The priorities of both the VOC and the Netherlands Indies state after 1816 were overwhelmingly commercial. Not even in British India was the ledger book such a weighty consideration. But opinion in the Netherlands was changing. In 1899 a liberal lawyer named Conrad Théodoor van Deventer published a polemical essay, "A Debt of Honor," the Dutch journal De Gids. Van Deventer, who had long experience in the Indies, argued that the Netherlands had a moral responsibility to return to the colony all the profits that had been made from the sale of cash crops following the Dutch Staten-Generaal's assumption of fiscal responsibility for the islands in 1867. He estimated that this amount totaled almost 200 million guilders, which should be invested in welfare and educational facilities. When a liberal government was elected in the Netherlands in 1901, these ideas became the basis for what was known as the Ethical Policy. Its scope included expansion of educational opportunities for the population as a whole, improvements in agriculture, especially irrigation, and the settlement of villagers from overpopulated Java onto some of the Outer Islands.

Filled with good intentions, the proponents of the Ethical Policy, like Daendels and Raffles before them, generally ignored the "feudal" political traditions that had bound together Dutch officials and Indonesian subordinates since the early days of the VOC. The rationalization and bureaucratization of the colonial government that occurred in the wake of new welfare policies alienated many members of the priyayi elite without necessarily improving the lot of the common people. Whereas Sumatra and the eastern archipelago were thinly inhabited, Java at the beginning of the twentieth century had serious population and health problems. In 1902 the government began a resettlement program to relieve population pressures by encouraging settlement on other islands the program was the beginning of the Transmigration Program (transmigrasi--see Glossary) that the Republic of Indonesia would pursue more aggressively after 1950.

One Ethical Policy goal was improvement of education. In contrast to British (or pre-British) Burma and the Philippines under both the Spanish and Americans, the islands were poorly endowed with schools, and literacy rates were low. In 1900 there were only 1,500 elementary schools in the entire archipelago for a population of more than 36 million. In Christian areas such as Ambon, some Batak communities in Sumatra, and Manado in Sulawesi, conditions were better than average because missionaries established their own schools. In Sumatra there were a large number of village-level Islamic schools. But public education was virtually nonexistent until the government established a system of village schools in 1906. By 1913 these schools numbered 3,500 and by 1940, 18,000. Many local people, however, resented having to pay teacher salaries and other school expenses.

Even members of the Javanese elite, the priyayi, had limited educational oppofb7 portunities at the beginning of the century. A school for the training of indigenous medical assistants had been established at Batavia as early as 1851, and there were three "chiefs' schools" for the education of the higher priyayi after 1880. A handful of the elite, some 1,545 in 1900, studied alongside Dutch students in modern schools. But government policy maintained an essentially segregated system on all school levels. Dutch-Language Native Schools (Hollandsche Inlandsche Scholen), with 20,000 students in 1915 and 45,000 on the eve of World War II, have been described by the historian John R.W. Smail as "perhaps the most important single institution in twentieth century Indies history." Through the medium of Dutch, graduates were introduced to the modern world being "natives," however, their subsequent careers were limited by racial bars, an injustice that stoked future nationalism.

In 1900 the old medical school became the School for Training Native Doctors, whose students also played a major role in emergent nationalism. A technical college was established at Bandung in 1920, and four years later a law faculty was set up at Batavia. A very small but highly influential group of graduates matriculated at universities in the Netherlands, especially the University of Leiden and the economics faculty at Rotterdam.

Raden Ajeng Kartini (1879-1905), daughter of the regent of Jepara on Java, was one of the first women to receive a Dutchlanguage education. In letters written to Dutch friends, published in 1911 as Door duisternis tot licht: gedachten over en voor het Javanese volk (From Darkness to Light: Thoughts About and on Behalf of the Javanese People) and later translated into English as Letters of a Javanese Princess, Kartini called for the modern education of Indonesian women and their emancipation from the oppressive weight of tradition. These letters were published for the purpose of gaining friends for the Ethical Policy, which was losing popularity. As a result, a number of Kartini schools for girls were established on Java in 1913 from private contributions.

The Ethical Policy was at best modestly reformist and tinged with an often condescending paternalism. Few Dutch liberals imagined that the islands would ever be independent. Most assumed a permanent, and subordinate, relationship with the Netherlands which was in striking contrast to American "Philippines for the Filipinos" policies after 1900. Thus the Indies' political evolution was extremely tardy. The Decentralization Law of 1903 created residency councils with advisory capacities, which were composed of Europeans, Indonesians, and Chinese in 1925 such councils were also established on the regency level. In 1918 the People's Council (Volksraad), a largely advisory body to the governor general consisting of elected and appointed European and Indonesian members, met for the first time. Although it approved the colonial budget and could propose legislation, the People's Council lacked effective political power and remained a stronghold of the colonial establishment.

Data as of November 1992