If your capital is captured, you surrender half of your IPCs to the power that captured your capital and the rest are forefit to the bank.
Any remaning factories you started the game with and are still under your control may continue to operate in the following fashion. Factories may collect IPCs from the territory they are on, and any territories that power controls within 3 spaces of that factory. These IPCs may not be saved, they must be spent immidatley on units.
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By these rules (which still need minor tweaks) India, canada, and perhaps south africa, and obviously ANZAC continue to fight. The Western United States fights to liberate the east coast, Russia doesnt put up a white flag the second Moscow falls, factories continue to produce, albeit like an infantry and an artillery a turn but still! If China can get units and doesnt even have a factory, and these powers have factories.
by these rules also, canada can collect from all of canada, which may be around 5-8 IPCs total
India can collect from burma, and shan state, and malya, but not far flung territores
Western US still collects from alaska, etc
Germany still collects from its territores if soviets take berlin, and it still has france.
Japan only starts with one factory, so they dont realy benifit from this, no japanese dvisions are being raised in shangtung and french indochina etc. if Tokyo falls
Expect something similar to this to be in my 1940 house rules suplement
also stuff like convincing spain to join the war. artilery act as blockhouses when defending against amphibious invasions. US gets an atom bomb…etc.