of present day
Indonesia. It was also during this period Indonesia.
(3000-500 BC) that Indonesia was inhabited
Moslem merchants from Gujarat and
by Sub Mongoloid migrants from Asia who
Persia began visiting Indonesia in the 13th
later inter-married with the indigenous people.
Century and established trade links between
Later still (1000 BC) inter-marriage occurred
this country and India and Persia. Along with
with Indo-Arians migrants from the south
trade, they propagated Islam among the
Asian sub-continent of India.
Indonesian people, particularly along the
The first indian migrants came coastal areas of Java, like Demak. At a later
primarily from Gujarat in Southeast India stage they even influenced and converted
during the first Christian era. Early trade Hindu kings to Islam, the first being the Sultan
relations were established between South of Demak. This Moslem Sultan later spread
India and Indonesia. Sumatra was then Islam westward to Cirebon and Banten, and
named Swarna Dwipa of “the island of gold, “ eastward along the northern coast of Java to
Java was called Java Dwipa or “the Rice the kingdom of Gresik. In the end, he brought
island,” and a Hindu kingdom of Crivijaya in the downfall of the powerful kingdom of
Sumatra and Nalanda in South India were not Majapahit. After the fall of Majapahit, Islam
confirmed to religious and cultural exchanges. spread further to almost all Indonesia’s nook.
They later developed diplomatic relations, and
The Dutch had started their quest for
even covered a wide range of trade. The
Indonesia spices to sell on the European
influx of Indian settlers continued during the
market at big profit. For the purpose of more
period from the first to the seventh century
efficient and better organized merchant trade
AD. Peacefully and gradually the Hindu
they established the Dutch East India
religion spread throughout the archipelago. It
Company (VOC) in 1602. To protect the
was adopted by all layers of the people of
merchants fleet from frequent pirate attacks
Java, but limited to the upper classes on the
on the high seas, Dutch warships were
other islands.
ordered to accompany it. After the
Many well-organized kingdoms with a nationalization of the VOC in 1799, the Dutch
high degree of civilization were ruled by Government had a firm grip on the vital
indigenous kings who had adopted the Hindu territories of the country. People in those
or Buddhist religion. This explains why this territories were forced to surrender their
period in history is called the Period of Hindu agricultural produce to the Dutch merchants.
Kingdoms. It lasted from ancient times to the It was the beginning of Dutch colonialism in
16th Century AD. Because the culture and Indonesia.
civilization, which emanated from the Hindu
When all the regional wars of
and Buddhist religions, were syncretized with
independence failed, Indonesian nationalists
the local cultural elements, the period was
began thinking of a more-organized struggle
also referred to as the Hindu-Indonesian
against Dutch colonialism. The move began
period. Indian culture and customs were
with the founding-of Boedi Oetomo, literally
introduced, such as the system of
meaning “noble conduct,” on May 20, 1908.
government in a monarchy, the ancestry
This organization of Indonesian intellectuals
system, the organization of military troops,
was initially set up for educational purposes
literature, music and dances, architecture,
but later turned to politics. It was inspired by
religious practices and rituals, and even the
Japan’s victory over Russia in 1901, which
division of laborers into castes or varnas. The
also gave impetus to nationalist movements
Hindu literary works known as Vedas and the
in many parts of Indonesia.
“Mahabharata” and “Ramayana” epics were
also introduced through the wayang, or After their attack on Pearl Harbor in
shadow-play performance, which is still very Hawaii, the Japanese forces moved
southward to conquer several Southeast



Asian countries. After Singapore had fallen, thorough going change over to a Liberal
they invaded the Dutch East Indie and the System. Individual private enterprise, and
colonial army surrendered in March 1942. then large-scale corporation enterprise, came
Under the pressure of the 4th Pacific war, to dominate the modern sector after 1870.
where their supply lines were interrupted, and The Agrarian Law, which made all of this
the increasing of Indonesian insurrections, the possible, was merely permissive legislation; a
Japanese ultimately gave into allow the red- series of decrees and ordinances spelled out
and-white flag to fly as the Indonesian the actual system. The net effect of the
national flag. Recognition of “Indonesia liberal system of land legislation was the
Raya” as the national anthem and Bahasa opening up of two avenues for private-
Indonesia as the national language followed. enterprise estates, both of which proved
Hence, the youth’s pledge of 1928 was important to the future of the Indonesian
fulfilled. After persistent demands, the social and economic structure.
Japanese finally agreed to place the civil
The third phase of Dutch colonial
administration of the country into Indonesian
policy was the Ethical System, or the Ethical
hands. This was a golden opportunity for
Policy, which covered roughly the years 1900-
nationalist leaders to prepare for the
1930. It concentrated in principle on raising
proclamation of lndonesia’s independence.
both the material standard of living of the
The Republic of Indonesia first saw Indonesian and the general level of their
light on August 17, 1945, when its social welfare. It also sought, through
independence was proclaimed just days after government intervention, to modernize
the Japanese surrender to the Allies. Indonesian psychological, economic, and
Pancasila became the ideological and political life; to create a middle class; to
philosophical basis of the Republic, and on integrate the autochthonous and the modern
August 18, 1945 the Constitution was sectors; to stimulate output; to industrialize; to
adopted as the basic law of the country. provide social overhead capital; and in a most
every way to promote what is now called
economic development. Although it differed
The Dutch Colonialism. in method from postwar efforts at
modernization and development, it did not
As mention above, the nationalization
differ in objective, except in that it most
of the VOC in 1799 recorded in Indonesian
definitely did not envisage national
history as the beginning of Dutch colonialism.
independence. It represented a shift,
The history of colonialization in Indonesia is
certainly, from the de facto policies of the
the history of the social, cultural, and
Liberal System, but it was nevertheless
economic dislocation of society under the
continuous with that era in several ways.
influence of colonial government. The
Indeed it was still consonant with liberalism,
process occurred unevenly and at different
but a liberalism once again shifted in meaning
stages in various parts of Indonesia, but by
and emphasis. As stressed later by the New
the end of century the disruption was
Deal and similar reforms in the west during
completealmost everywhere and had affected
depression, one view of liberalism recognized
all classes of society. According to Aveling
that when personal freedom and economic
(1979) the process of involution, in economic
freedom came into conflict, the welfare of the
affairs, came to be most clearly marked
people was paramount over the welfare of
during the period of culture system, for it was
corporations. In the Indonesia this doctrine
then that the Indonesian farmer was denied
was anticipated: the welfare of the Indonesian
any real participation in future economic
was paramount over the economic interests
development.
of the Dutch plantation and business
The liberal developments of the pre- interests. Official liberalism reverted from
1870 era constituted a mere prelude to a laissez faire to its early humanistic roots, or in



today’s term, benevolent interventionism was petani. In practice the legal limit of land
substituted for old-style economic liberalism. exaction (one-fifth of the land holdings) was
often grievously exceeded in specific
communities at specific times, but it average
Cultivation System, 1830-70 out. The petani who supplied labor was
similarly supposed to work a maximum of
“Cultivation System” is a translation of
“one-fifth tim,” calculated as sixty-six days a
Cultuur Stelsel, which by homology often
year, but in practice this ceiling, too, was
appears in the literature as “Culture System.”
often ignored. Cultivation of the new
It refers to agricultural cultivation and might
government-sponsored crops simply
with some accuracy be translated “Agricultural
demanded more time than the traditional
System.” However, insofar as cultuur in
staple, rice.
Dutch has a concrete signification—a specific
kind of crop or a specific acreage, as I might In the restricted and precise sense of
say “influenza culture,” but never “potato the term, then, the Cultivation System was a
culture,” when referring to a potato field—it device to make the government the master
conveys a meaning for which there is no planter of all Java, the outer islands remaining
precise equivalent in contemporary English for the most part out of reach of enforcement,
usage in an agricultural context, for neither and to convert part of every village, on the
“culture” nor “cultivation” will quite do, though island into a localized section of the
both have been used. I will avoid the government plantation. In terms of world
concrete usage here and employ the form systems, then, the idea of a planned or
“Cultivation System”. control economy dates back to the Dutch
Indies of 1830.
By whatever translation, Cultuur
Stelsel is an inadequate name for the overall In the large sense, what I have called
policy of the period, though it is convenient if the Compulsory and Monopoly System refers
the proper qualifications are understood. In to all the coercive measures of the middle
the extensive sense, a better name might be decades of the nineteenth century designed
the “Compulsion and Monopoly System.” In to maximize the income of Batavia, the
the narrow and proper sense, the Cultivation Nederlandsche Handel-Maatschappij (NHM),
System refers to the employment of a specific and the Netherlands government. The old
contract between the government (via a Priangan system, for example, had nothing to
director of cultivation) and, usually, the desa do with land rent and was therefore distinct
(village), via the headman, requiring the desa from the Cultivation System proper; but
to devote a set quota of land and labor to the inasmuch as it was in harmony with the
cultivation of particular crops for the objectives of the new system, the Priangan
government in lieu of land rent. Theoretically, system in coffee production was retained, as
the petani (farmers) would be paid, or given it had been throughout all the reform era. The
equivalent credit, for contributions in excess Priangan system also survived the longest of
of his quotas. While nominally voluntary in all the compulsory systems and was not
the beginning, in order to assure that its terminated until World War I.
quotas were met, the government might have
In concept, the Cultivation System
been expected to exert compulsory (as it proper made all of at least sawah Java a
soon did) upon the petani to cooperate in the single government plantation, with the petani
system. Moreover, the letter of the law was
coerced to the extend that his land and his
soon violated so that the desa not only
labor were tied to government quotas of
provided their quotas under the Cultivation
specified export crops. In practice, when
System but in addition paid land rent,
regions or crops proved unprofitable they
particularly when their forced labor did not were dropped.
meet the 40 percent land rent. Thus,
unproductive crops were subsidized by the



But this was only part of the total entrepreneurial roles even when virtually all
system in the largest sense—what I have risks were removed. As time went on, the
called the Compulsory and Monopoly contractors became more professionalize as a
System—which included many additional class. They took an interest in improving crop
compulsory and monopolistic features. For yields, and by saving and reinvesting part of
example, the petani was still responsible, in their inordinate profits they were able to
practice, for land rents and for forced services institute such technical improvements as
to various superiors, including the state, on steam power and tram railways for local
public projects such as roads and dams, for transport. The NHM played a role in this
which he was paid in theory but always in sector also, building model plants, lending
practice. It was by forced labor that a money, and overseeing where they were
significant amount of capital formation took creditors. The NHM encouraged
place, in the same way that the ancient improvements in agricultural and processing
kingdoms had built temples. The NHM also techniques and the introduction of ever more
played an integral and, as a buyer of crops, a sophisticated machinery. The Compulsion
semi monopolistic role in the grand design, and Monetary System was rounded out by
particularly through the Consignment System. enforcement of the Cultivation System
This latter system provided that a certain through corporal punishment and by a severe
quota of the various agricultural products restriction of personal liberty through a special
were to be sold to NHM for shipment to the set of laws governing clothing, restriction of
Netherlands. No other Dutch shippers movement, and the like. Finally, production
existed. The ships themselves were by the petani on his own initiative in
chartered from Dutch owners. Only British competition with government was
enterprise was able to compete at all. The discouraged.
NHM also loaned to Batavia. Between 1857
The Cultivation System proper, in
and 1881 a number of other banks were
theory, systematized a set of principles into a
established in the Indonesia, including
code as well as a policy: (1) Batavia as
Escomptobank; the Rotterdamsche Bank;
sovereign owned, in the western sense, all of
Internationale Crediet en Handelsvereniging
the land over which it ruled; (2) the villagers
Amsterdam; the Koloniale Bank; Dorrepaal
were obligated to pay a portion of their annual
Co,; and a branch of the British Chartered
produce for the privilege of using this land; (3)
Bank of India, Australia, and China.
to protect the petani from the usurer, this
Another aspect of the overall system payment should be at least partly in kind; and
was that, inasmuch as certain products had to (4) the obligation to provide land and/or labor
be processed in factories, these industrial was to be construed no as corvee but as a
centers were built and operated by simple book keeping substitute, or perhaps an
contractors. The government in the beginning insignificant difference in end product without
encouraged Europeans and Chine to assume altering the total contribution to the state. The
this function by making financing absurdly petani owed the state the rice he was
easy, virtually guaranteeing the processor sacrificing; he would have been obliged to
against loss, and assuring him a high price spend the land and labor anyway to produce
and a cheap supply of labor and raw the land rent in rice.
materials. Chinese, British, French, and
Indian nationals responded to this
opportunity, but Netherlanders waited until the The Liberal System, 1870-1900
arrangement had proved foolproof. In lieu of
The Liberalism which was defeated in
willing contractors, the government
1830 with the introduction of van den Bosch
sometimes built the factory and hired a
statist colonial policy never died out in the
manager for it, usually British. In short,
Netherlands, though its character changed
Chinese and Europeans reluctantly assumed
somewhat. As the Netherlands grew in



prosperity, the middle class expanded, and The great triumph of liberal colonial
with it that kind of liberalism which sought policy consisted of the twin bills of 1870, the
economic and political power for the middle Sugar Act and the Agrarian Law. The Sugar
class at home. While hardly antistatist in its Act added sugar to the list of crops to be
colonial policy, the States-General defied the exempted, though by gradual stages, from the
king as early as 1839, which resulted in the Cultivation System, which action formally
abdication of William and the resignation of terminated the system. Coffee continued to
van den Bosch from his office as colonial be grown under forced cultivation, because
minister. Parliamentary power steadily the ancient Priangan system was regarded as
expanded, and with it the States-General’s something apart. It was not until 1915 that
concern for and authority over the Indonesia. the Priangan system was abolished by law,
The Liberal Party members eventually had a effective January 1, 1917.
turn heading governments, but by that time a
Even before 1870, parliamentary
more liberal colonial policy could be expected
victories over the king and the new
from both liberals and conservatives.
Fundamental Law of 1848 resulted in some
During the era of growing liberalism at colonial reforms, especially the far-reaching
Netherland and the era of the Cultivation change in 1854 of the Basic Regulations of
System in Indonesia, Dutch reformers sought the Colonies (Regerinsreglementn). While
to change colonial policy through both political dubiously liberal and too ambiguous in
action and propaganda. Among the most language to be immediately effective, the
influential reform writers were Dr. W. R. Baron 1854 document served firmly to establish the
van Hoevall, Eduard Dowes Dekker, and principle that the state was not to interfere—
Isaac D. Fransen van de Putte. Hoevell first though to be sure it did in fact continue to
work, Reis over Java (Journey through Java), interfere—in the administrative of judicial
was published in 1849, and he published as functions of the native governmental
late as 1881. In 1860 the works of Douwes structure. In short, the petani were wholly at
Dekker and Fransen van de Putte appeared. the mercies of their own leaders, who were in
Douwes Dekker wrote a famous novel called turn under economic pressure to oppress
Max Havelaar under the pseudonym Multatuli, them. At the same time, political dualism was
a Latin work meaning “I who have suffered formalized. European-Indonesian cleavage
great injury.” This work was a barely was now recognized in Constitutional Law.
disguised autobiography based on Douwes
The Agrarian Law opened Indonesian
Dekker’s own experiences as a civil servant in
agriculture to European private enterprise as
Java. It was critical of government policy as
never before. As noted earlier, however, the
seen by an insider, through not necessarily
private sector did not wholly disappear during
without bias. Fransen van de Putte was an
the early phases of the Cultivation System,
insider with a different vantage point: that of a
and it grew in significance in the late 1850’s.
planter. His Suiker-Contracten (Sugar
By 1860, virtually half of all exports came from
Contracts) proposed liberal reform in the
privately produced crops, and in 1870 about
economic sense then current-an end to
57 percent. During this era many of the
monopoly supported by the state and in its
private holders were located in the
place encouragement (also by the State!) of
principalities. After about 1860 the East
private estates and private enterprise. Both
Hook, in government territory, became
Douwes Dekker’s and van de Putte’s
important, especially in respect to tobacco
publication undoubtedly played a role in the
and sugar. There were also other centers of
removal, over the decade of the 1860’s, of
private estates. Of all these, the most fateful
virtually all crops except sugar and coffee
was a tobacco plantation located in the
from forced cultivation. Indeed, Fransen van
sultanate of Deli in East Sumatra. This
de Putte served as colonial minister from
plantation was to form the basis of thee
1863 to 1866 and again from 1872 to 1874.
unique cigar-wrapper industry of Deli, and it



eventually contribute to the expansion of peasants and convert them into a rural
Sumatra into a major rival of Java as an proletariat, they competed with them for land.
export center. In 1863 one Jacobus Out of this situation emerged thee commercial
Nesnhuys, an entrepreneur with Dutch smallholder cultivators, who, though not very
financial backing who had failed in his East numerous, rivaled and in some crops
Javan undertakings, heard of the rich ash soil outstripped the estates as producers for
of Deli and soon after concluded a contract export. Thus the famed demonstration effect
with the sultan to cultivate what had been apparently did operate inn this instance,
ladang lands. As a result of early successes, though the older tradition of producing ladang
Nienhuys got the backing of the N.H.M. inn pepper for world markets may have also had
1869 and formed the Deli Company, which a part in shaping the modern smallholder.
was to b become enormously prosperous. So While some modernizing of the peasants
all in all, the Liberal System had a good occurred, the lease estate was essentially an
running start by 1870. I must now understand enclave, isolated from the indigenous
liberalism to mean the free right of private economy. It produced for export, sent its
individuals and firms to exploit the soil, and profits home, and invested only within its own
people, of the Indonesia. boundaries.
The first avenue was perhaps, in the The imitative Indonesian smallholder
long run, of lesser significance. It provided production was still not very modern, using
that the old erfpacht, or “heritable,” lease be little capital in comparison. What investment
modified in two crucial respects. The term of was needed for processing was usually in the
the lease was extended to seventy-five years, hands of middlemen. Nor did the small-
which was long enough to justify capital holder employ technically advanced methods.
improvement as well as to give enough
The second avenue for private
security to creditors to encourage investment.
enterprise under the Agrarian law was of vast
The other modification was the redefinition of
significance. It permitted, in the name of
the lands disposable by government—at the
liberalism, the continuation and crystallization
time they were defined, essentially, equivalent
of the unequal symbiosis between the modern
to landang lands—together with a willingness
sector and the indigenous sector. Boeke
by government to dispose of these lands on
(1953) calls this system, in which the village
erfpacht lease. erfpacht and princely
sector was disorganized by capitalism but
concessions together in time created the
was not permitted to become capitalistic,
characteristic plantation, on which laborers
Dualism. At this juncture it was Java that was
live for long periods or permanently as
particularly affected.
proletariat. While slavery as such had been
outlawed in Indonesia in 1854, effective in When the government withdrew its
1860, impressed labor was not legally demands for land and labor, the contractors
abolished until 1942, by which time it had were free to make contracts with the petani
almost disappeared. The erfpacht lease to rent their fields for a short term, in the
eventually was of about equal numerical beginning for a maximum of five years in the
importance on Java and the Outer Islands, typical situation. Thus the rotation of the soil
but in the formative period t was was assured. Labor, of course, was likewise
characteristically Javan. Its greatest impact to be obtained by free contracts both for field
was in the perennial, notably tea, cocoa, and work and for operating the factory. Though
cinchona. A small percentage off t he government compulsory declined, various
peasant population was affected by the lease other obligatory labor services remained. To
estates; in this sense the total effect on the entice an otherwise non-market-oriented,
Indonesian social structure may be said to reluctant petani, the factory would sometimes
have been small. On the Outer Islands, pay outrages in advance and then use
where the estates did not absorb the ladang punitive powers to force compliance. The



headman often played a role in ensuring the except the traditional, labor-based expansion
requisite labor supply. Most of the workers of the village irrigation system. When further
needed could be hired from those who rented pressed, the petani resorted to second-
their land. Sometimes coolie labor was cropping and the production of mostly food
needed in tradition, especially at certain times crops during the dry season—dry rice,
of peak labor demand. In traditional areas of cassava, pulses—and in the course of time
the Cultivation System, the transition was other crops were added to the list. The
easy enough. Little formally changed, except upshot was that the marginal productivity of
that government receded and the contractor labor in respect to food production was
became more prominent. But the new law maintained as population increased via
permitted the expansion of private enterprise greater efficiency of land-use, some
via village contracts into areas not previously expansion of cultivation area per village,
under the system, and over the same period higher-calorie-producing crops, and some
new areas were created by the expansion of capital gain in the form of irrigation; yet no
the cultivated area of Java. In the absence of true modernization took place. While
precedent, harsh methods were sometimes marginal productivity in agriculture was thus
used in these new areas. While this new prevented from falling, by shifting the curve
rent-contract system applied most ever higher while constantly moving down it,
conspicuously to sawah land and the rotation the redundant agrarian population was not
of sugar with rice, it was also used in tegalan permitted to raise the industrial marginal
lands, in particular in the rotation of agave productivity through urbanization and the
with cassava. Other crops affected by the development of a manufacturing sector,
system include tobacco and rice as a except on the enclave estates.
commercial crops. In any case, the system
Geertz’s theory of involution explains
applied to a system of rotation of annuals,
the way the Javanese village societies
necessitating the continued and expanded
responded to the destructive thrust of Dutch
invasion of the village by the Western planter
colonial policies, though by Geertz’s own
and his factory. It was this system which,
dates the crucial period would seem to have
though bringing petani and Westerner close
been precisely the liberal era, not the period
together physically, robbed the petani of any
of the Cultivation System. In terms of the
significant degree of freedom in relation to the
Indonesian petani’s self-protective interests,
Westerner. As Java expanded in terms of
involution was a satisfactory response. With
population and territory under cultivation, it
no viable alternative, it was a method of
was not very feasible for the petani to run
survival. Any kind of revolutionary
away. Ladang cultivation had in any case
breakthrough under the Dutch regime is hard
virtually disappeared on Java.
to imagine at this early date; nor were the
The Javanese villager’s response to results necessarily all negative. Despite
this challenge has recently been rationalized involution, in point of fact deterioration of
by Geertz (1963), as a kind of involution. village unity did take place and in the cause of
Geertz argues that village economy time became progressively worse. But initially
deliberately stood still by means of investment involution was a creative alternative to the
of great ingenuity in changing nothing. While evolution which Dualism prevented, and for a
in the first instance economic, this applied to time it staved off social dissolution. It is not
the general social structure also, and so an the involuting villagers who are to be blamed
increasingly archaic way of life became for backwardness but rather the Dutch
fossilized. Population increments were exclusionist policy, which kept the
absorbed into the village society by ever more modernizing sector beyond the reach of the
intensive working of the land and ever more Indonesian. It was to the advantage of the
intensive use of labor, but not by petani to erect their own walls against the
technological progress of capital investment, onslaught of a new system which they were in



no position to make their own, even though The man who implemented the
the problems of present-day Indonesian transition was Alexander W.F. Idenburg, who
leadership are exacerbated by the alienation served either as colonial minister or as
and dissolution which now characterize governor-general for all but three years from
village life. 1902 to 1917. He commissioned studies into
Indonesian conditions, including one by van
In sum, the institutionalization of a
Deventer, and policy was based on the
Dual system was solidified in two stages; (1)
findings and recommendations of the
the Cultivation System, which abandoned
resultant reports. In 1904, the year the
early reformers’ idea of petani participation in
reports were published, the Netherlands
the modernizing process, especially when it
government, under the leadership of
was carried on so long that a generation that
Idenburg, assumed the debt of the colonial
might have been stimulated was instead
government, to the amount of 40 million.
stultified, and (2) the Liberal System, which,
Also under Idenburg’s first regime, the
however less oppressive, made the alienation
Atjehnese were finally defeated, a success
of the indigenous population permanent, at
which led within a few years to the effective
least for the period of Dutch rule.
expansion of Dutch political control and of
Dutch centered economy over all Sumatra.
During the five years that Johannes B. van
The Ethical System, 1900-1930
Heutsz, the commander who won the Atjeh
The Ethical Policy was foreshadowed victory, was governor general, the Dutch
by a program and philosophy proclaimed by finally subjugated virtually all of the territories
Baron W.K. van Dedem, colonial minister in which now constitute Indonesia. Van Heutsz
the early 1890’s, but he was not able to served for about three years of his five-year
implement his avowed policy. Henri Hubert term under Colonial Minister D. Fock, author
van Kol, a socialist deputy and former Indian of one of the three reports of 1904 submitted
civil servant, did his best to educate his to Idenburg. Fock, like Idenburg, later served
colleagues in the States-General in a in the Indonesia as governor general.
humanitarian outlook, while a publicist in the
Fock in his budget of 1907, provided
Indonesia, P. Brooshoft, introduced the term
for major subsidies to the Indonesia,
ethical into the debate. But clearly the most
especially in education, with an emphasis on
effective advocate of the new regime was
primary and vocational training. Education
Conrad Theodore van Deventer, whose
was to prove one of the main thrusts of the
article “Een Eerreschuld” [A Debt of Honor],
new era, at least in principle. While
published in 1899, won a widespread
government revenues were inadequate to
response. Van Deventer held that the batig
carry out Fock’s initial plan, van Heutsz, by
slot had been immoral and that all such
devising a system of village schools financed
colonial contributions from 1867 on should be
in part by the villages themselves, made
repaid as a”debt of honor.” The term
possible the success of the program. By
eereshuld is reminiscent of an ancient tribal
1939, 1.7 million pupils attended these
concept-honor price, or recompense due from
schools, ten times the number that attended
a tribe for injury it has done another tribe.
in 1900. While it represented a significant
Upon the assumption of power by the Clerical
expansion, the 1930 enrollment was
Party in 1901, Queen Wilhelmina, while not
nevertheless small for a country of 61 million
going as far as van Deventer, made the
people, encompassing roughly one-fourth of
Ethical Policy official in her address to the
the population from five to fourteen years of
States-General. The deciding factor,
age. Among the Minangkabau, however, 5
however, was undoubtedly the depression of
percent of the entire population attended
1900.
school in 1935. In addition to this vernacular
school program, approximately 120,000



Indonesian and Sino-Indonesian attended lead to a significant amount of Indonesian
Dutch-language cultural schools by 1930, private enterprise in the industrial sector or to
including roughly 1,500 at the senior-high- the employment of Indonesian in Indonesian
school level. This latter program was geared owned shops and factories; rather, the
to the European educational ladder. graduates of these schools were employed in
low-level jobs in Europeans firms. In 1930, a
As to higher education, while a few
total of about 22,000 non-Europeans were
privileged Indonesian were admitted to Dutch
enrolled in vocational and trade schools. By
universities, no true university education was
1940, 32,000 Indonesian, over a fifth of whom
available in the Indonesia until the University
were trained in the Dutch language, attended
of Indonesia (at that time the University of
vocational, commercial, or industrial schools.
Batavia), centering upon a Faculty of Letters
and Philosophy, was organized in 1941, at The Dutch colonial regime, in short,
the very end of the Dutch raj. During the did not succeed in providing adequate
interwar period, higher education was education for the Indonesian at any level,
restricted to three professional schools, a though it did register progress above the
technical institute, founded in 1919; a law extremely low level of 1900. On the other
school, founded in 1924; and a medical hand, the Dutch did make some impact upon
school, founded in 1926. In 1940 a Faculty of illiteracy, and they began, at higher level, to
Letters and Philosophy was added, and in open the doors to a technical and
1941 a Faculty of Agriculture. Yet by 1930 professional education for severely limited
there were still only 240 Indonesian and Sino- numbers of Indonesian. For those who
Indonesian students enrolled in the three emerged from the higher schools (speaking in
extant colleges together. Even by 1940, western terms and thus excluding those
when the population of the Indonesia was educated in the Moslem or in the Chinese
over 70 million, those enrolled in institution of traditions), at least as important as their new
higher learning included 637 Indonesian, 364 skills was their new orientation in the world.
other Asians, and 245 who were at least Perhaps ironically, this newly westernized
legally European, only 1,246 in all. elite tended to become nationalistic to one
degree or another. In large part, indeed, the
Vocational schools, “vocational,” here
nationalist movement found its leadership
describe all manner of applied or
among this professional sector. At the same
“noncultural,” subjects, excepts the
time, nationalists generally were enthusiastic
mechanical trades, were established in the
supporters of western-style education, though
Indonesia, in both Dutch and the vernacular,
a few carried their nationalism to the point of
in order to man the indigenous civil service,
boycotting the Dutch-operated schools and
the schools, and the military. Registration
promoting more nationalistic schools. Even at
was limited to the numbers that could be
the small-town or the village level, western-
absorbed in government service. From the
style education was popular among the
Dutch point of view, this measure prevented
middle class because it was seen as a
the creation of a class of unemployed
passport to better-paying jobs or to higher
technical people. The nationalist considered
status in the Dutch-dominated social system.
it a deliberately restrictive and colonialist
As everywhere among non-modern cultures,
device to prevent large scale education of
boys whose families sent them to school often
Indonesian and the creation of a technically-
in cities distant from their homes, usually
trained class capable of competing with the
became alienated from the culture from which
Dutch and perhaps even dispensing with the
they came. Western-style education created
Dutch altogether. In addition to these civil-
a new value system for a small number of
service-oriented schools, trade, or industrial,
privileged Indonesians, as well as new
schools were also established to prepare a
conflicts. The new elite found themselves
few thousand Indonesian for industrial
homeless, truly belonging neither to the
employment. But this development did not



society from which they had come, because Summary and Conclusion
they were now modernized, nor to the Dutch
The period of culture system came to
social order, because they had discovered
their Indonesian identity. The final irony was be most clearly marked as the process of
that the Dutch created an elite large enough involution, for it was then that the Indonesian
farmer was denied any real participation in
to provide a leadership to overthrow their
future economic development. The
regime, but not large enough to assume
destruction of communal tenure, the change
proper command over the modern political
in the role of the village head, and the
and economic structures they inherited.
restructuring of the village organizations to
The key motif of the Ethical Policy was cope with the demands of the Dutch estate
increased welfare for the Indonesian, and this sector all affected the Indonesian farmers for
was promoted in various other ways than the worse. The liberal system of land
those already mentioned. One of the legislation was the opening up of two avenues
avenues employed was the expansion of for private-enterprise estates, both of which
systems of water control. Modern masonry proved important to the future of the
dams and complex irrigation networks were Indonesian social and economic structure.
built, supplying almost free water on an ever-
The Ethical System is concentrated in
expanding scale to Dutch and Indonesian
principle on raising both the material standard
interests alike. Of the total area (exclusive of
the principalities) in sawah on Java in 1838, of living of the Indonesian and the general
close to two-fifths came to be irrigated by level of their social welfare. It also sought,
through government intervention, to
Dutch-built modern systems. Over the years,
modernize Indonesian psychological,
the Dutch invested an estimated quarter of a
economic, and political life; to create a middle
billion guilders in irrigation and allied works.
class; to integrate the autochthonous and the
Some observers regard this contribution to
Indonesian agricultural productivity as the modern sectors; to stimulate output; to
greatest accomplishment of the Dutch in the industrialize; to provide social overhead
capital; and in a most every way to promote
Indonesia. Other maintain that expanded
what is now called economic development.
sawah simply encouraged traditional
agriculture and militated against the transfer I can conclude that for Indonesia,
of the petani to urban industry. beside the disadvantage, the colonialism
The Dutch colonial government also period has advantage.
invested in roads, railroads, dock, dockyards,
and other public works; in public health and
sanitation; in agricultural extension service;
and in credit facilities and other measures to
promote indigenous industry. In addition, the
government encouraged, not too successfully,
transmigration and agricultural colonization to
ease the pressure of population on Java.
Furthermore, land-rent and labor legislation
was passed with the object of supporting the
petani and the Indonesian laborer against
exploitative tendencies in European business
and agricultural interests.



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