In 1888, in order to secure assistance from important minority groups, the British-Indian government established an alliance with the Shan. The Shan are a large agricultural minority population that occupies much of eastern central Myanmar. By forming this alliance the British were attempting to avoid the problems their predecessors (the kings) had experienced. Moreover, the British hoped that this alliance would assist British merchants in obtaining natural resources for export.
The Shan lived in both highland and lowland regions of eastern Myanmar and had access to the hill country in the east, where large stands of exotic trees for lumber grew. The Shan also grew a variety of crops, including rice, potatoes, and coffee. The British were interested in the highlands for the lumber yield; they were also interested in the lowland regions because the soils there had the potential to grow cotton. Cotton was a major cash crop for the British.
During the latter half of the nineteenth century the British established new administrative and civil roles for Burmese villages. These new administrative roles were organized on an Indian model. In fact, many of the local officials were from India. This produced conflicts among the various local ethnic groups. Many local village leaders, usually male elders or Theravada Buddhist monks, began to openly oppose this new "outsider's" system. These new local administrators also discovered that the dominant ethnic Burmese population did not recognize British-Indian authority. This situation produced a three-way factional conflict.
Many non-Burmese minority groups did not respect and obey the local British-Indian civil administrators. The large Burmese population began to outwardly defy British-Indian rule at the national level, and the British found that a threat of military force was necessary to maintain control in Myanmar. From 1885 to 1945, Myanmar was continuously under a state of martial law. After 1937 the new partially independent government faced the same problems the British had faced earlier. Thus, in order to maintain civil order, martial law was extended. From 1885 to 1937 the dominant Burmese population, based on their experience with the British, developed an extreme distrust of outsiders.
By the beginning of the twentieth century the foundations for further conflicts had been established. During the early years of the twentieth century the British-Indian government had replaced many of the local village leaders with their own Indian officials. These appointments, combined with growing discontent among various ethnic groups, stimulated the growth of separate ethnic nationalist movements. Ethnic groups such as the Karen and the Kachin organized their own nationalist parties. Thera-vada Buddhist monks mounted an anti-British campaign. Some ethnic Burmese Buddhist monks joined small but growing groups of Marxists; this occurred despite the general Marxist opposition to religion.