Carney: The stabilizing state – State capitalism as a response to financial globalization in one-party regimes


One of the most important developments in the modern global economy is financial globalization. This has raised threats to the stability of political regimes in two ways: (1) by enhancing the possibility of a financial crisis that could cause political turmoil; and (2) by easing access to foreign sources of financing for opposition political groups. I argue that state capitalism – defined as state-owned publicly listed corporations – is greater among one-party regimes as a way to address these dual threats. One-party regimes have both the motivation and a greater institutional capacity for addressing these threats in comparison to other regimes. Tests are conducted on 607 firms in 1996 and 856 firms in 2008 across seven East Asian economies, and are supplemented with case studies of Malaysia and South Korea. The evidence suggests that financial globalization is contributing to the rise of the state as a counter reaction.


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