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An Economic View of Indonesian History
An Economic View of Indonesian History
An Economic View of Indonesian History
An Economic View of Indonesian History
An Economic View of Indonesian History
An Economic View of Indonesian History
An Economic View of Indonesian History
An Economic View of Indonesian History
An Economic View of Indonesian History
An Economic View of Indonesian History
An Economic View of Indonesian History
An Economic View of Indonesian History
An Economic View of Indonesian History
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An Economic View of Indonesian History

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

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

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  • 1. 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 f kc. k ' , . ,It . * .. i&-
  • 2. 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
  • 3. Dadang Solihin: An Economic View of Indonesian History 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 Economic Journal FE-Unpad Vol. XVIII, No. 1, March 2003 Page 2
  • 4. Dadang Solihin: An Economic View of Indonesian History 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 Economic Journal FE-Unpad Vol. XVIII, No. 1, March 2003 Page 3
  • 5. Dadang Solihin: An Economic View of Indonesian History 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 Economic Journal FE-Unpad Vol. XVIII, No. 1, March 2003 Page 4
  • 6. Dadang Solihin: An Economic View of Indonesian History 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 Economic Journal FE-Unpad Vol. XVIII, No. 1, March 2003 Page 5
  • 7. Dadang Solihin: An Economic View of Indonesian History 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 Economic Journal FE-Unpad Vol. XVIII, No. 1, March 2003 Page 6
  • 8. Dadang Solihin: An Economic View of Indonesian History 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 Economic Journal FE-Unpad Vol. XVIII, No. 1, March 2003 Page 7
  • 9. Dadang Solihin: An Economic View of Indonesian History 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 Economic Journal FE-Unpad Vol. XVIII, No. 1, March 2003 Page 8
  • 10. Dadang Solihin: An Economic View of Indonesian History 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 Economic Journal FE-Unpad Vol. XVIII, No. 1, March 2003 Page 9
  • 11. Dadang Solihin: An Economic View of Indonesian History 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 Economic Journal FE-Unpad Vol. XVIII, No. 1, March 2003 Page 10
  • 12. Dadang Solihin: An Economic View of Indonesian History 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. Economic Journal FE-Unpad Vol. XVIII, No. 1, March 2003 Page 11
  • 13. Dadang Solihin: An Economic View of Indonesian History References Aveling, Harry (ed) (1979) The Development Neill, Robin (1991) A History of Canadian of Indonesian Society, from the Coming Economic Thought, Routledge, London of Islam to the Present Day, University and New York of Queensland Press, Queensland Ricklefs, M.C. (1993) A History of, Standford Boeke, J.H. (1953) Economics and Modern Indonesia since c. 1300, Economics Policy of Dual Societies, as Standford University Press, California Exemplified by Indonesia, Institute of Siegel, James T. (1969) The Rope of God, Pacific Relations, New York University of California Press, Berkeley Dasgupta, Ajit (1993) A History of Indian Van Niel, Robert (1970) The Emergence of Economic Thought, Routledge, London the Modern Indonesian Elite, the and New York University References Dievers, Allen M. (1974) The Mistical World of W. Hefner, Robert (1990) The Political Indonesia, Culture and Economic Economy of Mountain Java, an Development in Conflict, The John Interpretative History, University of Hopkins University Press, Baltimore and California Press, Berkeley London Furnivall, J.S. (1939) Netherlands India, a Study of Plural Economy, Cambridge University Press, London and New York Geertz, Clifford (1963) Agricultural Involution: the Process of Ecological Change in Indonesia, the University of California Press, Berkeley Geertz, Clifford (1963) Peddlers and Princes, Social Change and Economic Modernization in Two Indonesian Towns, the University of Chicago Press, Chicago Higgins, Benjamin (1957) Indonesia’s Economic Stabilization and Development, Greenwood Press, Connecticut Indonesia (1994) An Official Handbook, Ministry of Information, the Republic of Indonesia, Jakarta Jay, R. Robert (1969) Javanese Villagers, Social Relations in Rural Modjokuto, the MIT Press, Massachusetts Morris, Tessa-Suzuki (1989) A History of Japanese Economic Thought, Routledge, London and New York Economic Journal FE-Unpad Vol. XVIII, No. 1, March 2003 Page 12

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