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One of the most widely held views about Indonesia, and especially Java, in the nineteenth century was that such economic growth as occurred did not benefit the mass of the indigenous population, whose living standards almost certainly declined. Many scholars have drawn attention to the evidence that per capita rice production fell after 1880 as proof that living standards were definitely falling in the last two decades of the century, while others have not hesitated to draw the bolder conclusion that living standards declined almost continually after 1800:One theme stands out most prominently in Javanese society during this time: the theme of involution and reaction…. Despite the promises of the changing colonial policies to further the individual welfare of the Javanese, conspicuously little was done in this regard. Instead the Javanese farmer became gradually more impoverished throughout the whole of the nineteenth century, with a particularly severe drop in living standards in the second half of the liberal period (1885–1900).

This paper surveys the evidence on trends in poverty and inequality during the years of Soeharto's presidency. That Indonesia saw a decline in the incidence of poverty, and improvements in other welfare indicators such as infant mortality rates and literacy rates over these years, seems indisputable. Comparative studies show that by the latter part of the 1980s, the headcount measure of poverty in Indonesia was below that in the Philippines although above that in Malaysia and Thailand. But relative poverty has declined more slowly, and indeed increased in some urban areas between 1987 and 1996. The paper also examines evidence on the determinants of rural poverty in Indonesia in 1993, and suggests that rural development programs targeted to the specific needs of poor people in poor areas will be essential if rural poverty is to be further reduced in future years.

The paper reviews the changes in the structure and role of provincial and sub-provincial governments in Indonesia since independence. Particular attention is paid to the process of splitting both provinces and districts (kabupaten and kota) into smaller units. The paper points out that this process has been going on since the 1950s, but has accelerated in the post-Soeharto era. The paper examines why the splitting of government units has occurred in some parts of the Outer Islands to a much greater extent than in Java, and also examines the implications of developments since 1999 for the capacity of local government units to deliver basic services such as health and education.

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