Indonesia-US Trade Agreement and the Strengthening of Oligarchic Structures
This article is an opinion piece, and all content and opinions reflect the personal views of the author and do not reflect the editorial stance.
The return of tariffs as a primary tool in global trade marks a major change in the world’s economic order.
International trade is no longer solely driven by the logic of efficiency and openness, but is increasingly determined by power calculations.
In this context, President Donald Trump’s tariff policies are not merely an episode of US protectionism, but a reflection of the fragility of the global system that has long supported developing countries.
For Indonesia, Trump’s tariffs represent the most concrete test for the neo-dirigist approach that is currently being implemented.
In the tradition of Asian development in the 1950-1980s, dirigism refers to a state-led development model in which the government actively shapes the economic structure through selective protection, credit control, exchange rate management, and trade diplomacy integrated with industrialization strategies.
The state functions as a developmental state that acts as an architect of long-term transformation, rather than simply a market regulator.
This model supported the process of structural transformation from agriculture to industry in Japan, South Korea, Taiwan, and Indonesia in the early days of the New Order.
Indonesia was also part of this pattern. The fertilizer, cement, steel, automotive, and petrochemical industries were built through a combination of state and private investment.
Food and energy subsidies were used to keep the cost of living down. The state was relatively firm in setting conditions for investors.
The results were also clearly visible. In the period 1970-1996, Indonesia’s economic growth averaged more than 6 percent per year.
Poverty rates fell from around 60 percent in the early 1970s to below 15 percent in the mid-1990s. The contribution of manufacturing to GDP increased significantly, and social mobility was widely available.
In the 2000s, Indonesia and many developing countries shifted to liberalization and global integration. The ratio of world trade to global GDP jumped from around 30 percent in 1970 to more than 60 percent in 2008.
Capital flows were strong, growth returned to high levels, and global optimism strengthened.
This phase did not last long. Since the early 2010s, global trade has stagnated relative to GDP. Total factor productivity in many developing countries has slowed from around 2 percent per year in the 1990s to below 1 percent.
Wealth inequality has increased. Market concentration has strengthened. Indices of political freedom and institutional quality in many countries show a downward trend. Globalization has entered a phase of fragmentation and politicization.
This slowdown is in line with Ahmet Akarli’s analysis in A Modern Economic History of Emerging Markets, 1950-2020 (2021), which shows that many developing countries have entered a defensive growth phase when the impetus for globalization weakens and institutional capacity is not yet fully mature.
Neo-dirigism is born in a more unstable world. State intervention is strengthening again, but its policy space is narrowed by pressure from financial markets, international trade regimes, and global supply chain integration.
Its orientation has shifted from building production capacity to simply maintaining system stability.
In this context, the state no longer fosters the entire industrial base equally, but is increasingly selective in determining the sectors that are considered to generate the fastest foreign exchange, attract investment, or support macroeconomic stability.
Industrial and trade policies move in the logic of “picking winners” in the short term—prioritizing the mining, palm oil, energy, and certain manufacturing sectors—while other sectors are left to adapt on their own without adequate support.