Soeharto resigned from the office of president of Indonesia on May 21, 1998, some ten months after the onset of currency speculation against the rupiah. His resignation signaled the end of the New Order regime and the beginning of a period of transition toward democracy. His successor, B. J. Habibie, who had been serving as vice president, was an aeronautical engineer known more for his nationalist economic ideology and loyalty to Soeharto than for any independent political skill. By the end of 1999, Abdurrahman Wahid (Gus Dur) assumed the country's presidency, and Indonesia's transition to democracy was complete. One of the world's most enduring dictatorships became the world's third most populous democracy.

Yet a firm understanding of why the New Order collapsed as it did, when it did, remains elusive. The theory advanced in Chapter 2 shows how political conflict over adjustment policy drove the breakdown of the New Order. The New Order collapsed because mobile capital – in the Indonesian context, ethnic Chinese konglomerat – withdrew its support from the regime. This fracture in the New Order's support coalition took place gradually, during the first six months of 1998, during which time Indonesia saw a dramatic upsurge in anti-Chinese violence. It culminated in anti-Chinese riots during May 13–14, 1998, which drove most of the konglomerat overseas. Many factional alignments existed in Indonesia along which the regime might have fractured: capital (mobile and fixed) versus labor, or Muslim versus non-Muslim, or even political Islam (“green”) versus secular nationalism (“red and white”).