Capitalism Isn’t Dying, It Is Being Rewritten and Middle Powers Like Indonesia Must Shape It

For years, many of us were told that the future of the global economy would be defined by ever-deeper globalization, frictionless capital flows, and permanently integrated supply chains. That story no longer fits the world we are living in.

What we are experiencing today is not simply a geopolitical realignment. It is a structural change in capitalism itself.

History helps us see this more clearly.

The political economist Karl Polanyi famously argued in his book The Great Transformation that when markets expand too far and begin to damage social stability, societies respond by re-embedding markets into social and political institutions. In other words, capitalism periodically corrects itself.

We are in one of those moments.

For the last four decades, the dominant model was hyper-globalized capitalism — driven by cost efficiency, financial liberalization, and highly fragmented global value chains. International institutions such as the World Trade Organization and the International Monetary Fund were designed for that world. Their mandate was simple: liberalize, integrate, and stabilize.

Today, that world is disappearing.

Supply chain disruptions, strategic sanctions, technology rivalry, climate risks, and widening inequality have exposed a fundamental weakness in the old system. Efficiency alone cannot sustain political legitimacy, social cohesion, or national security. The pandemic and subsequent geopolitical tensions merely accelerated a transformation that was already under way.

The central question now confronting governments and investors is no longer “Where is the cheapest production base?” but rather:

Is this supply chain secure?

Is this technology strategically sensitive?

Is this investment socially and politically sustainable?

Is this compatible with long-term climate commitments?

This is a profound shift.

Some interpret this moment as the beginning of the end of capitalism. I believe that is a misunderstanding. Capitalism is not dying. The old version of capitalism is.

A new form is emerging — one that can best be described as strategic and geopolitically embedded capitalism.

Markets remain indispensable. Private investment, innovation, entrepreneurship, and competition will continue to drive growth. However, the role of the state has changed fundamentally. Governments are no longer passive regulators. They are becoming strategic investors, industrial planners, market shapers, and risk absorbers — especially in sectors related to energy transition, digital infrastructure, food systems, health, and advanced technologies.

This transformation is not ideological. It is pragmatic.

The influential economist Dani Rodrik has long argued that deep globalization, domestic political autonomy, and social stability cannot be fully achieved at the same time. Something must give. In today’s global rebalancing, hyper-globalization is the variable being constrained.

The deepest change is the replacement of one organizing principle with another.

For decades, the primary logic of economic systems was profit maximization and cost efficiency. The emerging logic is system resilience.

Resilient supply chains.

Resilient energy systems.

Resilient food and health ecosystems.

Resilient employment structures.

Capital is still welcomed. But capital is now expected to serve strategic national objectives.

This shift has enormous implications for middle-power countries.

In a fragmented world, influence is no longer defined only by military power or financial scale. It is increasingly determined by the ability to consolidate domestic economic capabilities and connect selectively — and strategically — to multiple global networks.

Cooperation platforms such as BRICS illustrate a broader trend: countries are seeking diversified partnerships rather than exclusive alignment within a single geopolitical bloc.

For Indonesia, this global reconfiguration presents a rare strategic opportunity.

Indonesia’s large domestic market, demographic strength, geographic position, and deep MSME ecosystem give us an advantage in a world where internal economic depth matters more than sheer export dependence. In the emerging system, resilience is built at home before it is projected abroad.

This is why Indonesia must move beyond a development model that relies primarily on cost competitiveness and fragmented project-based foreign investment. The future belongs to countries that are able to consolidate value domestically before integrating with global markets.

I describe this approach as value consolidation.

In practical terms, it means designing national investment frameworks that deliberately integrate local enterprises, communities, digital platforms, logistics, skills, and financing into unified domestic value systems.

Tourism provides a clear illustration.

Under the old globalization model, tourism development often prioritized international operators, standardized infrastructure, and externally captured value. In a strategic capitalism environment, tourism must be repositioned as a domestic value ecosystem — connecting local MSMEs, creative industries, culinary systems, digital services, and cultural assets into a coherent investment platform.

Foreign capital remains essential. But it should participate in nationally structured value chains, not merely extract returns from isolated projects.

The same principle applies to green infrastructure, digital services, health systems, and food security. Selective globalization must be built on strong domestic consolidation.

This new economic architecture also demands a new approach to social policy.

The world is indeed moving back toward a stronger social orientation — but not in the traditional welfare-state sense alone. What is emerging is strategic social protection.

Governments are increasingly focused on protecting workers and communities affected by technological disruption, supporting MSME upgrading, stabilizing employment in strategic sectors, and guaranteeing access to essential services. Social policy and industrial policy are no longer separate domains. They are becoming a single framework for national resilience.

This is not a transition from capitalism to socialism.

It is a transition toward negotiated capitalism — a system in which markets operate within explicit social, political, and strategic boundaries.

For Indonesia, the challenge is not to resist this transformation. The challenge is to actively shape its national form.

By prioritizing value consolidation, strengthening MSMEs, embedding tourism and creative industries into integrated investment ecosystems, and aligning digital and green transformation with domestic capability building, Indonesia can turn global fragmentation into a platform for inclusive and resilient growth.

Capitalism is being rewritten.

Middle powers like Indonesia must not merely adapt to the new rules. We must help define them.