Weathering the storm : the economies of Southeast Asia in the 1930s depression 9789812300799, 9812300791, 9789812300805, 9812300805

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The aims of the Koninklijk Instituut voor Taal-, Land- en Volkenkunde (KITLV, Royal Institute of Linguistics and Anthropology), Leiden, The Netherlands, founded in 1851, are to collect and catalogue books and other documents, to carry out and support research, and to publish books and journals on Southeast Asia and Oceania — particularly Indonesia — within the disciplines of language and literature, history, anthropology and other social studies. The Institute of Southeast Asian Studies (ISEAS) was established as an autonomous organization in 1968. It is a regional research centre for scholars and other specialists concerned with modern Southeast Asia, particularly the manyfaceted problems of stability and security, economic development, and political and social change. The Institute’s research programmes are the Regional Economic Studies (RES, including ASEAN and APEC), Regional Strategic and Political Studies (RSPS), and Regional Social and Cultural Studies (RSCS). The Institute is governed by a twenty-two-member Board of Trustees comprising nominees from the Singapore Government, the National University of Singapore, the various Chambers of Commerce, and professional and civic organizations. An Executive Committee oversees day-to-day operations; it is chaired by the Director, the Institute’s chief academic and administrative officer.

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First published in Singapore in 2000 by Institute of Southeast Asian Studies 30 Heng Mui Keng Terrace Pasir Panjang Singapore 119614 Internet e-mail: [email protected] World Wide Web: http://www.iseas.edu.sg/pub.html First published in Europe in 2000 by KITLV Press P.O. Box 9515 2300 RA Leiden The Netherlands All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the Institute of Southeast Asian Studies. © 2000 Institute of Southeast Asian Studies, Singapore. The responsibility for facts and opinions in this publication rests exclusively with the editors and contributors and their interpretations do not necessarily reflect the views or the policy of the Institute, the KITLV or their supporters. ISEAS Library Cataloguing-in-Publication Data Weathering the storm: the economies of Southeast Asia in the 1930s depression / edited by Peter Boomgaard and Ian Brown. 1. Asia, Southeastern—Economic conditions. 2. Asia, Southeastern—History—20th century. I. Boomgaard, Peter, 1946II. Brown, Ian, 1947III. Title: Economies of Southeast Asia in the 1930s depression HC441 W36 2000 sls2000049831 ISBN 981-230-079-1 (soft cover) ISBN 981-230-080-5 (hard cover) For Europe, this soft cover edition is co-published by KITLV Press, Leiden, The Netherlands (ISBN 90-6718-163-3)

Printed in Singapore by Stamford Press Pte Ltd

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Institute of Southeast Asian Studies, Singapore

Contents List of Tables List of Figures Acknowledgements List of Contributors

vii xi xiii xv

1 The Economies of Southeast Asia in the 1930s Depression: An Introduction Peter Boomgaard and Ian Brown

1

PART I MATERIAL CONDITIONS 2 Surviving the Slump: Developments in Real Income During the Depression of the 1930s in Indonesia, Particularly Java Peter Boomgaard

23

3 The Philippines in the Great Depression: A Geography of Pain Daniel F. Doeppers

53

4 Uneven Impact and Regional Responses: The Philippines in the 1930s Depression W. G. Wolters

83

5 Material Conditions in Rural Lower Burma During the Economic Crisis of the Early 1930s: What the Cotton Textile Import Figures Reveal Ian Brown

109

PART II AGRICULTURAL STRATEGIES 6 Structural Origins of the Economic Depression in Indonesia During the 1930s J. Thomas Lindblad © 2000

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CONTENTS

7 Entrepreneurial Strategies in Indigenous Export Agriculture in the Outer Islands of Colonial Indonesia, 1925-38 Jeroen Touwen

143

8 The Economy of Besuki in the 1930s Depression S. Nawiyanto

171

9 The Rice Economy of Thailand in the 1930s Depression Sompop Manarungsan

189

10 Rice and the Colonial Lobby: The Economic Crisis in French Indo-China in the 1920s and 1930s Irene Nørlund

198

PART III TRADING COMMUNITIES 11 Hadhrami Arab Entrepreneurs in Indonesia and Malaysia: Facing the Challenge of the 1930s Recession William Gervase Clarence-Smith

229

PART IV THE STATE’S RESPONSE 12 The State and the 1930s Depression in French Indo-China Pierre Brocheux

251

13 Imperial Unity Versus Local Autonomy: British Malaya and the Depression of the 1930s Paul H. Kratoska

271

14 Crisis and Response: A Study of Foreign Trade and Exchange Rate Policies in Three Southeast Asian Colonies in the 1930s Anne Booth

295

Index

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List of Tables 2.1 2.2 2.3 2.4

2.5

2.6 2.7

2.8 2.9 2.10

2.11 2.12 3.1 3.2

3.3 4.1 4.2

Exports, Imports, and the Trade Balance, 1925-38 Exports in Real Terms, 1925-38 Dividends and Trade Profits, and Private Capital Imports, 1925-38 Indexes of Real Income of the Indigenous Population of Java, both Total and Per Capita and of Per Capita Real Income of Indonesia as a whole, 1927-39 Average Annual Per Capita Consumption of Calories (thousands) and Protein (kilograms) of the Principal Food Crops, Java, 1927-40 Average Quantities Annually Available for Consumption Per Capita, Java, 1925-39 Rice Production Per Capita, in Kilograms of Husked Rice, and Percentage of Rice Crop Lost Owing to Drought, Java, 1927-39 Crude Death Rate (Deaths per Thousand People), Java, 1927-40 Indexes of Export, Rice, and Import Prices, and of Landrent (Java) Per Capita (in Real Terms), 1929-34 Number of Consumers (in Thousands) of Opium, and Amounts Consumed (in Thousands of Thails), Java, 1928-40 Number of Loans or Debtors at Various Categories of Bank, Java, 1929-37 Number of Javanese Pilgrims (Haji) to Mecca, 1926/27-1938/39 Philippine Exports and Capitation Tax Collections, 1928-36 Proportion of People Paying the Capitation Tax in 1932-35, as a Percentage of the Average Number Who Paid in 1928-29, by Province Area Dedicated to Six Major Crops, Philippines, 1928-29 and 1933-34 Average Values of Total Philippine Exports, 1925-29 to 1935-38, in Current and 1913 Prices Average Values of Philippine Export Crops and Paddy, 1925-29 to 1935-37 in Current Prices

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25 26 27

29

30 31

31 33 36

38 41 42 59

63 77 87 90

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viii LIST OF TABLES

4.3

4.4 4.5 5.1 5.2 5.3 5.4 5.5 5.6

7.1 7.2 7.3

8.1 8.2 8.3 8.4 9.1 9.2 10.1 10.2

Income from Three Categories of Crops as Percentages of Total Per Capita Agricultural Production, by Crop Region for the Year 1934 Average Per Capita Merchandise Sales, by Crop Region and by Province, 1918, 1928, 1934, and 1936 Agricultural Production and Merchandise Sales Per Capita, by Crop Region, for 1934 Imports of Cotton Piece-Goods into Burma, 1926/27-1936/37 Imports of Cotton Piece-Goods into Burma, 1926/27-1936/37: Three-year Annual Averages Per Capita Imports of Cotton Piece-Goods into Burma, 1926/27-1936/37: Three-year Annual Averages Per Capita Imports of Cotton Twist and Yarn into Burma, 1926/27-1936/37: Three-year Annual Averages Prices of Imports of Cotton Piece-Goods into Burma, 1926/27-1936/37 Imports of Cotton Piece-Goods into Burma, 1926/27-1936/37: Percentage Distribution between Grey, White, and Coloured, Printed or Dyed: Three-year Annual Averages Exports and Imports Per Capita by Region, Including Inter-regional Trade, Averages 1926/30 and 1931/35 Major Factors Determining Indigenous Export Growth Relative Proportions of the Three Major Export Commodities of South Sulawesi, Manado, Jambi, and West Kalimantan, 1927-38 Tobacco Production in the Besuki Plantations, 1921-30 Tobacco Production in the Besuki Plantations, 1931-38 Cultivation of Rice in Besuki Residency, 1931-41 Production of Unhusked Rice in Besuki Residency, 1931-41 Thailand’s Rice Exports, 1927-38 Prices of Thai, Vietnamese, and Burmese Rice in Singapore in 1930 Comparative Basic Information on the Regions of Indo-China, c.1930 Number of Rice Mills and Average Number of Days in Operation Per Month in Cholon, 1932-38

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94 96 97 112 113 113 114 116

116 148 148

153 174 177 179 180 190 192 202 205

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LIST OF TABLES

10.3 10.4 10.5 10.6 10.7 10.8 10.9 12.1 12.2 12.3 12.4 12.5 12.6 12.7 12.8 12.9 12.10 12.11 12.12 12.13 12.14 12.15

13.1 13.2 13.3 13.4 13.5

Rice Prices in Saigon (piastre per 100 kg) and the General Price Index, 1925-40 Percentage Falls in Income in Regional Budgets, Between 1930 and 1931, and Between 1930 and 1934 Index of the Cost of Living, 1925-40 Daily Wages of Workers, 1931-38 Daily Wages of Women, Children, and Inspectors et al., 1931-38 Wage Movements Compared with the General Price Index, 1931-38 Rice Exports from Indo-China to Hong Kong, China, the Dutch East Indies, and France, 1927-34 Bankruptcies and Compulsory Liquidations among the Chinese Traders of Saigon-Cholon, 1927-31 Prices of Rice and Paddy in Saigon, 1929-34 Main Exports from Indo-China, 1928-34 Mortgaged Viet Landhold Cost of Living Index Income from Régies, 1930-36 Tax Payments, 1929-36 Indirect Tax Revenues, 1924-33 Indirect Tax Revenues in Baclieu and Camau, 1930-34 Taxpayers and Taxes Paid in Baclieu, 1930-33 Trade Balance and Capital Repatriation, 1928-1931 Price of White Rice no. 1 in Saigon, 1925-40 Government Revenue and Expenditure, 1928-40 Nominal and Real Wages for Skilled and Unskilled Workers, 1931 and 1936 Index of Nominal Wages of Unskilled Workers in Saigon-Cholon, Towns in Bac bo and Trung bo, and in Mines in Bac bo, 1930-40 Malayan Balance of Trade, 1924-36 Japan’s Percentage Market Share in Malaya for Selected Items, 1930 and 1933 Malaya’s Balance of Trade with Japan, 1925-34 Malayan Imports of Cotton and Artificial Silk Piece-Goods, 1927-38 Malaya: Value of Rice Imports and Rubber and Tin Exports, 1924-40

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205 209 210 212 212 213 215 252 252 253 255 258 259 260 261 261 261 263 264 264 266

267 272 274 275 277 280

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LIST OF TABLES

13.6 13.7 14.1 14.2 14.3 14.4 14.5 14.6

Area of Land Planted with Rice, 1924-40 Production, Imports, and Consumption of Rice in Malaya, 1925-40 Exports Per Capita (US$) in Southeast Asia, 1909-13 and 1934-38 Metropolitan Shares of World Export Trade and Colonial Import Trade, 1929-34 Japanese Exports to Selected Asian Countries, 1913-1942 World, Java, and Philippines Raw Sugar Production, 1926-26 to 1935-36 Changes in the Cost of Living in Batavia and Saigon, 1929-40 Trends in the Nominal and Real Exchange Rate of the Piastre against the Yen, 1929-39

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283 283 298 301 308 310 314 315

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List of Figures 3.1 4.1 4.2 4.3 6.1 6.2 6.3 6.4 6.5 7.1 7.2

7.3 7.4 7.5

7.6 7.7 10.1 10.2 10.3 10.4

Average Percentage of Population Paying Capitation Tax, 1932-35 as Compared to 1928-29 Price Changes for the Main Export Crops Between 1920 and 1938 Merchandise Sales, at Current Prices and Deflated, 1925-36 Philippine Islands and Provinces, with Average Monthly Rainfall Graphs for Selected Places Foreign Trade of Colonial Indonesia at Current Prices, 1925-39 Foreign Trade of Colonial Indonesia at Constant Prices, 1925-39 Main Markets for Indonesian Exports, 1925-37 Commodity Composition for Exports, 1925-31 Commodity Composition for Exports, 1932-37 Location of West Sumatra, Jambi, West Kalimantan, South Sulawesi, and Manado in the Netherlands Indies Concentration of Exports on One Major Commodity, 1928-37: Three-year Moving Average of the Percentage of the Major Export Crop in Relation to Total Exports, Including Inter-regional Exports Relative Changes Between the Three Major Export Commodities of Jambi, 1927-38 Indigenous (Smallholder) Rubber Exports, 1927-38 Index of the Volume of Indigenous Rubber Exports, 1927-38 (1927 = 100), and the Rubber Price (guilders per 100 kg) Share of Exports Directed to Java, 1927-38 Share of Exports Directed to Other Outer Islands, 1927-38 Changes in GNP per capita in the United States, France, the United Kingdom, and Denmark, 1920-38 Rice Prices in Saigon, 1925-40 Value of Exports and Imports in Indo-China, 1885-1940, in Current Prices Value of Exports and Imports in Indo-China, 1885-1940, in Deflated Prices

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61 86 88 91 125 127 130 132 133 146

151 152 157

160 164 164 200 207 219 220

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xii

LIST OF FIGURES

10.5 10.6 10.7 12.1 12.2 14.1 14.2 14.3 14.4 14.5 14.6

Import and Export Volumes, 1913-40; and Rice Export Volumes, 1880-1940 Exports to France and Other Countries, in Current Prices (1913 = 100); Five-year Moving Averages Imports from France and Other Countries, in Current Prices (1913 = 100); Five-year Moving Averages Budget Income in 1930s Value of Rice Exports, Number of Registered Villagers Who Paid Poll Tax, and Poll Tax Rate, 1913-37 Growth of Real Exports, 1925-39 Growth of Real Imports, 1925-39 Percentage of Imports from the Metropole Percentage of Exports to the Metropole Currency Units Per US$ Percentage of Imports from Japan

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221 222 223 259 262 296 297 300 302 304 309

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Acknowledgements The proposal for a collaborative examination of the impact of the 1930s depression on the economies of Southeast Asia arose from discussions during a panel on “Short- and Long-Term Cycles in the Southeast Asian Economy: Historical Perspectives”, convened for the First Conference of the European Association of Southeast Asian Studies, held in Leiden in June 1995. The proposal came to fruition in a three-day workshop held in April 1998 at the School of Oriental and African Studies in London. And to complete the circle, there was a further gathering at the Second Conference of the European Association of Southeast Asian Studies, held in Hamburg in September 1998, at which the final revisions of the papers were discussed and the editors’ first attempt at an introduction was “adjusted”. The main meeting — the workshop in London — was made possible by the generous financial assistance of the Asia Committee of the European Science Foundation. The Jakarta Office of the Ford Foundation made it possible for Nawiyanto to participate in the revising meeting in Hamburg: and the School of Oriental and African Studies met the costs of translating Sompop Manarungsan’s chapter and of preparing the Index.

Peter Boomgaard and Ian Brown Leiden and London

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List of Contributors Peter Boomgaard is Director of the Royal Institute of Linguistics and Anthropology [KITLV] in Leiden, and Professor of the Environmental and Economic History of Southeast Asia at the University of Amsterdam. His present research focuses on the forests of Java in the period 16001950. Anne Booth is Professor of Economics (with reference to Asia) at the School of Oriental and African Studies in London. Her research focuses on economic growth and changing living standards in Southeast Asia. Pierre Brocheux is Professor of Contemporary History at Université Paris 7-Denis Diderot. He is presently working on the economic, social, and political history of Vietnam and the Indochinese peninsula. Ian Brown is Professor of the Economic History of Southeast Asia at the School of Oriental and African Studies in London. He is currently writing a book on rural Burma in the 1930s depression. William G. Clarence-Smith is Professor of the Economic History of Asia and Africa at the School of Oriental and African Studies in London. His current research interests are: entrepreneurial diasporas; and tree crops and livestock in the Indian and Pacific Oceans in the period 1750-1940. Daniel F. Doeppers is Professor of Geography and Southeast Asian Studies at the University of Wisconsin-Madison. His current research focuses on the provisioning of Manila in the nineteenth and twentieth centuries. Paul H. Kratoska is an Associate Professor in the Department of History of the National University of Singapore. His current research interests are: the Japanese occupation of Southeast Asia; and rice cultivation and food supplies in Southeast Asia. J. Thomas Lindblad is a Senior Lecturer in the Departments of History and Southeast Asian Studies at Leiden University in the Netherlands. His research focuses on the modern economic history of Indonesia. © 2000

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xiv LIST OF CONTRIBUTORS

S. Nawiyanto teaches the economic history of Indonesia in the University of Jember in Indonesia. He is currently undertaking research on agricultural development in the Residency of Besuki since the 1870s. Irene Nørland is a Senior Research Fellow at the Nordic Institute of Asian Studies in Copenhagen. Her present research focuses on living and working conditions in Vietnamese enterprises in the 1990s. Sompop Manarungsan is Associate Professor in the Economic History and Economic Development of Thailand and East Asia at Chulalongkorn University in Bangkok. His present research is concerned with globalization and Thailand’s economic development. Jeroen Touwen is a Lecturer in Economic and Social History at Leiden University in the Netherlands. His research focuses on the economic history of Indonesia. Willem Wolters is Professor of Economic Anthropology at the University of Nijmegen in the Netherlands. His current research interests are: agricultural production and money circulation in the Philippines between the 1880s and 1930s; and socio-economic development in an upland area of Central Java since the 1970s.

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ISEAS DOCUMENT DELIVERY SERVICE E. No reproduction without permission of the publisher: Institute of Southeast Asian Studies, 30 Heng Mui Keng Terrace, SINGAPORE 119614. FAX: (65)7756259; TEL: (65) 8702447; E-MAIL: [email protected]

INTRODUCTION 1

1 The Economies of Southeast Asia in the 1930s Depression An Introduction Peter Boomgaard and Ian Brown

THEME OR VARIATIONS

Southeast Asia’s great depression — the pre-war depression — was a complex phenomenon. Even to answer the apparently simple question, ‘When did it start?’, would require an extended and highly nuanced analysis. This complexity arises from three main considerations. First, the very causes of the depression in Southeast Asia were highly complex. Second, economic structures and circumstances in the different parts of the region, despite important commonalities, were greatly varied. And finally, the impact of the depression (indeed any sharp contraction on the scale experienced by Southeast Asia in the early 1930s) was different for each socio-economic group — rural-dwellers as against townsfolk, landowners as against landless, creditors as against debtors. To rework a well-worn phrase, all generalizations about the causes, course, and impact of the 1930s depression in Southeast Asia are wrong — except the present one. The immediately following paragraphs will expand on the three considerations above. The principal cause of the depression in Southeast Asia, most scholars would argue, lay outside the region — in the sharp contraction in economic activity in the industrial countries of North America and western Europe which began towards the end of the 1920s. Perhaps the most important mechanism by which the depression was transmitted from the advanced industrial economies to Southeast Asia was through a sharp contraction in demand for many of the region’s major primary commodity exports. A

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PETER BOOMGAARD AND IAN BROWN

notable example was the heavy fall in demand for the rubber produced on plantations and smallholdings in the Malay States, Sumatra, and CochinChina, as automobile production contracted, notably in the United States at the close of the 1920s. But there were other mechanisms of transmission, perhaps most importantly the worldwide tightening of credit that arose, first from the sharp contraction of American foreign lending from mid1928 as funds were drawn into the fierce speculative boom on the New York stock exchange and then as the American authorities raised rates in an attempt to dampen the boom, and subsequently from the widespread collapse of banks across the United States and western Europe as the depression took hold.1 That tightening of credit was felt in Southeast Asia. For example, Chettiar moneylenders in Burma were forced to reduce substantially new lending to rice cultivators and to demand a sharp reduction in existing loans, as they themselves came under pressure from the local western banks from which they in turn had borrowed.2 But the depression in Southeast Asia also had important internal causes: and there is little doubt that, even if the industrial economies had not plunged into depression at the end of the 1920s, the economies of Southeast Asia would still have been in considerable difficulties during these years. Two internal causes were particularly important. First, in this period a number of the region’s major primary commodity exports were, for different reasons, in serious oversupply. The principal examples were rubber, for very high prices in the 1910s had caused a too rapid expansion in new planting in the Malay States and in Sumatra, and the vastly increased output hit the market in the 1920s: and sugar, due mainly to the development of higher-yielding cane and more efficient mills, particularly in Java, from the early twentieth century. Second, in a number of Southeast Asia’s most important agricultural areas — notably in the delta of the Irrawaddy and in Luzon’s central plain — the expansion in cultivated area, in progress from the mid-nineteenth century, was now coming to an end: the open land frontier was closing. And as land increasingly became the scarce factor of production, rents rose, and tenant profits and labourer wages fell. In the vast rice-growing delta of the Irrawaddy, an agricultural crisis — marked by rising indebtedness and increasing landlessness — was clearly apparent in the early 1920s, considerably before the industrial economies hit trouble.3 It would be an easy matter to provide a number of examples of the differences in economic structure and circumstance in the different parts of Southeast Asia in this period — the great trading and financial centre at Singapore against, say, the vast rice-exporting deltas of the Irrawaddy, the Chaophraya, and the Mekong to the north. But the point being made here

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INTRODUCTION 3

is a more subtle one — that often there were important differences in economic structure and circumstance between districts which, at first sight, were strongly similar. And those differences were dramatically exposed by the depression. Just two examples must suffice. While the expansion of rice cultivation in the Burma delta had, from the final decades of the nineteenth century, been strongly driven by heavy lending on the part of Chettiar moneylenders to Burmese agriculturists, the expansion in Siam — at a considerably slower rate — had depended almost exclusively on local sources of capital. Consequently, on the eve of the depression, the burden of agricultural debt was substantially heavier in the rice districts of Burma than in the rice districts of Siam: and therefore, once the crisis struck, the scale of debt default, land foreclosure, and economic distress was considerably greater in Burma than in Siam. Second, the two principal producers of sugar for export in Southeast Asia in this period were Java and the Philippines. It is widely accepted that Java was by far the more efficient producer on the eve of the depression. Yet in the early 1930s, the industry on Java was forced to contract severely, while production in the Philippines increased markedly. The crucial difference in the circumstances of the two industries lay in access to markets. While sugar from the Philippines continued to enjoy privileged entry to the huge American market — the metropolitan market — Java’s sugar producers, who could never hope for a substantial market in the Netherlands, found their traditional markets in Asia rapidly closing as the crisis struck. They were shut out. There were also, of course, important differences in economic structure and circumstance within each territory — in particular within the vast archipelagos of the Philippines and the Netherlands East Indies. Indeed it is the sharply different experiences of the contrasting ‘ecological regions’ and ‘sub-national divisions’ of the Philippines during the depression which is the principal concern of the chapters by Doeppers and Wolters in this volume, while Nørlund draws attention to the important differences in the impact of the depression as between the various components of French Indo-China. The final argument is simply that as the depression took hold in Southeast Asia, some socio-economic groups were in a less vulnerable position than others: indeed some were not only better placed to deflect the impact of the crisis but were even able to take advantage of it. Many townsfolk were relatively secure — simply because the cost of basic foodstuffs, a major item of their expenditure, fell so sharply. Government servants of all grades may have been in a comparatively strong position, for salaries were

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PETER BOOMGAARD AND IAN BROWN

usually cut less than the cost of living fell.4 Among the most vulnerable were, surely, marginal landowners who, even in good times, barely cleared their working loans when the harvest was taken. The collapse in commodity prices and the tightening of credit left them completely exposed: they defaulted and lost their meagre holding. To a substantial degree, the material circumstances of any specific group of agriculturists in any part of Southeast Asia during the crisis was determined by their ability to resist the demands of tax-collectors, landowners, and moneylenders — by outright force, by intimidation, or by sly concealment. At the same time, it is often extremely difficult for the historian to plot precisely the experience of a particular socio-economic group during the depression, simply because so much of the statistical data on consumption patterns — the data on imports, on the taxation of consumer items, even on death-rates — are impossible to disaggregate by socio-economic class. Even so, a number of chapters in this volume — including those by Boomgaard, Nawiyanto, and Brocheux — tackle this central issue. Given the complexity of the external and internal origins of the 1930s depression in Southeast Asia, the vast differences in economic structures and circumstances across the region, and the often sharply different (although perhaps difficult to define precisely) depression experiences of each socio-economic group, it must now be clear why even the simple questions — when did the depression start, when was the bottom reached, when was recovery completed — defy simple answers. Perhaps, on the basis of the chapters which follow, we can say that the depression hit Southeast Asia ‘with full force’ only in 1930: but it would be essential to add that for rubber producers in the Malay States, prices had been sharply depressed for much of the 1920s, and that for sugar producers in the Philippines, the depression never really came. Perhaps, on the basis of Booth’s chapter in this volume, we could argue that the abandonment of the gold standard by Britain and Japan in 1931 while France and the Netherlands remained tied to gold, marked a crucial worsening in the course of the depression in Southeast Asia: but for many primary commodities — notably rice — prices did not hit their lowest point until 1933 or 1934. And how do we define ‘the bottom point’ of the depression? For many of Southeast Asia’s cultivators, their darkest hour — their point of most severe hardship — may not have come when the prices they received for their crop hit bottom, because by that point they had been able to protect their material circumstances by increasing production, by resisting the demands of moneylenders and tax-collectors, and by taking advantage of the influx of cheap Japanese imports. Perhaps their darkest hour came

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INTRODUCTION 5

as prices first fell sharply — in 1930 for rice cultivators — for there was then insufficient time for the survival strategies to ‘kick in’. And how do we define ‘recovery’? It is possible to mark the points when export volumes (but not values) returned to their pre-depression level — by 1935 or 1936: but for some commodities (rice), export volumes never fell significantly, while for others (abaca), there was never a return to the level of output common before the depression struck. Nevertheless, if forced to give an overall impression, it could be said that the depression was not all that serious until the latter months of 1930, reached a trough in 1933 or 1934, and was largely over by 1937 or 1938. The argument that Southeast Asia’s pre-war depression was a complex phenomenon marks a clear advance on an earlier orthodoxy (to be considered below) that it was an unrelieved economic disaster. But the present argument also brings its own problems. By focusing on the vast variety of economic experience across Southeast Asia during the depression years, it becomes more difficult to identify common trends. The experience of each socio-economic group and of each geographical area — the landless labourers in Java’s sugar fields, the hacienda owners in central Luzon, the office clerks in Bangkok — is seen as being uniquely determined. The commonalities are obscured. In fact some commonalities will be touched on below. For example, the depression decade saw, in all parts of Southeast Asia, a much greater degree of state intervention in the economy. Other commonalities have already been sketched in. Marginal landowners — whether in Burma, Java, or Luzon — were strikingly vulnerable when commodity prices collapsed and credit tightened: those who avoided savage wage cuts—government servants across Southeast Asia — almost certainly enjoyed an improvement in their material circumstances as prices fell. And this point forms a valuable context for the following discussion: what impact did the depression have on the standard of living of Southeast Asians? THE STANDARD OF LIVING DEBATE

It is probably fair to say that up to the late 1970s, most scholars assumed without much discussion that the 1930s depression had been a terrible ordeal for the indigenous peoples of Southeast Asia. A striking example of this orthodoxy was provided by Wim Wertheim, writing in 1950: A League of Nations’ report stated, with justice, that in Indonesia the economic crisis lasted longer and weighed heavier than

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anywhere else in the world. Western enterprise and the native population both suffered. The catastrophic decline in world agricultural prices brought enormous difficulties for the Western plantations and for the Indonesian farmer equally. Innumerable undertakings had to close down or considerably reduce their working acreage, their staffs and their production costs, wages included. In this way many an Indonesian witnessed the disappearance of his money earnings or saw them shrink to a fraction of the former amount. Dismissed coolies returned by the thousand from Deli to increase the burdens of the Javanese desas. Many unemployed left the towns in Java and returned to the countryside they had deserted in better days. And all this happened at a time when the Javanese farmer, like his counterpart on the Outer Islands, was obtaining but a trifle for his crops compared with the price he had been getting in the boom period.5 Such a perspective was certainly reasonable. The depression is a bleak period in the collective memory of the West, and it is generally accepted that primary producing countries — a category to which the entire region belonged — were afflicted more than the industrial economies of North American and western Europe, largely because the terms of trade moved against the primary producers.6 As if this were not bad enough, according to some authors, a number of aggravating factors turned the slump into a severely gruelling experience. The main culprits of this aggravation were colonial governments, landlords, and moneylenders. The following factors are often alluded to when scholars want to stress how disastrous a period the depression really was. Colonial administrations, fearing that their tax revenues would decline sharply and so threaten the stability of their finances, ruthlessly enforced their tax demands against rural populations who were experiencing major declines in money income: consequently, for cultivators across the region — but certainly, it is alleged, in French Indo-China and Burma — the real burden of taxation rose. Second, the economic policies of colonial governments favoured Western enterprise and the mother country, and went against the interests of the indigenous people. As one writer, William O’Malley, put it: Government, in its employment and welfare programs, instead of acting as a countervailing force to the economic storm blowing over the people, compounded and intensified their economic problems by acting in concert with the winds of distress.7

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INTRODUCTION 7

Colonial administrations, so the argument continues, made little provision for the unemployed, at least in Indonesia and Malaysia. Moneylenders and landlords — in such countries where the notion of landlordism can be meaningfully used — insisted on their ‘pound of flesh’, and in so doing almost certainly increased the real burden of their claims against debtors and tenants. There was an increase in mortgage foreclosure and in the extent of tenancy, while the terms of tenancy deteriorated (Burma, Java, Philippines, Siam).8 Several scholars have pointed out that the 1930s were characterized by widespread rural unrest, and some have cited this as evidence that Southeast Asia was going through a particularly rough patch.9 But from the early 1980s, a number of writers have argued that the 1930s depression in Southeast Asia may not have been a period of unremitting gloom in all areas, for all social strata, and in all branches of the economy. Names that come to mind are Jan van Laanen, Ian Brown, John Ingleson, Norman Owen, and Daniel Doeppers.10 They do not argue that there was nothing wrong in Southeast Asia during the depression. But they do suggest, first, that some of the factors mentioned above were less important than at first sight they may have appeared, and, second, that other factors, ignored or insufficiently stressed by earlier authors, had a powerful mitigating influence. In essence, the first argument of the revisionists is that the burden of taxation was not everywhere as heavy as had been stated:11 that during the depression years, taxes were often not levied in full, that some socioeconomic groups and individuals were quite successful in resisting the tax collector, and that not all socio-economic groups were liable for certain taxes — notably land taxes — anyway. In many regions there was also resistance to the demands of moneylenders and landowners.12 A related point is that, although it seems likely that the level of indebtedness increased during the depression, rural Southeast Asia has always been characterized by high levels of debt, which, therefore, does not in itself constitute proof of adverse economic circumstances.13 The second argument — that regarding mitigating circumstances — is less easily summarized, as the circumstances consist of a wide variety of factors. However, one can distinguish two broad categories — factors that contributed to higher levels of real income for the indigenous population, and factors that helped to reduce household expenditures. What, in the first place, certainly protected income levels was the fact that many cultivators were quite successful in shifting their labour from export crops to subsistence food crops, particularly rice. This guaranteed

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PETER BOOMGAARD AND IAN BROWN

a basic income — the bare minimum needed to survive — to large numbers of rural people. In the second place, people diversified into other economic activities, of which we need mention only mining (particularly of gold), hunting, fishing, and the increased exploitation of forest products, particularly lumbering.14 Third, and finally, note should be made of the growth of the industrial sector.15 Part of this growth involved small-scale, cottage or workshop production of very cheap commodities, made largely from local materials; but part also involved large-scale Western and Japanese enterprise, willing to invest in economies with low wages, moreover, economies around which tariff and non-tariff barriers had now been erected.16 Turning now to the reduction of household expenditure, the first point to note is that people were apparently willing to reduce non-essential outlays, such as that on cock-fights in the Philippines, on opium in Indonesia and Vietnam, and on alcohol in Vietnam and Cambodia. Also important was the influx of cheap imports — prominently textiles — from other parts of Asia, notably Japan but also from British India. Third, there is evidence of an enormous increase in the cultivation and consumption of roots and tubers (sweet potato, cassava) during the depression, which enabled those who had to balance their household budget to secure the same amount of calories as before but at a lower cost.17 The point has been made earlier in this introduction, but certainly bears repetition, that not all socio-economic groups in all areas had the same opportunity to take advantage of these mitigating circumstances. Thus we find that salaried groups, including the considerable numbers of government officials, experienced an increase in real income — as long as they kept their jobs, of course. There is a strong suggestion in the literature that some (or all) cities were doing better than the countryside.18 Three final points might be made about the investigation of material circumstances in rural Southeast Asia during the depression. As noted earlier, several scholars have pointed to the considerable unrest — the outright rebellion — experienced in parts of rural Southeast Asia in these years as evidence of a sharp deterioration in economic conditions. We would argue that, apart from food riots, unrest or rebellion is an extremely poor guide to material circumstances. As a substantial literature on rural unrest in Southeast Asia in the depression years (and at other times) makes clear, the causes of unrest and outright rebellion are, firstly, extremely complex, and secondly, by no means restricted to economic circumstance.19 It might also be asked, if rural unrest is a reliable guide to material conditions, does this imply that those parts of rural Southeast Asia which

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INTRODUCTION 9

went through the depression years without significant disorder — “[i]n the Indies, there were neither revolts nor large-scale popular unrest in the 1930s”20 — suffered far less hardship than those which saw large-scale rebellion. That last proposition is extremely doubtful. A much more useful indicator of material circumstances, in our view, although not an unproblematic one, is the death-rate. Against those who regard the depression as an epoch of material disaster in Southeast Asia, it need only be said that, for those parts of the region for which we have data, there is no evidence of increased mortality, famine, or epidemic — apart from the years in which the monsoon failed. Stable mortality figures for this period could be found in Bikol in the Philippines, in the rural districts of Burma, and in Java.21 Finally, it is important to note that the standard of living ‘debate’ — a real debate is strangely lacking — confronts us with ideological complications. On the one hand, most of the scholars who have seen the depression years in Southeast Asia as a disaster have strong anti-colonial opinions. The depression, in their view, was colonialism at its worst, with the gloves off, as it were. However, as Dixon has pointed out, colonial administrators and their apologists would also have a vested — but of course different — interest in emphasizing the devastating effects of the depression, for this would enable them to explain the low levels of income in the region on the eve of the Pacific War.22 In their view, the indigenous populations had been in much better shape at the end of the 1920s, having enjoyed the benefits of the long boom in commodity production and trade from the middle of the nineteenth century, the heyday of colonialism. The 1930s, the last full decade of colonial rule in the region, was an aberration. In the same vein, one cannot but note the irony that those who argued that Western enterprise — for example in the sugar industry in Java — provided no benefit for the indigenous population found it even less to their liking when sugar disappeared. STRUCTURAL IMPLICATIONS

It is not difficult to understand why scholars working on the economies of Southeast Asia during the 1930s depression — including the majority of contributors to this volume — have focused on its impact on the material circumstances of the region’s populations. This reflects in part, perhaps, popular perceptions of the ‘Great Depression’, certainly in the industrial economies, as a time of massive unemployment and severe economic distress. It also partly reflects a natural interest in the ability of individuals

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10 PETER BOOMGAARD AND IAN BROWN

and communities to survive great upheaval. We well understand that in the period from the middle of the nineteenth century, huge populations across Southeast Asia had created an intense dependence on the production of, and trade in, primary commodities for international markets: how indeed did they fare when the world economy, whose long boom had underpinned the region’s extraordinary growth in recent decades, stuttered and then collapsed? Yet this understandable focus should not obscure the fact that the 1930s depression created a number of changes in the basic structures of the economies of Southeast Asia which were of greater long-term importance than its immediate impact on living standards.23 In exploring this argument it must be acknowledged that during the 1920s and 1930s, some substantial structural changes occurred in the economies of the region that were not linked to the world economic depression. An important example was the gradual closing of the land frontier in many of the region’s most important agricultural districts — the central act in the transition of Southeast Asia from the labour-scarce region of the late nineteenth century to the laboursurplus economies of the late twentieth, with all the implications this holds for wage levels, agricultural productivity and profits, immigration, and industrial expansion. The concern here, however, is with those structural changes which reflected, largely or exclusively, the impact of the depression itself. The first was noted above — in a different context. There is a strong likelihood that the depression caused important realignments in the distribution of wealth and economic power within rural, and perhaps between rural and urban, Southeast Asia. Some socio-economic groups were clearly in a less vulnerable position than others when the crisis struck, while some were better placed than others to deflect its impact: crucially yet others were even able to take advantage of the crisis. Sadly, for Southeast Asia this important theme has yet to attract much serious research, although it has drawn the attention of historians working on the impact of the 1930s crisis in other parts of the non-European world.24 The nature and scale of the realignments in wealth and economic power in Southeast Asia in these years — the extent to which existing wealth was consolidated or new wealth created, the ways in which the crisis forced those who held economic power to seek new endeavours and opportunities, the extent to which the position of the most vulnerable, the poorest, deteriorated further — need to be fully explored. As noted above, the chapters by Boomgaard, Nawiyanto, and Brocheux in this volume represent brave initial explorations.

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INTRODUCTION

11

Second, the depression significantly weakened the position of Western business interests in Southeast Asia and strengthened, relatively and sometimes absolutely, the position of Asian commerce — the Japanese, of course, but in addition local Chinese and Arab commercial groups and also, on occasions, indigenous economic interests. It must be said that in almost all these cases, other factors — long-term influences — were driving in the same direction: but the depression was of central importance. The weakening of Western business interests can be seen, for example, in the struggle of British rubber plantation companies in the Malay States to survive against extremely low-cost Malay smallholders when the world price of rubber hit the floor at the beginning of the 1930s. British rubber interests were saved in the 1930s, as they had been in the 1920s, by the creation of a restriction scheme to push up prices. Or again, the depression saw a sharp contraction in the sales of Western consumer manufactures across Southeast Asia — the most striking example is imports of cotton piece-goods — and the dramatic advance of Japanese consumer manufactures in local markets, underpinned by low wage costs in Japanese industry (the long-term consideration) but ignited by the sharp devaluation of the yen in late 1931. And as a final example, the depression years saw a marked acceleration in the restructuring of Chinese capital in Southeast Asia, away from commodity production and towards — for reasons to be considered below — manufacturing. But not all Asian commercial interests advanced in this period. Chettiar moneylenders, who had played an important role in the creation of Burma’s rice economy from the final decades of the nineteenth century, never recovered from the very substantial losses they sustained as the crisis struck their rural clients from the final months of 1930. But the most substantial long-term impact of the depression in Southeast Asia was — in that last full decade of colonial rule in the region — to advance greatly the role of the state in the economy, in the direction of protection and self-sufficiency. Once again, other factors — long-term influences — were driving in the same direction. But the 1930s depression was of pivotal importance, in forcing governments to intervene. Just three examples must suffice. The creation of international commodity control schemes for rubber, tin, and sugar during the 1930s involved the administrations of, in particular, British Malaya and the Netherlands East Indies, in the very considerable tasks of recording, regulating, and monitoring production and trade. The erection of tariff and quota restrictions against imports from Japan by, prominently, the Netherlands East Indies, the Philippines, and the Straits Settlements, from the early 1930s clearly

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12 PETER BOOMGAARD AND IAN BROWN

marked a substantial intervention in the conduct of foreign trade. And finally, the 1930s saw most governments in Southeast Asia — notably in the Philippines, the Netherlands East Indies, and in Siam — make considerable efforts to foster the expansion of local industry. The measures they employed included, of course, the imposition of tariff and quota restrictions against competitive imports, in an attempt either to protect fledgling indigenous producers or to encourage foreign industrialists to jump the barriers and establish a plant locally. But in some cases — notably in Siam — the government itself, often in collaboration with local capitalists, became directly involved in establishing new industrial enterprises. And in the Netherlands East Indies, towards the close of the 1930s the administration took on the enormous task of regulating virtually all aspects of local industrial production — setting prices and output even at plant level. There is an important paradox here which really needs to be explored further. In the early 1930s, governments across Southeast Asia, faced with rapidly declining revenues from production and trade, were forced to reduce their expenditures in an attempt to maintain balanced budgets. For all governments, the major element in their expenditure was establishment costs — the cost of administration itself, including, notably, salary costs. There was, therefore, very considerable pressure to reduce the establishment, to engineer the early retirement of senior staff and to halt, or cut substantially, the recruitment of new officials. And yet, as noted above, the 1930s saw governments across Southeast Asia assume greatly increased administrative burdens as they came to intervene on a much greater scale in the economy. How was this achieved? Did it involve, for example, the increasing replacement of expensive expatriates by local staff in the middle levels of administration? If so, the political implications would have been important.

TWO CRISES

When one is studying the 1930s depression in Southeast Asia, it is difficult to avoid making comparisons with Asia’s present economic turmoil, although the process does not appear to work the other way, as few economists writing about the present Asian crisis refer to that of seventy years ago. This comparison is, of course, a rather hazardous undertaking, as the present slump has yet to run its course, and as scholars much more qualified than ourselves are still debating what is happening, why it

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13

happened, and what we may expect to happen.25 And yet it would be interesting to see whether we can draw some lessons from the 1930s, and — for economic historians, a perhaps even more attractive proposition — whether living through the present turmoil in Asia can teach us a thing or two about the past. Looking at the present may focus our attention on details from the past that might otherwise escape us. On the face of it, the two crises seem to be very different.26 The present one is often dubbed a banking or financial crisis, or even — euphemistically — a monetary crisis (the Indonesians call it krismon). In the years before the crisis broke — in Thailand in mid-1997 — much of the region appeared to be awash with investable funds. Consequently, many major banks were dangerously overextended and huge construction booms had, in many cases, left property seriously overvalued. As the equity and bond markets are less developed in Southeast Asia, most of this over-investment was raised through bank loans, many companies using short-term loans to finance long-term investment. And a considerable proportion of the capital came from outside the region. Those who controlled investable funds in the United States, Europe, and Japan, were drawn into Southeast Asia by high growth-rates and the prospect of huge returns. However, there were a number of flaws in the Southeast Asian economies that perhaps were not particularly important as long as things were going well but which rapidly turned a miracle into a débâcle when things started to go wrong. In the first place, returns on investment had been falling for several years, and had reached rather low levels in many economies in the region by the mid-1990s. Second, corporate profligacy was common, with money being thrown at some absurd projects. Third, banking regulations were outdated and lacked transparency, while supervision of the financial sector was weak. Reporting rules were either lacking or largely ignored, with the result that the scale of foreign debt was unknown and certainly underestimated. Fourth, in relation to GDP, the major banks in Southeast Asia are much larger than those in the West: consequently, when they hit trouble, the country was in trouble. Last, and certainly not least, banks and other businesses are firmly entangled in Southeast Asia’s luxuriant growth of corruption and crony capitalism. The crisis gathered in the first half of 1997, with falls in the value of Thai stocks and pressure against the baht, and then broke on 2 July 1997 when the Bank of Thailand finally left the baht to float — the baht almost immediately losing some 18 per cent of its value against the US dollar. In the weeks and months which followed, the currencies of the Philippines,

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14 PETER BOOMGAARD AND IAN BROWN

Singapore, Malaysia, Hong Kong, South Korea, Taiwan, and Indonesia came under intense pressure, while Japan, with an economy already stagnating, ran into further economic trouble. The crisis in Southeast Asia was marked by the closure of numerous banks and finance houses (including Finance One, Thailand’s largest finance company), falling foreign direct investment (and often falling tourism figures), the postponement or cancellation of major corporate investments and government construction projects, large-scale dismissals, falling imports (in many cases falling exports too), and, as currencies fell sharply in external value (particularly the Indonesian rupiah), marked inflation. As the ‘dragons’ (Hong Kong, Singapore, South Korea, Taiwan) are less dependent on foreign direct investment than the ‘tigers’ (Indonesia, Malaysia, Thailand), the latter are, in this important respect, in more serious trouble. Thus there are many important differences between the two crises. The principal causes of the 1930s depression in Southeast Asia lay outside the region: the region was caught in a worldwide economic contraction. The 1990s crisis, in contrast, has very powerful domestic origins — although it might still become entwined with a global crisis embracing at least Russia and Latin America. The 1930s depression was overwhelmingly a rural phenomenon — inevitably so given the region’s predominantly agricultural character at that time. The 1990s crisis is essentially an urban crisis: indeed, one observer has argued that ‘[a]griculture has been the strongest performing sector in the crisis economies ... [r]ural producers have thus far escaped relatively unscathed’.27 While the 1930s saw prices fall sharply, the present crisis has seen severe inflation, at least in Indonesia: whether prices rise or fall has a crucial impact on, for example, debt, tax, and rent burdens, and on the strategies which populations must adopt to protect their material circumstances. The 1930s saw banks in difficulties only after production and trade had turned down, and not serious difficulties at that: in the 1990s, the banking sector was at the core of the crisis, and has been decimated. If these are some of the important contrasts, where are the similarities — or rather, what lessons can be learnt by looking at one crisis from the perspective of the other? In the first place, it should be noted that in parts of the region, the beginning of the crisis in both 1929 and in 1997 coincided with drought and harvest failures, which no doubt deepened the recession, and certainly made it a more harrowing experience for many. Second, important in both crises was over-investment — for example, in

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15

rubber and sugar cultivation in the 1920s, in the property market in the 1990s. Third, in both crises, large numbers of people lost their livelihood, permanent and circular migrants into the towns and cities were sent home, and home-villages were deprived of the remittances of family members. Here the similarities are uncanny: during both recessions, governments attempted to rid the cities of jobless rural migrants by providing free tickets to the countryside, certainly in Indonesia and the Philippines. In both crises, many were forced to borrow and were confronted with mounting debts, although, presumably, the opportunities and dangers of borrowing are different in times of inflation than in periods of deflation. In the 1930s, as now, those Indonesians seeking loans preferred to use government pawn-shops rather than other lenders — as long as they had anything left to pawn: but many failed, and fail, to redeem their possessions. In those circumstances, they now turn to private moneylenders, who include civil servants and village headmen, just as was the case in the 1930s. It is to be expected that many Indonesian cultivators, particularly those with minute holdings, will lose them, as they did throughout Southeast Asia in the 1930s, and join the ranks of the landless. At the same time, some sectors of the Indonesian economy are doing well in the present crisis: fruit and furniture production, protected from imports by the fall in the external value of the rupiah, is thriving, as is the export of fish and shellfish, again because of the rupiah’s collapse. In the 1930s too, some sectors did well — for example, in the Philippines, housing construction around Manila and gold mining and export. In the 1990s crisis, local and foreign investors soon come looking for bargains in the economies in shambles. Low prices and low wages attract investment — just as low wages and low building costs stimulated Manila’s construction boom in the early 1930s. In drawing lessons from the 1930s for the 1990s, it can be expected that attempts will now be made to increase local food production and to intensify the exploitation of natural resources. Already many people are turning to gold-panning and fishing, and it may not be long before we see an increase in hunting and gathering. At the same time, the opportunities to pursue such survival strategies may well be less now than they were seventy years ago, for much higher population densities on the land and the spread of urbanization have undoubtedly reduced the scope for increasing subsistence food production and for foraging: in Indonesia, the forest fires of 1997 and 1998 have undoubtedly reduced those opportunities still further.

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16 PETER BOOMGAARD AND IAN BROWN

And finally, in what ways can our evolving understanding of the present crisis inform our exploration of the 1930s depression? Here we will limit ourselves to just one issue — the behaviour of the rich, an aspect of the 1930s turmoil that has not received the attention it deserves. A striking — and engrossing — feature of the present crisis has been the destruction of the business empires of many of Southeast Asia’s ‘super-rich’, and the battering received by the region’s middle classes, who have seen their disposable incomes reduced to a mere fraction of their previous levels. In many cases, this has involved ethnic minorities, and in particular the Chinese. Here we need only note that in Indonesia, Chinese networks are folding under the threat of physical violence, a collapse which will worsen an already difficult economic situation, given the importance of the Chinese in transport, trade, and credit. These contemporary observations should encourage us to look more closely — Clarence-Smith has begun the process in his contribution to this volume — at the experience of trading and financial minorities in the 1930s depression. As a further example, we can now observe the ways in which, in Indonesia at least, the wealthier elements in the rural areas — but also perhaps in the towns and cities — are coming under pressure to provide assistance to those suffering serious hardship. Did such mechanisms operate — operate effectively — in the 1930s? We do not, of course, expect the past to provide us with clear lessons for the present. But we do expect the past to inform our understanding of the present — and the other way around. One ‘lesson’ must be that the resilience of the people of Southeast Asia in the 1930s was greater than might have been expected, particularly in the rural areas; and there is evidence that during the present turmoil, the countryside is again coping much better than initial, often quite alarming prognostications led us to believe. A further ‘lesson’ could be that remedies concocted outside the region are not always the best ones. In the 1930s, all the countries of Southeast Asia, except Thailand, were of course colonial possessions; and it is generally accepted that the metropolitan powers — the United States, France, Britain, and the Netherlands — were not exclusively driven by concern for the well-being of their colonies when they took action to counter the ill effects of the depression.28 Southeast Asia has now long been politically independent. Even so the countries of the region are not at liberty to devise their own solutions to the present crisis. Not least, for those in trouble, the International Monetary Fund and the World Bank often dictate the terms upon which assistance will be given. It could be argued — it has been argued — that these terms have, on occasions,

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worsened rather than relieved the crisis. And yet, some possibility to defy the prescriptions of outsiders does now exist, as witness Malaysia’s decision in September 1998 to impose currency controls.

Notes *This chapter has greatly benefited from the comments of Norman Owen. 1.

A standard text on the 1930s world depression, although with a very pronounced focus on the industrial economies, is Charles P. Kindleberger, The World in Depression 1929-1939 (London: Allen Lane The Penguin Press, 1973). Dietmar Rothermund, The Global Impact of the Great Depression 1929-1939 (London: Routledge, 1996), while it is concerned not only with the industrial economies but also with the economies of Africa, Asia, and Latin America, perhaps lacks analytical depth: it includes a very brief chapter on reactions to the depression in Southeast Asia [pp. 120-25].

2.

Michael Adas, The Burma Delta: Economic Development and Social Change on an Asian Rice Frontier, 1852-1941 (Madison: University of Wisconsin Press, 1974), pp. 186-87.

3.

Ibid., chapter 6.

4.

These points are skilfully made in Daniel F. Doeppers, “Metropolitan Manila in the Great Depression: Crisis for Whom?”, Journal of Asian Studies 50, no. 3 (1991): 511-35.

5.

W. F. Wertheim, Effects of Western Civilization on Indonesian Society. International Secretariat Paper no. 11, p. 10. (New York: Institute of Pacific Relations, 1950).

6.

See, for example, W. A. Lewis, Economic Survey 1919-1939 (London: Allen and Unwin, 1970 [first published in 1949]), pp. 155, 196; A. G. Kenwood and A. L. Lougheed, The Growth of the International Economy 1820-1960 (London: Allen and Unwin, 1971), pp. 203-21; Charles P. Kindleberger, The World in Depression 19291939, p. 191.

7.

W. J. O’Malley, “Indonesia in the Great Depression: A Study of East Sumatra and Jogjakarta in the 1930s”. PhD. dissertation, Cornell University, 1977, p. 81.

8.

Ibid., pp. 79-83; Ian Brown, “Rural Distress in Southeast Asia During the World Depression of the Early 1930s: A Preliminary Reexamination”, Journal of Asian Studies 45, no. 5 (1986): 1011-12; Norman G. Owen, “Subsistence in the Slump: Agricultural Adjustment in the Provincial Philippines”, in The Economies of Africa and Asia in the Inter-War Depression, edited by Ian Brown, pp. 102-04; (London: Routledge, 1989); Chris Dixon, South East Asia in the World-Economy (Cambridge: Cambridge University Press, 1991), pp. 133-34.

9.

Michael Adas, The Burma Delta, chapter 8; James C. Scott, The Moral Economy of the Peasant: Rebellion and Subsistence in Southeast Asia (New Haven: Yale University Press, 1976), pp. 120-56; Benedict J. Kerkvliet, The Huk Rebellion: A Study of

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18 PETER BOOMGAARD AND IAN BROWN Peasant Revolt in the Philippines (Berkeley: University of California Press, 1977), pp. 35-39; Pierre Brocheux in this volume. 10.

J. T. M. van Laanen, The World Depression (1929-1935) and the Indigenous Economy in Netherlands India (Townsville: James Cook University of North Queensland, Centre for Southeast Asian Studies, 1982), Occasional Paper 13; Ian Brown, “Rural Distress in Southeast Asia During the World Depression of the Early 1930s”; John Ingleson, “Urban Java during the Depression”, Journal of Southeast Asian Studies 19, no. 2 (1988): 292-309; Norman G. Owen, “Subsistence in the Slump: Agricultural Adjustment in the Provincial Philippines”; Daniel F. Doeppers, “Metropolitan Manila in the Great Depression”.

11.

For example by James C. Scott, The Moral Economy of the Peasant, pp. 91-156.

12.

Ian Brown, “Rural Distress in Southeast Asia During the World Depression of the Early 1930s”, pp. 1010-11, for data from Burma and Vietnam; Boomgaard and Brocheux in this volume, for Java and Vietnam respectively.

13.

Norman G. Owen, “Subsistence in the Slump: Agricultural Adjustment in the Provincial Philippines”, p. 103, on the Philippines; and Boomgaard and Brocheux in this volume, on Java and French Indo-China respectively.

14.

Incidentally, areas that were already diversified often did much better during the depression than monocrop areas: see Boomgaard and Wolters in this volume.

15.

This process is better documented, and was perhaps also more important, in Latin America: see A. G. Frank, Lumpenbourgeoisie: Lumpendevelopment, Dependence, Class, and Politics in Latin America (New York/London: Monthly Review Press, 1972), pp. 75-91.

16.

Ian Brown, “Some Comments on Industrialisation in the Philippines during the 1930s” in The Economies of Africa and Asia in the Inter-War Depression, edited by Ian Brown, pp. 203-20 (London: Routledge, 1989); Norman G. Owen, “Subsistence in the Slump: Agricultural Adjustment in the Provincial Philippines”, pp. 98-99; Daniel F. Doeppers, “Metropolitan Manila in the Great Depression”, pp. 515, 530; Peter Boomgaard, Forests and Forestry 1823-1941 [Changing Economy in Indonesia, 16] (Amsterdam: Royal Tropical Institute, 1996), pp. 13-15; Brocheux and Kratoska in this volume.

17.

J. T. M. van Laanen, The World Depression (1929-1935) and the Indigenous Economy in Netherlands India, p. 9; Owen, op. cit., pp. 97, 100; Doeppers, op. cit., pp. 528-29; Boomgaard and Brocheux in this volume.

18.

Ian Brown, “Rural Distress in Southeast Asia During the World Depression of the Early 1930s”, p. 1012; John Ingleson, “Urban Java during the Depression”, p. 309; Owen, op. cit., pp. 102-03; Doeppers, op. cit., pp. 517, 530.

19.

See, for example, Michael Adas, Prophets of Rebellion: Millenarian Protest Movements against the European Colonial Order (Chapel Hill: University of North Carolina Press, 1979), which emphasizes the importance of the millenarian tradition in the Hsaya San Rebellion in Burma at the beginning of the 1930s; and Samuel L. Popkin, The Rational Peasant: The Political Economy of Rural Society in Vietnam (Berkeley: University of California Press, 1979), which emphasizes the role of ‘political entrepreneurs’ in the depression unrest and rebellions in Vietnam.

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20.

W. J. O’Malley, “Indonesia in the Great Depression: A Study of East Sumatra and Jogjakarta in the 1930s", p. 236.

21.

Ian Brown, “Rural Distress in Southeast Asia During the World Depression of the Early 1930s”, p. 1020; Owen, op. cit., p. 101; Boomgaard in this volume.

22.

Chris Dixon, South East Asia in the World-Economy, p. 134.

23.

An important pioneer here is C. J. Baker, “Economic Reorganization and the Slump in South and Southeast Asia”, Comparative Studies in Society and History 23, no. 3 (1981): 325-49.

24.

See, for example, the papers on Kenya (by David Anderson and David Throup) and on western India (by Neil Charlesworth) in The Economies of Africa and Asia in the Inter-War Depression, edited by Ian Brown (London: Routledge, 1989).

25.

The literature on the 1990s crisis is already in full flood. Among the most useful texts are: Southeast Asia’s Economic Crisis: Origins, Lessons, and the Way Forward, edited by H. W. Arndt and Hal Hill (Singapore: Institute of Southeast Asian Studies, 1999); East Asia in Crisis: From Being a Miracle to Needing One? edited by Ross H. McLeod and Ross Garnaut (London: Routledge, 1998); Philippe F. Delhaise, Asia in Crisis: the Implosion of the Banking and Finance Systems (Singapore: John Wiley, 1998); Tigers in Trouble: Financial Governance, Liberalisation and Crises in East Asia, edited by Jomo K. S. (London: Zed Books, 1998); Callum Henderson, Asia Falling? Making Sense of the Asian Currency Crisis and its Aftermath (Singapore: McGraw-Hill, 1998).

26.

For the present economic turmoil, the following draws heavily upon a reading of newspapers and magazines, particularly the Far Eastern Economic Review.

27.

Hal Hill, “An Overview of the Issues”, in Southeast Asia’s Economic Crisis: Origins, Lessons, and the Way Forward, edited by H. W. Arndt and Hal Hill (Singapore: Institute of Southeast Asian Studies, 1999), p. 7.

28.

There are some interesting comparisons to be made with the experience of the countries of Latin America in the 1930s. In comparable economic circumstances, many simply defaulted on international debt and devalued, options not open to the colonial territories of Southeast Asia. For a valuable collection of papers on the Latin American experience, see Latin America in the 1930s: The Role of the Periphery in World Crisis, edited by Rosemary Thorp (London: Macmillan, 1984).

© 2000 Institute of Southeast Asian Studies, Singapore

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INDONESIA: DEVELOPMENTS IN REAL INCOME 23

2 Surviving the Slump Developments in Real Income During the Depression of the 1930s in Indonesia, Particularly Java Peter Boomgaard

INTRODUCTION

In the second half of 1997 and the first half of 1998, Indonesia went through a particularly difficult period. During the summer and autumn of 1997 the country had been faced with widespread forest fires and harvest failures due to severe drought. While this was going on, the financial crisis in Thailand triggered off devaluations in the Philippines, Malaysia, and Indonesia in July 1997. Indonesia was hit again in January 1998, when the rupiah found itself in free fall, foreign capital-owners withdrew their portfolio investments, and real or imagined price rises led to rural and urban unrest. The Year of the Tiger was off to a very bad start. Whatever the ultimate outcome of these recent developments, already called the worst economic crisis in Indonesia since 1966, they do remind us of that other, much more (in)famous crisis, now almost seventy years ago. That in itself is good reason for a (re)study of the 1929 crisis and the depression of the 1930s. To my mind, it would be particularly promising to take a closer look at developments in the standard of living during those years, as this is still a topic of considerable controversy, or rather a topic on which people hold widely diverging opinions.

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24 PETER BOOMGAARD

This has been so since the late 1930s, when the first accounts of the depression in the Indies were written. On the one hand there are the ‘pessimists’, according to whom the depression was an appalling disaster for the Indonesian population. The economist G. Gonggrijp, writer of an economic history of Indonesia, is an early representative of this school. More recent adherents to the pessimist school are J. A. A. van Doorn, William O’Malley, and W. F. Wertheim. I am somewhat hesitant to class D. H. Burger with the pessimists, but he certainly does not belong to the optimist school. In the late 1950s, he wrote a social and economic history of Indonesia, that was not published until 1975. Another qualified pessimist was W. K. H. Feuilletau de Bruyn, a conservative member of the Volksraad (People’s Council, a representative body), who in the early 1940s wrote an account of the depression in the Indies.1 One of the first ‘optimists’ was the British colonial civil servant J. S. Furnivall, also the author of an economic history of Indonesia. This school does, of course, acknowledge the hardships suffered by Indonesians but stresses a number of positive developments that took place at that time, such as the emphasis on food production, the successful attempts at industrialization, and the growth of real per capita income. J. J. Polak, whose 1943 report on Indonesian national income was not published until 1979,2 is another early representative of this school. Partly based on his findings, later economic and social historians, such as Anne Booth, John Ingleson, and Jan van Laanen have also written more positive accounts.3 In this chapter, I take another look at the evidence — such as it is. I try to find out why these differences in opinion exist, and whether they can be reconciled. Figures are introduced that have not been used before, at least not for the depression ‘debate’. I argue that the pessimists overstate their case, partly because they have not attempted to separate the effects of the (international) depression from those of (local) harvest failures, and partly because government concern regarding the depression generated much knowledge of local conditions, which reflected structural flaws rather than cyclical problems. THE CRISIS AND ITS AFTERMATH

In Indonesia, 1929 was a year of widespread crop failures and forest fires caused by a drought (just as 1997!).4 The news of the Wall Street stock market crisis of 24 October was, therefore, not the first nasty surprise of that year. Nor was it the first indication that the international economy was facing serious problems. Throughout the world, prices had been falling

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INDONESIA: DEVELOPMENTS IN REAL INCOME 25

during the late 1920s, particularly those of primary producers, due to increased production and productivity not being met by a comparable increase in demand.5 Indonesia was not an exception in this respect. Here, falling prices made for declining export earnings after a 1925 peak, as is demonstrated in Table 2.1. The downward trend of exports continued in 1929, but the first extraordinary drop in export earnings occurred in 1930, the same year that witnessed the first decrease in imports. By then, the recession had really set in in Indonesia. But it could be argued that, as was the case worldwide, the 1929/30 crisis in Indonesia was little more than a fairly traditional slump until 1931, when the Bank of England went off gold. The bottom was reached in Indonesia in 1933, as regards the balance of trade, and from 1934 onwards the surplus of exports over imports, which had contracted almost continuously since 1925 (but had never become negative) widened again. Export earnings (in nominal terms) did not pick up until 1936. If we study export earnings in real terms (constant prices), correcting the figures in Table 2.1 with an index of export prices, the effects of the crisis were much less dramatic. The drop between the 1929 peak and the 1934 trough is only 20 per cent, as opposed to a 70 per cent drop in money terms. We can also see that 1930 was not a bad year at all, and that by 1937 exports were almost back to their 1929 level.6 The data are presented in Table 2.2. Therefore, apparently, the staggering drop in prices triggered off an equally astounding increase in export volumes, and only when tariff and non-tariff restrictions were imposed and prices dropped even further TABLE 2.1 Exports, Imports, and the Trade Balance, 1925-38 (in Netherlands Indies guilders millions, at current prices)

Exports Imports Balance

Exports Imports Balance

1925

1926

1927

1928

1929

1930

1931

1,795 841 954

1,622 895 727

1,647 903 744

1,590 1,005 585

1,440 1,110 330

1,170 888 282

753 593 160

1932

1933

1934

1935

1936

1937

1938

536 384 152

478 330 148

487 291 196

459 277 182

546 287 259

955 499 456

655 486 169

Source: W. L. Korthals Altes, Balance of Payments 1822-1939 [Changing Economy in Indonesia, 7] (Amsterdam: Royal Tropical Institute, 1987), Table 1.

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26 PETER BOOMGAARD

TABLE 2.2 Exports in Real Terms, 1925-38 (Using Laspeyres Export Volume Index)

Exports

Exports

1925

1926

1927

1928

1929

1930

1931

2,263

2,189

2,428

2,933

3,008

2,897

2,585

1932

1933

1934

1935

1936

1937

1938

2,664

2,501

2,399

2,439

2,537

2,898

2,674

Source: The index has been taken from B. van Ark, Indonesian Export Growth and Economic Development: 117 Years of Empirical Evidence, 1823 to 1940 (Groningen: University of Groningen, Faculty of Economics [Research memorandum 189], 1986), p. 46.

— no doubt owing to the depreciation of the dollar and of sterling when they went off gold — were exports seriously reduced (in terms of volume) in comparison to the last ‘normal’ year (1928). This means that in real terms, 1931 was Indonesia’s first depression year. Imports did not bottom out until 1935, in both nominal and real terms, probably partly because import prices declined neither as fast or as much as export prices. In the Netherlands, the gold standard was adhered to until the bitter end, and as the Netherlands Indies formed a monetary union with the mother country, the colony also stuck with the gold standard until 27 September 1936. By then, the Indonesian economy was recovering from the shocks it had received, and was still doing so when World War II broke out in Europe in 1939. The policy of the gave gulden (hard, that is non-devalued guilder) was a hotly debated, strongly political issue at the time, and economic historians are still discussing the pros and cons for the Dutch economy of the decision to stay on gold until 1936. Opinions were, and are, still divided over the effects of this policy on the Indonesian economy. Gonggrijp, a contemporary observer, was very much opposed to the adherence to the gold standard, arguing that it depressed the earnings of Western enterprise, although he had to admit that devaluation would not necessarily have boosted exports. E. P. Wellenstein, Director of Economic Affairs in the early 1930s, and chairman of the Kleine Welvaarts-Commissie (Little Prosperity Committee), emphasized that the hard guilder had caused prices of foodstuffs to drop even further, thereby preventing malnourishment of the poorest Indonesians. Among more recent scholars, O’Malley argued that what may have been unproblematic for a creditor nation such as Holland was a real burden for Indonesia, a debtor country; Van Laanen thought that the pro-cyclical policy of the hard guilder probably led to

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INDONESIA: DEVELOPMENTS IN REAL INCOME 27

unnecessary losses; whereas Korthals Altes argued that it did not make much difference either way.7 However, there is no doubt that Western enterprise in Indonesia was hit very hard by the crisis and the depression. It can be argued without much exaggeration, although it may sound a bit callous in view of the suffering of many poor Indonesians, that Dutch capital owners were among those who were hit hardest by the depression in Indonesia, in terms of proportion of income lost.8 Dividends and trade profits peaked — as did exports — in 1925, and then went downhill until 1932/33. Capital owners seem to have been losing confidence in the Indonesian economy from a rather early date, given the fact that share prices for Netherlands Indies stocks started to drop at the beginning of 1928 — while European and U.S. stocks were still climbing.9 Private capital imports, a measure of confidence among entrepreneurs, did not vanish immediately after the Wall Street Crash, but from 1931 to 1935 amounts were nil or negligible. A rather modest recovery of investment got underway from 1936, as is demonstrated in Table 2.3. Wage rates were also falling, although not as rapidly as profits. As there was a limit to cost-cutting in order to keep up with continuously dropping prices, many an enterprise went out of business (bankruptcies peaked in 1932) or had to reduce its scale of operations, so that many people were dismissed. In Europe and the United States, the drop in employment and the reduction of nominal wages for those who were still employed, set in motion a downward spiral of decreasing purchasing power and therefore further employment losses, making for a shrinking real income per capita. In the Netherlands, for example, national income per capita in real terms,

TABLE 2.3 Dividends and Trade Profits, and Private Capital Imports, 1925-38 (in Indies guilders millions, at current prices)

Profits Capital imports

Profits Capital imports

1925

1926

1927

1928

1929

1930

329 82

302 48

287 35

250 103

189 59

1932

1933

1934

1935

1936

1937

1938

21 0

20 2

28 2

49 0

89 12

167 25

125 12

64 69

1931 35 0

Source: W. L. Korthals Altes, Balance of Payments 1822-1939 [Changing Economy in Indonesia, 7] (Amsterdam: Royal Tropical Institute, 1987), Table 1.

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28 PETER BOOMGAARD

expressed as an index, dropped from 100 in 1927/29 to 83 in 1934. It remains to be seen whether this mechanism operated in the same way in a partly monetarized economy, in which wage labour played only a modest role. MACROECONOMIC DATA: THE CASE FOR THE OPTIMISTS

Let me start by presenting the data upon which some of the optimists base their case. As 1929 was itself a bad year — for reasons unrelated to the crisis — a better baseline for comparison would be the average index of 1927 to 1929, or 103.7 (see Table 2.4). This procedure yields negative, although far from disastrous, results for the depression years, as the average index value for the years from 1930 to 1939 was 101.0. Measured from the 1927-29 peak of 103.7 to the trough in 1934 of 96.0, the loss was 7.5 per cent, which compares most favourably with the 17 per cent loss in the Netherlands during the same period. Evidently, the situation for Indonesia as a whole was somewhat more bleak.10 This implies that the indigenous populations of the Outer Islands were hit harder by the depression than the people of Java. The drop in real income started earlier and the trough was deeper. In this chapter, the emphasis is on Java, as the more detailed data needed for further analysis are lacking for the Outer Islands. Just a few words on the difference in timing. As the depression was entirely export-led, it is important to look at differences in the composition of exports from Java and exports from the Outer Islands. The share of smallholder output in exports from Java was some 20 per cent around 1930, and some 55 per cent for the Outer Islands. As income from smallholder exports had started to drop in 1930, and that from Western enterprise not until 1931, it is clear why real income in the Outer Islands started to fall earlier than in Java. According to one estimate, the population of Java lost, on average, 1 guilder per capita in 1930 because of the drop in export earnings, while the people of the Outer Islands lost 5 guilders ‘per soul’.11 Although, therefore, according to these figures, the Javanese fared better during the depression than the people of the Outer Islands, it has to be borne in mind that at the start, the Outer Islanders had more to lose than the Javanese. Polak calculated that in 1930 the Javanese earned 55 guilders per capita, whereas the Indonesians from the Outer Islands had an average income of 66 guilders. According to another calculation, dealing with the same period, an adult Javanese male earned on average 160 guilders.12 The real income figures presented in Table 2.4 are the product

© 2000 Institute of Southeast Asian Studies, Singapore

107 98 95

1935

1934 103 96 93

104 106 105

102 105 104

1928

109 98 95

1936

100 100 100

1929

113 100 103

1937

103 102 98

1930

122 107 103

1938

104 101 96

1931

128 110 107

1939

103 99 95

1932

105 99 94

1933

Source: Based on P. Creutzberg, National Income [Changing Economy in Indonesia, 5] (The Hague: Nijhoff, 1979), p. 81. Data on the indigenous population of Java, used for the calculation of real income per capita, were extrapolated from the figure from the 1930 census, assuming an average annual growth rate of 1.5 per cent.

Real income Java Real income Java, per capita Real income Indonesia, per capita

Real income Java Real income Java, per capita Real income Indonesia, per capita

1927

TABLE 2.4 Indexes of Real Income of the Indigenous Population of Java, both Total and Per Capita and of Per Capita Real Income of Indonesia as a whole, 1927-39 (1929 = 100)

INDONESIA: DEVELOPMENTS IN REAL INCOME 29

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30 PETER BOOMGAARD

TABLE 2.5 Average Annual Per Capita Consumption of Calories (thousands) and Protein (kilograms) of the Principal Food Crops, Java, 1927-40

Calories Protein

Calories Protein

1927

1928

1929

1930

1931

1932

1933

682 14.4

603 13.5

565 12.8

625 14.2

610 13.5

615 13.4

622 13.8

1934

1935

1936

1937

1938

1939

1940

564 12.2

616 13.1

639 13.6

598 12.9

644 13.6

640 13.5

650 13.6

Source: Taken from Statistisch Jaaroverzicht van Nederlandsch-Indië (Batavia: Landsdrukkerij, relevant years). The crops are rice, maize, cassava, sweet potato, potato, peanuts, soy beans.

of various estimates made by J. J. Polak, and although Polak no doubt did a very good job, it would be reassuring if his figures could be corroborated by additional data. The series of data presented in Table 2.5 seem to fit the bill. Again we find that, on average, the years after 1929 are not worse than 1929 itself. On the contrary, in almost all the depression years average consumption of calories and protein was higher than in 1929, the only exception being 1934. We do not get a radically different perspective if we select another baseline — one that includes the two years prior to 1929. Average annual calorie consumption in 1927-29 was 617,000, while the mean for the period 1930-40 was 620,000. For protein, the figures are 13.57 and 13.40 respectively. In other words, these figures suggest that consumption of basic foodstuffs, in terms of calories and protein, stayed more or less the same. However, the figures also seem to imply a slight loss (of 1.2 per cent) in protein consumption, and an even smaller gain in calorie consumption (0.5 per cent). Although the margin of error of these estimates does not permit a firm conclusion, they seem to correspond to developments that can be deduced from other data — namely a shift in cropping, export, and consumption patterns in Java in the 1930s. Part of this is demonstrated in Table 2.6. Table 2.6 demonstrates that the amounts of rice and maize available for consumption per person had dropped, whereas per capita availability of cassava had increased considerably. In fact it had increased so much that in terms of quantity (calories/carbohydrates) the higher cassava production compensated for the lower rice and maize figures. However, the loss in protein caused by this shift from cereals to roots and

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INDONESIA: DEVELOPMENTS IN REAL INCOME 31

TABLE 2.6 Average Quantities Annually Available for Consumption Per Capita, Java, 1925-39 (in kilograms) Average 1925-28

Average 1936-39

88.0 45.0 137.0 27.0 2.7 4.4

82.0 41.0 151.0 27.0 2.4 5.4

Rice Maize Cassava Sweet potatoes Peanuts Soy beans

Source: “Voedselproblemen en overheidspolitiek op Java en Madoera”, Koloniaal Tijdschrift, 29 (1940): 661.

tubers was probably not entirely covered by an increased availability of protein-rich soybeans. The reduced availability of rice was not the result of falling production figures per capita, as witness Table 2.7. Table 2.7 demonstrates that, generally speaking, rice production kept up with population growth. The average production figure for 1927-29 was 88 kilograms, whereas it was 87 kilograms for the period 1930-40. Lower production figures, such as those for 1929, 1931, and 1934, were clearly related to long spells of very dry weather in those years. The drop in average quantities available for consumption was a result of the fact that Java, still a rice importer in the late 1920s and early 1930, had TABLE 2.7 Rice Production Per Capita, in Kilograms of Husked Rice, and Percentage of Rice Crop Lost Owing to Drought, Java, 1927-39 1927 1928 1929 1930 1931 1932 1933 Production per capita Percentage lost owing to drought

93 0.3

88 0.3

84 1.6

88 0.6

83 1.1

87 0.2

87 0.6

1934 1935 1936 1937 1938 1939 1940 Production per capita Percentage lost owing to drought

80 0.9

86 1.4

89 0.2

86 0.4

89 0.3

89 0.3

94

Source: Based on P. Boomgaard and J. L. van Zanden, Food Crops and Arable Lands: Java 1815-1942 [Changing Economy in Indonesia, 10] (Amsterdam: Royal Tropical Institute, 1990), Tables i and 12. Data on the indigenous population of Java, used for the calculation of rice production per capita, were extrapolated from the figure from the 1930 census, assuming an average annual growth rate of 1.5 per cent.

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32 PETER BOOMGAARD

turned net rice exporter on the eve of the Pacific War. This had been made possible by the fact that the sugar mills, increasingly unable to export the quantities of sugar they had traded before the depression, had vacated large quantities of good quality land. In fact, Java now exported so much rice that some authorities became alarmed, arguing that this was a sign of impoverishment, as rice growers were selling larger proportions of their harvest to the rice millers — because there were no longer sufficient alternatives for those in need of cash.13 During the same period Java had also become a net exporter instead of a net importer of soybeans: but in this case the per capita quantities that remained in Java had risen. If we compare the average calorie consumption from basic food crops in the 1920s with that of the years 1930-40, the available figures suggest a 3.5 per cent drop. Given the margin of error involved, such a drop is inconclusive — the more so as the figures exclude important items such as coconuts, fruits and vegetables, and fish. Around 1940, these foodstuffs represented slightly more than 10 per cent of average Javanese calorie consumption, and there are indications that their share in the diet had been increasing during the depression — thereby easily cancelling out a possible loss owing to a slightly reduced consumption of cereals. Minor cereals such as foxtail millet were also excluded from the figures: yet we know that its production increased considerably.14 If we calculate the average calorie consumption of basic foodstuffs in the 1930s, we arrive at around 1,700 calories per capita per day, which, according to the norm of the time (1,500) was more than sufficient. If it is accepted that on average, say, 5 per cent was excluded from the figures presented, we get a figure of almost 1,800 for the average daily calorie consumption of the Javanese in the 1930s, an amount much higher than the norm.15 The figures on food availability confirm the data on real income per capita in Java. As at low levels of income, expenditure on food is by far the largest expenditure item, usually representing more than half of all income,16 this confirmation is not entirely unexpected.17 Fortunately, we also have at our disposal an indicator of ‘well-being’ that is based on figures entirely unconnected with food availability data or real income statistics. This is the mortality figures, presented in Table 2.8. The average (registered) death rate in the years 1927-29 was 17.5, and for the period 1930-40 it was 17.8. This slightly higher figure may have been the result of improvements introduced in the system of registration of death. These improvements were not introduced in most residencies prior to 1936. The higher death rates of 1934 and 1935 are almost certainly real, reflecting anomalous weather conditions and harvest failures.18 If we

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INDONESIA: DEVELOPMENTS IN REAL INCOME 33

TABLE 2.8 Crude Death Rate (Deaths per Thousand People), Java, 1927-40

Death rate

Death rate

1927

1928

1929

1930

1931

1932

1933

17.0

17.7

17.9

17.8

17.1

16.8

16.2

1934

1935

1936

1937

1938

1939

1940

17.7

17.9

17.3

18.4

18.0

18.5

20.0

Source: Based on P. Boomgaard and A. J. Gooszen, Population Trends 1795-1942 [Changing Economy in Indonesia, 11] (Amsterdam: Royal Tropical Institute, 1991), Table 10b.

calculate the average mortality over the period 1930-36, we get a figure of 17.3, or slightly lower than that for 1927-29. These figures, therefore, suggest a death rate that was more or less stable — which is in keeping with the data on real income and food availability per capita. Taken together, the data do not suggest that the depression of the 1930s was a disastrous period for the indigenous population of Java. Some years were, admittedly, rather bad, such as 1929 and 1934. However, data on those years reflect old-fashioned crises de subsistance, not modern cyclical fluctuations. Nevertheless, we may assume that the pessimists had their reasons for coming to a different conclusion. In the following sections I evaluate their arguments. THE CASE FOR THE PESSIMISTS: WHAT TO DO WITH THE JOBLESS?

Reviewing the arguments of the pessimists, one is struck by the fact that they are seldom of a quantitative nature, which makes it difficult to evaluate the impact of the various factors they mention. But let us go ahead anyway. The factors most often mentioned are a loss of jobs by Indonesians working on plantations, a loss in income by those smallholders who produced predominantly for foreign markets, a loss in income even by those who did not produce for foreign markets, because their money income fell more than their expenditure, including tax. Indonesians, therefore, were spending more than they earned, such that they had to dip into their savings, and/or go into debt. Thus, the argument goes, Indonesians experienced widespread impoverishment, undernourishment, the threat of famine, and, occasionally, higher mortality. There is some truth in all these arguments, but there are often countervailing tendencies that are either

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34 PETER BOOMGAARD

underestimated or not acknowledged at all. I will demonstrate this by discussing a number of factors in more detail. One feature, mentioned by many writers, was the army of unemployed, either coolies returning from the Sumatran plantations or recent migrants from the big cities and plantations of Java, invading the Javanese countryside.19 In the first place the sources seem to underestimate the number of Javanese who stayed on in Sumatra. Thus we find it mentioned that the number of Javanese coolies working on the plantations of Sumatra’s East Coast dropped from 400,000 in 1929 to 175,000 in January 1933, implying that in three years 225,000 coolies had returned to Java. Checking this against the annually published statistics on Javanese coolies coming from and going to Sumatra, we find that only 95,000 coolies returned to Java during these years. It seems likely that the other 130,000 coolies established themselves somewhere in Sumatra, where land was not a scarce commodity.20 What is also overlooked is that the so-called transmigration from Java to Sumatra never stopped entirely, although it was little more than a trickle prior to 1935. However, during the next three years, 35,000 Javanese peasant colonists left their native soil for Sumatra, a figure that went up to 110,000 during the period 1938-40. An interesting question is whether or not the urban unemployed did pulang kampung (go back to the village). (During the present (1997/98) crisis, the authorities seem to be more concerned that villagers will descend in droves on the cities!) The few explicit statements on this topic I have seen suggest that many people were, indeed, returning to their villages, whereas circular migrants stopped coming. It seems safe to assume that the large majority of Javanese plantation coolies who returned from Sumatra went back to the villages from where they had come, whereas only a small minority tried their luck in Java’s cities.21 A factor that has been acknowledged by (almost?) all writers is that the production of foodcrops in Java increased considerably during the 1930s. This growth not only took care of a large number of the potentially unemployed: one might even argue that it would have been impossible without a flow of labour from other sectors — a point that has escaped the attention of most pessimists. All of a sudden, many landowners had very cheap landless labourers and sharecroppers at their disposal. The increase in foodcrop production had been stimulated greatly by the sugar restriction scheme (the Chadbourne plan) which had made considerable additional land available since 1932, and by government protectionist policies which, from 1933, kept out imports of cheap rice. In the meantime, land reclamation for dry-land agriculture (cassava, maize) continued, while the Irrigation

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INDONESIA: DEVELOPMENTS IN REAL INCOME 35

Service was instrumental in expanding the sawah area under technical irrigation, which made for larger rice crops. At the same time, the use of land was intensified (there was a more than 15 per cent increase in the cropping ratio between 1929 and 1940), and improved cultivation methods, introduced by the Agricultural Extension Service, resulted in (marginally) higher returns.22 Another factor, acknowledged by most but possibly underestimated in its impact on employment, was the high rate of growth of small- and largescale industry. The development of both was stimulated by the high prices for foreign imports, and by the very low wage level that obtained in Indonesia, particularly in Java, from the beginning of the depression. This was made possible by, and in turn stimulated, the growth in the number of (hydro-electric) power stations. Sitsen estimated that there were annually some 55,000 new entrants into large-scale (mechanized) industry during the second half of the 1930s, and it may be assumed that employment opportunities in small-scale industry, with lower wages, grew at an even higher rate.23 The spontaneous growth of the industrial sector was supported by government policies, such as protection for infant industries, particularly against Japanese imports. Japan had devalued the yen at an early stage, and was able to increase its share of industrial products in Indonesian markets considerably. Whereas its share of Indonesian imports was less than 10 per cent in 1928, it had shot up to 20 per cent in 1932, and reached 30 per cent in 1933, where it stayed during the following years. These cheap imports were a blessing for the Indonesian population, but they created problems for European trading firms and for European producers who exported to Indonesia. They also threatened some of Java’s fledgeling industries, such as the textile industry. It was, therefore, important for government to steer a middle course between the various interest groups when formulating its economic policies regarding Japan.24 It is a moot point whether the service sector grew as well. Gonggrijp stated that petty traders, for whom train, tram, and bus had become too expensive, could or would not revert to more primitive ways of transporting their goods. I fail to see why that should be the case, particularly given the fact that, for example in Surabaya, the number of taxis increased — with a consequent fall in rates. Other sources do, indeed, report an increase in hawking and street-selling. However, the number of retail shops and market stalls fluctuated, and many went out of business. In Yogyakarta the number of indigenous teachers in ‘wild’ schools increased during the 1930s.25

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36 PETER BOOMGAARD

INCOME, EXPENDITURE, AND SAVINGS

Although, therefore, the loss of jobs and income was compensated by the creation of other jobs, the availability of cheap food, and the substitution of cheap Japanese imports and local industrial products for expensive Western imports, it remains highly likely that a real loss of income and/or capital occurred. The factors most often mentioned in this respect are: the drop in income in terms of money was not matched by a comparable drop in expenditure; people had to spend most of their savings; and indebtedness and, finally, alienation of land increased. Generally speaking, during the early years of the depression, export prices fell more and faster than did import prices, and it stands to reason, so the argument goes, that on average those smallholders who produced for foreign markets experienced a loss in income. The same reasoning applies to cultivators who did not produce for foreign markets, as the prices of the products they sold in local markets fell more than the prices of the products they bought. Moreover, some items on the expenditure side did not drop at all, as was the case with the main tax on peasant cultivators, the Landrent, and with an important article of consumption, salt.26 This line of reasoning is largely based on the data presented in Table 2.9. The developments as such, represented by the figures in Table 2.9, are not disputed. But there is room for alternative interpretations. For example, if a smallholder producing for foreign markets stepped up his production, he might compensate for the lower prices per unit. Indeed this was what happened in many cases. One also expects a quick shift from export crops

TABLE 2.9 Indexes of Export, Rice, and Import Prices, and of Landrent (Java) Per Capita (in Real Terms), 1929-34 (1929 = 100)

Export prices Rice prices Import prices Landrent per capita

1929

1930

1931

1932

1933

1934

100 100 100 100

72 98 94 104

54 63 74 156

42 51 60 164

35 40 52 180

34 39 49 156

Source: Indexes of export and import prices were taken from Statistisch Jaaroverzicht, as were the data on Landrent. The rice price index, taken from P. Creutzberg, Rice Prices [Changing Economy in Indonesia, 4] (The Hague: Nijhoff, 1978), Table 1, was also used to ‘correct’ the nominal Landrent data.

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INDONESIA: DEVELOPMENTS IN REAL INCOME 37

to foodcrops, which would imply that the expected effects would be restricted to one harvest. Of course, the effects of price movements on those cultivators who operated largely outside the market would be slight. But then, few people had no dealings with the market at all, and it would be more interesting to discover the reactions of those who could not avoid markets entirely. We know that increasing numbers of villagers tried to avoid monetary transactions by reverting to barter, thus circumventing the payment of market dues and the profit margins of shopkeepers. In lieu of money wages for those who helped to prepare the land, Javanese landowners soon started to give payments in kind — or even just lodging, food, and a set of clothes. They also returned to mutual help (sambatan) where possible, and to the performance of village services, most of which had been paid off previously.27 Retrenchment was, of course, another reaction. People reverted to the use of cheaper products. This shows up in the import statistics as an increase in imports from Japan and British India (textile, crockery, glassware). It is also visible in the substitution of tin and zinc for copper and brass, and of all kinds of things that people could make, grow, or gather themselves for goods that had been bought, such as damar and kacang-oil instead of petroleum, and atap instead of roof tiles.28 They also cut back on expenditure for ceremonial meals (selametan, sedekah bumi) on which the Javanese set great store. The selametan, organized in order to commemorate religious, agricultural, and family festivities, was one of the few occasions on which the Javanese menu included some meat. As a source of animal protein, therefore, it should not be underestimated.29 In the early 1930s, many Javanese started to have fewer and more frugal selametan.30 Some European observers argued that the Javanese now had to stop consuming luxuries they should never have started buying in the first place. Although we find such opinions rather patronizing, I can think of one product for which we can probably all agree that this line of reasoning should apply — opium. Data on consumers and consumption of opium are given in Table 2.10. In 1928, the people of Java spent almost 20 million guilders on opium: by 1935 this had dropped to 3.5 million. The number of consumers dropped to less than one-third, and the amount consumed to one-sixth — implying that those who continued to use opium did so at a much reduced level. The proportion of Chinese among the consumers was much higher than their share in the general population warranted, but nevertheless most consumers were Javanese — on average 80 per cent of

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TABLE 2.10 Number of Consumers (in Thousands) of Opium, and Amounts Consumed (in Thousands of Thails), Java, 1928-40

Consumption Consumers

Consumption Consumers

1928

1929

1930

1931

1932

1933

1934

655 106

615 104

527 94

418 89

293 64

208 56

157 44

1935

1936

1937

1938

1939

1940

117 35

147 35

196 38

238 40

241 41

238 41

Source: Taken from Statistisch Jaaroverzicht. 1 Thail = 38.6 grams.

the total. At the end of the 1930s consumption picked up a bit, partly because prices per unit had been lowered in 1936. However, neither consumption nor the number of users returned to former levels, although many indicators suggest that real income was back to normal. One assumes that those who had kicked the habit — some 65,000 people — were not anxious to repeat the ‘cold turkey’ experience. Opium was one of the products that had to be imported (in its raw state), and it is imports that most pessimists hold responsible for the failure — at least in their view — of expenditure to drop as much as income. One would, therefore, like to know the share of imports in the budget of the average Javanese. The pessimists produce long lists of prices of imports that dropped less rapidly than export prices: but they do not give an impression of the importance of imports in the total outlay of the Javanese. Based on calculations by Van Laanen, it can be said that they constituted 14 per cent of all expenditure (cash and non-cash) of the Javanese in 1929, but about 7 per cent in 1935. The influence of import prices was, therefore, not all that important. Landrent, calculated as a percentage of all expenditure by the Javanese, was even less important, fluctuating between 1.5 per cent in 1929 and 2.5 per cent in 1933.31 Another point often made is that people had to dip into their savings. Although the Javanese made use of savings banks, on which more presently, it was not the most popular method of saving. Generally speaking, Javanese invested their savings in gold and silver (both coins and jewelry) and in livestock. Starting with the latter, we do, indeed, observe falling numbers of livestock in the villages (goat, buffalo, cattle). Particularly cattle and buffaloes, apart from their importance as beasts of burden and as draught animals, were money on the hoof. The animals incorporated the labour

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INDONESIA: DEVELOPMENTS IN REAL INCOME 39

input of young boys, which thus could be accumulated, and were sold either on festive occasions (selametan!) or in dire circumstances. This was related to another phenomenon I have just mentioned, namely the drop in quantity and quality of selametan. Part of the slaughter of cattle and buffaloes, however, was a perfectly healthy adaptation to the diminishing requirements of the sugar industry for plough animals.32 As another piece of evidence that the Javanese were spending their savings, it is almost invariably mentioned that large amounts of gold left Indonesia from 1931 onwards. Normally, the country was a net importer of ‘treasure’, which was hoarded in the form of coins or ornaments. However, from 1930 people started to bring their gold coins and jewelry in increasing quantities to the government pawnshops. As they were often unable to redeem these items, the latter were then auctioned off to — predominantly — Chinese and Arab traders, who also went to the villages in order to buy such items directly from the peasants or to buy their pawnshop slips for a pittance. Gold coins and ornaments that had not been bought up by traders were sent to Batavia to be melted down and sold. Between 1931 and 1935, 144 million Netherlands Indies guilders in gold were exported.33 Finally the Post Office savings bank should be mentioned, if only because it shows a trend that is quite different from what might have been expected from the data on livestock and gold. The amounts deposited each year in Java increased continuously between 1928 and 1939, with the exception of very slight dips in 1933 and 1936. I could not find a breakdown by ethnic group for Java: but if we assume that the breakdown for the Indies as a whole can be applied to Java, there was an increase in savings and depositors across the board (Indonesians, Europeans, and ‘Foreign Orientals’, that is Chinese and Arabs). I assume that these almost anticyclical data represent the savings of those who had been able to retain their jobs, and whose real income, by virtue of the greater fall in prices than in wages, had actually increased. This applies to the Indonesians and the Europeans, many of whom were employed by the government. It may have applied much less to the Foreign Orientals, whose increased savings probably represent successful business ventures. To give the reader an idea of the number of people and the amounts of money involved, I present the following figures. On average, in 1928 Indonesians had 60 guilders in their savings account at the end of the year: at the end of 1939, they had almost 65 guilders. For Foreign Orientals, the amounts were 105 guilders and 140 guilders respectively. In 1928, 115,539 Indonesians had a savings account, of whom probably three-quarters were Javanese. This number

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40 PETER BOOMGAARD

had risen to 191,244 in 1939.34 Although the number of people is not impressive (Java’s indigenous population in 1930 was almost 41 million), the total amount saved each year was not negligible, climbing from 5 million to 9 million guilders between 1928 and 1939. However, compared to the amount of gold exported during the first half of the depression, it was rather small fry. DEBTS AND SOCIAL STRATIFICATION

If the number of people with savings worth mentioning dropped during the depression, the number of those with debts may have been rising. I will deal briefly with the topic of indebtedness, a strong point in favour of the pessimists. After 1929, the number of loans given by the government pawnshops, the village banks, and the divisional (Afdeelings) banks fell considerably, as did the average amount lent.35 This was not a sign that Java’s population no longer needed as much credit as previously. On the contrary, many people needed more credit than before, but as arrears were now accumulating, the banks became more and more hesitant to part with their money. In many cases, arrears were the result of falling rice prices, as people were suddenly confronted with debts, much higher in real terms than when they had been contracted. During the earliest years of the depression this was often combined with Landrent assessments that were at least as high as previously. It seems likely that under these circumstances, marginal peasants would run the highest risk. From 1934, the government-sponsored General Public Credit Bank (Algemeene Volkscrediet Bank, or AVB), now supervising both the village and the division banks, started a programme of debt reductions. However, many people had debts to private persons, inside or outside the village, where much higher interest rates obtained. Professional Arab and Chinese moneylenders, for large and small sums respectively, and Indonesian hajis (see below), well-to-do landowners, and traders, advanced money to those who could put up collateral, often land and perennial crops (tree-crops). Depending on the specific conditions, the owner lost (part of) the income from these assets for as long as the loan was not repaid. If repayment was impossible, the lands and crops would ultimately be alienated, and often transferred into the hands of non-cultivators living in the cities. In these cases, the Government Credit Service attempted to do what the AVB had done with bank debts.36 It seems, however, that such rescue operations were often too late, and that they did not cover those who were indebted the most.

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INDONESIA: DEVELOPMENTS IN REAL INCOME 41

All this is no doubt true, and the data do reflect a peasantry in trouble. Nevertheless one wonders whether the case for increasing indebtedness in the 1930s has not been overstated. Soenario, for example, in an otherwise interesting article in 1939 about the scale of indebtedness in a number of areas, argues that up to the beginning of 1935, on the eve of the AVB-led investigations of this topic, even the experts assumed that the burden of debt among the indigenous peasantry would be relatively minor. I think he exaggerated. As can be seen in the investigations by the Commission for the Fight against Usury, established in 1929, and in the investigation into the functioning of pawnshops, which got under way in 1928, government was already concerned about indigenous indebtedness prior to the depression. Other investigations had revealed that in the 1920s, on average, Javanese families obtained between fifteen and twenty per cent of their income from loans of one kind or another. The Kutowinangun investigation, carried out in the deep recession years of 1933 and 1934, showed a drop in the income of the families that had been studied, and an increase in the proportion of that income that was obtained from loans — but only from 14.7 per cent in 1933 to 16.5 per cent in 1934. Soenario does present a number of alarming figures: but they are based on a mere handful of case studies.37 We have other, more representative data, which reflect a remarkably resilient peasantry: Table 2.11 shows that the number of people who were still being given loans — who, therefore, were regarded as solvent — was much larger than the number who could no longer be helped. Table 2.11 suggests a difference between the divisional and the village banks. A more detailed study reveals that the borrowers who disappeared from the clientele of the divisional banks were the slightly above-average villagers with a family holding (let us say a one-buffalo farm) who were in need of larger TABLE 2.11 Number of Loans or Debtors at Various Categories of Bank, Java, 1929-37 (in thousands)

Loans by divisional banks Debtors to paddy banks Debtors to village banks

1929

1935

1937

856 1,081 1,087

473 1,196 851

414 1,115 942

Source: Soemitro Djojohadikoesoemo, Het Volkscredietwezen in de Depressie (Haarlem: Bohn, 1943), pp. 32, 123, 136.

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42 PETER BOOMGAARD

amounts than the village banks were prepared to give them. In 1934, loans from the latter banks were 6 guilders on average, whereas the mean village loan taken out at a divisional bank was 23 guilders. Such a sum could increasingly be borrowed only by the better-off (two-buffalo) cultivators. The category that did much better as borrowers from the divisional banks were the (largely urban?) civil servants, wage-earners, and pensioners. The sums they borrowed, on average, were even increasing during the 1930s. These remarks bring us to the question of whether the depression hit all social strata with equal severity, suggesting that it did not. This is a badly researched topic, and there is a deplorable lack of firm data, with some conflicting evidence. What follows is largely speculative. In the first place, the above evidence (on savings banks and divisional banks) strongly suggests that wage earners, including civil servants, were well off. They had to face cutbacks, but prices dropped more than their income. Second, we may assume that the ‘drain’ of gold represents a levelling effect, as it is hardly to be expected that the poorest of the poor had much in the way of gold coins and ornaments. However, we do not know whether the slightly above-average peasant cultivator — with a (one-buffalo) holding just large enough to support a family, and who after a few good seasons had been able to put aside a few gold coins — was hit proportionally harder than the more well-to-do villager with income and landholding in the highest quartile. Common sense suggests that those with marginal savings were more at risk than the richer guys. However, an indication that some of the really better-off were hit hard by the crisis and the depression is to be found in Table 2.12. This shows the number of Indonesians who undertook the pilgrimage to Mecca, no doubt the more well-to-do segment of the population. Clearly, the first setbacks

TABLE 2.12 Number of Javanese Pilgrims (Haji) to Mecca, 1926/27–1938/39 (in thousands) 1926/27 1927/28 1928/29 1929/30 1930/31 1931/32 1932/33 No. of pilgrims

15.5

16.9

16.5

18.1

12.0

3.0

1933/34 1934/35 1935/36 1936/37 1937/38 1938/39 No. of pilgrims

1.4

2.0

2.2

2.7

3.8

5.5

Source: Statistisch Jaaroverzicht.

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1.3

INDONESIA: DEVELOPMENTS IN REAL INCOME 43

related to the crisis were already felt during the Muslim year 1930/31, but the real onslaught came in 1931/32, and recovery was rather slow and by no means complete. Many of these hajis will have been traders, and it stands to reason that indigenous merchants, who were the link between the world market and the Javanese, fared badly when this connection more or less collapsed. There is, indeed, evidence that Javanese traders from the towns of Kudus, Pekalongan, and Tegal, were already in trouble immediately after the crisis of 1929. We also know that market shops and stalls went broke when villagers reverted as much as possible to barter, and credit became more expensive and much harder to get. There are also indications that during the earlier years of the depression, owners of more or less large tracts of arable land were encountering increasing difficulties in hiring out land they could not work themselves. These surplus holdings had to be sold or given to share-croppers at unusually low rates.38 On the other hand, some traders and landowners were evidently doing well for themselves. I mentioned the Arab and Chinese moneylenders and buyers of ‘treasure’, and the Indonesian hajis, well-to-do landowners, and traders, who advanced money as a sideline, and who became the owners or quasi-owners of land and perennial crops when the original owners defaulted on their debt. Here we seem to witness accumulation of property among those who were already well-to-do. Apparently this was not a monolithic group, and some sub-groups were doing well whereas others were not. There is not much doubt that two other groups were doing poorly — those who were clinging to their minute landholdings, and the unskilled urban coolies. The owners of ‘dwarf’ holdings were particularly vulnerable to usury, as they had no reserves to speak of and were not eligible for credit from the government-sponsored banks. Many of them must have lost their property, joining the ranks of the landless. They were not necessarily facing starvation, as they were still ‘embedded’ in the village sphere, but they had certainly lost their status. Those who probably did face starvation from time to time were the coolies, concentrated in and around the cities. They were unskilled labourers, the so-called kuli rupa rupa, who depended on casual labour and who had lost all contact with ‘the village’. The drop in the consumption of opium was no doubt partly their doing. During really bad patches, when no commercial work was available at all, the government organized relief works, such as those around Batavia in 1930 and 1931.39 My impression is that the landless labourers in the villages were not doing so badly, particularly in those areas where the contraction of the

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44 PETER BOOMGAARD

sugar industry had made considerable land available for peasant agriculture.40 At least, this seems to have been the case in most areas in most years. That there were exceptions, and that the threat of starvation was also occasionally felt in the countryside will be shown in the next section.

THE SPECTRE OF HUNGER

The strongest point of the pessimists seems to be that on various occasions and in different regions, people ran out of rice and other foodstuffs, and were feeding themselves on things they would usually spurn — such as tubers of banana trees and sawah-snails. In one area, higher mortality, particularly among the elderly, was observed, in many cases preceded by the tell-tale symptoms of hunger oedema. In various situations, government had to intervene with relief works and/or the free distribution of food.41 Here we seem to be confronted with straightforward evidence that the depression took a number of people to the brink of starvation and even pushed some over the edge. However it is highly questionable whether these problems can be attributed to the depression. I see two factors, not related to the depression, that locally gave rise to crisis situations — harvest failures, and structural problems that pre-dated the 1929 crisis. The first factor, harvest failure, is of course an age-old phenomenon. The Wall Street crisis of 1929 coincided, as we have seen, with a drought year. Those peasants who had run up arrears with the bank or the pawnshop often did so after a harvest failure, more often than not the result of very dry or very wet weather. Even the paddy banks had considerable arrears in 1934 and 1935, largely because of harvest failures. In fact, when it dawned upon the government’s officials that they were not dealing with an ordinary slump, and that the population was in for a rough time, they started to investigate the possibilities of local food shortages, and were amazed to discover that even in a rather bad harvest year, as 1931, local shortages were very rare. It is largely during the ‘anomalous’ years — 1934 and 1935 — that we find information on harvest failures, food shortages, and hunger.42 These problems, therefore, were caused by (cyclical) weather anomalies, not by the business cycle. As regards the second point — the structural factors — even a simple listing of the problem areas shows that we are dealing with basically four regions:

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INDONESIA: DEVELOPMENTS IN REAL INCOME 45

1. 2. 3. 4.

Krawang-Indramayu-Cirebon (north coast West Java) West Banyumas (south coast West-Central Java) Bojonegoro-North Madiun-Nganjuk-Jombang (north-western East Java) Blitar-Tulungagung (south-west coast East Java).

In these regions, the problems were of a structural nature, and flared up periodically. Basically we are dealing with two problem-complexes — areas where either the soil and/or the climate were unfavourable, or where monocropping of rice rendered the area more vulnerable to bad weather (or, of course, both). Regions 3 and 4 are typical of areas with less desirable soils, namely marl and limestone hills respectively. Lack of rain (and irrigation) also played a role in the limestone region, and it was also the main problem in region 1. Owing to this lack of moisture, the latter region produced only one rice harvest and not much else. Region 2 had two rice harvests, but no other food crops. In fact, regions 1 and 2 were rice-surplus areas, so at first sight it might seem rather amazing that they were traditional food shortage regions. However, as I pointed out earlier, in some regions the cultivators had to sell more rice than they really could afford in order to earn cash, and they were then left with not much else in the rice monocrop areas.43 That these problems generally speaking pre-dated the depression is illustrated by the fact that they were noted as problem-areas prior to the crisis. A. M. P. A. Scheltema, who in 1929 published an analysis of the areas of Java that contributed most to the stream of contract-coolies for Sumatra, identified our regions 2, 3, and 4 as important sources of migrants. In a number of the sub-regions he listed (Jombang, Nganjuk, Tulungagung) he found population densities much higher than the Java mean. M. B. Smits, who published a textbook, also on the eve of the crisis, mentioned the unfavourable natural circumstances of a number of areas, among them our regions 1 and 3. It is possible that in some areas, the structural problems became worse during the depression, namely where erosion was a serious threat, as it was in parts of our areas 2 and 4.44 Finally, I should add that the depression, of course, aggravated the conditions described here. There had always been good and bad areas in economic terms: but as circular migration was seriously curtailed by the depression, the differences were more emphasized after 1929. CONCLUDING REMARKS

Evidently, the crisis of 1929 and the depression of the 1930s created big problems for many Indonesians. As we have seen, the problems started

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before 1929, with the terms of trade going against the colony after 1925. In many respects, the first two years of what is usually called the Great Depression, 1929 and 1930, had roughly the same effect on Indonesia as any other severe weather anomaly, such as that of 1925/26. In 1931 — and one is tempted to see a connection with sterling’s break with gold — it became clear that this was more than an ordinary slump. Most indicators continued to drop in 1932 and 1933, until the bottom was reached in 1934. The first signs of recovery were visible in 1935 but, as the tables presented here show, some variables did not recover until 1936 or even 1937. In a number of important cases, pre-crisis levels were recovered between 1935 and 1938. I concur with the views of the then Director of Economic Affairs and later Lieutenant-Governor-General, H. J. van Mook, writing in 1939 — that the years 1933 to 1935 were the worst as far as Java was concerned.45 During those years, bad weather conditions — causing harvest failures in many areas — hit Java at the very moment that the depression was about to bottom out. However, these factors did not hit everyone equally hard. Those Javanese who were employed by the government or by Western enterprise, and who kept their jobs, were actually doing better in terms of real income. This was also true for some of the better-off Javanese landholders, merchants, and village officials, and for Chinese and Arab moneylenders and gold-dealers. However, given the export of gold and the drop in the number of pilgrims, it is clear that some of the richer Javanese had to use their savings and curb their expenditure. Many owners of ‘dwarf’ holdings were more at risk than the average smallholder: but in all probability, it was the kuli rupa rupa who faced the gravest difficulties during the early years of the depression. On balance, it is clear that many people faced hardship during these years. But it seems an exaggeration to regard the depression as a period of great suffering for the Indonesian, particularly Javanese, population. In so far as suffering did occur, as certainly was the case locally, the depression was often not the cause of the problem, although probably an exacerbating factor. Why, then, did the pessimistic view have so many adherents? I see two factors that have contributed to this state of affairs. In the first place, few pessimists have tried to separate the effects of the (international) depression from the effects of (local) harvest failures, particularly in regions that were traditional trouble spots. In the second place, as government was concerned about the possible effects of the crisis and the depression, they ordered a large number of investigations into the condition of the Javanese population.

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INDONESIA: DEVELOPMENTS IN REAL INCOME 47

Consequently, scholars in the later 1930s knew much more about Javanese village life than ever before, some of it quite shocking. However these facts were only partly related to the depression. If comparable investigations had been carried out on this scale in the 1910s or the 1920s, the results would have been very similar. Notes 1.

W. K. H. Feuilletau de Bruyn, Tien moeilijke jaren voor landbouw en industrie in Nederlands-Indië 1930-1940 (Deventer: Van Hoeve, 1942), p. 26; G. Gonggrijp, Schets ener economische geschiedenis van Nederlands-Indië (Haarlem: Bohn, 1949, third edition), pp. 215-17; D. H. Burger, Sociologisch-Economische geschiedenis van Indonesia (Amsterdam: Koninklijk Instituut voor de Tropen, 1975), volume 2, pp. 45, 71; W. J. O’Malley, “Indonesia in the Great Depression: A Study of East Sumatra and Jogjakarta in the 1930’s”. Ph.D. dissertation, Cornell University, 1977, pp. 79-83, 100-01 (note 66); [the tone in W. J. O’Malley, “The Bengkalis Hunger Riots of 1935”, in Between People and Statistics: Essays on Modern Indonesian History, edited by F. van Anrooij et al. (The Hague: Nijhoff, 1979), p. 236, seems somewhat lighter]; W. F. Wertheim, Indonesië: van vorstenrijk tot neo-kolonie (Meppel/ Amsterdam: Boom, 1978), pp. 81-82; J. A. A. van Doorn, De laatste eeuw van Indië: Ontwikkeling en ondergang van een koloniaal project (Amsterdam: Bert Bakker, 1994), pp. 231-34.

2.

Published in P. Creutzberg, National Income [Changing Economy in Indonesia, 5] (The Hague: Nijhoff, 1979), pp. 25-101.

3.

J. S. Furnivall, Netherlands India: a Study of Plural Economy (Cambridge: Cambridge University Press, 1944), pp. 444-45; J. T. M. van Laanen, The World Depression (1929-1935) and the Indigenous Economy in Netherlands India ([Townsville]: James Cook University of North Queensland, Centre for Southeast Asian Studies, 1982); J. T. M. van Laanen, “Per Capita Income Growth in Indonesia, 1850-1940”, in Economic Growth in Indonesia 1820-1940, edited by A. Maddison and G. Prince (Dordrecht/Providence: Foris, 1989), p. 56; J. Ingleson, “Urban Java during the Depression”, Journal of Southeast Asian Studies 19, no. 2 (1988); A. Booth, “Living Standards and the Distribution of Income in Colonial Indonesia: a Review of the Evidence”, Journal of Southeast Asian Studies 19, no. 2 (1988): 327-32; A. Booth, “Exports and Growth in the Colonial Economy”, in A. Maddison and G. Prince, op. cit., pp. 71-72.

4.

E. P. Wellenstein, Nederlandsch-Indië in de wereldcrisis (’s-Gravenhage: Nijhoff, 1931), pp. 27, 83; J. R. Lette, Onderzoek naar de werking van het pandcrediet onder de inlandsche bevolking ([Batavia]: Directie van Financiën, 1933/34), volume 1, pp. 7, 19; Soemitro Djojohadikoesoemo, Het Volkscredietwezen in de Depressie (Haarlem: Bohn, 1943), p. 33; Furnivall, op. cit., p. 429; P. Boomgaard and J. L. van Zanden, Food Crops and Arable Lands, Java 1815-1942 [Changing Economy in Indonesia, 10] (Amsterdam: Royal Tropical Institute, 1990), p. 47; P. Boomgaard, Forests and Forestry 1823-1941 [Changing Economy in Indonesia, 16] (Amsterdam: Royal Tropical Institute, 1996), pp. 160-61.

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48 PETER BOOMGAARD 5.

Feuilletau de Bryun, op. cit., p. 55; Gonggrijp, op. cit., p. 212; W. A. Lewis, Economic Survey 1919-1939 (London: Allen & Unwin, 1970 [first published 1949]), p. 45; C.P. Kindleberger, The World in Depression 1929-1939 (Berkeley: University of California Press, 1973), pp. 83-107.

6.

However, correcting nominal figures with a price index is a tricky business. If one uses the Divisia index, in 1937 exports had already surpassed those of 1929: B. van Ark, Indonesian Export Growth and Economic Development: 117 Years of Empirical Evidence, 1823 to 1940 (Groningen: University of Groningen, Faculty of Economics [Research memorandum 189], 1986), p. 46.

7.

Jaarverslag van den voorzitter van de Kleine Welvaarts-Commissie over 1931 (Batavia: Kolff, 1932), p. 29; Gonggrijp, op. cit., pp. 215-16; O’Malley, op. cit., pp. 71-72; J. T. M. van Laanen, The World Depression (1929-1935) and the Indigenous Economy in Netherlands India, p. 2; W. L. Korthals Altes, “De depreciatie van de Nederlandsch-Indische gulden in 1936”; in Between People and Statistics: Essays on Modern Indonesian History, edited by F. van Anrooij et al. (The Hague: Nijhoff, 1979).

8.

According to one estimate, dated 1932, Dutch investors in Indonesia had lost over 5 billion guilders by the end of 1931. This was said to be one-third of all taxable property in the Netherlands at the time: Jaarverslag 1931, p. 37.

9.

E. P. Wellenstein, Nederlandsch-Indië in de wereldcrisis, p. 56.

10.

But still not as bleak as in the Netherlands: the drop from 1927-29 to the trough in 1934 is 10 per cent, as opposed to 17 per cent for Holland.

11.

P. Bakker, Eenige beschouwingen over het geldverkeer in de inheemsche samenleving van Nederlandsch-Indië (Groningen/Batavia: Wolters, 1936), p. 104; W. K. H. Feuilletau de Bruyn, Tien moeilijke jaren voor landbouw en industrie in NederlandsIndië 1930-1940, p. 21; J. T. M. van Laanen, The World Depression (1929-1935) and the Indigenous Economy in Netherlands India, p. 2.

12.

M. B. Smits, Over den landbouw in Nederlandsch-Indië (Groningen: Wolters, 1929), p. 198; P. Creutzberg, National Income [Changing Economy in Indonesia, 5] (The Hague: Nijhoff, 1979), p. 77. If we accept that a nuclear family had on average five members, family income according to this source would have been 275 guilders in 1930. If we subtract the 160 guilders brought in by the male head of the family, the wife and children would earn another 115 guilders, which is quite plausible.

13.

“Voedselproblemen en overheidspolitiek op Java en Madoera”, Koloniaal Tijdschrift, 29 (1940): 643, 658-61, 677, 681-83; P. Creutzberg, Het ekonomisch beleid in Nederlandsch-Indië: Tweede stuk (Groningen: Tjeenk Willink, 1974), pp. 473-85, 496-546; J. T. M. van Laanen, The World Depression (1929-1935) and the Indigenous Economy in Netherlands India, p. 4.

14.

E. P. Wellenstein, Nederlandsch-Indië in de wereldcrisis, p. 76; W. K. H. Feuilletau de Bruyn, Tien moeilijke jaren voor landbouw en industrie in Nederlands-Indië 1930-1940, pp. 30-32; Creutzberg, op. cit., pp. 753-54; P. Boomgaard and J. L. van Zanden, Food Crops and Arable Lands: Java 1815-1942 [Changing Economy in Indonesia, 10] (Amsterdam: Royal Tropical Institute, 1990), p. 51.

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INDONESIA: DEVELOPMENTS IN REAL INCOME 49 15.

Sagalaherang-Rapport. Onderzoek naar de voeding en voedingstoestand der bevolking te Sagalaherang (Regentschap Krawang) in 1937-1939. Batavia: Instituut voor Volksvoeding [Mededeeling 1], 1940, p. 32. There were various methods for the conversion of crop data into calorie consumption figures, but the differences between them are rather small and the trends are the same: C. van de Koppel, “Eenige statistische gegevens”, in De landbouw in den Indischen archipel, deel I, edited by C. J. J. van Hall and C. van de Koppel (’s-Gravenhage: Van Hoeve, 1946), p. 369. For the various budget (and calorie consumption) investigations, see L. H. Huizenga, “Het koeliebudgetonderzoek op Java in 1930-40” (Ph.D. dissertation, Wageningen, 1958).

16.

According to a table produced by J. T. M. van Laanen, “Het bestedingspakket van de ‘inheemse’ bevolking op Java (1921-1939)”, in Between People and Statistics: Essays on Modern Indonesian History, edited by F. van Anrooij et al. (The Hague: Nijhoff, 1979), p. 144, around 55 per cent of all indigenous income in Java was spent on food.

17.

It is also not entirely unexpected because Polak too used the data upon which the food availability figures are based.

18.

See P. Creutzberg, Het ekonomisch beleid in Nederlandsch-Indië: Tweede stuk, p. 766; P. Boomgaard and A. J. Gooszen, Population Trends 1795-1942 [Changing Economy in Indonesia, 11] (Amsterdam: Royal Tropical Institute, 1991), pp. 30-32, 176. I am talking here about the registered death rate: the real death rate was almost certainly higher but that is beside the point in this context.

19.

A. Neytzell de Wilde and J. Th. Moll, The Netherlands Indies during the Depression (Amsterdam: Meulenhoff, 1936), p. 13; J. S. Furnivall, Netherlands India, p. 444; Creutzberg, op. cit., pp. 776-79; J. T. M. van Laanen, The World Depression (19291935) and the Indigenous Economy in Netherlands India, p. 6; J. A. A. van Doorn, De laatste eeuw van Indië: Ontwikkeling en ondergang van een koloniaal project, pp. 235-37.

20.

O’Malley’s ‘some thousands of coolies’ (“Indonesia in the Great Depression”, p. 134) is therefore somewhat of an understatement.

21.

Jaarverslag 1931, p. 130; W. K. H. Feuilletau de Bruyn, Tien moeilijke jaren voor landbouw en industrie in Nederlands-Indië 1930-1940, p. 7; J. Ingleson, “Urban Java during the Depression”, pp. 300-01.

22.

J. R. Lette, Onderzoek naar de werking van het pandcrediet onder de inlandsche bevolking, volume 1, p. 63; Neytzell and Moll, op. cit., pp. 14-18; G. J. Schimmel, “De rijstpolitiek in de jaren 1933 tot 1937”, Landbouw: landbouwkundig tijdschrift voor Nederlandsch-Indië, 13, 7, 8 (1937), pp. 156-72; E. de Vries, “Maatregelen op het gebied van voedingsgewassen en voedseldistributie”, Landbouw: landbouwkundig tijdschrift voor Nederlandsch-Indië, 13, 7, 8 (1937), pp. 173-201; “Voedselproblemen en overheidspolitiek op Java en Madoera”, Koloniaal Tijdschrift 29 (1940): 661-70; Creutzberg, op. cit., pp. 171-546; D. H. Burger, Sociologisch-Economische geschiedenis van Indonesia, volume 2, pp. 131-32; P. Boomgaard, “Treacherous Cane: the Java Sugar Industry between 1914 and 1940”, in The World Sugar Economy in War and Depression, 1914-1940, edited by B. Albert and A. Graves (London:

© 2000 Institute of Southeast Asian Studies, Singapore

50 PETER BOOMGAARD Routledge, 1988), pp. 157-69; P. Boomgaard and J. L. van Zanden, Food Crops and Arable Lands: Java 1815-1942 [Changing Economy in Indonesia, 10] (Amsterdam: Royal Tropical Institute, 1990). 23.

Neytzell and Moll, op. cit., pp. 83-87; P. H. W. Sitsen, Industrial Development of the Netherlands Indies. [Bulletins of the Netherlands and Netherlands Indies Council of the Institute of Pacific Relations, 2], 1942; Furnivall, op. cit., pp. 429, 434-35, 43940; H. J. van Oorschot, De ontwikkeling van de nijverheid in Indonesië (’s-Gravenhage: Van Hoeve, 1956); Suhadi Mangkusuwondo, “Industrialization Efforts in Indonesia”, Ph.D. dissertation, University of California at Berkeley, 1967; Creutzberg, op. cit., p. 458; Burger, op. cit., volume 2, pp. 120-22; W. A. I. M. Segers, Manufacturing Industry 1870-1942 [Changing Economy in Indonesia, 8] (Amsterdam: Royal Tropical Institute, 1987); B. White, “Economic Diversification and Agrarian Change in Rural Java, 1900-1990”, in In the Shadow of Agriculture. Non-farm Activities in the Javanese Economy, Past and Present, edited by P. Alexander, P. Boomgaard, and B. White (Amsterdam: Royal Tropical Institute, 1991), pp. 50-56.

24.

Jaarverslag 1931, p. 54; Lette, op. cit., volume 2, p. 136; Neytzell and Moll, op. cit., pp. 53-54; Feuilletau de Bruyn, op. cit., p. 20; Furnivall, op. cit., p. 429; G. Gonggrijp, Schets ener economische geschiedenis van Nederlands-Indië, p. 228; Saroso Wirodihardjo, De contingenteeringspolitiek en hare invloed op de Indonesische bevolking (Djakarta: Indira, 1951); W. J. O’Malley, “Indonesia in the Great Depression”, p. 82; J. T. M. van Laanen, The World Depression (1929-1935) and the Indigenous Economy in Netherlands India, p. 9.

25.

Gonggrijp, op. cit., p. 228; W. J. O’Malley, “Indonesia in the Great Depression”, p. 193; J. T. M. van Laanen, The World Depression (1929-1935) and the Indigenous Economy in Netherlands India, p. 10; J. Ingleson, “Urban Java during the Depression”, p. 296.

26.

Feuilletau de Bruyn, op. cit., pp. 18-26; Soemitro Djojohadikoesoemo, Het Volkscredietwezen in de Depressie, pp. 21-23; Gonggrijp, op. cit., pp. 17-18. However, it is often overlooked that crisis reductions in Landrent payments were granted from 1932 onwards, constituting, in the first year, one-sixth of the preliminary assessment.

27.

Lette, op. cit., volume 1, pp. 23, 63-66, 78; P. Bakker, Eenige beschouwingen over het geldverkeer in de inheemsche samenleving van Nederlandsch-Indië (Groningen/ Batavia: Wolters, 1936), pp. 117-22; Neytzell and Moll, op. cit., pp. 20-21; G. H. van der Kolff, The Historical Development of the Labour Relationships in a Remote Corner of Java as they Apply to the Cultivation of Rice: Provisional Results of Local Investigations (Batavia: Institute of Pacific Relations, 1937), pp. 42-61; Feuilletau de Bruyn, op. cit., pp. 8, 14, 29-30; Gonggrijp, op. cit., p. 215.

28.

This gathering was not unproblematic. Generally speaking, the depression saw an increase in the unlawful exploitation of forest products (and in the equally illegal clearing of forest lands) at a time when the Forest Service was becoming more successful in protecting Java’s forested areas.

29.

The share of meat in total calorie consumption in Java was (and often is) negligible.

30.

Lette, op. cit., volume 1, pp. 65, 83; volume 2, pp. 30-32, 40-45; Bakker, op. cit., p. 110; Soenario, Verschulding en economische toestand op Java’s platteland (Batavia:

© 2000 Institute of Southeast Asian Studies, Singapore

INDONESIA: DEVELOPMENTS IN REAL INCOME 51 Vereeniging Indonesische Bestuursambtenaren [Rede, uitgesproken als prae-advies, 9e congres PPBB, Surakarta] [Speech, given as preliminary report, ninth congress, PPBB, Surakarta], 1939); Sagalaherang-Rapport. Onderzoek naar de voeding en voedingstoestand der bevolking te Sagalaherang (Regentschap Krawang) in 19371939 (Batavia: Instituut voor Volksvoeding [Mededeeling 1], 1940), p. 22; Feuilletau de Bruyn, op. cit., p. 29. 31.

J. T. M. van Laanen, “Het bestedingspakket van de ‘inheemse’ bevolking op Java (1921-1939)”, p. 144. In the Kotawinangun budget research project, carried out in 1932/33, the share of all taxes was found to be 7 per cent: Bakker, op. cit., pp. 34-35.

32.

M. B. Smits, Over den landbouw in Nederlandsch-Indië (Groningen: Wolters, 1929), pp. 129, 214-15; Feuilletau de Bruyn, op. cit., pp. 22-24.

33.

Lette, op. cit., volume 1, pp. 70, 79-81, 119; volume 2, pp. 4, 39-40; Bakker, op. cit., p. 59; Neytzell and Moll, op. cit., p. 19; “Voedselproblemen en overheidspolitiek op Java en Madoera”, p. 643; Feuilletau de Bruyn, op. cit., p. 25; Gonggrijp, op. cit., p. 224; Burger, op. cit., volume 2, p. 71. Strangely enough, in 1930 this export was hardly more than the import of non-monetary gold: W. L. Korthals Altes, Balance of Payments 1822-1939 [Changing Economy in Indonesia, 7] (Amsterdam: Royal Tropical Institute, 1987), p. 94.

34.

Assuming that the proportion of Javanese savers of all Indonesian savers corresponded to the proportion of Javanese deposits of all deposits. The calculations are based on data published in Statistisch Jaaroverzicht.

35.

The so-called desalumbungs, or paddy banks, did not have major problems during the depression as their credit was in kind (rice), as were repayments: Soemitro Djojohadikoesoemo, Het Volkscredietwezen in de Depressie, pp. 122-25.

36.

Soekasno, “Grondwoeker als gevolg van crediet-transacties in het Pemalangsche”, Volkscredietwezen 24 (1936); Verslag van de Commissie voor de Woekerbestrijding (No place of publication: no publisher, 1936); Soenario, Verschulding en economische toestand op Java’s platteland; E. de Vries, “Pogingen tot schuldbevrijding”, Verslagen der Vergaderingen van het Indisch Genootschap, 20 January 1939, pp. 47-64; Feuilletau de Bruyn, op. cit., pp. 25-26; Soemitro Djojohadikoesoemo, op. cit.; Gonggrijp, op. cit., pp. 223-24.

37.

Lette, op. cit.; “Geld- en producten-huishouding, volksvoeding en -gezondheid in Koetowinangoen”, Landbouw: landbouwkundig tijdschrift voor Nederlandsch-Indië, 10, 4, 5 (1934), pp. 53, 74; Bakker, op. cit., pp. 46-47; Verslag van de Commissie voor de Woekerbestrijding, 1936; Soenario, op. cit., p. 7.

38.

“Invloed van de suikerrestrictie op de welvaart der inheemsche bevolking”, Economisch Weekblad van Nederlandsch-Indië, 1, special number 1 (1932/33), pp. 37-38; Bakker, op. cit., p. 44; Feuilletau de Bruyn, op. cit., p. 9; Soemitro Djojohadikoesoemo, op. cit., p. 134; J. T. M. van Laanen, The World Depression (1929-1935) and the Indigenous Economy in Netherlands India, p. 10.

39.

E. P. Wellenstein, Nederlandsch-Indië in de wereldcrisis, p. 93; Bakker, op. cit., pp. 124-33; J. T. M. van Laanen, The World Depression (1929-1935) and the Indigenous Economy in Netherlands India, p. 13.

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52 PETER BOOMGAARD 40.

“Invloed van de suikerrestrictie op de welvaart der inheemsche bevolking”, pp. 3738; Lette, op. cit., volume 1, p. 63.

41.

A. G. van Veen, “Voeding”. In Een eeuw natuurwetenschap in Indonesië, 1850-1950: Gedenkboek Koninklijke Natuurkundige Vereeniging. Bandung: Koninklijke Natuurkundige Vereeniging, 1950, p. 229; P. Creutzberg, Het ekonomisch beleid in Nederlandsch-Indië: Tweede stuk, pp. 423-24, 461, 726, 766; C. L. M. Penders, “The ‘Ethical’ Policy in Action: the Effect of Cheaper Credit Facilities and Agricultural Extension in Bojonegoro and Tulungagung”. Unpublished paper for a conference on ‘Economic Growth and Social Change in Indonesia, 1820-1940’, University of Groningen, 1984, p. 30.

42.

Jaarverslag, 1931, pp. 136-40; E. de Vries, “Pogingen tot schuldbevrijding”, p. 55; "Voedselproblemen en overheidspolitiek op Java en Madoera", pp. 645-46; Soemitro Djojohadikoesoemo, op. cit., p. 125; P. Creutzberg, Het ekonomisch beleid in Nederlandsch-Indië: Tweede stuk, pp. 421-27, 753-67; Penders, op. cit., pp. 30-31.

43.

Jaarverslag, 1931, pp. 138-40; E. de Vries, “Het rijstvervoer op Java in 1930 en 1931”, Economisch Weekblad van Nederlandsch-Indië, 1932/33, 1, 2, pp. 2114, 2118-19; Lette, op. cit., volume 2, pp. 7,13-14; E. de Vries, “Pogingen tot schuldbevrijding”, p. 49; “Voedselproblemen en overheidspolitiek op Java en Madoera”, pp. 644-46; Soemitro Djojohadikoesoemo, op. cit., p. 126; P. Creutzberg, Het ekonomisch beleid in Nederlandsch-Indië: Tweede stuk, pp. 421-27, 454-61, 751-67; Penders, op. cit.

44.

A. M. P. A. Scheltema, “Eenige gegevens betreffende den economischen toestand in de regentschappen, van waar in 1928 de meeste contract-koelies vertrokken”, Koloniale Studiën, 13, 1929, pp. 411-29; M. B. Smits, Over den landbouw in NederlandschIndië, pp. 44, 135; B. Schuitemaker, “Maatregelen tot het behoud van de bodem in het inheemse landbouwbedrijf op Java”, Landbouw: landbouwkundig maandblad voor Indonesië, 21, 4, 5 (1949) pp. 159-61; P. Creutzberg, Het ekonomisch beleid in Nederlandsch-Indië: Tweede stuk, p. 761.

45.

P. Creutzberg, Het ekonomisch beleid in Nederlandsch-Indië: Tweede stuk, p. 456.

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THE PHILIPPINES: A GEOGRAPHY OF PAIN 53

3 The Philippines in the Great Depression A Geography of Pain Daniel F. Doeppers

Study of the economic history of Southeast Asia is coming on these days. Even so, work on the impact of global trade cycles remains underdeveloped, and critical attention to the historical geography of such phenomena has barely begun. This essay is an attempt to compare regions and provinces of the Philippines in terms of the economic experience of the vulnerable strata of society during the depression of the 1930s. My purpose is to develop an analytical framework for the exploration of the sub-national impacts of the slump and then, in essence, to map the depression in space and time. The differences among places are strongly traceable to the profile of local cash crop specialization and to the market demand and political economy surrounding each crop. It is worth noting that trade cycles were not the only, or even the primary, cause of episodic economic hardship in the archipelago during the twentieth century. In a concurrent project, I have been impressed by the impact of droughts, usually but not always associated with El Niño climatological patterns, on rice production. Likewise, the diffusion of the epizootic rinderpest from the mainland so thoroughly annihilated the herd of carabao work animals at the end of the 1880s and again in the early twentieth century that a great many fields went unploughed and unplanted. There were near famine conditions in several provinces in the early 1900s. Finally, imperial warfare at the turn of the century and in the 1940s was also the proximate cause of great human suffering. In metropolitan Manila, the starvation of 1944-45 and, in living memory at least, the combination of inflation and unemployment in the Marcos depression of the mid-1980s were both more harmful than the

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54 DANIEL F. DOEPPERS

slump of the 1930s. Trade cycles were important events from the point of view of their potential impacts on human welfare but they were hardly singular. Nevertheless, the events of the early 1930s in the Philippines constitute a quintessential trade cycle transmission from the core manufacturing export economy of the United States to the commodities export economy of the Philippines — both deflation and a declining volume of orders for particular commodities were transmitted. Profound regional differences in economic well-being are an ordinary characteristic of capitalist development. The question here is not to rediscover the existence of this phenomenon but to approach a critical evaluation of the degree and specific contexts of such disparities. Birnberg and Resnick, in constructing a macro-level model, found that the economic experience of the specific manufacturing core economy to which a commodity-exporting colony was tied, went far towards explaining the magnitude of such events as the Great Depression.1 This was particularly true of the 1930s because of the protectionist barriers raised around colonial systems of trade during this period. By this light, the Philippines as a whole was particularly disadvantaged, because its primary export trade was with the United States — the major core economy with the worst experience during the slump. Further, the Philippines had scant autonomy during any part of the 1930s to formulate its own tariff and trade policies.2 But below the macro level of colonial control, there were local exceptions. Japan, rather than the United States, formed the primary market for abaca (Manila hemp) grown on Japanese-run plantations in Davao Province in the pioneer southern extremity of the archipelago, and Japan felt the impact of the 1930s slump much less than the United States. Analogous situations may have obtained in the western lowlands of British Malaya, where the United States was a leading customer of its rubber and tin, or in the Deli plain of Sumatra with its international involvement in plantation agriculture. In addition to the regional impact of segmented markets, there are other important considerations, as Brown points out, that also had local and regional rather than universal impact. Individual commodities have particular requirements and market cycles, and these may be significantly out of synch. Credit and pre-existing agrarian debt levels vary, while the ease or difficulty of reverting to subsistence cultivation differs with crop and land tenure arrangement from place to place.3 In short, as a literature accumulates on the impact of trade cycles and the Great Depression in Southeast Asia, it is analytically important to keep regional systems in mind.

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THE PHILIPPINES: A GEOGRAPHY OF PAIN 55

Two recent papers on the Great Depression in the Philippines address the impact of the slump at the sub-national level. Both have used quantitative and non-quantitative methodologies to assess the character of the impact of the depression on human welfare. Owen has demonstrated that, bad as it was on normal livelihood patterns, the depression of the 1930s was not accompanied by anything like a mortality crisis in the Bikol region of southern Luzon.4 People planted root crops, if they had too, but they rarely starved (but then I have seen no studies of changes in physical stature engendered by depression era diets). Neither did they die in unusual numbers of diseases associated with malnutrition. In the capital city, with a population of three-quarters of a million, Doeppers finds that there was considerable disruption of livelihoods, as in Bikol, but that the temporal and sectoral patterns were exceedingly complex and various.5 Rarely or never did all sectors turn down at once. Furthermore, there is considerable evidence that the urban class of employed civil servants, politicians, and others enjoyed a rising standard of living during the first half of the 1930s, due to the impact of deflation on nearly fixed salaries. But how do we fit such studies into a metric of evaluation of the depression era experience of the entire archipelago, and, conversely, can we use them to calibrate and give meaning to a common scale of evaluation? In a full scale treatment of the Great Depression in the Philippines, we might well be advised to consider, seriatim, the fate of the major export commodities and then proceed to speculate on the experience of local and provincial areas based on their degree of specialization in the production or handling of a particular export commodity. But what then of areas producing solely for the domestic market, as in those specializing in rice or corn — constituting more than half of the area devoted to the major cash crops? And how should we compare areas that were not highly specialized, or were located on the then-frontier or in outbacks? How indeed should we assess the numbers and proportions of families bearing the brunt of the downturn, as opposed to the ‘average’ experience? Instead, I propose to construct a framework for analysis through the lens of a common metric. CONSTRUCTING AN ANALYTIC METRIC

It proved surprisingly difficult to construct an adequate index of the regional and provincial impact of the depression. Since the slump was a phenomenon of world trade, the idea of somehow measuring the value and tonnage of exports through regional ports is attractive, particularly in an archipelago. Such data, however, fail to capture the experience of provinces

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56 DANIEL F. DOEPPERS

and regions not heavily engaged in export agriculture. Further, with only six ports engaged in significant foreign trade, considerable diversity of experience within port hinterlands would be lost. Finally, the standard time series on the value of Philippine foreign trade fails to include gold, the bonanza export commodity of the middle and late 1930s. In short, an adequate direct measure of the value of exports per capita by region is not available and, in any case, would provide only an out-of-focus view. A second possibility is to devise a measure of well-being through the medium of consumer spending. Any drop in the real value of consumption would indicate either hard times or withdrawal from the cash economy or both. One possible measure of ordinary welfare involves the consumption of textiles, an item of universal necessity. Most textiles consumed in the Philippines during the early 1930s were imported. In a paper cited earlier, Doeppers presents a depression era index of the volume of imports of cotton and rayon textiles.6 This volume turns out to have had dynamics that are specific to merchandise commerce — the tendency for competing organizations to overstock, and the problem of capital loss when these accumulated inventories have to be sold at deflated prices. Judging, or rather misjudging, from the textile import data, the depression was a phenomenon limited primarily to 1930-31, with the nadir reached in 1930 when imports were only 77.2 per cent of the average of 1927-29. Further, there is no consistent body of provincial-level data on textile sales for the Philippines. I conclude that the textile import measure has its greatest utility at the national and primate city level, and in situations where a close chronological calibration with other phenomena is not required. In the short term, it may also be quite useful as a measure of merchant behavior. But it does not solve our problem. A third possibility involves mortality. Although the official mortality record for this period is woefully incomplete, the results of any significant increase in local and provincial infant mortality as a result of hard times should appear in the age-structure of the populations recorded in the census of 1939. But the slump in the Philippines was not an occasion for crisis mortality, and even the most severely impacted areas showed no apparent increase.7 Thus the census is of little help to us in this specific context. Fourth, a direct measure of family incomes just before and during the depression would, of course, be optimal for our purposes. Unfortunately, there are neither income nor income tax data for the majority of the population during these years. Finally, the existence of annual provinciallevel data on the collection of the poll tax, or cedula, came to my attention. This, at last, provides a rather good index.

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THE PHILIPPINES: A GEOGRAPHY OF PAIN 57

The cédula personal was a kind of personal registration and identity certificate. It was required to be shown as a condition of formal sector employment, legal proceedings, government services, and the like. The flat annual payment required to obtain the cedula constituted a longstanding, regressive tax, having been continued from the Spanish period. Initially opposed, the American administration nevertheless reinstituted and then reduced this tax. Compliance during periods of prosperity was normally fairly high, and it comprised a significant portion of internal revenue collections in 1928-29, just before the depression, with an average of almost 2.6 million adults contributing.8 Another plus for our purposes is the abundant and standard record of cedula collections by province in the annual reports of the Collector of Internal Revenue. Any quantifiable decrease in the ability of individuals to pay, or any increase in their refusal to pay the annual capitation tax, provides a measure of personal and family distress. The relative change in the number paying the cedula tax from year to year is a crude, but fairly reflective surrogate for estimating the level of economic distress. Based on the assumption of a constant taxable population, the national level of compliance slipped from an index of 100 for 1928-29 to 93.5 in 1931, plummeted to 79.0 in 1933, and was still only 80.0 in 1935, the worst year for real exports. This suggests that 20 to 21 per cent of the national adult population was in dire straits during the worst of the depression — as opposed to one-third of the American population. This level of difference between the two countries may be about right. The impact of the Great Depression was less severe in the Philippines than in the United States, but it was not negligible.9 One idiosyncrasy of the cedula system in the Philippines was that one was required to pay off arrears from earlier years before being allowed to purchase the current year’s cedula. This tended to discourage those with only a marginal cash income. Further, this tax became more regressive as the deflation of the depression proceeded. In nominal terms, the standard cedula remained at 2 pesos throughout the depression: but in relation to the price of rice, its real cost nearly doubled from 1928-29 to 1932-34.10 Again, I am setting aside the question of possible provincial differences in levels of compliance before the depression in order to focus on changes coincident with the Great Depression. As the depression began, the usual effort was made to enforce this tax. In 1931 in Samar, a Justice of the Peace sentenced a man to jail for failing to pay the small sum due for several earlier years — a real but apparently unusual news item. At the end of 1932 and in the face of rapidly declining

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58 DANIEL F. DOEPPERS

compliance, the legislature enacted a bill to extend the deadline and cancel the delinquency penalties of persons paying their 1932 cedula tax before 30 March 1933. This was not successful in stimulating a higher rate of payment. Likewise, special efforts by municipal treasurers in some of the worst districts to increase collections by ‘dividing their towns into collection districts’ also yielded little. With too little cash in the hand and a barter economy prevailing in numerous rural areas, the regressive cedula tax was enormously unpopular. Its repeal was enacted in 1934 but the repeal was vetoed (along with much of the appropriations bill) by the American governor general. In October 1936, with the Philippines now a Commonwealth and signs of economic recovery starting to accumulate, President Manuel Quezon signed a bill condoning all cedula delinquencies for persons who paid the 1937 tax by May of that year. At the flat rate of two pesos, the cedula was now about 25 per cent less expensive in terms of the price of rice than it had been at the peak of deflation. For the first time since the depression began, the number of payees exceeded the average for 1928-29. A year later, the tax was abolished.11 Scholars of Vietnam and the French colonial administration there will be struck by the high levels of non-payment of the capitation tax quietly tolerated by elected and bureaucratic Filipino officials and the overarching skeletal colonial administration. They form a strong contrast to the gendarmes and militia acting as capitation tax collectors during the Great Depression in the Transbassac who went about inspecting poll tax cards and jailing peasants who had not paid. According to Brocheux, non-payers ‘became veritable outlaws hunted by the militia’.12 In the twentieth century, non-payment by some categories of destitute persons was simply tolerated in the Philippines, and, although hated, the cedula tax was not allowed to become a major opening for radical independence organizations. In this, the Philippine-American hybrid state forms a strong exception to the patterns elsewhere elucidated by James Scott in The Moral Economy of the Peasant — that is, the Philippines provides an early example of Myrdal’s ‘soft state’. In any case, the way the cedula/capitation tax worked in practice provides us with a careful statistical record of payment, and thus a calculation of non-payment can work as an index of declining cash income. CHRONOLOGICAL AND GEOGRAPHICAL PATTERNS OF DEPRIVATION

After careful examination, I conclude that the changing local rate of cedula payments forms a data base that is valuable within the limits of the

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THE PHILIPPINES: A GEOGRAPHY OF PAIN 59

present analysis because of the way it reflects the probable impact of trade fluctuations over time and space. Starting with the temporal, Philippine real export trade data, derived from those calculated by Birnberg and Resnick, are presented in Table 3.1 as a set of deviations from the exponential trend for the period 1902-38. Against these is placed the record of the number of cedula payees expressed as a percentage of those paying in 1928-29. The fit is not exact. One reason is the lag effect produced by cedula payments falling due in the first part of the year, and thus better reflecting family income at the start of the year or at the end of the previous year. Further, I have noted elsewhere what I believe to be a major shortcoming of the otherwise invaluable Birnberg and Resnick time series, namely its exclusion of gold as an ordinary export commodity during the gold mining boom, and the resulting understatement of the value of Philippine exports by 5 per cent during 1932-34, 8 per cent during 1935-36, and even more for subsequent years.13 Nevertheless, this series captures the major features of the Depression era export experience of the Philippines. This experience begins with the sharp contraction of Philippine real exports from later 1929 through to 1932 — simultaneous with, and as a result of, the even deeper contraction of U.S. GNP. It continues with the anomalous Philippine sugar export boom of 1933-34, while at the same time U.S. GNP continued to plummet to the nadir of an appalling 2.3 standard deviations below the exponential trend. While this was followed by the slow recovery of the United States to near normal performance

TABLE 3.1 Philippine Exports and Capitation Tax Collections, 1928-36 Year 1928-29* 1930 1931 1932 1933 1934 1935 1936

Real exports: deviation from exponential trend 1.41* 0.64 –0.32 –0.58 0.27 1.12 –1.45 –0.78

Index of the number paying the cedula tax 100.0 98.6 93.5 89.1 79.3 84.9 80.1 83.0

* For 1929 alone, the figure is 1.69. Source: Doeppers, “Metropolitan Manila in the Great Depression”, p. 515, calculated from Birnberg and Resnick, op. cit.; calculations of the number of persons paying the various rates of cedula tax from the monetary collections reported in ARCIR, 1928-36.

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60 DANIEL F. DOEPPERS

during 1936-37, the Philippines experienced its worst single export year in 1935 and then recovered to something like normal performance in 1937. The sugar boom of 1933-34 was certainly real, caused by the competition of sugar mill owners to maximize short-term production for the still dutyfree American market in anticipation of the looming imposition of import quotas.14 This short-term surge in sugar-production was done in order to secure a larger share of an anticipated future quota. The end of open imports to the United States and the new quota system were imposed in late 1934. This narrow, single commodity export expansion, coming in the middle of the depression, is abundantly mirrored in the level of cedula payment participation in the major sugar producing provinces: Negros Occidental (to 111.4 in 1934!), Tarlac, Pampanga, and Batangas. All four were over the index of 100 in 1934, and all four were up significantly from the levels of the previous year. This brief sugar boom is reflected, as well, in the national rise of cedula payments from 79.3 to 84.9. It is this closeness of fit, together with the highly organized geographical pattern of declining payments, that persuades me of the analytical utility of the capitation tax record. Despite its shortcomings, the changing rate of cedula payments is the best available indicator. Figure 3.1 presents a summary overview of the geography of relative material deprivation associated with the Great Depression in the fortyeight provinces and capital city region of the Philippines. It is not a representation of average levels of living, which often conceal the experience of the extremes, but of the change in welfare of the poorest strata of society — of those no longer able to pay the cedula. Far from a crazy quilt of random values, the pattern is notable for its organization and regularity. By this formulation, the worst loss of subsistence income came in the broad group of provinces stretching southward from Camarines Sur to Leyte, and including most of Bikol and the Eastern Visayas, in short, the abaca belt. In this category, only Sulu is geographically extraneous. With only slightly less severity, this eastern belt of pain is continued across the northern littoral of Mindanao. The moderately severe third category stretches back northward in an adjacent central belt from Cebu through CapizAklan and the small islands to Tayabas/Quezon, Laguna, and Nueva Ecija. A considerable part of these last two categories constitutes the coconut production area of the country. At the opposite end of the spectrum, an absolute growth in cedula payments was recorded from the pioneer settlement and tobacco-maize zones in the Cagayan River Valley, as well as in northern Ilocos (both in northern Luzon) and the sugar heartland of Negros Occidental. Areas with only a little decline included pioneer

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THE PHILIPPINES: A GEOGRAPHY OF PAIN 61

FIGURE 3.1 Average Percentage of Population Paying Capitation Tax, 1932-35 as Compared to 1928-29

© 2000 Institute of Southeast Asian Studies, Singapore

62 DANIEL F. DOEPPERS

Cotabato-Bukidnon-Lanao (in Mindanao), Batangas-Cavite-Rizal in the suburbs and penumbra of the capital, most of the Central Plain of Luzon, southern Ilocos, and scattered western provinces. The City of ManilaBulacan, Iloilo, and a diverse scatter of other places were intermediate. The explanation of these gross patterns lies in the ecological and space economy of the archipelago, in the fluctuations in external industrial demand for particular tropical commodities and products, and in the nature of élite (and also American farm and trade union) intervention in the market process. The data that underlie the averages displayed in Figure 3.1 are also reflected in Table 3.2. This is based on the number of persons paying the cedula tax in a particular province relative to the number paying in the base years just before the depression. Table 3.2 records the number of years a certain percentage range of persons paid the tax in each province, for the years from 1932 to 1935. The breaks between the categories employed in Figure 3.1 are marked in Table 3.2. The provinces with more than 100,000 taxpayers are shown in boldface, while the two with fewer than 10,000 are marked with asterisks. Far from a polarization into rich and poor clusters, as might be implied by a rhetoric of ‘core’ and ‘periphery’, the data reveal a wide and continuous spectrum of experience. One notable feature, however, is the degree to which the ten poorest provinces diverge negatively from the general trend of the spectrum shown in Table 3.2. It is difficult to spot in these data evidence of a local culture of resistance to the national-colonial state. Indeed, since our measure is one of relative decline in capitation tax compliance, it would have been a culture or spirit of resistance that flowered suddenly with the onset of the depression. One notion along such lines concerns the Muslim province and former sultanate of Sulu, depicted here in the worst category. But without other evidence, such speculation is unwarranted. The data for Pampanga, Bulacan, and Nueva Ecija on the Central Plain of Luzon do not immediately stand out as areas of special capitation tax resistance, although this was the zone of maximum agrarian confrontation with landowners and the state apparatus. It later developed into the territory of the Huk revolutionary movement. Further, part of Bulacan was one of the sites of the localized Sakdal Revolt in 1935. It is possible, however, that the negative divergence of Nueva Ecija from the tax experience of contiguous rice-producing provinces is partially explainable in these terms. Nueva Ecija was the location of the 1931 Tayug municipality rebellion over agrarian abuses, and such abuses, writ large, may have been responsible for a real immiserization that is reflected in the 1930s decline in cedula payments. Nueva Ecija was also

© 2000 Institute of Southeast Asian Studies, Singapore

THE PHILIPPINES: A GEOGRAPHY OF PAIN 63

TABLE 3.2 Proportion of People Paying the Capitation Tax in 1932-35, as a Percentage of the Average Number Who Paid in 1928-29, by Province (Number of years in each percentage category) Province, economic specialization Albay: abaca, copra Leyte: abaca, copra Sorsogon: abaca, copra Camarines S.: rice, abaca Samar: abaca, copra Sulu: abaca, copra Surigao: abaca, copra Romblon: copra Zamboanga: copra, lumber Misamis: copra, abaca Capiz-Aklan: rice, copra Cebu: copra mixed Laguna: copra Tayabas/Quezon: copra Masbate: copra, cattle Marinduque: copra Bataan: mixed Nueva Ecija: rice Negros Oriental: copra Mindoro: pioneer copra Agusan: pioneer copra Camarines Norte: mining Davao: abaca for Japan Bulacan: rice, maize Iloilo: rice Manila: multi-functional Bohol: maize Pangasinan: rice Pampanga: sugar, rice Bukidnon:* cattle, pineapple Cavite: mixed Palawan: frontier Antique: mixed Batangas: fruit, sugar Zambales: mixed Ilocos S.: mixed, remittances Lanao: lumber, pioneer La Union: tobacco

Percentage range, Number of years 8 500