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The colonial period of Indonesia did not
 immediately start when the Dutch first arrived in the archipelago at 
the end of the 16th century. Instead, it was a slow process of political
 expansion that took centuries to reach the territorial boundaries of 
present-day Indonesia. 
During the course of the 18th century the United East India Company (Vereenigde Oost-Indische Compagnie,
 abbreviated VOC) had established itself as the dominating economic and
 political power on Java after the crumbling and collapse of the Mataram
 empire. This Dutch trading company had been a major power in Asian 
trade since the early 1600s, but started to develop an interest to 
interfere in indigenous politics on the island of Java in the 18th 
century as that would improve their hold on the local economy. 
Mismanagement, corruption and fierce competition from the English East 
India Company, however, resulted in the slow demise of the VOC towards 
the end of the 18th century. In 1796 the VOC went bankrupt and was 
nationalized by the Dutch state. As a consequence its possessions in the
 archipelago passed into the hands of the Dutch crown in 1800. However, 
when the French occupied Holland between 1806 and 1815 these possessions
 were transferred to the British. After Napoleon's defeat at Waterloo it
 was decided that most parts of the archipelago would return to the 
Dutch.  
Architects of the Dutch Colonial State in Indonesia
Two names stand out as being architects 
of the new Dutch colonial state in Indonesia. Firstly, Herman Willem 
Daendels, Governor-General from 1808 to 1811 during the French 
occupation of Holland and, secondly, British Lieutenant Sir Stamford 
Raffles, Governor-General from 1811 to 1816 during the British 
occupation of Java. Daendels reorganized the central and regional 
colonial administration by dividing Java into districts (also known as 
residencies), each one headed by an European civil servant - called the 
resident - who was directly subordinate - and had to report - to the 
Governor-General in Batavia. These residents were responsible for a wide
 range of matters in their residency, varying from legal matters to 
the organization of agriculture. Raffles continued the reorganizations 
of his predecessor by reforming the judicial, police and administrative 
system of Java. He introduced the land-tax which meant that Javanese 
peasants had to pay tax, approximately the value of two-fifths of their 
annual harvests, to the authorities. Raffles also had a sincere 
interest in the cultures and languages of Java. In 1817 he published 
his The History of Java, one of the first academic works on the
 topic of Java. However, his administrative reorganizations meant an 
increasing intervention in Java's society and economy by foreigners, 
which is reflected by the growing number of middle ranked European 
officials working in the residencies. Between 1825 and 1890 this number 
increased from 73 to 190.
The Dutch system of rule in colonial 
Java was both direct and dualistic. Alongside the Dutch hierarchy, there
 existed an indigenous one which functioned as an intermediary between 
the Javanese peasants and the European civil service. The top of this 
indigenous structure consisted of the Javanese aristocracy, previously 
the officials that ran the Mataram administration. Now, however, they 
had to execute the will of the Dutch center.
The Cultivation System in Java
Competing British traders, the 
Napoleonic wars in Europe and the Java War implied a big financial 
burden on the Dutch kingdom's budget. It was decided that Java should 
become a major source of revenue for the Dutch and therefore 
Governor-General Van den Bosch ushered in the era of the Cultivation 
System in 1830. This system meant a Dutch monopoly on the cultivation of
 export crops on Java. Moreover, it were the Dutch who decided what kind
 of crops (and in what quantity) had to be delivered by the Javanese 
peasants. Generally it meant that Javanese peasants had to hand over 
one-fifth of their harvests to the Dutch. In return the peasants 
received an arbitrarily fixed compensation in cash which basically had 
no relation to the value of the crop on the world market. The Dutch and 
Javanese officials received a bonus when their residency delivered more 
crops than on previous occasions, therefore stimulating top-down 
intervention and oppression. On top of this compulsory cultivation of 
crops and traditional corvee-labor services, Raffles' land tax still 
applied as well. The Cultivation System turned out to be a financial 
success. Between 1832 and 1852 around 19 percent of total Dutch state 
income was generated from the Javanese colony. Between 1860 and 1866 
this number reached around 33 percent.
Initially, the Cultivation System was 
not dominated by the Dutch authorities only. Javanese power holders and 
private European as well as Chinese entrepreneurs joined in as well. 
However, after 1850 - when the Cultivation System was reorganized - the 
Dutch colonial state became the dominant player. But these 
reorganizations also opened doors for private parties to start 
exploiting Java. A process of privatization commenced in which the 
colonial state gradually transferred export production to Western 
entrepreneurs. 
The Liberal Period of Colonial Indonesia
More and more voices were heard in the 
Netherlands that rejected the Cultivation System and supported a more 
liberal approach for foreign enterprises. This rejection of the 
Cultivation System was both for humane and for economic motives. Around 
1870 Dutch liberals had won their battle in Dutch parliament and 
successfully eliminated some characteristic features of the Cultivation 
System, such as the cultivation percentages and the compulsory use of 
land and labour for export crops. These liberals paved the way for the 
introduction of a new period in Indonesian history, known as the Liberal
 Period (circa 1870 to 1900). This period is marked by a huge influence 
of private capitalism on colonial policy in the Dutch Indies. The 
colonial state now more or less played the role of supervisor in 
relations between Western enterprises and the rural Javanese population.
 But - although liberals claimed that the benefits of economic growth 
would trickle down to the local level - Javanese farmers suffering 
from hunger, famine and epidemics were just as common as under the 
Cultivation System.
The 19th century is also known as the 
century in which the Dutch made substantial geographical expansion in 
the archipelago. Driven by the New Imperialism-mentality, European 
countries were competing for colonies outside the European continent for
 both economic motives and status. One important motive for the Dutch to
 expand its territory in the archipelago - apart from financial benefit -
 was to prevent other European countries from taking parts of this 
region. The most famous and prolonged battle during this period of Dutch
 expansion was the Aceh War that started in 1873 and lasted until 1913, 
resulting in the deaths of more than 100,000 people. The Dutch would, 
however, never have full control over Aceh. But the political 
integration of Java and the Outer Islands into a single colonial polity 
had largely been achieved by the start of the 20th century.
The Ethical Policy and Indonesian Nationalism
When the borderlines of the Dutch Indies
 began to take the shape of present Indonesia, Queen Wilhelmina made an 
announcement in her annual speech in 1901 informing that a new policy, 
the Ethical Policy, would be installed. The Ethical Policy 
(acknowledging that the Dutch had a debt of honour towards the 
Indonesians) was aimed at raising the living standards of the native 
population. The means to accomplish this was direct state intervention 
in (economic) life, promoted under the slogan ‘irrigation, education and
 emigration’. This new approach would, however, not prove to be a 
significant success in raising the living standards of Indonesians.
This Ethical Policy implied a profound 
side effect. Its educational component contributed significantly to the 
awakening of Indonesian nationalism by providing Indonesians the 
intellectual tools to organize and articulate their objections to 
colonial rule. The Policy provided a small Indonesian elite with 
Western political ideas of freedom and democracy. For the first time 
people began to develop a national consciousness as 'Indonesians'.
In 1908 students in Batavia founded the 
association Budi Utomo, the first native political society. This event 
is often regarded as the birth of Indonesian nationalism. It established
 a political tradition in which cooperation between the young Indonesian
 elite and the Dutch authorities was expected to lead to acquiring some 
degree of independence. The next chapter in the emergence of Indonesian 
nationalism was the founding of the first mass-based political party, 
the Sarekat Islam (Islamic Union) in 1911. Initially, it was formed to 
support the indigenous entrepreneurs against the dominating Chinese in 
the local economy but expanded its scope and developed a popular 
political consciousness with subversive tendencies. Other important 
movements that led to the unfolding of indigenous political thinking 
were the Muhammadiyah, an Islamic reformist socio-religious movement 
founded in 1912 and the Indonesian Association of Social Democrats, a 
communist movement founded in 1914 that spread Marxist ideas through the
 Dutch Indies. Internal disunity in this latter movement led to the 
formation of the Indonesian Communist Party (PKI) in 1920.
Initially, the Dutch colonial 
authorities permitted the establishment of indigenous political 
movements but when Indonesian ideologies radicalized in the 1920s (as 
seen in the communist uprisings in West Java and West Sumatra in 1926 
and 1927) the Dutch authorities changed course. A relative tolerant 
regime was replaced by a repressive one in which every suspected act of 
subversive behaviour was suppressed. This repressive regime in fact only
 worsened the situation by radicalizing the entire Indonesian 
nationalist movement. Part of these nationalists established the 
Indonesian Nationalist Party (Partai Nasional Indonesia, abbreviated PNI) in 1927 as a reaction to the repressive regime. Its goal was full independence for Indonesia. 
Another important occasion for 
Indonesian nationalism was the declaration of the Youth Pledge in 1928. 
At this congress of youth organizations three ideals were proclaimed, to
 wit one motherland, one nation and one language. The main aim of this
 congress was to stimulate the feeling of unity between the young 
Indonesians. On this congress the future national anthem (Indonesia Raya) was played and the future national flag (merah-putih)
 was shown for the first time. The colonial authorities reacted with 
another act of suppression. Young national leaders, such as Soekarno
 (who would become Indonesia's first president in 1945) and Mohammad 
Hatta (Indonesia's first vice president) were arrested and exiled.
Japanese Invasion of the Dutch Indies
The Dutch were powerful enough to curb 
Indonesian nationalism by arresting its leaders and suppressing the 
nationalist organizations but never were they able to eliminate 
nationalist sentiment. The Indonesians, on the other hand, did not have 
the power to compete with the colonial rulers and therefore needed 
outside help to eliminate the colonial system. In March 1942 the 
Japanese, fueled by the desire for oil, provided such help by occupying 
the Dutch Indies. Although initially welcomed as liberators by the 
Indonesian population, soon they would experience the hardship of the 
Japanese rule: scarcity of food, clothing and medicines as well as 
forced labour under harsh conditions. The scarcity of food was mainly 
brought on by administrative incompetence, turning Java into an island 
of hunger. Indonesians working as forced labourers (called romusha) were stationed to work on labour-intensive construction projects on Java.
When the Japanese took over, Dutch 
officials were put in internment camps and were replaced by Indonesians 
to administer government tasks. The Japanese educated, trained and armed
 many young Indonesians and gave their nationalist leaders a political 
voice. This enabled the nationalists to prepare for a future 
independent Indonesian nation. In the final months before Japan's 
surrender, effectively ending World War II, the Japanese gave full 
support to the Indonesian nationalist movement. Political, economic and 
social dismantling of the Dutch colonial state meant that a new era was 
about to emerge. On 17 August 1945 Soekarno and Hatta proclaimed the 
independence of Indonesia, two days after the Nagasaki atomic bombing.
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