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Few countries are as poorly understood as Indonesia, especially in the United States. The largest Muslim and fourth most populous nation in the world, with a population of 210 million, Indonesia is not well represented by large expatriate communities living overseas, nor has it figured prominently in international affairs. Given this situation, teaching about Indonesia is particularly challenging: while students may have some familiarity about China or Japan, they are likely to have no basis with which to approach Southeast Asia’s giant. This article argues for the use of world-systems theory to reveal Indonesia’s historical construction in a manner that is likely to capture students’ interest. The world-systems perspective argues that Indonesia can only be understood by embedding it within the dynamics of an international system. Although this point is abundantly evident with regard to the long Dutch colonization, Indonesia’s external ties long precede the Dutch colonial occupation. Indonesia today is a palimpsest reflecting the imprints of many cultures over a long period of time, and it can only be understood meaningfully in those terms.

This article first briefly summarizes a pedagogy revolving around world-systems theory. Second, it traces the contours of the long period of Indonesia’s history prior to colonialism. Third, it focuses on the impacts of Indonesia’s incorporation into the capitalist world system under Dutch rule. Fourth, it offers some observations about the nation’s contemporary status, particularly its growing prominence among the “new tigers” of southeast Asia. While the notion that external linkages are important determinants of the events within a particular place is not new, it has been given substantial theoretical rigor through its formalization in terms of world-systems theory.

WORLD-SYSTEMS AS HEURISTIC TOOL

The world-systems perspective holds that places can only be analyzed through their interactions with the remainder of the world, that all regions are interconnected and never exist in isolation of one another. First articulated by Waller­stein,¹ this view has been highly influen­tial in the social sciences.² It holds that individual places can only be fruitfully analyzed with reference to their ties to the world economy, that exogenous sources of change are as important as endogenous ones, and that the global economic and political context is of enormous impor­tance in shaping the fortunes of regions over time. Unlike earlier world empires, where a single political structure dominat­ed to appropriate the surplus value pro­duced by places on the periphery (e.g., the Roman Empire), in a true world-system there are multiple political centers.

In the context of capitalism, the fun­damental political structure is the interstate system (not the nation-state), meaning that there is no effective way to control global markets. Indeed, the very flexibility and viability of capitalism assumes capital’s ability to cross national borders and pit places against one another. The steady expansion of capitalism—its inherent drive to incorporate places within com­modity production—is driven by the search for profits. In the twentieth century, the global system of nations and markets has tied places together to an unprecedent­ed degree, including international net­works of trade, investment, subcontract­ing, and consumption.³ In light of the steady spread of multinational firms, financial firms, and nongovernmental organizations since World War II, it is impossible to understand any regional or national economy without examining its foreign linkages.

Unlike earlier dependency views, which took a uniformly negative view of the impacts of capitalism on less devel­oped regions, the world-systems perspec­tive allows for both upward and down­ward mobility within the global economy.⁴ There have been substantial revisions and modifications to this view since Waller­stein’s early theoretical model of a trilogy of global core, periphery, and semi-periphery. Recent modifications include attempts to reconcile the world-systems with theories of human consciousness and the critical roles of culture and ideology,⁵ providing antidotes to the economic deter­minism that plagued earlier conceptions. Geographers have been attracted to world-systems theory because of its sensitivity to spatial differences in historical experience, and the ways in which it allows regions to be contextualized within a global setting.⁶ Dixon approached southeast Asia within the broad parameters sketched here, but paid little attention to the precolonial period.⁷

The remainder of this article illus­trates how Indonesia’s historical geogra­phy can be understood using a world-sys­tems view. Its purpose is not simply to recapitulate the nation’s history, but to show how its global linkages continu­ally reverberated across the archipelago in profoundly important ways.

EARLY INDONESIA AND THE PRE-CAPITALIST WORLD-SYSTEM

Situated near the great culture realms of China and India, the 13,000 islands that comprise Indonesia have long been subject to cultural influ­ences from both.⁸ Much of the islands’ earliest history borrowed greatly from India, from which Indonesia acquired the Hindu/Buddhist culture that dominated for a millennium until the Muslim arrival in the fourteenth and fifteenth centuries. The Hinduization of Java, starting in the fourth century, was initiated by waves of Indian traders traveling by sea.⁹

From the seventh to the thirteenth centuries, the western islands of Indone­sia flourished under the powerful Srivi­jaya Empire, the most important in its history. At its apex under the Buddhist Sailendra dynasty, Srivijaya’s influence extended across southeast Asia to include southern Vietnam.¹⁰ Coedes notes that the opening for this kingdom was made possible by the collapse of Funan in Indochina, which had dominated the region’s seas for the preceding five cen­turies.¹¹ A common explanation of Srivi­jaya’s success centers upon control over the strategic Malacca Strait and the grow­ing trade network between China and India.

Abu-Lughod describes in detail a world system not under the domination of Europe, linking cultures as diverse as Sung and Ming dynasty China, Mughal India, Srivijaya Indonesia, Mamluk Egypt, and feudal Europe, all of which were sutured together by trade routes overland (the Silk Road) and over water, primarily the Indian Ocean.¹² Abu­Lughod attributes the Srivijayans’ signif­icance entirely to their domination over the Malacca Strait, linking their rise to an eighth-century upswing in trade and their collapse with the thirteenth-century disin­tegration of Sung Dynasty China from the Mongol invasion, which annihilated the eastern terminus of that trading sys­tem.¹³ She argues (p. 303) that “If the political definition of dependency is that externally generated decisions have an inordinate effect on internal events that a country is powerless to withstand, then the Strait area must be conceptualized, at least in part and in the preceding cen­turies, as a dependency of China.”

While her view emphasizes the role of the world-system, it reduces Indonesia to a mere entrepot function, one that min­imizes the significance of the local pro­duction and exchange systems that flour­ished there, such as batik textiles, bam­boo artifacts, stone carvings, and peppers and spices.¹⁴ Javanese rice exports pro­vided that island with the basis of its political power,¹⁵ in return for Chinese silks, Bengali opium, and iron and cotton from Gujarat and the Malabar and Coro­mandel coasts of India.¹⁶ An active divi­sion of labor among the islands generated a vibrant trade that included Javanese batiks, Sulawesi cloves, Sumatran pep­per, Timorese sandalwood, and Moluc­can nutmeg, all of which testify to a thriving regional exchange system.¹⁷

The collapse of Srivijaya reflected three concurrent factors in the thirteenth-century world-system. First, a series of conflicts occurred with the Chola king­doms in India, including Chola raids against Malacca as the two struggled for control over trade in the eastern Indian Ocean.¹⁸ Second, the Mongol conquest of China and Burma created vast turmoil throughout Asia, including Kublai Khan’s attempted invasion of Java using Chinese mercenaries in 1293, only to be defeated by the Javanese navy and malar^­ia. Third, the Thai conquest of the Malay peninsula robbed Srivijaya of northern control of the Straits.¹⁹

Externally, Srivijaya’s collapse facili­tated the emergence of the Khmer king­dom in Cambodia as Indochina was liber^­ated from Indonesian control.²⁰ Internally, it set the stage for the ascendancy of the Javanese Majapahit Empire (1300–1478) over the Sumatran-based Srivijaya. Coedes notes that “the simultaneous, if not com­bined, action of the Javanese and the Thai tripped Srivijaya at once of its island and continental posses­sions.” ²¹ Majapahit Indonesia, in turn, col­lapsed in the face of the arrival of Islam in the fourteenth and fif­teenth centuries.²²

The collapse of Srivijaya effectively left international com­merce to the Arabs, who rapidly took con­trol of the all-impor­tant spice trade.²³ Itinerant Arabic sailors, travelers, and missionaries played a key role in the spread of Islam.²⁴ Thus, the arrival of Islam accelerated trade between the eastern and western edges of the Indian Ocean.²⁵ Islam’s ascendancy also reflected the geopolitics of the region, particularly the interests of local Javanese kings who wished to counter the old Hindu Majapahit state, the Buddhist Siamese, or the new European presence.²⁶ Islam spread rela­tively rapidly throughout Indonesia (excepting Bali), diffusing along coastal areas and through the conversion of elites.²⁷ By the early sixteenth century much of Sumatra had been converted, and by 1520 Islam had gained converts throughout Java, effectively annihilating the old Indian influence.

DUTCH INDONESIA: INCORPORATION INTO THE CAPITALIST WORLD ECONOMY

The colonization of Indonesia by Europeans marked a distinctive break from previous eras and its steady incorporation into the expanding world system wrought by capitalism. While the broad contours of Indonesia’s colonial experience are familiar to any student of colonialism, they also reflect the enduring legacy of the precolonial epoch, the specific policies and practices of the Dutch, the timing of the nation’s incorporation into the world of global commodity production, and in turn set the stage for the nationalist movements of the twentieth century.

Modelski periodizes the history of the capitalist world economy into distinct epochs, each of which was dominated by a hegemonic national power. ²⁸ The first period, which saw the rise to world promi­nence of the Portuguese, started in South­east Asia with their seizure of Malacca in 1511. The Portuguese were well aware of the importance of this strait to Europe: explorer Tome Pires, for example, claimed that “Whoever is lord of Malacca has his hands on the throat of Venice.”²⁹

In 1602, the Dutch arrived, signaling the second great hegemon.³⁰ The primary vehicle for the Dutch colonization of Indonesia was the Dutch East India Com­pany (Vereenigte Oost-Indische Compag­nie, or VOC), the world’s largest trading and shipping company in the seventeenth and eighteenth centuries.³¹ Dutch activity in Southeast Asia was an integral part of its struggle against the Spanish and its trade rivalry with Britain.³² Dutch rule during the seventeenth century was aided by the rise of the Mataram kingdom, which fostered a period of Indonesian servitude that suppressed indigenous mer­chants and craft workers in favor of the colonialists.³³

Like the Hudson Bay and British West and East Indies Companies, the VOC was a chartered monopoly representing both public and private interests, which under mercantilism were often hard to sep­arate. A pillar of the Dutch state, the VOC was also important in South Africa and Sri Lanka, as well as trade with Japan through Deshima, on Ky†sh†. The VOC dominat­ed Indonesia until its abolition in 1798, when it went bankrupt and faced mounting British naval competition.³⁴ Rising expen­ditures ditures associated with administration and protection may have eroded its profitabili­ty, as did increased competition with the British.³⁵ Following the Napoleonic Wars, the Dutch East Indies became a crown possession.

The expansion of Dutch control over the Netherlands East Indies was temporal­ly very extended and highly uneven geo­graphically. Control over the clove and nutmeg trade in Ambon, Banda and the Moluccas in 1602 gave them a foothold, to be followed by the founding of the port of Batavia (later Jakarta) in Java in 1617, and the seizure of Malacca in 1641. Two cen­turies later, in the 1830s, the Dutch subju­gated the Minangkabau in western Suma­tra. Aceh in northern Sumatra succumbed in 1904, and Bali was the last to fall, in 1908. The prominence of Batavia saw a realignment of power away from Indone­sia’s traditional capital, Jogjakarta, which reflected the importance of the maritime world economy (Figure 1).

The Dutch molded Indonesia into a profitable source of export-based cash crops, including cinnamon, nutmeg, cloves, copra, pepper, sugar, coffee, tea, cotton, indigo, and tobacco, mostly pro­duced in a vast network of plantations that accelerated the commodification of agri­culture and transformed the VOC from merchant to landlord, from a maritime to a naval power. With the global wave of time-space compression that accompanied the Industrial Revolution, particularly the introduction of the steamship and the com­pletion of the Suez Canal in 1869, the European demand for Indonesian goods expanded to include tin, palm oil, copper, lumber, and, after 1903, rubber.³⁶ While plantations generated huge increases in exports of raw materials, the majority of the rural population remained locked in subsistence rice production,³⁷ forming a classic dual economy. If colonialism impoverished Indonesia, it made the Netherlands wealthy, reviving the ship­ping industry and turning Amsterdam into a major trade entrepot.³⁸

Anticolonial struggles in Indonesia were also conditioned by the world-sys­tem. In the sixteenth century, using imported Turkish arms, the Acehnese attacked Portuguese-held Malacca.³⁹ Emboldened by the Napoleonic Wars and the brief British occupation (1811–16), mounting discontent with the Dutch led to the Second Javanese War (1825–30). Turkish participation in the Crimean War (1854–56) inspired many Javanese to a pan-Islamic, anti-Western perspective.⁴⁰ Steamships made it possible for large numbers to make the pilgrimage to Mecca, fueling a resurgence of religious fervor. In the early twentieth century, secularized, urbanized Indonesian nationalists were inspired by Japan’s victory against Russia in 1905 and by the Chinese Revolution in 1911. Dutch rule was eventually broken by the brutal Japanese occupation during World War II, which shattered the myth of European invincibility.

INDONESIA IN COLD WAR CONTEXT

In August 17, 1945, President Sukarno proclaimed the indepen­dence of the Republic. Despite the four-year-long Dutch attempt at recolo­nization, Indonesia attained sovereignty. President Sukarno, who played a key role in the formation of the new republic, attempted to integrate the multitude of islands and peoples into a modern nation­state.⁴¹ However, Sukarno’s strident nationalism and anti-Western rhetoric— including expropriation of Dutch holdings and expulsion of Dutch nationals in 1957, takeovers of British and U.S. businesses in 1963, a sustained distrust of foreign capital,⁴² and withdrawal from the United Nations—was accompanied by the steady growth of the Communist Party of Indonesia (PKI).

Illustrating the difficulty a former colony has when it attempts development in isolation of the world-system (much like similar attempts in Burma and Tanza­nia), Indonesia’s economy under Sukarno collapsed, with negative GNP growth and rapid inflation.⁴³ Sukarno attempted to minimize domestic conflict by appealing to foreign crises, even generating his own to divert attention from the deteriorating economy, including the 1962 campaign to wrest Irian Jaya from the Dutch, which incorporated a distinctly Melanesian peo­ple into a predominantly Asian society. By contradicting the strategic interests of the post-WWII hegemon, the U.S., Sukarno risked the fate of many other national leaders who attempted to defy superpower priorities that emphasized quiescent Third World nations amenable to foreign capital, especially given the intense jockeying between the U.S. and the Soviet Union during the years of Cold War rivalry.

In the aftermath of the October, 1965 coup that overthrew Sukarno, roughly one-half million or more people were killed, particularly in Bali and eastern Java. Many of the victims died in orga­nized pogroms against the Chinese minor^­ity, who comprised 3 percent of the popu­lation but served as a lightning rod for Muslim hotheads, who portrayed them as wealthy, greedy infidels.

The events of 1965 spelled the end of Indonesia’s nationalist, import-substitu­tion phase and the beginning of its rapid integration into the international econo­my. As Emmerson noted, “Where Sukarno struggled for self-reliance with­out the West, Suharto has tried to achieve it by using the West.” ⁴⁴ Suharto’s poli­cies emphasized unfettered markets, deregulation, convertibility of the rupiah, and overtures to foreign capital.⁴⁵ In con­trast to the stagnation suffered under Sukarno, these policies succeeded quite well. Calling himself the Father of Devel­opment, Suharto succeeded in delivering 7 percent annual economic growth for three decades, one of the most rapid rates of sustained economic growth in history. Suharto’s emphasis on economic develop­ment also included family planning, increasing literacy, and self-sufficiency in rice production. As a result, the poverty rate declined from 70 percent in 1970 to 15 percent in 1990. Because Suharto con­ducted so much of his business with the ethnic Chinese minority, who control the economy, that group witnessed particular­ly dramatic increases in prosperity.⁴⁶

Beginning in the seventeenth century, Dutch colonialism saw Indonesia reduced to the periphery of the world-system as the VOC accelerated the commodification of cash crops through a vast plantation system. The decades following Sukarno’s ouster in 1965 witnessed Indonesia steadily incorporated into the global economy, elevating Indonesia to the semi-periphery and pulling millions out of poverty.

Given the austere international poli­tics of the Cold War from the 1960s through the early 1990s, Indonesia’s mili­tary-dominated government became an increasingly repressive garrison state. As Suharto’s New Order replaced Sukarno’s Guided Democracy, thousands of people languished in the government’s gulag sys­tem. Political repression is particularly harsh in the case of East Timor, where separatists, mindful of their Portuguese, Catholic ancestry, have long struggled against its forced incorporation into Indonesia in 1974. In 1975, a govern­ment-inspired massacre and simultaneous famine accentuated by the island’s fre­quent droughts in East Timor combined to kill up to 200,000 people. In 1991, gov­ernment troops opened fire on demonstra­tors, killing between fifty and one hun­dred. Similar, less visible repression con­tinues in Irian Jaya, whose non-Muslim inhabitants resist Java’s attempts to con­trol its rich mineral and timber resources.

The core-periphery dichotomy between Java and the outer islands, repeatedly reinforced through Indonesia’s foreign linkages, has had important policy effects. The Indonesian government has long sought to encourage transmigration from that overpopulated isle (which, with 100 million people, contains one-half of the nation’s population) to the “outer islands,” particularly Sumatra, Kaliman­tan, Sulawesi, and Irian Jaya.⁴⁷ Between 1950 and 1984, more than 2.3 million people were thus relocated.

The OPEC oil shocks of the 1970s initiated a new era of economic change. As OPEC’s only Asian member, Indone­sia benefited from the 1973–82 global oil boom, during which petroleum constitut­ed three quarters of the nation’s exports, half the government’s budget revenues, and one-fifth of GNP.⁴⁸ While oil rev­enues accelerated the corruption for which Indonesia is famous, they also contributed to a steady, if uneven, improve­ment in the quality of life for rural peas­ants. Nonetheless, like most peripheral states in the world-system, Indonesia’s reliance upon petroleum reflected a dependence upon the export of primary sector raw materials. As the price of oil collapsed in the 1980s and 1990s, the nation was forced to explore other alter­natives, paving the way for a more diver­sified economy.

In the 1990s, Indonesia has aggres­sively courted foreign capital.⁴⁹ In Wallerstein’s terms, this process catapult­ed the region from the status of periphery to semi-periphery.⁵⁰ Indonesia became particularly attractive to firms located in the later phases of the product cycle, when large quantities of cheap, unskilled labor are most in demand. Nike shoes, for example, has been abandoning its South Korean plants for cheaper operations in Indonesia.⁵¹ In an attempt to imitate its more successful neighbor Malaysia, Indonesia initiated an infant industry in semiconductors and electronic parts,⁵² which was linked to its hopes of estab­lishing an aerospace industry (the heavily subsidized Nusantara Aircraft Company in Bandung). As Indonesia joined the “new tigers” of southeast Asia, annual GNP growth rates in the late 1980s and 1990s hovered around 8 percent annually,⁵³ although by the late 1990s they declined precipitously. Tourism, especially in Bali, has also increased the nation’s foreign revenues.⁵⁴ Because most foreign investment is concentrated in Java, while the Outer Islands remain largely dependent upon extraction of raw materials, Indonesia’s position in the world economy has accentuated its long­standing bifurcation between core and periphery.

These events also have important ecological repercussions. Beseiged by rising population levels and both local and foreign demand for hardwoods, Indonesia’s vast rainforests, primarily those located on Kalimantan and Suma­tra, are rapidly being destroyed at the rate of six million acres annually, partic­ularly under conditions of El Nino-dri­ven drought. Japanese, Korean, Ameri­can and Indonesian lumber and timber companies have turned Indonesia into the world’s largest plywood producer.⁵⁵ Like many developing nations, Indonesia faces a brutal “jobs or trees” tradeoff. Whereas many Westerners envision a land of pristine rainforests and indige­nous tribes, parts of the nation have been reduced to the tropical equivalent of Iowa.

INDONESIA AFTER THE COLD WAR

The historical geography of global capitalism is replete with successive epochs of expansion and contraction. These “long waves” of growth and decline constitute a fundamental part of world-systems theory.⁵⁶ Although the long post-WWII economic boom in East Asia may have appeared to continue indefinitely to the millions scattered in the region stretching from Tokyo to Surabaja, the late 1990s brought about a sudden, massive contraction in their economic fortunes, abruptly ending the steady eco­nomic progress that made that part of the globe an inspiration to many impover­ished nations. Beginning in May, 1997, a catastrophic currency crisis signaled the end to the “Asian miracle.”⁵⁷ The severe depression that diffused throughout the Asian economies inevitably brought with it important political repercussions.

Indonesia’s position economically was particularly precarious. Like many neighboring countries, its financial system was caught in the collapse of a spec­ulative bubble that included an overval­ued currency, overbuilding in the com­mercial real estate market, and poor gov­ernment oversight of lending practices, leading to a wave of bankruptcies, fore­closures, and layoffs. Between mid-1997 and mid-1998, the rupiah declined by 80 percent relative to the U.S. dollar, mak­ing imports prohibitively expensive for the middle class and poor and swelling popular discontent. The prices of Indone­sian debt and equity on the bond and stock exchanges were reduced to deriso­ry levels, allowing “bottom-fishing” investors brave enough to withstand the nation’s murky markets to make high levels of profits in the case of an eco­nomic rebound.

Under the watchful eye of the Inter­national Monetary Fund, Indonesia has been forced to overhaul its financial markets, restructure debt, reduce subsi­dies for public transport and cooking oils, and in general conform to the global prerequisites of neoliberal economic internationalism. Winters attributes many of Indonesia’s changes from the 1970s to the 1990s to the growing mobility of international capital and its ability to leverage its interests against nation-states.⁵⁸

These circumstances politically brought about the collapse of the authori­tarian Suharto regime, which had ruled Indonesia throughout the long decades of the Cold War. Widespread resentment against government corruption and inac­tion fueled a long-standing latent hostili­ty toward the minuscule Chinese minori­ty, leading to attacks on shopkeepers and merchants. Buffeted by massive, angry student riots and demonstrations, and growing calls for democracy among the urban poor, Suharto, one of the world’s longest-reigning dictators, resigned on May 21, 1998.

Without the need for a bastion of anti-Sovietism in Southeast Asia, the withdrawal of U.S. support was also important; in the political context of the post-Cold War world-system, U.S. support for dictatorial regimes was ren­dered largely unnecessary to further its geopolitical aims. Unlike the 1965 coup, however, this transition was relatively bloodless. While the disorganized oppo­sition movement, including Sukarno’s daughter Megawati Sukarno, claimed credit for the change, others point to the army as the decisive power broker.⁵⁹

The course to be pursued by the new government, led by President B. J. Habibie, is still unclear, although there are hopes for the release of political prisoners, the repeal of repressive laws, free elections, the end of press censor­ship, and a resolution to the continuing problem in East Timor. Without a quick economic recovery, Indonesia could easily slide into chaos, fertile grounds for anti-Western radicalism or Islamic fundamentalism. As Barber has percep­tively pointed out, the global upsurge in ethnic politics after the Cold War largely reflects the struggles of the economically marginalized against globalization.⁶⁰ In Indonesia’s case, the ethnic politics of globalization could translate into renewed attacks against the Chinese minority, which prospered so well under Suharto and continues to control 70 per­cent of the national economy.

CONCLUSION

World-systems theory offers a useful means to illustrate Indonesia’s historical geography to students. While numerous works have studied places in their global con­text, this perspective allows the diverse welter of facts and anecdotes about a complex, diverse set of islands to be organized systematically. In light of this view, Indonesia’s internal social and spa­tial structures are profoundly shaped by its external connections.

Such linkages predate the colonial world system.⁶¹ For example, early trade routes across the Indian Ocean brought Hinduism and Buddhism, which deci­sively shaped Indonesia’s cultures and landscapes. Trade repeatedly connected Indonesia with China and India, leading to a series of trading states (e.g., Srivi­jaya, Majapahit). However, a diversity of local production systems (rice, sandal­wood, spices) testify that Indonesia was far more than a mere entrepot with con­trol over the Malacca Strait. Beginning in the seventeenth century, Dutch colo­nialism saw Indonesia reduced to the periphery of the world-system as the VOC accelerated the commodification of cash crops through a vast plantation sys­tem. The decades following Sukarno’s ouster in 1965 witnessed Indonesia steadily incorporated into the global economy, elevating Indonesia to the semi-periphery and pulling millions out of poverty. The Suharto regime, which negotiated this process, received firm backing from its patron, the U.S., in return for the staunch anticommunism that was one of its primary political pillars.

Finally, the collapse of the Suharto regime reflects not only the end of the long-standing Asian economic miracle and the beginning of a new epoch of heightened uncertainty, but also the geopolitical realities of the post-Cold War era. In short, the internal dynamics of Indonesia can be best understood in relation to their external context, i.e., the world system that has repeatedly struc­tured and restructured Indonesia over the last two millennia. This sort of analysis is likely to have similar applicability to other places.

The author thanks Jan Kodras and three anonymous reviewers for their helpful comments.