The Indonesian Economy in the Nineteenth and Twentieth Centuries. A History of Missed Opportunities

394 Pages·1998·2.268 MB·English

by  Anne Booth

The Indonesian Economy
in the Nineteenth and
Twentieth Centuries
A History of Missed Opportunities
Anne Booth
THE INDONESIAN ECONOMY IN THE
NINETEENTH AND TWENTIETH CENTURIES
A MODERN ECONOMIC HISTORY OF SOUTHEAST ASIA
The Australian National University is preparing a multivolume eco-
nomichistoryofSoutheastAsia,whichwillforthefirsttimeplacethe
remarkable economic changes of the late twentieth century within a
broaderhistoricalframework.Thisseriesisatonceaworkofpioneer-
ing scholarship, since nothing remotely comparable has previously
been attempted, and a work of synthesis, since hitherto discrete lit-
eraturesinseveraldisciplinesandontencountriesmustbeintegrated.
Theserieswillinclude severalvolumesontheeconomic historyofthe
principal countries of Southeast Asia over the past one hundred and
fifty years, and a larger number of volumes integrating the whole
region in terms of major themes in economic history. Each volume
will be accessible to students and specialists alike, aiming to make
coherent a history which has been fragmented or ignored.
The Economic History of Southeast Asia Project has been supported
bytheResearchSchoolofPacificandAsianStudiesoftheAustralian
National University, and by the Henry Luce Foundation.
General Editors: Anthony Reid (chair), Professor of Southeast Asian
History, the Research School of Pacific and Asian Studies, the Aus-
tralian National University, Canberra; Anne Booth, Professor of Eco-
nomics, School of Oriental and African Studies (SOAS), London;
Malcolm Falkus, Professor of Economic History, University of
New England, Armidale, Australia; and Graeme Snooks, Coghlan
Professor of Economic History, Research School of the Social
Sciences, the Australian National University, Canberra.
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The Indonesian Economy
in the Nineteenth and
Twentieth Centuries
A History of Missed Opportunities
Anne Booth
ProfessorofEconomics
SchoolofOrientalandAsianStudies
UniversityofLondon
#AnneBooth1998
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Contents
List of Figures x
List of Tables xi
Preface xiv
1 Introduction 1
The Formation of an ‘Indonesian’ Economy 1
Continuity and Change in Indonesian Economic
Performance 6
2 Output Growth and Structural Change: 1820–1990 14
Phases of Growth: An Introduction 14
Economic Growth in Java: 1800–70 16
Economic Growth outside Java: 1800–70 25
Policy Reform and Slow Growth: 1870–1900 29
Accelerated Growth and Economic Diversification:
1901–28 34
Depression and Recovery: 1929–41 39
Economic Growth in the Colonial Era: A Summing Up 45
The Japanese Occupation and the Indonesian
Revolution: 1942–49 47
Recovery from War and Revolution: 1950–57 53
Performance of the Guided Economy: 1958–65 63
Structural Retrogression in the Indonesian
Economy: 1940–65 70
Growth and Structural Change in the New Order Era 72
Phases of Growth: A Summing Up 85
Appendix: Growth of Manufacturing Industry:
1880–1970 87
3 Living Standards and the Distribution of Income 89
Evaluating Trends in Living Standards and Income
Distribution in Indonesia 89
Trends in Living Standards in the Nineteenth Century 92
Living Standards in the Final Phase of Colonial Rule 105
vii
viii Contents
Poverty and Inequality in the Colonial Era:
A Summing Up 113
The Standard of Living and the Distribution of Income
in an Era of Transition: 1950–65 116
Distributional Consequences of Accelerated
Economic Growth after 1970 124
Trends in Indicators of Poverty: 1969–90 128
Long-Term Trends in Living Standards 132
4 Government and the Economy in Indonesia in the
Nineteenth and Twentieth Centuries 135
The Economic Role of Government in Indonesia 135
Government-Led Exploitation: 1830–70 137
Laissez-faire Liberalism: 1870–1900 141
Growth of Government Revenues and
Expenditure after 1900 144
Infrastructure Development and the Growth of
State Enterprises 148
The Rise of ‘Welfare Interventionism’: 1900–42 154
The Colonial Fiscal System in International Perspective 158
Revenue and Expenditure Policy: 1950–65 161
The Failure of Stabilisation Policies: 1950–65 168
The Growth of the Public Enterprise Sector after 1950 172
Lessons from Old Order Public Policy 175
Stabilisation Policies and the Return to Growth:
1966–73 178
The Return to Development Planning under the
New Order 183
Managing the Oil Boom: 1974–81 186
Post-Oil Boom Restructuring and Partial Liberalisation 194
Government and Development: A Summing Up 201
5 The Impact of International Trade 203
The Role of International Trade in the Indonesian
Economy 203
Growth and Change in the Composition
and Direction of Exports 204
Changes in the Direction of Trade 208
The Commodity Trade Balance and the Balance of
Payments 210
Contents ix
Changes in the Trade Regime: The Rise and
Decline of Free Trade Liberalism in the Colonial Era 215
The Regulated Trade Regime since 1950 222
International Trade and Economic Growth:
The Colonial Experience 227
Trade and Growth: The Post-colonial Experience 236
6 Investment and Technological Change 244
Sources of Investment in Colonial and
Post-colonial Indonesia 244
Private Investment in Small-scale Enterprises
in Indonesia 246
Private Investment in Large-scale Capitalist Production 253
The Role of Government in Investment 265
Investment in Human Capital Through Education 268
Efficiency of Investment 279
Processes of Technology Transfer in Indonesia 281
Indonesia and the ‘Lucas Paradox’ 287
7 Markets and Entrepreneurs 290
Colonial Perceptions of Indigenous Entrepreneurship 290
The Development of Labour and Land Markets in
the Colonial Era 293
The Development of Colonial Credit Facilities 301
Indigenous Entrepreneurship and the Role of the
Chinese in the Colonial Economy 307
Socialism, Planning and the Private Sector: 1950–65 311
The Market, the State and Entrepreneurship in the
New Order 318
8 Conclusions 327
Bibliography 337
Index 364