The formation in 1824 of the Netherlands Trading Society (Nederlandsche Handel-Maatschappij; NHM), a company embracing all merchants engaged in the Indies trade and supported by the Netherlands government with the king as its chief shareholder, did not produce the hoped-for commercial expansion. In 1830, however, a newly appointed governor-general, Johannes van den Bosch, devised a new method by which the government could tap the resources of the Indies. This was the so-called Cultivation (or Culture) System (Cultuurstelsel).

The Cultivation System provided that a village set aside a fifth of its cultivable land for the production of export crops. These crops were to be delivered to the government in lieu of tax. Land rent was to continue at the same time as a complementary part of the system and as a measure of the amount to be produced by each village. Thus, if a village, through the growing of export crops on a fifth of its land, returned an amount in excess of the land rent for which it had been assessed, it would be free of land rent and would be reimbursed to the extent of the excess; on the other hand, if a village produced less than the assessed amount of land rent, it would have to make up the difference.

From the government's point of view, the Cultivation System was an overwhelming success. Exports soared, rising from 13 million guldens in 1830 to 74 million a decade later. The products were disposed of through the Netherlands Trading Society, and between 1840 and 1880 their sale brought to the Dutch treasury an annual average of 18 million guldens, approximately a third of the Dutch budget. The effects of the system for the Javanese were, however, of more dubious value. Though its founder believed that, by stimulating agricultural production, the Cultivation System would ultimately benefit the people of Java as well as the home government, it came to be considered, in later years, both by Dutch critics and by outside observers, as a particularly harsh and burdensome policy. Van den Bosch's expectations were not entirely false. The policy did extend village production in certain areas, and the population of Java increased from 6 million to 9.5 million during the full operation of the system. The range of exports from Java was extended. Indigo and sugar were the first items to be made the subject of compulsory cultivation; coffee, tea, tobacco, and pepper were subsequently added. Nevertheless, the system placed a heavy burden on the cultivators and tended to accentuate social and economic differences within rural society. Dominant peasants, members of a rural elite, were able to manipulate the system to their advantage. And while the Cultivation System brought the Indies into contact with a wider overseas market, the Indies government stood between producer and market, and the annual surplus added to Dutch, not Javanese, prosperity. The system did nothing to stimulate technological change or economic development for the Javanese people. An increasing commercial role was played not by the indigenous population but by the Chinese who fitted into colonial rule as a separate caste, engaged in tax farming, moneylending, and small trading.

There were other consequences. The Cultivation System accentuated the differences between Java and the outer islands, and in Java it led to a considerable tightening of the administrative system. The regent became the kingpin of the system, responsible to the resident for the delivery of crops from his regency. In some cases, regents, secure in the knowledge they were backed by Dutch power, imposed additional burdens upon their subjects--a development that received trenchant criticism in the novel Max Havelaar (1860), written under the pseudonym Multatuli (*) by the Dutch writer Eduard Douwes Dekker, a former official of the Indies government. But the long-term effect of the new functions imposed on regents was to reduce their independence and to hasten the process, started by Daendels, by which a loosely structured administrative aristocracy was gradually converted into a salaried civil service. Regents were no longer able to draw their revenues from their subjects, and the lines of authority were clearly drawn. Regents, aided by a junior Dutch official (the controleur), became clearly responsible to the Dutch residents above. By 1860 the administrative divisions of Java had been firmly established, and the service that staffed them had acquired the character it was essentially to preserve for the remainder of the colonial period.

In the 1860s the Cultivation System came under attack not only from humanitarian quarters but also from private business interests in The Netherlands. The latter appealed to liberal economic principles in support of their right to share in the riches of the Indies; and their pressure was effective. Though the Cultivation System was not abolished and continued for a number of years to make its contribution to the Dutch treasury, the decision was taken to encourage also the entry of private capital. The Liberal Policy, as it was called, was effectively inaugurated in 1870 by the adoption of an agrarian law that provided that European investors could acquire land under long-term leasehold, either from Indonesian landholders, or in the case of unoccupied land, from the government. Certain safeguards were provided for the Indonesian landholder: the provision that Europeans lease, rather than purchase, land was intended to prevent the alienation of Indonesian land, and the government was charged with the responsibility also of preventing Europeans from leasing land needed for the subsistence of village populations.

Within this framework Dutch capital began to flow to the Indies on a scale that was to transform the character of the Indonesian economy and society. During the next 60 years there was a 10-fold increase in the value of exports (from 107 million guldens to 1.16 billion). There was a change, also, in kinds of products exported. Such exports as coffee, sugar, tea, and tobacco continued to expand; but such industrial raw materials as rubber, copra, tin, and oil soon came to dominate the export economy. These remarkable developments were, in large measure, the product of a totally different system of production. Under the company, during the interregnum, and, later, under the Dutch crown working through the Cultivation System, export crops were grown by Indonesian cultivators on their own land. Under the Liberal Policy, however, the new crops were the subject of estate production. Much economic expansion took place in Sumatra rather than Java, and Sumatra's east-coast residency became the seat of a vast new plantation economy. The estates were company-owned, and the economic developments of the late 19th century were indeed the product of corporate, rather than individual, enterprise.

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