The Next Threat to Globalization? Capital Controls

Back in the day, when a country’s currency was under pressure, the worst thing you could do was impose capital controls. Stopping money from leaving might work temporarily, but it would cause investors to lose faith, and shut you out of financial markets in the long run. In a laissez-faire, globalizing world, nothing could be worse than that.

Indonesia is now challenging that assumption, and may prove that we operate in a completely different global economy now. Last month, the rupiah hit a record low, driven by worries about President Prabowo Subianto’s economic policies. He seemed willing to widen the fiscal deficit, which was higher in 2025 than it has been for two decades, excluding the pandemic years. And the nomination of his nephew to the central bank’s board didn’t help. MSCI Inc. last week warned the market may be downgraded to frontier status unless transparency improves, prompting a flurry of activity from regulators to try and shore up confidence. The benchmark Jakarta Composite Index fell as much as 5.1% Monday.