Cultivation System

The Cultivation System (cultuurstelsel) was a Dutch government policy from 1830–1870 for its Dutch East Indies colony (now Indonesia). Requiring a portion of agricultural production to be devoted to export crops, it is referred to by Indonesian historians as tanam paksa ("enforced planting").

Background
By the late 18th century, the business model of the old Dutch East India Company, which relied on monopolies and domination of markets led to the ruin of the company. By 1805, the Dutch part of Java produced a revenue of only 2.5 million Java Rupees. The government of Herman Willem Daendels from 1808 to 1811 raised this to 3.5 million just before the English conquest. During the British occupation of Java, revenue rose to 7.5 million Rupees for Java and its dependencies in 1815. Another 2 million were contributed by the native lands. Most of this income was raised by a land tax. However, the land tax system soon failed, because in the long run, the tenants were unable to pay the amounts required.

From the late 1820s, the East Indies government then came under increased financial pressure. This started with the Dutch involvement in the Padri Wars (1821–1837). It was followed by the costly Java War (1825 to 1830). The Belgian Revolution of 1830 then brought the finances of the Netherlands themselves into trouble. The costs of keeping the Dutch army at a war footing until 1839, made that this turned into a financial crisis that almost ended in a state bankruptcy.

In 1830, a new governor general, Johannes van den Bosch, was appointed to increase the exploitation of the Dutch East Indies' resources. The Cultivation System was implemented only on land controlled directly by the colonial government, thus exempting the Vorstenlanden (princely states) and the particuliere landerijen (private domains).

Implementation
The cultivation system was primarily implemented in Java, the center of the colonial state. Instead of land taxes, 20% of village land had to be devoted to government crops for export or, alternatively, peasants had to work in government-owned plantations for 60 days of the year. To allow the enforcement of these policies, Javanese villagers were more formally linked to their villages and were sometimes prevented from traveling freely around the island without permission. As a result of this policy, much of Java became a Dutch plantation. Some remarks while in theory only 20% of land were used as export crop plantation or peasants have to work for 66 days, in practice they used more portions of lands (same sources claim nearly reach 100%) until native populations had little to plant food crops which result famine in many areas and, sometimes, peasants still had to work more than 66 days.

To handle and process the cash crops, the Dutch set up a network of local middlemen who profited greatly and so had a vested interest in the system: compradores somewhat like the cottier system in Ireland. It was financed partly by bonds sold to the Dutch themselves and partly by introducing a new copper coinage at about a 2:1 ratio to the old, thereby gaining a massive seigneurage from the depreciation at the expense of the local economy.

"'An ingenious device for increasing the Government profit was devised by General Van-der Bosch at the same time as he initiated the culture system. An enormous amount of copper coinage was manufactured in Holland, the intrinsic value being rather less than half the nominal value. This coinage was made a legal tender, and the cultivator was paid for his produce in this copper coin. Thus, as Mr. Money in his work Java; or, How to Manage a Colony, naively remarks:- 'The loans, raised in Holland to start the system, produced an effect in Java equal to double their amount.''"

Effects
The policy brought the Dutch enormous wealth through export growth, averaging around 14%. It brought the Netherlands back from the brink of bankruptcy and made the Dutch East Indies self-sufficient and profitable extremely quickly. As early as 1831, the policy allowed the Dutch East Indies budget to be balanced, and the surplus revenue was used to pay off debts left over from the defunct VOC régime. The cultivation system is linked, however, to famines and epidemics in the 1840s, firstly in Cirebon and then Central Java, as cash crops such as indigo and sugar had to be grown instead of rice.

Political pressures in the Netherlands resulting partly from the problems and partly from rent seeking independent merchants who preferred free trade or local preference (see the Henry Scott Boys work cited above) eventually led to the system's abolition. Legal milestones to achieve this were the Suikerwet and the Agrarische Wet, both introduced in 1870. This was the start of the free-market Liberal Period in which private enterprise was encouraged.