In more concrete terms, resilience will be translated into governments spending much more money on improving their countries› food and energy security. Trade will continue to decline and trade policy will be driven more by politics than ever before–a prime example being the bipartisan consensus in America that trade sanctions against China must be kept in place and that America›s national security interests will be better served by decoupling with the Chinese economy.
For Indonesia›s economic policymakers, much more thought must be put into weighing the risks of being over-reliant on Chinese trade and investment and how that reliance not only carries economic risks but also potentially compromises its national interests. Vladimir Putin has already amply demonstrated to Europe the costs of doing business with an authoritarian regime. Just as Putin has weaponized energy as a means of punishing Europe for supporting Ukraine in its war with Russia, Xi Jinping’s China has no compunction against weaponizing trade and investment policies to achieve its geopolitical ambitions.
Those same concerns should also be addressed by ASEAN as a whole. Regional and multilateral trade pacts that exclude China would help in diversifying ASEAN›s trade portfolio and keep it safer from the type of economic bullying that Australia experienced after its diplomatic rows with Beijing. Policymakers must also become more wary of the interdependencies that come with participation in China›s One Belt One Road initiative–Chinese investments in strategic infrastructure are not just commercial plays but involve geopolitical interests that come with a potentially huge downside risk for countries such as Indonesia.
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Indonesia and its ASEAN partners must also contend with the fact that with the decoupling of America and China there will come an inevitable splintering of the international financial system, with one system based on the US dollar and the other on the yuan. Not only trade and currencies but capital markets as well will become weaponized in the US-China rivalry. Ultimately, governments and corporations as well will be forced to take sides.
For too long we have seen economics as something above ideologies and our value systems. Or at least that was the neoliberal delusion as long as market fundamentalism prevailed. Now, with the decline of globalization we need to be prepared for politics becoming the main driver of economic policy.