Extremes in the Archipelago: Trade and Economic Development in the Outer Islands of Indonesia, 1900-1942

Published by EH.NET (May 2002)

Jeroen Touwen, Extremes in the Archipelago: Trade and Economic Development

in the Outer Islands of Indonesia, 1900-1942. Leiden: KITLV Press, 2001.

xvii + 459 pp. ISBN: 90-6718-159-5.

Reviewed for EH.NET by Anne Booth, School of Oriental and African Studies,

University of London.

The last two decades have seen an explosion of interest in the economic

history of the Indonesian archipelago. This reflects both the greater

availability of historical statistics (many valuable series have been published

in the sixteen-volume “Changing Economy of Indonesia” series) and also a

growing interest in Indonesian economic history among younger scholars both in

Indonesia and in the Netherlands, which was the former colonial power and where

most of the archival material now resides. While much of this work has

inevitably been “Java-centric” reflecting the much greater availability of

historical data on Indonesia’s most populous island, there have in recent years

been a number of valuable studies on the economic development of other parts of

the archipelago, usually referred to collectively as the “Outer Islands.”

Jeroen Touwen’s monograph, based on a thesis written at Leiden University is

both an ambitious attempt to synthesize the literature on the economic and

social development of the Outer Islands during the last four decades of Dutch

colonial rule, and an important contribution to that literature.

Dr Touwen is well aware of the pitfalls in attempting such a project. The

islands outside Java are an extremely diverse group, and like several other

scholars, he has tried to impose order on the diversity by “clustering” the

various provinces into broadly similar types of economies, while disregarding

geographic location. He has produced four clusters, each characterized by the

type and level of export production. Thus East Sumatra, Palembang and Southeast

Kalimantan form one cluster, where there was substantial export growth largely

based on European-financed, capital intensive estates and extractive industries

(mainly based on petroleum), together with some growth of indigenous export

production. A second cluster includes those regions where there was also

significant export growth, but almost entirely based on indigenous enterprise,

especially smallholder production of export crops such as rubber, pepper, copra

and coffee. This cluster comprises the provinces of Aceh, West Sumatra, Jambi,

Lampung, West Kalimantan, South Sulawesi and Menado. A third, much smaller

cluster includes those regions (Bangka and Belitung and Riau) where export

production was entirely based on European enterprise while the fourth cluster

(Tapanuli, Bengkulu, Bali, Maluku and the islands east of Bali as far as Timor)

was characterized by little export growth and little economic expansion over

these four decades.

It is clear from this typology that Touwen sees export growth as the main

driver of economic development outside Java in the last phase of Dutch colonial

rule. Indeed much of the book is devoted to a careful analysis and comparison

of the “European” and the “Asian” dynamics of export growth. European-type

growth was dominated by large agricultural estates on the one hand and mining

companies on the other. Chapter 3 summarizes the extensive archival and

secondary literature on the development of both types of production for the

regions in clusters 1 and 3. The author pays particular attention to the

consequences for labor migration (both from Java and from other parts of Asia,

especially China) and for infrastructure development. Chapter 4 examines the

“Asian dynamics” of export growth, and here attention shifts to the regions in

cluster 2. There is much useful detail on which provinces grew what, and on the

development both of “traditional staples” and “new staples” (mainly rubber and

copra) after 1900. The importance of trade networks is stressed, and an

assessment is given of the growth effects of indigenous export production on

the local economies. The main conclusion is that, whereas the profits of

“European-type” export expansion were often drained away to Java and abroad, a

substantial share of the profit from smallholder export production ended up

with the traders, who were often Chinese. Also smallholder export growth

appeared to lead to more imports of consumption goods than was the case in the

regions dominated by European enterprise.

Chapter 5 addresses the problem of the dog that did not bark; the provinces in

cluster 4, which by and large failed to participate in the export boom of the

years from 1900 to 1930. Touwen rightly stresses that the data on international

trade are by themselves misleading, as several regions in Sumatra and in

eastern Indonesia were involved in regional trade, mainly with Java. But even

allowing for regional exports, their participation in trade was much less than

those regions in clusters 1, 2 and 3. The reasons advanced by the author are

not very surprising: most of these provinces were held back by an absence of

natural resources, poor soils, adverse climatic conditions and poor transport

links. The very features indeed which have continued to hamper the economic

development of eastern Indonesia over the post-independence decades.

Chapter 6 examines policy responses to export development outside Java in the

decades after 1900. The famous “ethical policy” which was initiated in 1901 in

response to the perceived problem of declining welfare in Java, did not have

much direct effect on the vast Dutch possessions in other parts of the

archipelago. The author argues that the movement of people from Java to Sumatra

and Sulawesi under government-financed agricultural settlement schemes had only

a very limited impact on the economies of the receiving provinces (perhaps

Lampung was an exception?), while other policies such as irrigation development

and rural credit schemes were very largely targeted to Java. On balance Touwen

sees Dutch policy outside Java right up to 1942 as being mainly preoccupied

with the maintenance of law and order. Most government revenues were spent on

Java, and much of the infrastructure development which did take place outside

Java was directly financed by estates and mining companies. Thus plans to

develop a trans-Sumatra rail link were never brought to fruition and in many

regions outside Java; transport links were either by native boat along rivers

or through rough jungle tracks. The author also stresses the lack of any

technological progress in the cultivation of smallholder export crops.

Cultivators had little access to credit and little motivation to invest in

higher-yielding varieties or better processing equipment. Yields of crops such

as coffee and rubber were much lower than on the large estates and these

differences have persisted until the present day.

The book is characterized throughout by extensive references to archival and

secondary literature, and to many statistical sources. Statistical series on

population, prices, export production and trade are set out in several valuable

appendices. The book will doubtless become an indispensable work of reference

for future scholars working on the economic development of the regions outside

Java over these years. It will also be valuable to scholars of comparative

colonial development, especially those interested in the complex nature of the

linkages between export growth and broader economic growth in a colonial

context. If I have a criticism, it is that Dr. Touwen’s meticulous scholarship

has perhaps led him to underplay the grander theme of the long-term economic

underdevelopment of much of the Indonesian archipelago outside Java. Why at the

end of the twentieth century was Sumatra still so much poorer and less

developed than neighboring peninsular Malaysia? Why were the provinces of

Indonesian Kalimantan so much less developed, and characterized by much higher

incidences of poverty, than the neighboring Malaysian states of Sabah and

Sarawak? Why has so much of Eastern Indonesia remained backward in relation to

the rest of the country? To explore these questions Touwen would need to extend

his analysis into the post-1950 era. Perhaps that will be the object of a

further volume.

Anne Booth is Professor of Economics (with reference to Asia) in the School of

Oriental and African Studies, University of London. She is the author of The

Indonesian Economy in the Nineteenth and Twentieth Centuries: A History of

Missed Opportunities (Macmillan, 1998). She is currently working on a study

of economic crises in South East Asia in the twentieth century.