00074910012331337833
Bulletin of Indonesian Economic Studies
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Representations of Development in 19 and
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20 Century indonesia: A Transport History
Perspective
Howard Dick
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To cite this article: Howard Dick (2000) Representations of Development in 19 and 20
Century indonesia: A Transport History Perspective, Bulletin of Indonesian Economic Studies,
36:1, 185-207, DOI: 10.1080/00074910012331337833
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Bulletin of Indonesian Economic Studies
Vol 36 No 1, April 2000, pp. 185–207
REPRESENTATIONS OF DEVELOPMENT
IN 19TH AND 20TH CENTURY INDONESIA:
A TRANSPORT HISTORY PERSPECTIVE
Howard Dick*
University of Melbourne
Contemporary debate in Indonesia over ‘people’s economy’ and
‘globalisation’ recalls the vigorous 1950s debate over ‘dualism’. Taking as
a case study the rise and eclipse of railways, this paper argues that the
colonial phenomenon of dualism can with hindsight be reinterpreted as a
phase in a previous cycle of globalisation. However, economic history
has overlooked the remarkable vitality of the small-scale transport sector.
Focus on the small-scale sector highlights the inadequacies of familiar
paradigms and suggests the need to reconceptualise long-term
socioeconomic change. This analysis has important implications for
responses to the current wave of globalisation and how they may be
manifest in a more democratic post-Soeharto Indonesia.
INTRODUCTION
The economic crisis of 1998 has revitalised the small-scale or ‘informal’
sector of the Indonesian economy. Along with democratisation, it has
also changed the way many Indonesians conceptualise their economy
and perceive economic policy. A campaign for small-scale ‘people’s
economy’ (ekonomi rakyat) and criticism of the IMF and World Bank have
been part of the questioning of the benefits and costs of globalisation.
This ideological shift can be understood as a reaction against the
tremendous expansion of the formal sector under the New Order, and
against the accompanying political repression. Even casual observation
confirms that the Indonesian economy retains profoundly dualistic
features.
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Howard Dick
The terms ‘formal sector’ and ‘informal sector’ stereotype a more
complex reality, but they serve to distinguish between a highly structured,
capital-intensive corporate sector, which thrives in a stable, low-risk
environment, and a much more labour-intensive, family- or householdbased sector which has the flexibility and resilience to survive in a very
unstable and uncertain environment. At the end of the 1990s, as in the
mid 1960s, the formal sector found itself struggling in a much harsher
post-crisis environment, while small-scale enterprises again prospered
and multiplied. The aim here is not to revive the old chestnut of whether
Indonesia is in fact a dualistic economy and society, which is a crude
proposition, but to explore ways in which perceived dichotomies, between
small scale and large scale, between local and global, continue to influence
thinking and policy.
At times of crisis and regime change ‘other things’ do not hold
constant. Familiar assumptions need to be re-examined. One approach
is to set the immediate past in historical perspective. Revival of the formal
sector under the New Order resembled an earlier colonial phase of
corporate capitalism that began around the 1890s and lasted until the
1930s. However, it contrasted sharply with the intervening period. In the
1930s, as the modern or ‘formal’ sector of the colonial economy reeled
under the shock of the world depression, the informal sector thrived and
then continued to expand through the Japanese occupation, the
Revolution and the first two decades of independence. Post-New Order
Indonesia, economically weak and hesitantly democratic, shows some
of the features of the 1950s when the colonial paradigm was under
challenge.
Given the new relevance of the 1950s experience, this paper seeks to
revisit several ‘ghosts’ from that time that continue to haunt debates about
the nature of capitalism and development in Indonesia. The first of these
is dualism. It was never a theory but, like the more recent term
‘globalisation’, a codeword. 1 It denoted—and oversimplified—an
extraordinarily complex process, linking observable phenomena to a set
of shared ideological beliefs. Fortunately dualism is no longer the starting
point for analysis of the Indonesian economy, but the distinction between
large-scale and small-scale, capital-intensive and labour-intensive activity
continues to pervade policy discussion, and now once more politics as
well. Other ghosts are the Geertzian concept of ‘shared poverty’ and the
ongoing quest for the viable small-scale firm. This paper contends that
none of these concepts is particularly helpful and that the grand process
of Indonesia’s modern economic history may be better conceived in other
ways. Nevertheless, these are not esoteric debates but a pathway to
sharper analysis of the political economy of contemporary Indonesia.
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Representations of Development in 19th and 20th Century Indonesia
187
The following analysis is partly historical and partly interpretive. The
first part of the paper takes as a case study a story about the rise and
eclipse of Java’s railways, looking first at their impact around 1890, when
they were a leading edge of formal sector expansion, and then over a
century tracing their long-term decline in the face of competition from
small-scale land transport. The second part discusses some of the familiar
paradigms by which this story has in the past been caricatured, specifically
dualism, the lack of a firm-based Javanese response to modernisation,
and shared poverty, and draws out some of the implications of this
economic history for the current debate over globalisation.
A TALE OF TWO SECTORS2
The Intrusion of Railways
Java was the only territory of Southeast Asia to experience the full force
of the global industrial revolution of the 19th century. Around 1800 it had
been a set of loosely connected economies and societies held together by
a ramshackle colonial state. By 1900 it was a sophisticated agro-industrial
economy integrated by overlapping networks of telegraphs, telephones,
railways, narrow-gauge tramways and good roads. Nowhere in Southeast
Asia could boast better infrastructure (Dick 1992). Elsewhere in East Asia,
only Japan could compare.
Railways decisively shifted goods movement away from the main
rivers. Running more or less parallel to these former arteries of commerce,
railways were faster and more reliable. The much cheaper freight by river
prahu was offset by risks of pilfering and water damage (OMW 1907).
Export commodities for which quality mattered therefore shifted to rail.
Sugar was particularly suited to rail because it was bulky, it could be
consolidated into wagon loads, and the volume of traffic justified rail
spurs to the actual mills. By 1903 the average daily river traffic into
Surabaya was 110 prahu of around 700 tonnes capacity, which may be
compared with the seasonal average daily sugar carriage by rail of 6,000
tonnes (OMW 1907; Osten 1930: 8).
From road to rail, however, the shift was much less dramatic. In 1891
many Residents reported that rail was competitive only for full wagon
loads, which applied in the case of plantation exports and sugar in
particular. Smaller consignments, especially of local crops, handicrafts
and import goods, continued to be carried almost entirely by traditional
forms of transport. This reflected not so much relative efficiencies as
relative prices. Resident after Resident complained that rail freight rates
were too high, and the NISM (Nederlandsch–Indische Spoorweg
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Maatschappij, the Netherlands Indies Railway Company) did indeed
reduce its tariffs across the board from 1 January 1892.
The uncompetitiveness of rail freight vis-à-vis road had two
contributing causes. First, as a line-haul operation, shipment by rail
incurred feeder and transhipment costs at both ends of the journey, which
had also to be reckoned in the door-to-door calculus. The paperwork
involved in shipment by rail and the greater risk of damage or leakage of
fragile or liquid goods might also be taken into account. In the case of
traffic between Jakarta and Bandung, Chinese importers sent low volume
but heavy goods such as screws, nails, metalware, paint, linseed oil and
soap by ox-cart (grobak); iron pots and pans were said to be carried 50%
more cheaply than by rail.
Secondly, rail competition brought about considerable reduction in
the costs of competing modes. Local carters seem to have charged what
the traffic would bear in the light of railway tariffs. The Resident of Japara
reported that in competition with the narrow-gauge tramway small local
carts (karretjes) had reduced charges to only one-third of their previous
level, despite which their number continued to increase. Elsewhere
charges probably fell by rather less, but still roughly matched those for
rail before calculation of feeder and transhipment costs. The Resident of
Pasuruan explained that the 15 kilometres from Pasuruan to Grati by
third-class rail cost 17 cents per person without accompanying goods,
whereas three to five women with baskets could share a small cart for 50
to 60 cents, or around 17 cents per person with accompanying goods and
direct to their village.
An important determinant of the responsiveness of traditional modes
of transport to railway competition was the scarcity and opportunity cost
of labour. Where labour was abundant and there were few opportunities
for alternative off-farm employment, such as in the densely populated
rice-growing district of Bagelen to the west of Yogyakarta, villagers were
prepared to hire themselves out, with or without a horse, for little more
than the cost of food. A vivid case in point was the man-drawn cart (grobak
wong), which as late as 1891 could still compete with rail for long-distance
haulage from Bagelen across the mountains to Semarang and back. As
described by the local Resident, six men—or sometimes men and
women—would hire a cart able to carry five to six pikul (about one-third
of a tonne) and at local markets buy up a full load of goods such as Java
sugar, eggs and earthenware. The cart would then be pushed or dragged
to Semarang, while on the way part of the load was sold to cover living
expenses. On arrival the goods would be sold on credit to wholesale
traders (bakul) and, as the money was paid over, dried or salted fish and
other articles of daily consumption were bought up as return load, to be
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Representations of Development in 19th and 20th Century Indonesia
189
sold back in Bagelen in the same manner. One return trip would take
about 20 days and yield just enough profit to live on. As a subsistence
activity, such carrying and trading was quite sophisticated and might be
likened to the operation of small interisland prahu.
The rate at which passenger traffic shifted to rail was also impeded
by high fares. In May 1891 the Resident of Surakarta described the rates
of the NISM as ‘neither cheap nor fair’. His concern was not with the
rates charged for export crops, which very quickly shifted to rail, but
with those for Indonesian passengers and in particular petty traders. He
observed that few passengers travelled with goods in excess of the free
allowance:
The native, who places no value on time and expects much more
for his few coins than quick transport, still goes much on foot,
even carrying his goods himself. Besides, the transport of the
goods by rail is much too expensive for him, for the transport
costs often amount to more than the value of the goods (KV 1892:
C5).
The Netherlands Indies Railways and the State Railways therefore seem
to have had only a marginal impact on petty trade. Narrow-gauge
tramways, by contrast, specialised in local passengers and market traders,
and set timetables to fit in with the timing of local markets.
In the long run, market forces thus established a dynamic equilibrium
between rail and ‘traditional’ modes of transport. The initiative lay very
much with the railways and tramways, state and private, which by trial
and error adjusted the level and structure of passenger fares and freight
rates to achieve the most profitable mix of traffic. Other modes had to
make the most of the opportunities that were left. Railways came to
dominate longer distance freight and passenger movement, while roadbased traffic remained competitive over shorter distances, especially in
serving the village economy.
The process was nevertheless far more complex than adjustment of
market shares. First, the reduction in the real cost by all modes and the
greater availability and ease of travel and transport facilitated personal
mobility and the circulation of commodities, so that the demand for
transport steadily increased, as indeed it had been doing since the
introduction of the forced production of export crops under the
Cultivation System (Elson 1994). However, rail and road modes were
complementary as well as competitive. Growth in rail traffic generated
demand for road vehicles to and from the stations, besides which there
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Howard Dick
was more lively traffic between villages and local markets. On balance
the number of horse-drawn vehicles continued to increase. This applied
particularly to pony-carts suited to carrying both passengers and small
quantities of accompanying goods.
Secondly, some ‘traditional’ vehicles were forced into ‘down market’
niches. River prahu, for example, lost most of the long-distance trade
except in village produce such as local sugars, padi and palawija, or very
low-value items such as wood, firewood, charcoal and fruit, especially
coconuts (OMW 1907). Even today, traditionally built wooden prahu are
still used on the lower reaches of the Brantas and Solo rivers, larger ones
for sand and gravel and smaller ones for local trade across the river where
there are no nearby bridges. Similarly with grobak: since the 1830s, when
such carts had been requisitioned, their mainstay had been cane transport
from fields to the factory. As the rail network intensified, however, and
mills laid mini-gauge rails into the fields, this demand collapsed, except
among older and smaller mills, none of which survived into the 1920s. In
the lowland plain, carts were relegated to the transport of low-value local
goods which were either heavy, such as bricks and tiles, or of very large
volume, such as wooden or bamboo furniture, timber or firewood. In the
highlands, ox-carts were better able to hold their own until the era of
motor transport. For reasons of terrain, pack horses and even porters
also continued to be used.
Thirdly, there was some evidence of innovation in the kind of service
provided by small-scale indigenous transport. For example, in 1904 the
Resident of Mojokerto in the Lower Brantas reported that pony-carts
(dokar) were being used like omnibuses, not for single hire, but picking
up and putting down passengers along the road at very low fares (OMW
1907). While this might seem a small thing, conceptually it marked a
breakthrough to the stage of common carrier. 3 Significantly, the
breakthrough occurred a generation before motor buses and three
generations before the ‘Colt revolution’ of the 1970s. In other words, the
organisational breakthrough appears to have preceded the generally
recognised technological one, confirming the flexibility and adaptability
of the small-scale indigenous sector.
The Automobile Age
Around the turn of the century no-one could have predicted that the
clumsy novelty of the automobile would eventually overwhelm the
mighty railway system and renew the vitality of the small-scale transport
sector. In 1900 there were just 15 automobiles in Java and Madura,
increasing to around 1,000 in 1910 (table 1). By 1913 and 1914 imports
had accelerated to just over 1,000 per annum, but before World War I
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Representations of Development in 19th and 20th Century Indonesia
191
TABLE 1 Number of Motor Vehicles, Java and Madura, 1900–96a
Vehicles
1900
15
1910
1,000
1929
45,000
1940
58,000
1966
140,000
1996
1,850,000
a
To 1940 including motorcycles.
Source: CKS (Central Statistics Office, Batavia), Indisch Verslag [Indies Report], various issues; BPS, Statistical Pocketbook and Indonesian Statistical Yearbook, various
issues.
automobiles were still hardly to be seen outside the main coastal cities
(Knaap 1989: 86–7). By 1929 the number of vehicles had increased to
45,000, and imports were over 10,000 units in both 1928 and 1929. Imports
of trucks and buses, which began to be significant at the end of World
War I, were also running at a high level. The demand for vehicles on Java
was so high that in 1927 General Motors made the decision to locate its
new assembly plant not in Singapore but in Jakarta.
Railways began to feel the spur of road competition in the 1920s.4 In
East Java, for example, by 1927 there were 35 bus owners based in
Surabaya with a fleet of 200 vehicles, for the most part deployed along
the same busy corridors to and from outlying market towns. Most of
these operators owned no more than a few buses, but one large Chinese
firm (Tan Luxe Omnibus Service) owned 65; by 1930 this Tan Luxe fleet
had increased to 250 buses operating across a network of 625 kilometres.
The OJS (note 4) attributed this upsurge of road competition to several
factors. First, rail tariffs had not been adjusted in line with the deflation
that had occurred since the end of the boom in 1920. Second, newly
imported buses had become very cheap—only f3,000 for a vehicle able
to carry around 20 passengers–and, with few overheads, could carry
passengers for as little as one cent per kilometre and still make a modest
profit. Third, the quality of bus service was better, with more frequent
departures and willingness to stop on demand anywhere along the road,
which reduced the need for passengers to walk or to pay for other
transport to get to and from the station.
Small-scale entrepreneurship in land transport did not emerge out of
nothing. It grew out of the services long provided by carts, relying mainly
upon animal power. The tiny European community owned half the
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Howard Dick
192
TABLE 2 Rail Freight, Java and Madura, 1911–96
Freight
(million
tonnes)
1911
1920
1929
1935
1939
1960s
1996
8
12
16
5
8
2
7
Source: As for table 1; for pre–World War II figures: Knaap (1989).
colony’s private automobiles, which were luxury items, and a third of
the motorcycles, but only 7% of commercial vehicles (Knaap 1989). Of
this last category, Indonesian and Chinese owners held almost equal
shares. Local transport was an industry that local people well understood.
They had only to master and adapt the mechanics and navigation of motor
vehicles, a challenge they embraced with enthusiasm.
In the face of this vigorous challenge, railways sought government
protection from bus competition, citing their public service role and
pointing to the burden of high overhead costs. The Dutch Motor Traffic
Act of 1924 established a precedent for licensing and regulation, but the
government dithered. On the one hand was the alliance of colonial capital
and the state, not least as the main railway owner, pressing strongly for
regulation. On the other was the public interest in cheap fares. Amidst
ongoing controversy the Road Traffic Act (1933) came into effect on 1
January 1937. Thereafter along main highways buses and trucks were
allocated to set routes, for which operators and capacity were licensed
and minimum tariffs and other restrictions set by decree. Implementation
was delegated to provincial and local government. This system, with all
its powers of patronage and discrimination, is still in force, administered
by the Directorate General of Land Transport.
As a matter of survival, rail and tramway companies had also to adopt
commercial strategies. One strategy was to start up subsidiary bus services
as extensions of and feeders to the rail network. Another was to reduce
fares and improve frequencies. Road competition also forced railways to
restructure their business towards freight. Assisted by the rapid expansion
in the output of sugar, rail freight of 16 million tonnes in 1929 much
surpassed the 1920 peak of 12 million tonnes (table 2).
Despite the erosion of rail traffic, especially around the main cities,
on the eve of World War II Java remained pre-eminently a rail-based
society. On 1 January 1941 the whole of Java and Madura could boast
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Representations of Development in 19th and 20th Century Indonesia
193
TABLE 3 Rail Passengers, Java and Madura, 1911–96
Passengers
(million)
1911
1920
1929
1939
1952
1960
1970s
1996
75
166
130
76
97
143
20
149
Source: CKS, Batavia, Indisch Verslag, various issues; BPS, Statistical Pocketbook,
various issues; for pre–World War II figures: Knaap (1989).
only 58,000 motor vehicles, including 10,000 motorcycles, which by
contemporary standards was insignificant (table 1). Nevertheless, the
trends were against rail. In terms of passengers, Java’s railway and
tramway companies never surpassed the peak carriage of 166 million in
1920 (table 3). From 130 million in 1929, numbers collapsed during the
1930s. In 1939 only 76 million passengers were carried, no more than in
1911, although the network was more extensive and the average journey
longer. Rail freight also collapsed during the depression, falling from 16
million tonnes in 1929 to just 5.4 million tonnes in 1935. By 1939 tonnage
was still only half the level of 1929 and, as in the case of passengers, no
more than that carried in 1911–12.
The Cycle Revolution
During the 1930s the Indonesian population found in the bicycle a cheap
and flexible mode of road transport. The large yen devaluation of
December 1931 made imported Japanese bicycles cheap enough to
become an item of mass consumption. In expanding cities like Jakarta
and Surabaya, they were a means to commute to work without having
each day to pay precious cents in public transport fares. Factories installed
long rows of cycle racks. With small adaptations, the bicycle was also
found to be a very efficient means of carrying small quantities of goods
from village to market. The bicycle became for Indonesians what the car
was to Europeans. Between 1931 and 1940, 240,000 bicycles were imported
to Indonesia, which may be compared with the 1940 total of 88,000 motor
vehicles (58,000 for Java and Madura) (Knaap 1989). Photographs taken
in the 1930s, especially in the main cities, show large numbers of bicycles
sharing the street with motor vehicles. After independence the bicycle
became ubiquitous, almost epitomising the new era of personal freedom.
As late as 1970 the former revolutionary capital of Yogyakarta was still a
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Howard Dick
city of bicycles and pedicabs, with scarcely a car to be seen and only a
few motorcycles. In rural Java the bicycle is still an important means of
transport.
During the Japanese occupation of 1941–45, bicycle technology gave
rise to a new public transport vehicle, the becak or three-wheeled pedicab.
The first rather heavy and unwieldy prototypes appeared in the late
1930s—a decade of innovation in public transport—and seem to have
developed from the more common goods delivery vehicles (Robinson
1952). After the military requisitioned all motor vehicles in 1942, a lighter
and more manouevrable type of becak gained popular acceptance,
competing against the well established pony-carts, which were dependent
upon a regular supply of feed. Owners were mainly Hokkien Chinese,
who controlled the bicycle trade, but drivers were invariably indigenous
Indonesians, often villagers who had migrated to the city in search of
employment. Although the heavy work of pedalling was regarded as
demeaning by educated Indonesians, the tukang becak themselves were a
tough and independent band of urban dwellers who claimed the cities
and towns of Indonesia as their own territory.
Under the New Order, rising real incomes saw the bicycle give way
to the Japanese-made motorcycle as popular individual transportation.
In the early 1960s motorcycle numbers were growing at a rate of about
10% per annum, but as late as 1966 only 216,000 were registered, fewer
than the number of bicycles in 1941. By 1996, however, there were 6.5
million in Java—two-thirds of all registered motor vehicles—and new
motorcycles were being assembled locally at the rate of a million each
year (BPS 1997). Automobile numbers grew more slowly, from 140,000
in 1966 to almost two million by 1996. In the cities the extraordinary
growth in motor traffic resulted in the bicycle being marginalised—not
least because cycling was now so dangerous. In Jakarta during the 1970s
the reign of the becak was forcefully brought to an end, setting an example
for restrictions to be imposed in other main cities.
The Railways in Eclipse
After independence rail freight succumbed to road competition. At its
best in 1960/61 the railways carried only half the depressed 1939 level of
8 million tonnes, and by the late 1960s this had fallen away to only 2
million tonnes (table 2). Because of massive pilferage the railways were
no longer trusted with less than carload shipments, and had to rely upon
carriage of state-controlled bulk commodities, mainly petroleum products
and fertiliser. By 1996 economic growth and rehabilitation had helped
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Representations of Development in 19th and 20th Century Indonesia
195
rail freight to recover to 6.7 million tonnes, but this was still no better
than the depression levels of the 1930s.
In passenger traffic, the 1950s were the Indian summer of the railway
system. Recorded passenger movement increased from 97 million in 1952
to a peak of 143 million in 1960 (table 3). Assuming that fare evasion was
much more rife and at least 15% of traffic, this would have equated to the
record carriage of 1920, albeit from a much larger population. Yet by the
mid 1970s, in the face of vigorous bus competition, passenger traffic had
collapsed to only 20 million. Java’s passenger traffic was booming but
rail patronage was in decline. Rehabilitation of Jakarta’s metropolitan
network and introduction of fast inter-city trains helped to revive
patronage from 60 million in 1991 to 149 million in 1996 (table 3),
impressive enough by prewar standards, but at 1990s levels of population
and mobility no more than a niche operation.
The passenger business lost by rail was captured by air and road
transport. By the 1950s government officials and businessmen could
afford to fly, even within Java, and by the early 1990s there were hourly
shuttle flights between Jakarta and Surabaya. The general public travelled
by long-distance bus. During the 1970s there was a boom in overnight
long-distance bus services, which competed in quality of service, offering
soft seating, air-conditioning and taped music. Every city and town
received central government subsidies to construct bus terminals, which
became much busier interchanges than the railway stations. Mediumdistance buses faced competition from light commercial vans known as
Colts, which provided faster—though not safer—transport for passengers
with little accompanying baggage. Transport between the village and
market town had shifted in the 1950s to buses, which over short distances
were supplemented by bicycles and pony-carts. In the late 1970s buses
began to lose business to light commercial vehicles or small pick-ups.
These ran more frequently than the buses and could more easily detour
off the main roads. If need be they could also be hired to carry a load of
goods.
The New Order revolution in personal mobility therefore barely
involved the railways (Dick and Forbes 1992). Because roads became more
and more crowded, the rate of travel was not fast; neither was it
particularly safe, but road transport did provide a seamless web of
connections throughout Java. Facilitated by central government (Inpres)
funding of village roads and bridges, rural dwellers could now travel
almost on demand to the nearest market town and, if they wished, connect
through to Surabaya, Jakarta or even Sumatra. Except for a few bulk
commodities and main passenger lines, rail was now incidental.
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Howard Dick
INTERPRETATION AND REPRESENTATION
The Large-Scale Sector: Dualism
In the late colonial period of the 1920s various glossy official and
commemorative publications hailed the railways as a triumph of modern
technology and organisation and, without needing to be explicit, as an
important part of the justification for efficient colonial rule (notably
Reitsma 1925, 1928; KRN 1930). By the 1960s, from a functional
perspective, they were an engineering and organisational disaster. Within
less than a century, railways had degenerated from a leading edge of
modern capitalism to an arm of a bloated, dysfunctional and hopelessly
corrupt state.
This history of Java’s railways may be encapsulated as a cycle of
intrusion, adaptation and absorption. In the first decades, railways were
an alien modern technology and organisational form, part of an emerging
capitalist mode of production controlled by western enterprise. Railways
were a vital part of what Burger (1939) described so perceptively as ‘the
unlocking of Java’s interior for world commerce’. In Java’s emerging
plantation economy, the productive potential of the new industrial
revolution technology could be realised only with a transport system of
equivalent scale to link the agro-industrial factory with world markets.
The huge investment in railways and tramways was essential in
restructuring the sugar industry after the crisis of the 1880s and 1890s,
when real cane sugar prices collapsed in response to competition from
the expanding European beet sugar industry. The Resident of Surakarta
reported in 1891 that without the railways the sugar mills would not
have survived the crisis. Smaller mills closed down and output was
concentrated in larger and more modern factories. The subsequent growth
in output simply could not have been accommodated by traditional carts
and river prahu at a price that would have been competitive on world
markets. Devastated by blight, in the 1890s the coffee industry was also
enabled to restructure by the opening of rail access to the virgin slopes of
Java’s highlands and southern hills (Schaik 1986).
Over time, however, railways adapted to the local economy and
society. Rolling stock and infrastructure, schedules and fares had to be
adjusted to the demands of freight and passengers, including the great
number of third- and fourth-class passengers. Shortage of European
labour made it necessary to train Indonesians as drivers, guards and
station personnel; these permanently employed and uniformed wage
earners became part of the colonial labour elite (Ingleson 1986).
Conversely, local society adapted its habits and mobility to the railways,
as also of necessity did competing modes of transport.
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Representations of Development in 19th and 20th Century Indonesia
197
What could not have been predicted before 1942 was the ultimate
absorption of the railways into Indonesian society. This happened in two
associated ways, first the economic eclipse of railways by road transport
and, secondly, their political eclipse by nationalisation and rampant
bureaucratisation. The economic competition which railways encountered
from motor and pedal transport from the 1920s was a worldwide
phenomenon that flowed from a fundamental disparity in scale and unit
cost. Rail could maintain dominance over pedestrian and animal-powered
transport but without regulatory protection had to compete head-on and
at a disadvantage with motor transport. Ultimately fares were driven
below long-run marginal cost and railways became a non-profit public
good.
To withstand intensifying road-based competition, railways needed
both state protection and very efficient internal organisation. Instead they
became organisationally dysfunctional. The main network of the State
Railways (Staatsspoor) was in 1950 reconstituted as the Railway
Department (Djawatan Kereta Api), which in turn took over management
of the residual private railway and tramway systems as part of a single
nationalised system. Schedules, customs and rituals were faithfully
maintained but profitability ceased to matter. The government funded
growing financial deficits but did not undertake the massive investment
needed to modernise the system, which gradually contracted from its
1931 peak of 5,500 kilometres. Foreign aid funded replacement of rolling
stock on main lines, but elsewhere vintage technology survived as though
in a quaint open-air museum. By the 1960s the Railways Department
had become a vast employment relief organisation.
Dualism has been one way of representing this historical experience.
Boeke’s original concept of social dualism came to attention only in the
1950s, at the end of his career and amidst the tense period of
decolonisation. Its acceptance or rejection differentiated ‘neo-colonial’
from ‘anti-colonial’ writers. In an incisive critique first published in 1957,
the young Indonesian economist Sadli (1971) pointed out the lack of any
logical chain of reasoning in Boeke’s argument and perceptively
distinguished three possible causes of dualism:
• the import of an (alien) capitalist society;
• the ‘high capitalistic structure’ of that imported society;
• the inability or unwillingness to adapt of the pre-capitalist host
society.
Emphasising process rather than structure, Sadli pointed to the scope
for adaptation, integration and synthesis between the capitalist and noncapitalist modes of production. In these terms the experience of railways
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Howard Dick
does not fit a crude dualistic model. The most generous interpretation is
that dualism may have been a late-colonial phase. From the outset railways
were involved in a process of dynamic interaction with the small-scale
transport sector, and the alliance between colonial capital and the colonial
state became increasingly defensive.5 By the 1930s small-scale road
transport was eroding the market share of railways. After independence,
Indonesianisation of the state railways and nationalisation of private
railways eliminated their capitalist features. Under state ownership and
control railways remained a large-scale, capital-intensive enterprise and
thus part of the ‘formal’ sector. However, instead of operating under
commercial norms, they were now managed to achieve political,
bureaucratic and social objectives. In Sadli’s terms, the ‘imported’ and
‘capitalistic’ features of railways atrophied when they were absorbed into
the national economy and society.
The Small-Scale Sector: Static or Dynamic?
Railways stimulated rapid expansion in the area and output of the largescale plantation sector. The other fascinating side of the story is the mixed
response of the small-scale sector. The Residency reports of 1891 put
forward a widespread view that railways stimulated trade but not village
agriculture. In other words, by widening the market the railways created
a ‘vent for surplus’, raising the proportion of household time directed
towards the market economy but without much change in the technology,
scale or intensity of production. Thus somewhat more rice and dry-season
(palawija) crops were sold on the market, along with fruit, coconuts,
coconut oil, palm sugar, chickens, eggs and some handicrafts, but these
were adjustments on the margin, not a transformation.
This essentially passive or Boeke-like view of ‘peasant’ response sits
awkwardly with the evidence cited above of the dynamic response of
small-scale land transport to the intrusion of railways. Indigenous land
transport had to surrender ‘line-haul’ traffic to railways but enjoyed
increasing patronage in feeder traffic. This finding is consistent with recent
evidence of a trend since the introduction of the Cultivation System in
the 1830s of growth in off-farm employment opportunities and increasing
circular labour migration (Boomgaard 1989; Elson 1994; Fernando 1996).
Here there is strong evidence of economic transformation. The rapid
development of motorised land transport in the early 20th century was
also not a new phenomenon but a more sophisticated phase that built on
rising mass demand and increased supply of small-scale capital and
entrepreneurship, both indigenous and Chinese.
Attempts to reconcile these alternative perspectives of passive and
dynamic response lead back to other familiar paradigms in the literature.
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Representations of Development in 19th and 20th Century Indonesia
199
The apparent lack of peasant response in the 1890s suggests an early
formulation of the question that troubled Geertz in the 1960s. Geertz (1964,
1965), following on Dewey (1962), marvelled at the vitality and complexity
of the local market (bazaar) economy and wondered at the lack of an
organisational response. Why did such ‘rational’ economic actors remain
in the familiar world of small, shifting coalitions and not take the ‘logical’
next step of forming business firms? In the 1960s it was possible to
attribute failure of indigenous enterprise to economic pressure from
western and Chinese business. Geertz also invoked the notion of a failed
transition, by claiming to identify—the evidence is slender—a group of
larger Muslim traders whose business had succumbed to the depression
of the 1930s. If such people had not existed, they certainly ought to have
existed. Yet in 1891 Resident after Resident had observed how little of
large-scale trading was in indigenous hands. The 1891 reports give pause
for reflection that perhaps village society and its superstructure of the
bazaar economy was never actually a breeding ground for indigenous
business firms, that in Geertz’s succinct phrase the Javanese were always
‘entrepreneurs without enterprises’.
Geertz (1963) saw one surface of this phenomenon, which he
brilliantly but misleadingly labelled as ‘shared poverty’. The Javanese
were their own worst enemy. As a society they needed, in their own selfinterest, to be more individualistic, more selfish. ‘Shared poverty’ thus
neatly linked observed economic behaviour with a sophisticated social
construct of ‘other’, that perversely idealised Javanese villagers and
empathised with their tragic plight, an enervating combination of bad
luck and excessive virtue. Geertz reflected prevailing ‘developmentalist’
hostility to social mechanisms of redistribution but gave such behaviour
uniquely Javanist and historical respectability. Though staunchly anticolonial, he thereby gave a new lease of life to colonial representations of
Javanese as submissive and virtuous ‘other’. Only in the 1990s have
authors such Pemberton (1994), Ricklefs (1993) and Reid (1988, 1993)
begun to challenge and deconstruct these colonial representations.
If social representations of ‘Javanese’ can now be challenged, then it
is timely also to challenge economic representations. Let us assume, for
the sake of argument, that Javanese traders and villagers were not socially
crippled economic actors but skilled and sophisticated traders who
performed efficiently in the market superstructure, pejoratively labelled
the bazaar economy. This certainly fits the facts as they have been
represented in the literature. Dewey (1962) and Alexander (1987) confirm
Geertz’s assessment of the vitality of local markets. Citing contemporary
accounts, Reid (1993) extends a long historical gaze to the role of Javanese
traders in international trade in the 16th and 17th centuries. Hasselman
(1862: 25) wrote of the market in the central Javanese town of Japara,
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‘There reigns such a throng, noise and bustle that is to be expected only
of a busy, trading nation.’ Such evidence could be greatly multiplied and
is remarkable in its consistency over many centuries. It also accords with
broader social observation that Javanese of any social rank are highly
materialistic and, women especially, anything but naïve in money
matters.6 Rather than ignore or discount the weight of evidence to accord
with casual theorising, perhaps we need a better explanatory theory.
One line of inquiry is that Java may be another example of what Elvin
(1973) in China provocatively labelled the ‘high-level equilibrium trap’.
As a young scholar of China, Mark Elvin had been similarly puzzled at
the paradox that a people who displayed such obvious entrepreneurial
talent and had in the past achieved economic greatness should now be
so easily disparaged as economically backward. Disregarding neocolonial orthodoxy, Elvin argued that by the 19th century China had been
for several centuries a sophisticated and highly monetised market economy
with complex institutions and a vast household sector, including
agriculture, that had expanded to the limit of population within the
constraints of pre-modern agricultural technology. Except in foreign trade
and a few niches, there were no longer monopoly profits to be made
within the framework of existing institutions. China is not of course
directly comparable with Java. Until the early 20th century Java still had
unsettled agricultural land and was open to international trade and
foreign investment (Booth 1988, 1998). The insight is that, in a narrowly
based commercial economy, markets and institutions might become too
efficient, in effect become saturated, and thus eliminate the scope for
large-scale investment and capital accumulation. This is the institutional
equivalent of the profitless ‘stationary state’ that haunted classical
economists.
The new institutional economics also offers some insight. Firm-based
capitalism can be expected to thrive in imperfect markets where there
are few players, asymmetric information, and an uneven distribution of
firm-specific advantages. By contrast, the problem of Java’s indigenous
economy was not that its product markets were undeveloped but that
they were too developed, too sophisticated, that windfall gains were too
quickly and efficiently competed away. Market information was
symmetric and capital so fragmented that ‘firm-specific advantages’ were
not sustainable. From this perspective, ‘shared poverty’ may be pointing
not to any unique, culturally determined mode of behaviour but to fairly
standard economic behaviour in highly competitive markets. In the 1950s
when Geertz was in the field, as in the 1930s and late 1990s, efficient
markets allowed free entry to occupations or trades which offered incomes
above the prevailing norm. Here may be as good an explanation of the
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Representations of Development in 19th and 20th Century Indonesia
201
‘backwardness’ of Java, and especially Central Java, as shared poverty,
cultural decadence and colonial exploitation? This is not to discount an
oppressive influence from the Javanese courts, or to deny policy biases,
but it does restore agency to the Javanese people.
Dualism and Globalisation
Boeke’s definition of social dualism as ‘the clashing of an imported social
system with an indigenous social system of another style’ had no
theoretical underpinnings. It was based upon observation, mediated by
a set of beliefs which may be described as colonial ideology. The concept
found no favour because those colonial beliefs were rejected along with
the historical experience. Nevertheless, it does not follow that Boeke was
entirely wrong. He may have lacked insight into the political economy
of colonial exploitation, oversimplified industry structures and misread
the dynamics of long-term economic development, but he does at least
seem to have grasped the social tensions generated by economic
transformation. If the word ‘imported’ is replaced by the word
‘globalised’, and if the formulation is shorn of its colonial connotations,
this insight retains some relevance.
For the sake of argument and in hindsight the colonial economic
experience between the mid 19th and mid 20th centuries can be reread as
a prior wave of globalisation involving land-extensive, agro-industrial
production for export markets. Beginning on Java with introduction of
the state-directed Cultivation System in 1830, the process intensified after
the mid 19th century through application of modern, large-scale, capitalintensive industrial revolution technology. Java was the first part of
Southeast Asia in which this technology was systematically applied, in
particular to the sugar industry (Dick 1992). However, to maintain
international competitiveness it was not sufficient to increase scale and
reduce unit production costs. The scale and unit cost of transport and
communications had also to be adjusted more or less in step. The Dutch
achievement of the late 19th century was to visualise Java as a single
productive unit, a single integrated economy, and to coordinate state and
private enterprise to that end. The outcome was the sophisticated and
highly integrated ‘formal economy’ of plantations, management houses,
banks, trading houses, railways, utilities and the colonial state itself, which
reached its culmination in the 1920s. This formal economy, which defined
itself in dominance of and juxtaposition with the bulk of the indigenous,
small-scale economy, gave rise to the phenomenon that became known
as ‘dualism’ or, using Higgins’ terminology, bi-polar production.
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Indonesians fought for independence against the colonial economic
and political system and, having gained sovereignty, worked towards its
demise. The large-scale, modern sector including railways was
nationalised and brought under state control—by 1958 all Dutch
enterprises and in 1964/65 all other foreign enterprise. Except for
production-sharing agreements in the oil industry, foreign investment
and capitalism had been eliminated by the end of the Sukarnoist period
of Guided Democracy (1959–66). Alongside the large but highly inefficient
state sector was an atomised sector of household and small-scale
enterprises. Despite some surviving export capability, neither sector was
well articulated with the global economy. As exemplified by the country’s
chronic balance of payments crisis, Guided Democracy/Economy had
been the culmination of a period of disengagement from the international
economy.
The New Order ushered in a new wave of globalisation. Beginning
with the new foreign investment law of 1967, private capital and
technology again flowed into Indonesia, this time without the vehicle of
colonialism and with an increasing share directed to manufacturing rather
than agriculture. This process accelerated after the mid 1980s with the
non-oil export drive and the liberalisation of trade and investment. The
experience has been well documented by Hill (1996) and others, and only
two aspects need to be drawn out here.
First, the spatial pattern of New Order globalisation has been very
different from that of the colonial period.
ISSN: 0007-4918 (Print) 1472-7234 (Online) Journal homepage: http://www.tandfonline.com/loi/cbie20
th
Representations of Development in 19 and
th
20 Century indonesia: A Transport History
Perspective
Howard Dick
th
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To cite this article: Howard Dick (2000) Representations of Development in 19 and 20
Century indonesia: A Transport History Perspective, Bulletin of Indonesian Economic Studies,
36:1, 185-207, DOI: 10.1080/00074910012331337833
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Bulletin of Indonesian Economic Studies
Vol 36 No 1, April 2000, pp. 185–207
REPRESENTATIONS OF DEVELOPMENT
IN 19TH AND 20TH CENTURY INDONESIA:
A TRANSPORT HISTORY PERSPECTIVE
Howard Dick*
University of Melbourne
Contemporary debate in Indonesia over ‘people’s economy’ and
‘globalisation’ recalls the vigorous 1950s debate over ‘dualism’. Taking as
a case study the rise and eclipse of railways, this paper argues that the
colonial phenomenon of dualism can with hindsight be reinterpreted as a
phase in a previous cycle of globalisation. However, economic history
has overlooked the remarkable vitality of the small-scale transport sector.
Focus on the small-scale sector highlights the inadequacies of familiar
paradigms and suggests the need to reconceptualise long-term
socioeconomic change. This analysis has important implications for
responses to the current wave of globalisation and how they may be
manifest in a more democratic post-Soeharto Indonesia.
INTRODUCTION
The economic crisis of 1998 has revitalised the small-scale or ‘informal’
sector of the Indonesian economy. Along with democratisation, it has
also changed the way many Indonesians conceptualise their economy
and perceive economic policy. A campaign for small-scale ‘people’s
economy’ (ekonomi rakyat) and criticism of the IMF and World Bank have
been part of the questioning of the benefits and costs of globalisation.
This ideological shift can be understood as a reaction against the
tremendous expansion of the formal sector under the New Order, and
against the accompanying political repression. Even casual observation
confirms that the Indonesian economy retains profoundly dualistic
features.
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Howard Dick
The terms ‘formal sector’ and ‘informal sector’ stereotype a more
complex reality, but they serve to distinguish between a highly structured,
capital-intensive corporate sector, which thrives in a stable, low-risk
environment, and a much more labour-intensive, family- or householdbased sector which has the flexibility and resilience to survive in a very
unstable and uncertain environment. At the end of the 1990s, as in the
mid 1960s, the formal sector found itself struggling in a much harsher
post-crisis environment, while small-scale enterprises again prospered
and multiplied. The aim here is not to revive the old chestnut of whether
Indonesia is in fact a dualistic economy and society, which is a crude
proposition, but to explore ways in which perceived dichotomies, between
small scale and large scale, between local and global, continue to influence
thinking and policy.
At times of crisis and regime change ‘other things’ do not hold
constant. Familiar assumptions need to be re-examined. One approach
is to set the immediate past in historical perspective. Revival of the formal
sector under the New Order resembled an earlier colonial phase of
corporate capitalism that began around the 1890s and lasted until the
1930s. However, it contrasted sharply with the intervening period. In the
1930s, as the modern or ‘formal’ sector of the colonial economy reeled
under the shock of the world depression, the informal sector thrived and
then continued to expand through the Japanese occupation, the
Revolution and the first two decades of independence. Post-New Order
Indonesia, economically weak and hesitantly democratic, shows some
of the features of the 1950s when the colonial paradigm was under
challenge.
Given the new relevance of the 1950s experience, this paper seeks to
revisit several ‘ghosts’ from that time that continue to haunt debates about
the nature of capitalism and development in Indonesia. The first of these
is dualism. It was never a theory but, like the more recent term
‘globalisation’, a codeword. 1 It denoted—and oversimplified—an
extraordinarily complex process, linking observable phenomena to a set
of shared ideological beliefs. Fortunately dualism is no longer the starting
point for analysis of the Indonesian economy, but the distinction between
large-scale and small-scale, capital-intensive and labour-intensive activity
continues to pervade policy discussion, and now once more politics as
well. Other ghosts are the Geertzian concept of ‘shared poverty’ and the
ongoing quest for the viable small-scale firm. This paper contends that
none of these concepts is particularly helpful and that the grand process
of Indonesia’s modern economic history may be better conceived in other
ways. Nevertheless, these are not esoteric debates but a pathway to
sharper analysis of the political economy of contemporary Indonesia.
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Representations of Development in 19th and 20th Century Indonesia
187
The following analysis is partly historical and partly interpretive. The
first part of the paper takes as a case study a story about the rise and
eclipse of Java’s railways, looking first at their impact around 1890, when
they were a leading edge of formal sector expansion, and then over a
century tracing their long-term decline in the face of competition from
small-scale land transport. The second part discusses some of the familiar
paradigms by which this story has in the past been caricatured, specifically
dualism, the lack of a firm-based Javanese response to modernisation,
and shared poverty, and draws out some of the implications of this
economic history for the current debate over globalisation.
A TALE OF TWO SECTORS2
The Intrusion of Railways
Java was the only territory of Southeast Asia to experience the full force
of the global industrial revolution of the 19th century. Around 1800 it had
been a set of loosely connected economies and societies held together by
a ramshackle colonial state. By 1900 it was a sophisticated agro-industrial
economy integrated by overlapping networks of telegraphs, telephones,
railways, narrow-gauge tramways and good roads. Nowhere in Southeast
Asia could boast better infrastructure (Dick 1992). Elsewhere in East Asia,
only Japan could compare.
Railways decisively shifted goods movement away from the main
rivers. Running more or less parallel to these former arteries of commerce,
railways were faster and more reliable. The much cheaper freight by river
prahu was offset by risks of pilfering and water damage (OMW 1907).
Export commodities for which quality mattered therefore shifted to rail.
Sugar was particularly suited to rail because it was bulky, it could be
consolidated into wagon loads, and the volume of traffic justified rail
spurs to the actual mills. By 1903 the average daily river traffic into
Surabaya was 110 prahu of around 700 tonnes capacity, which may be
compared with the seasonal average daily sugar carriage by rail of 6,000
tonnes (OMW 1907; Osten 1930: 8).
From road to rail, however, the shift was much less dramatic. In 1891
many Residents reported that rail was competitive only for full wagon
loads, which applied in the case of plantation exports and sugar in
particular. Smaller consignments, especially of local crops, handicrafts
and import goods, continued to be carried almost entirely by traditional
forms of transport. This reflected not so much relative efficiencies as
relative prices. Resident after Resident complained that rail freight rates
were too high, and the NISM (Nederlandsch–Indische Spoorweg
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Maatschappij, the Netherlands Indies Railway Company) did indeed
reduce its tariffs across the board from 1 January 1892.
The uncompetitiveness of rail freight vis-à-vis road had two
contributing causes. First, as a line-haul operation, shipment by rail
incurred feeder and transhipment costs at both ends of the journey, which
had also to be reckoned in the door-to-door calculus. The paperwork
involved in shipment by rail and the greater risk of damage or leakage of
fragile or liquid goods might also be taken into account. In the case of
traffic between Jakarta and Bandung, Chinese importers sent low volume
but heavy goods such as screws, nails, metalware, paint, linseed oil and
soap by ox-cart (grobak); iron pots and pans were said to be carried 50%
more cheaply than by rail.
Secondly, rail competition brought about considerable reduction in
the costs of competing modes. Local carters seem to have charged what
the traffic would bear in the light of railway tariffs. The Resident of Japara
reported that in competition with the narrow-gauge tramway small local
carts (karretjes) had reduced charges to only one-third of their previous
level, despite which their number continued to increase. Elsewhere
charges probably fell by rather less, but still roughly matched those for
rail before calculation of feeder and transhipment costs. The Resident of
Pasuruan explained that the 15 kilometres from Pasuruan to Grati by
third-class rail cost 17 cents per person without accompanying goods,
whereas three to five women with baskets could share a small cart for 50
to 60 cents, or around 17 cents per person with accompanying goods and
direct to their village.
An important determinant of the responsiveness of traditional modes
of transport to railway competition was the scarcity and opportunity cost
of labour. Where labour was abundant and there were few opportunities
for alternative off-farm employment, such as in the densely populated
rice-growing district of Bagelen to the west of Yogyakarta, villagers were
prepared to hire themselves out, with or without a horse, for little more
than the cost of food. A vivid case in point was the man-drawn cart (grobak
wong), which as late as 1891 could still compete with rail for long-distance
haulage from Bagelen across the mountains to Semarang and back. As
described by the local Resident, six men—or sometimes men and
women—would hire a cart able to carry five to six pikul (about one-third
of a tonne) and at local markets buy up a full load of goods such as Java
sugar, eggs and earthenware. The cart would then be pushed or dragged
to Semarang, while on the way part of the load was sold to cover living
expenses. On arrival the goods would be sold on credit to wholesale
traders (bakul) and, as the money was paid over, dried or salted fish and
other articles of daily consumption were bought up as return load, to be
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Representations of Development in 19th and 20th Century Indonesia
189
sold back in Bagelen in the same manner. One return trip would take
about 20 days and yield just enough profit to live on. As a subsistence
activity, such carrying and trading was quite sophisticated and might be
likened to the operation of small interisland prahu.
The rate at which passenger traffic shifted to rail was also impeded
by high fares. In May 1891 the Resident of Surakarta described the rates
of the NISM as ‘neither cheap nor fair’. His concern was not with the
rates charged for export crops, which very quickly shifted to rail, but
with those for Indonesian passengers and in particular petty traders. He
observed that few passengers travelled with goods in excess of the free
allowance:
The native, who places no value on time and expects much more
for his few coins than quick transport, still goes much on foot,
even carrying his goods himself. Besides, the transport of the
goods by rail is much too expensive for him, for the transport
costs often amount to more than the value of the goods (KV 1892:
C5).
The Netherlands Indies Railways and the State Railways therefore seem
to have had only a marginal impact on petty trade. Narrow-gauge
tramways, by contrast, specialised in local passengers and market traders,
and set timetables to fit in with the timing of local markets.
In the long run, market forces thus established a dynamic equilibrium
between rail and ‘traditional’ modes of transport. The initiative lay very
much with the railways and tramways, state and private, which by trial
and error adjusted the level and structure of passenger fares and freight
rates to achieve the most profitable mix of traffic. Other modes had to
make the most of the opportunities that were left. Railways came to
dominate longer distance freight and passenger movement, while roadbased traffic remained competitive over shorter distances, especially in
serving the village economy.
The process was nevertheless far more complex than adjustment of
market shares. First, the reduction in the real cost by all modes and the
greater availability and ease of travel and transport facilitated personal
mobility and the circulation of commodities, so that the demand for
transport steadily increased, as indeed it had been doing since the
introduction of the forced production of export crops under the
Cultivation System (Elson 1994). However, rail and road modes were
complementary as well as competitive. Growth in rail traffic generated
demand for road vehicles to and from the stations, besides which there
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Howard Dick
was more lively traffic between villages and local markets. On balance
the number of horse-drawn vehicles continued to increase. This applied
particularly to pony-carts suited to carrying both passengers and small
quantities of accompanying goods.
Secondly, some ‘traditional’ vehicles were forced into ‘down market’
niches. River prahu, for example, lost most of the long-distance trade
except in village produce such as local sugars, padi and palawija, or very
low-value items such as wood, firewood, charcoal and fruit, especially
coconuts (OMW 1907). Even today, traditionally built wooden prahu are
still used on the lower reaches of the Brantas and Solo rivers, larger ones
for sand and gravel and smaller ones for local trade across the river where
there are no nearby bridges. Similarly with grobak: since the 1830s, when
such carts had been requisitioned, their mainstay had been cane transport
from fields to the factory. As the rail network intensified, however, and
mills laid mini-gauge rails into the fields, this demand collapsed, except
among older and smaller mills, none of which survived into the 1920s. In
the lowland plain, carts were relegated to the transport of low-value local
goods which were either heavy, such as bricks and tiles, or of very large
volume, such as wooden or bamboo furniture, timber or firewood. In the
highlands, ox-carts were better able to hold their own until the era of
motor transport. For reasons of terrain, pack horses and even porters
also continued to be used.
Thirdly, there was some evidence of innovation in the kind of service
provided by small-scale indigenous transport. For example, in 1904 the
Resident of Mojokerto in the Lower Brantas reported that pony-carts
(dokar) were being used like omnibuses, not for single hire, but picking
up and putting down passengers along the road at very low fares (OMW
1907). While this might seem a small thing, conceptually it marked a
breakthrough to the stage of common carrier. 3 Significantly, the
breakthrough occurred a generation before motor buses and three
generations before the ‘Colt revolution’ of the 1970s. In other words, the
organisational breakthrough appears to have preceded the generally
recognised technological one, confirming the flexibility and adaptability
of the small-scale indigenous sector.
The Automobile Age
Around the turn of the century no-one could have predicted that the
clumsy novelty of the automobile would eventually overwhelm the
mighty railway system and renew the vitality of the small-scale transport
sector. In 1900 there were just 15 automobiles in Java and Madura,
increasing to around 1,000 in 1910 (table 1). By 1913 and 1914 imports
had accelerated to just over 1,000 per annum, but before World War I
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TABLE 1 Number of Motor Vehicles, Java and Madura, 1900–96a
Vehicles
1900
15
1910
1,000
1929
45,000
1940
58,000
1966
140,000
1996
1,850,000
a
To 1940 including motorcycles.
Source: CKS (Central Statistics Office, Batavia), Indisch Verslag [Indies Report], various issues; BPS, Statistical Pocketbook and Indonesian Statistical Yearbook, various
issues.
automobiles were still hardly to be seen outside the main coastal cities
(Knaap 1989: 86–7). By 1929 the number of vehicles had increased to
45,000, and imports were over 10,000 units in both 1928 and 1929. Imports
of trucks and buses, which began to be significant at the end of World
War I, were also running at a high level. The demand for vehicles on Java
was so high that in 1927 General Motors made the decision to locate its
new assembly plant not in Singapore but in Jakarta.
Railways began to feel the spur of road competition in the 1920s.4 In
East Java, for example, by 1927 there were 35 bus owners based in
Surabaya with a fleet of 200 vehicles, for the most part deployed along
the same busy corridors to and from outlying market towns. Most of
these operators owned no more than a few buses, but one large Chinese
firm (Tan Luxe Omnibus Service) owned 65; by 1930 this Tan Luxe fleet
had increased to 250 buses operating across a network of 625 kilometres.
The OJS (note 4) attributed this upsurge of road competition to several
factors. First, rail tariffs had not been adjusted in line with the deflation
that had occurred since the end of the boom in 1920. Second, newly
imported buses had become very cheap—only f3,000 for a vehicle able
to carry around 20 passengers–and, with few overheads, could carry
passengers for as little as one cent per kilometre and still make a modest
profit. Third, the quality of bus service was better, with more frequent
departures and willingness to stop on demand anywhere along the road,
which reduced the need for passengers to walk or to pay for other
transport to get to and from the station.
Small-scale entrepreneurship in land transport did not emerge out of
nothing. It grew out of the services long provided by carts, relying mainly
upon animal power. The tiny European community owned half the
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TABLE 2 Rail Freight, Java and Madura, 1911–96
Freight
(million
tonnes)
1911
1920
1929
1935
1939
1960s
1996
8
12
16
5
8
2
7
Source: As for table 1; for pre–World War II figures: Knaap (1989).
colony’s private automobiles, which were luxury items, and a third of
the motorcycles, but only 7% of commercial vehicles (Knaap 1989). Of
this last category, Indonesian and Chinese owners held almost equal
shares. Local transport was an industry that local people well understood.
They had only to master and adapt the mechanics and navigation of motor
vehicles, a challenge they embraced with enthusiasm.
In the face of this vigorous challenge, railways sought government
protection from bus competition, citing their public service role and
pointing to the burden of high overhead costs. The Dutch Motor Traffic
Act of 1924 established a precedent for licensing and regulation, but the
government dithered. On the one hand was the alliance of colonial capital
and the state, not least as the main railway owner, pressing strongly for
regulation. On the other was the public interest in cheap fares. Amidst
ongoing controversy the Road Traffic Act (1933) came into effect on 1
January 1937. Thereafter along main highways buses and trucks were
allocated to set routes, for which operators and capacity were licensed
and minimum tariffs and other restrictions set by decree. Implementation
was delegated to provincial and local government. This system, with all
its powers of patronage and discrimination, is still in force, administered
by the Directorate General of Land Transport.
As a matter of survival, rail and tramway companies had also to adopt
commercial strategies. One strategy was to start up subsidiary bus services
as extensions of and feeders to the rail network. Another was to reduce
fares and improve frequencies. Road competition also forced railways to
restructure their business towards freight. Assisted by the rapid expansion
in the output of sugar, rail freight of 16 million tonnes in 1929 much
surpassed the 1920 peak of 12 million tonnes (table 2).
Despite the erosion of rail traffic, especially around the main cities,
on the eve of World War II Java remained pre-eminently a rail-based
society. On 1 January 1941 the whole of Java and Madura could boast
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TABLE 3 Rail Passengers, Java and Madura, 1911–96
Passengers
(million)
1911
1920
1929
1939
1952
1960
1970s
1996
75
166
130
76
97
143
20
149
Source: CKS, Batavia, Indisch Verslag, various issues; BPS, Statistical Pocketbook,
various issues; for pre–World War II figures: Knaap (1989).
only 58,000 motor vehicles, including 10,000 motorcycles, which by
contemporary standards was insignificant (table 1). Nevertheless, the
trends were against rail. In terms of passengers, Java’s railway and
tramway companies never surpassed the peak carriage of 166 million in
1920 (table 3). From 130 million in 1929, numbers collapsed during the
1930s. In 1939 only 76 million passengers were carried, no more than in
1911, although the network was more extensive and the average journey
longer. Rail freight also collapsed during the depression, falling from 16
million tonnes in 1929 to just 5.4 million tonnes in 1935. By 1939 tonnage
was still only half the level of 1929 and, as in the case of passengers, no
more than that carried in 1911–12.
The Cycle Revolution
During the 1930s the Indonesian population found in the bicycle a cheap
and flexible mode of road transport. The large yen devaluation of
December 1931 made imported Japanese bicycles cheap enough to
become an item of mass consumption. In expanding cities like Jakarta
and Surabaya, they were a means to commute to work without having
each day to pay precious cents in public transport fares. Factories installed
long rows of cycle racks. With small adaptations, the bicycle was also
found to be a very efficient means of carrying small quantities of goods
from village to market. The bicycle became for Indonesians what the car
was to Europeans. Between 1931 and 1940, 240,000 bicycles were imported
to Indonesia, which may be compared with the 1940 total of 88,000 motor
vehicles (58,000 for Java and Madura) (Knaap 1989). Photographs taken
in the 1930s, especially in the main cities, show large numbers of bicycles
sharing the street with motor vehicles. After independence the bicycle
became ubiquitous, almost epitomising the new era of personal freedom.
As late as 1970 the former revolutionary capital of Yogyakarta was still a
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Howard Dick
city of bicycles and pedicabs, with scarcely a car to be seen and only a
few motorcycles. In rural Java the bicycle is still an important means of
transport.
During the Japanese occupation of 1941–45, bicycle technology gave
rise to a new public transport vehicle, the becak or three-wheeled pedicab.
The first rather heavy and unwieldy prototypes appeared in the late
1930s—a decade of innovation in public transport—and seem to have
developed from the more common goods delivery vehicles (Robinson
1952). After the military requisitioned all motor vehicles in 1942, a lighter
and more manouevrable type of becak gained popular acceptance,
competing against the well established pony-carts, which were dependent
upon a regular supply of feed. Owners were mainly Hokkien Chinese,
who controlled the bicycle trade, but drivers were invariably indigenous
Indonesians, often villagers who had migrated to the city in search of
employment. Although the heavy work of pedalling was regarded as
demeaning by educated Indonesians, the tukang becak themselves were a
tough and independent band of urban dwellers who claimed the cities
and towns of Indonesia as their own territory.
Under the New Order, rising real incomes saw the bicycle give way
to the Japanese-made motorcycle as popular individual transportation.
In the early 1960s motorcycle numbers were growing at a rate of about
10% per annum, but as late as 1966 only 216,000 were registered, fewer
than the number of bicycles in 1941. By 1996, however, there were 6.5
million in Java—two-thirds of all registered motor vehicles—and new
motorcycles were being assembled locally at the rate of a million each
year (BPS 1997). Automobile numbers grew more slowly, from 140,000
in 1966 to almost two million by 1996. In the cities the extraordinary
growth in motor traffic resulted in the bicycle being marginalised—not
least because cycling was now so dangerous. In Jakarta during the 1970s
the reign of the becak was forcefully brought to an end, setting an example
for restrictions to be imposed in other main cities.
The Railways in Eclipse
After independence rail freight succumbed to road competition. At its
best in 1960/61 the railways carried only half the depressed 1939 level of
8 million tonnes, and by the late 1960s this had fallen away to only 2
million tonnes (table 2). Because of massive pilferage the railways were
no longer trusted with less than carload shipments, and had to rely upon
carriage of state-controlled bulk commodities, mainly petroleum products
and fertiliser. By 1996 economic growth and rehabilitation had helped
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195
rail freight to recover to 6.7 million tonnes, but this was still no better
than the depression levels of the 1930s.
In passenger traffic, the 1950s were the Indian summer of the railway
system. Recorded passenger movement increased from 97 million in 1952
to a peak of 143 million in 1960 (table 3). Assuming that fare evasion was
much more rife and at least 15% of traffic, this would have equated to the
record carriage of 1920, albeit from a much larger population. Yet by the
mid 1970s, in the face of vigorous bus competition, passenger traffic had
collapsed to only 20 million. Java’s passenger traffic was booming but
rail patronage was in decline. Rehabilitation of Jakarta’s metropolitan
network and introduction of fast inter-city trains helped to revive
patronage from 60 million in 1991 to 149 million in 1996 (table 3),
impressive enough by prewar standards, but at 1990s levels of population
and mobility no more than a niche operation.
The passenger business lost by rail was captured by air and road
transport. By the 1950s government officials and businessmen could
afford to fly, even within Java, and by the early 1990s there were hourly
shuttle flights between Jakarta and Surabaya. The general public travelled
by long-distance bus. During the 1970s there was a boom in overnight
long-distance bus services, which competed in quality of service, offering
soft seating, air-conditioning and taped music. Every city and town
received central government subsidies to construct bus terminals, which
became much busier interchanges than the railway stations. Mediumdistance buses faced competition from light commercial vans known as
Colts, which provided faster—though not safer—transport for passengers
with little accompanying baggage. Transport between the village and
market town had shifted in the 1950s to buses, which over short distances
were supplemented by bicycles and pony-carts. In the late 1970s buses
began to lose business to light commercial vehicles or small pick-ups.
These ran more frequently than the buses and could more easily detour
off the main roads. If need be they could also be hired to carry a load of
goods.
The New Order revolution in personal mobility therefore barely
involved the railways (Dick and Forbes 1992). Because roads became more
and more crowded, the rate of travel was not fast; neither was it
particularly safe, but road transport did provide a seamless web of
connections throughout Java. Facilitated by central government (Inpres)
funding of village roads and bridges, rural dwellers could now travel
almost on demand to the nearest market town and, if they wished, connect
through to Surabaya, Jakarta or even Sumatra. Except for a few bulk
commodities and main passenger lines, rail was now incidental.
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INTERPRETATION AND REPRESENTATION
The Large-Scale Sector: Dualism
In the late colonial period of the 1920s various glossy official and
commemorative publications hailed the railways as a triumph of modern
technology and organisation and, without needing to be explicit, as an
important part of the justification for efficient colonial rule (notably
Reitsma 1925, 1928; KRN 1930). By the 1960s, from a functional
perspective, they were an engineering and organisational disaster. Within
less than a century, railways had degenerated from a leading edge of
modern capitalism to an arm of a bloated, dysfunctional and hopelessly
corrupt state.
This history of Java’s railways may be encapsulated as a cycle of
intrusion, adaptation and absorption. In the first decades, railways were
an alien modern technology and organisational form, part of an emerging
capitalist mode of production controlled by western enterprise. Railways
were a vital part of what Burger (1939) described so perceptively as ‘the
unlocking of Java’s interior for world commerce’. In Java’s emerging
plantation economy, the productive potential of the new industrial
revolution technology could be realised only with a transport system of
equivalent scale to link the agro-industrial factory with world markets.
The huge investment in railways and tramways was essential in
restructuring the sugar industry after the crisis of the 1880s and 1890s,
when real cane sugar prices collapsed in response to competition from
the expanding European beet sugar industry. The Resident of Surakarta
reported in 1891 that without the railways the sugar mills would not
have survived the crisis. Smaller mills closed down and output was
concentrated in larger and more modern factories. The subsequent growth
in output simply could not have been accommodated by traditional carts
and river prahu at a price that would have been competitive on world
markets. Devastated by blight, in the 1890s the coffee industry was also
enabled to restructure by the opening of rail access to the virgin slopes of
Java’s highlands and southern hills (Schaik 1986).
Over time, however, railways adapted to the local economy and
society. Rolling stock and infrastructure, schedules and fares had to be
adjusted to the demands of freight and passengers, including the great
number of third- and fourth-class passengers. Shortage of European
labour made it necessary to train Indonesians as drivers, guards and
station personnel; these permanently employed and uniformed wage
earners became part of the colonial labour elite (Ingleson 1986).
Conversely, local society adapted its habits and mobility to the railways,
as also of necessity did competing modes of transport.
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What could not have been predicted before 1942 was the ultimate
absorption of the railways into Indonesian society. This happened in two
associated ways, first the economic eclipse of railways by road transport
and, secondly, their political eclipse by nationalisation and rampant
bureaucratisation. The economic competition which railways encountered
from motor and pedal transport from the 1920s was a worldwide
phenomenon that flowed from a fundamental disparity in scale and unit
cost. Rail could maintain dominance over pedestrian and animal-powered
transport but without regulatory protection had to compete head-on and
at a disadvantage with motor transport. Ultimately fares were driven
below long-run marginal cost and railways became a non-profit public
good.
To withstand intensifying road-based competition, railways needed
both state protection and very efficient internal organisation. Instead they
became organisationally dysfunctional. The main network of the State
Railways (Staatsspoor) was in 1950 reconstituted as the Railway
Department (Djawatan Kereta Api), which in turn took over management
of the residual private railway and tramway systems as part of a single
nationalised system. Schedules, customs and rituals were faithfully
maintained but profitability ceased to matter. The government funded
growing financial deficits but did not undertake the massive investment
needed to modernise the system, which gradually contracted from its
1931 peak of 5,500 kilometres. Foreign aid funded replacement of rolling
stock on main lines, but elsewhere vintage technology survived as though
in a quaint open-air museum. By the 1960s the Railways Department
had become a vast employment relief organisation.
Dualism has been one way of representing this historical experience.
Boeke’s original concept of social dualism came to attention only in the
1950s, at the end of his career and amidst the tense period of
decolonisation. Its acceptance or rejection differentiated ‘neo-colonial’
from ‘anti-colonial’ writers. In an incisive critique first published in 1957,
the young Indonesian economist Sadli (1971) pointed out the lack of any
logical chain of reasoning in Boeke’s argument and perceptively
distinguished three possible causes of dualism:
• the import of an (alien) capitalist society;
• the ‘high capitalistic structure’ of that imported society;
• the inability or unwillingness to adapt of the pre-capitalist host
society.
Emphasising process rather than structure, Sadli pointed to the scope
for adaptation, integration and synthesis between the capitalist and noncapitalist modes of production. In these terms the experience of railways
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Howard Dick
does not fit a crude dualistic model. The most generous interpretation is
that dualism may have been a late-colonial phase. From the outset railways
were involved in a process of dynamic interaction with the small-scale
transport sector, and the alliance between colonial capital and the colonial
state became increasingly defensive.5 By the 1930s small-scale road
transport was eroding the market share of railways. After independence,
Indonesianisation of the state railways and nationalisation of private
railways eliminated their capitalist features. Under state ownership and
control railways remained a large-scale, capital-intensive enterprise and
thus part of the ‘formal’ sector. However, instead of operating under
commercial norms, they were now managed to achieve political,
bureaucratic and social objectives. In Sadli’s terms, the ‘imported’ and
‘capitalistic’ features of railways atrophied when they were absorbed into
the national economy and society.
The Small-Scale Sector: Static or Dynamic?
Railways stimulated rapid expansion in the area and output of the largescale plantation sector. The other fascinating side of the story is the mixed
response of the small-scale sector. The Residency reports of 1891 put
forward a widespread view that railways stimulated trade but not village
agriculture. In other words, by widening the market the railways created
a ‘vent for surplus’, raising the proportion of household time directed
towards the market economy but without much change in the technology,
scale or intensity of production. Thus somewhat more rice and dry-season
(palawija) crops were sold on the market, along with fruit, coconuts,
coconut oil, palm sugar, chickens, eggs and some handicrafts, but these
were adjustments on the margin, not a transformation.
This essentially passive or Boeke-like view of ‘peasant’ response sits
awkwardly with the evidence cited above of the dynamic response of
small-scale land transport to the intrusion of railways. Indigenous land
transport had to surrender ‘line-haul’ traffic to railways but enjoyed
increasing patronage in feeder traffic. This finding is consistent with recent
evidence of a trend since the introduction of the Cultivation System in
the 1830s of growth in off-farm employment opportunities and increasing
circular labour migration (Boomgaard 1989; Elson 1994; Fernando 1996).
Here there is strong evidence of economic transformation. The rapid
development of motorised land transport in the early 20th century was
also not a new phenomenon but a more sophisticated phase that built on
rising mass demand and increased supply of small-scale capital and
entrepreneurship, both indigenous and Chinese.
Attempts to reconcile these alternative perspectives of passive and
dynamic response lead back to other familiar paradigms in the literature.
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The apparent lack of peasant response in the 1890s suggests an early
formulation of the question that troubled Geertz in the 1960s. Geertz (1964,
1965), following on Dewey (1962), marvelled at the vitality and complexity
of the local market (bazaar) economy and wondered at the lack of an
organisational response. Why did such ‘rational’ economic actors remain
in the familiar world of small, shifting coalitions and not take the ‘logical’
next step of forming business firms? In the 1960s it was possible to
attribute failure of indigenous enterprise to economic pressure from
western and Chinese business. Geertz also invoked the notion of a failed
transition, by claiming to identify—the evidence is slender—a group of
larger Muslim traders whose business had succumbed to the depression
of the 1930s. If such people had not existed, they certainly ought to have
existed. Yet in 1891 Resident after Resident had observed how little of
large-scale trading was in indigenous hands. The 1891 reports give pause
for reflection that perhaps village society and its superstructure of the
bazaar economy was never actually a breeding ground for indigenous
business firms, that in Geertz’s succinct phrase the Javanese were always
‘entrepreneurs without enterprises’.
Geertz (1963) saw one surface of this phenomenon, which he
brilliantly but misleadingly labelled as ‘shared poverty’. The Javanese
were their own worst enemy. As a society they needed, in their own selfinterest, to be more individualistic, more selfish. ‘Shared poverty’ thus
neatly linked observed economic behaviour with a sophisticated social
construct of ‘other’, that perversely idealised Javanese villagers and
empathised with their tragic plight, an enervating combination of bad
luck and excessive virtue. Geertz reflected prevailing ‘developmentalist’
hostility to social mechanisms of redistribution but gave such behaviour
uniquely Javanist and historical respectability. Though staunchly anticolonial, he thereby gave a new lease of life to colonial representations of
Javanese as submissive and virtuous ‘other’. Only in the 1990s have
authors such Pemberton (1994), Ricklefs (1993) and Reid (1988, 1993)
begun to challenge and deconstruct these colonial representations.
If social representations of ‘Javanese’ can now be challenged, then it
is timely also to challenge economic representations. Let us assume, for
the sake of argument, that Javanese traders and villagers were not socially
crippled economic actors but skilled and sophisticated traders who
performed efficiently in the market superstructure, pejoratively labelled
the bazaar economy. This certainly fits the facts as they have been
represented in the literature. Dewey (1962) and Alexander (1987) confirm
Geertz’s assessment of the vitality of local markets. Citing contemporary
accounts, Reid (1993) extends a long historical gaze to the role of Javanese
traders in international trade in the 16th and 17th centuries. Hasselman
(1862: 25) wrote of the market in the central Javanese town of Japara,
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‘There reigns such a throng, noise and bustle that is to be expected only
of a busy, trading nation.’ Such evidence could be greatly multiplied and
is remarkable in its consistency over many centuries. It also accords with
broader social observation that Javanese of any social rank are highly
materialistic and, women especially, anything but naïve in money
matters.6 Rather than ignore or discount the weight of evidence to accord
with casual theorising, perhaps we need a better explanatory theory.
One line of inquiry is that Java may be another example of what Elvin
(1973) in China provocatively labelled the ‘high-level equilibrium trap’.
As a young scholar of China, Mark Elvin had been similarly puzzled at
the paradox that a people who displayed such obvious entrepreneurial
talent and had in the past achieved economic greatness should now be
so easily disparaged as economically backward. Disregarding neocolonial orthodoxy, Elvin argued that by the 19th century China had been
for several centuries a sophisticated and highly monetised market economy
with complex institutions and a vast household sector, including
agriculture, that had expanded to the limit of population within the
constraints of pre-modern agricultural technology. Except in foreign trade
and a few niches, there were no longer monopoly profits to be made
within the framework of existing institutions. China is not of course
directly comparable with Java. Until the early 20th century Java still had
unsettled agricultural land and was open to international trade and
foreign investment (Booth 1988, 1998). The insight is that, in a narrowly
based commercial economy, markets and institutions might become too
efficient, in effect become saturated, and thus eliminate the scope for
large-scale investment and capital accumulation. This is the institutional
equivalent of the profitless ‘stationary state’ that haunted classical
economists.
The new institutional economics also offers some insight. Firm-based
capitalism can be expected to thrive in imperfect markets where there
are few players, asymmetric information, and an uneven distribution of
firm-specific advantages. By contrast, the problem of Java’s indigenous
economy was not that its product markets were undeveloped but that
they were too developed, too sophisticated, that windfall gains were too
quickly and efficiently competed away. Market information was
symmetric and capital so fragmented that ‘firm-specific advantages’ were
not sustainable. From this perspective, ‘shared poverty’ may be pointing
not to any unique, culturally determined mode of behaviour but to fairly
standard economic behaviour in highly competitive markets. In the 1950s
when Geertz was in the field, as in the 1930s and late 1990s, efficient
markets allowed free entry to occupations or trades which offered incomes
above the prevailing norm. Here may be as good an explanation of the
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‘backwardness’ of Java, and especially Central Java, as shared poverty,
cultural decadence and colonial exploitation? This is not to discount an
oppressive influence from the Javanese courts, or to deny policy biases,
but it does restore agency to the Javanese people.
Dualism and Globalisation
Boeke’s definition of social dualism as ‘the clashing of an imported social
system with an indigenous social system of another style’ had no
theoretical underpinnings. It was based upon observation, mediated by
a set of beliefs which may be described as colonial ideology. The concept
found no favour because those colonial beliefs were rejected along with
the historical experience. Nevertheless, it does not follow that Boeke was
entirely wrong. He may have lacked insight into the political economy
of colonial exploitation, oversimplified industry structures and misread
the dynamics of long-term economic development, but he does at least
seem to have grasped the social tensions generated by economic
transformation. If the word ‘imported’ is replaced by the word
‘globalised’, and if the formulation is shorn of its colonial connotations,
this insight retains some relevance.
For the sake of argument and in hindsight the colonial economic
experience between the mid 19th and mid 20th centuries can be reread as
a prior wave of globalisation involving land-extensive, agro-industrial
production for export markets. Beginning on Java with introduction of
the state-directed Cultivation System in 1830, the process intensified after
the mid 19th century through application of modern, large-scale, capitalintensive industrial revolution technology. Java was the first part of
Southeast Asia in which this technology was systematically applied, in
particular to the sugar industry (Dick 1992). However, to maintain
international competitiveness it was not sufficient to increase scale and
reduce unit production costs. The scale and unit cost of transport and
communications had also to be adjusted more or less in step. The Dutch
achievement of the late 19th century was to visualise Java as a single
productive unit, a single integrated economy, and to coordinate state and
private enterprise to that end. The outcome was the sophisticated and
highly integrated ‘formal economy’ of plantations, management houses,
banks, trading houses, railways, utilities and the colonial state itself, which
reached its culmination in the 1920s. This formal economy, which defined
itself in dominance of and juxtaposition with the bulk of the indigenous,
small-scale economy, gave rise to the phenomenon that became known
as ‘dualism’ or, using Higgins’ terminology, bi-polar production.
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Indonesians fought for independence against the colonial economic
and political system and, having gained sovereignty, worked towards its
demise. The large-scale, modern sector including railways was
nationalised and brought under state control—by 1958 all Dutch
enterprises and in 1964/65 all other foreign enterprise. Except for
production-sharing agreements in the oil industry, foreign investment
and capitalism had been eliminated by the end of the Sukarnoist period
of Guided Democracy (1959–66). Alongside the large but highly inefficient
state sector was an atomised sector of household and small-scale
enterprises. Despite some surviving export capability, neither sector was
well articulated with the global economy. As exemplified by the country’s
chronic balance of payments crisis, Guided Democracy/Economy had
been the culmination of a period of disengagement from the international
economy.
The New Order ushered in a new wave of globalisation. Beginning
with the new foreign investment law of 1967, private capital and
technology again flowed into Indonesia, this time without the vehicle of
colonialism and with an increasing share directed to manufacturing rather
than agriculture. This process accelerated after the mid 1980s with the
non-oil export drive and the liberalisation of trade and investment. The
experience has been well documented by Hill (1996) and others, and only
two aspects need to be drawn out here.
First, the spatial pattern of New Order globalisation has been very
different from that of the colonial period.