The Extractive Institutions as Legacy of Dutch Colonialism in Indonesia : A Historical Case Study

While some countries are thriving in political stability and economicprosperity, others are struggling with political instability and poverty. The fundamental difference between the successful and the failed nations boildown to their institutions, as stated by Acemoglu and Robinson in their influential institutional economics work, “Why Nations Fail”. Inclusive institution is the reason why some countries achieved economic success and prosperity because they allow the population to participate and take advantage of the economic activities while extractive institutions hinder it incase of failed nations. The purpose of this study is to explore more closely how extractive institutions persist in an ex-colonised country in spite of institutional drift andthe political disruptions of post-colonial governments avowedly vying to rid the present of the past. Indonesia is chosen as the subject for this historical desk research case study wherein the relevant history surrounding thecolonial period and the subsequent development will be explored andanalysed through the lens of secondary literature. In addition to being based on textual evidence, the institutional economics approach will be used as a theoretical framework to break down the social, economic, and political aspects of the history. Furthermore, the mechanism of how the institutions evolve will be seen through the political development framework. The result will show that patrimonialism is present as an extractive feature in both modern and colonial Indonesia and how it has been sustained after independence. This study also suggests other extractive features as a legacy ofthe Dutch colonialism that is separate from the native tradition and customs which are Javacentrism and racism in the form of social stratification between races as a result of colonial policies