The fall of Malacca to the Portuguese in 1511 is often taken as a turning point in Indonesian history. Over the next century Portuguese efforts were to be directed to securing control of the trade of the Spice Islands. At the end of the 16th century, Dutch and British interests in the region gave rise to a series of voyages: those of James Lancaster in 1591, Cornelis de Houtman in 1595 and again in 1598, Jacob van Neck in 1598, Lancaster again in 1601, and others. In 1602 the Dutch East India Company (formal name United East India Company [Vereenigde Oost-Indische Compagnie; VOC]) received its charter, two years after the formation of the English East India Company; it began to attempt to exclude European competitors from the Indies, control the trade carried on by indigenous Asian traders, and establish its own commercial monopoly.

Monopoly itself was not, of course, an innovation. Aceh, for example, had controlled trade on the northwest and east coasts of Sumatra. The company's monopoly, however, was more extensive and came to form the basis of the Dutch territorial empire. For these reasons many historians have tended to see 1511 or 1600 as the beginning of a period of European domination lasting until the 20th century.

Since the 1930s, however, some historians have criticized the view of Indonesian history that judges Europeans to have been the major factor in shaping the history of the Indies from the 17th century onward. By contrast, they have stressed an essential continuity of Indonesian history and have argued that the VOC at first made little change in traditional political or commercial patterns. Traditional Asian commerce, according to one view, was a noncapitalistic peddling trade, financed by patrician classes in Asian countries and conducted by innumerable small traders who collected spices and pepper in the Indies for disposal in the port cities of Asia. In this view the VOC was seen, in effect, as merely another merchant prince, gradually inserting itself into the existing trade patterns of the Spice Islands and accommodating itself to them. As Batavia became the headquarters from which it established factories in the Spice Islands and elsewhere, the company gradually became a territorial power but was, at first, only one power among others and not yet ruler of the Indies. Only during the 19th century did new economic forces, the product of industrial capitalism, burst upon the Indies and submerge them under a new wave of European imperialism.

The theory is an overstatement. If the coming of the Europeans did not represent a sharp break in the continuity of Indonesian history, it did, at least, initiate changes that, in the long run, were to be of enormous importance. The VOC itself represented a new type of power in the Indies: it formed a single organization, traded across a vast area, possessed superior military force, and, in time, employed a bureaucracy of servants to look after its concerns in the Indies. In sum, it could impose its will upon other rulers and force them to accept its trading conditions. Under the governor-generalship of Jan Pieterszoon Coen and his successors, particularly Anthony van Diemen (1636-45) and Joan Maetsuyker (1653-78), the company laid the foundations of the Dutch commercial empire and became the paramount power of the archipelago.

Jan Pieterszoon Coen.
Governor-general of the Indies.

The process was gradual. Historians now have tended to bypass the indigenous-external antithesis and to refer instead to a general commercial expansion throughout Southeast Asia from the 15th to 17th century--an "age of commerce" involving native as well as foreign participants. During this period the VOC did go far toward establishing its commercial control in the Indies. It captured Malacca from the Portuguese (1641), confined the British, after a period of fierce rivalry, to a factory at Bencoolen in southwestern Sumatra, and established a network of factories in the eastern islands. Though it may have wished to limit its activities to trade, the company was soon drawn into local politics in Java and elsewhere, and, in becoming the arbiter in dynastic disputes or in conflicts between rival rulers, it inevitably emerged as the main political entity in the islands.

In the 1620s Sultan Agung, ruler of the central Javanese kingdom of Mataram and representative of the old and highly sophisticated Javanese civilization, sought to extend his power over Bantam in western Java. This brought him into conflict with the Dutch, and he laid siege to the Dutch fortress at Batavia. Though Agung's forces were eventually compelled to withdraw, the result of the confrontation was inconclusive and left both the Dutch and Javanese warily respectful of each other's strength. But during the following century internal dissensions in Mataram led to increasing Dutch involvement, and in the early 18th century a series of wars of succession among pretenders to the throne of Mataram hastened the process. In return for its services in 1674 to Amangkurat I, Sultan Agung's successor, and to his successor, Amangkurat II, shortly afterward, the VOC received the cession of the Preanger regions of western Java.

This was the first of a series of major territorial advances. In 1704 Dutch forces assisted in replacing Amangkurat III with his uncle, Pakubuwono I, in return for which further territory was ceded. In this way almost all of Java gradually passed under Dutch control, and by 1755 only a remnant of the kingdom of Mataram remained. This was divided into two principalities, Jogjakarta and Surakarta, which survived until the end of Dutch rule. In an attempt to control the pepper trade in Sumatra, the VOC established footholds in western Sumatra and in Jambi and Palembang over the course of the 17th century, and it interfered in local conflicts in support of rulers who favoured it; but the main Dutch expansion there did not take place until the 19th century.

In acquiring territorial responsibilities, the company did not at first establish a close administrative system of its own in the areas that passed under its direct control. In effect, the VOC replaced the sovereign of the royal court and, in so doing, inherited the existing structure of authority. An indigenous aristocracy administered the collection of tribute on behalf of the company, and only gradually was this system converted into a formalized bureaucracy. The VOC, like the royal court before it, drew revenue in the form of produce from the peasantry within its domain.

To implement its commercial monopoly, the VOC established company factories (trading posts) for the collection of produce, pressured individual rulers to do business solely with the company, controlled the sources of supply of particular products (clove production, for example, was limited to Ambon, nutmeg and mace to the Banda Islands) and, in the 18th century, pushed through a system of so-called forced deliveries and contingencies. Contingencies constituted a form of tax payable in kind in areas under the direct control of the company; forced deliveries were produce that native cultivators were compelled to grow and sell to the company at a set price. There was little difference between the devices. In theory, forced deliveries were thought of as a form of trade in which goods were exchanged, but they were, in fact, as the British scholar J.S. Furnivall has described it, "tribute disguised as trade," while contingencies were "tribute undisguised." In effect, the whole system of company trade was designed to extract produce from the Indies for disposal on a European market, but without stimulating any fundamental technological change in the area's economy. The profits belonged to the company, not to the producers. The indigenous traders of the region were pushed aside by the VOC as it gained control of more and more of the export trade of the archipelago. The growth of Batavia resulted, for example, in the decline of the north coast ports of Java, through which much of the spice trade had been channeled since before the 15th century. In this way the traditional pattern of trade was checked and distorted.

During the 18th century, the VOC ran into financial difficulties from a variety of causes: the breach of the company's monopoly by "smuggling," the growing administrative costs as the company came to shoulder greater responsibilities of government, and the corruption of the company's servants. In 1799 the Dutch government of the Batavian Republic wound up the affairs of the company.