The Dutch returned to Indonesia in 1816 and were soon embroiled in a couple of bloody disputes against opponents of their rule. But, having finally regained control over their old colonies, the rest of the nineteenth century and the beginning of the twentieth saw the Dutch attempting to expand into previously independent territories. Their early efforts met with limited success: the Balinese only surrendered in 1906, a full sixty years after the Dutch had first invaded, whilst the war in Aceh, which the Dutch had first tried to annex in 1873, dragged on until 1908, costing thousands of lives on both sides. By 1910, however, following the fall of Banjarmasin in 1864, Lombok in 1894 and Sulawesi in 1905, the Dutch had conquered nearly all of what we today call Indonesia; the only major exception, Irian Jaya , finally accepted colonial rule in 1920.

Following the debilitating battles in Java and Sumatra, the Dutch in Indonesia were facing bankruptcy, so they devised the Cultural System in 1830, under which Javanese farmers had to give up a significant portion of their land to grow lucrative cash crops that could be sold in Europe for a huge profit. Java became one giant plantation and Indonesia evolved into a major world exporter of indigo, coffee and sugar. But indigenous farmers suffered hugely, some of them starving to death.

The Liberal System (1870-1900) aimed to rectify the injustices of the Cultural System and end the exploitation of the local population, but unfortunately coincided with some devastating natural and economic disasters, including widespread coffee-leaf disease and a sugar blight. A vocal, altruistic minority in the Dutch parliament began pressing for more drastic policies to end the injustices in Indonesia, giving rise to what is now called the Ethical Period . During this time, radical irrigation, health care, education, drainage and flood control programmes were started, and transmigration policies, from Java to the outlying islands, were introduced. But transmigration, as is still seen today, while temporarily alleviating over-population on Java, brought its own set of problems, with the displaced often ending up as the victims of ethnic violence in their new homelands.