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A taxonomy of state capitalism

The developmental phases of Russia, Kazakhstan, South Korea and Singapore - a comparative institutional analysis


Axel Wölk

What is the economic order of state capitalism? Furthermore,how can its significant performance differences be explained? The firstquestion is tackled with the help of New Institutional Economics by developinga model of state capitalism. This topic is furthermore dealt with in Chapter 3 wherea taxonomy of state capitalism is presented. This chapter already explains someof the performance differences. In the last chapter with the help ofsemi-structured interviews and literature surveys – in four case studies –propositions are forwarded as to why state capitalist orders vary so widely intheir performances. Two points stick out: the quality of the bureaucracy aswell as a varying degree of commitment of the political leadership to adevelopmental course. 
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List of Abbreviations

1 Introduction

1.1 Overview

1.2 A Tale of two Countries

China: Partial Liberalization of the Economy – Continuation of Autocracy in Politics

Russia: Progressing from Gorbachev to Putin

1.3 Antecedents of State Capitalism

2 Modeling State Capitalism

2.1 Fundamentals of New Institutional Economics

2.1.1 Methodological Individualism, Bounded Rationality and Institutions

Methodological Individualism

Bounded Rationality


2.1.2 Functions of Institutions

2.1.3 Institutional Change

Explanations of Institutional Change

From limited to open access Orders

2.2 State Capitalism in the Literature

State Ownership as the Core Characteristic

State Interventions as the defining Characteristic

Relevance of Development in State Capitalism

2.3 Market Capitalism as a Reference Model

Constituting principles of market capitalism

Political and economic actors in market capitalism

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2.4 A Model of State Capitalism

Applying constituting principles of market to state capitalism

Elements of state capitalism

Constituting principles of state capitalism

2.5 State Capitalism and Institutional Change

From Market to State Capitalism

From State to Market Capitalism

From Socialism to Capitalism

3 A Taxonomy of Modern State Capitalism

3.1 Varieties of State Capitalism

3.1.1 Classifications of State Capitalism in the Literature

3.1.2 Four Constituting Principles for the State Capitalist Taxonomy

3.1.3 Developmental States

Capable Bureaucracy

Capable Bureaucracies complement Policy Goals

Credible Commitments by the State further complement Policy Goals

3.1.4 Dual Economy State Capitalism

Strategic Sectors

Non-strategic Sectors

Relatively little Capability and Autonomy of Bureaucrats

Successful Integration into World Markets possible

Credible Commitments to secure Property Rights

3.1.5 Crony State Capitalism

Low bureaucratic Quality

Industrial Policy relatively ineffective

Commitments by the state not credible

3.1.6 Petro State Capitalism

Soft Budget Constraints for the Bureaucracy

Diversification as Industrial policy

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No taxes for local Economy and Dubai as a Role Model

3.1.7 Predatory State Capitalism

Cleptocratic Bureaucracy

No effective Industrial Policy is conducted

Property Rights even for Elites completely insecure

3.1.8 Democratic State Capitalism?

3.1.9 Conclusion

3.2 Institutional Change from one State Capitalist Variant to another

Moving upwards in Development Effectiveness

Moving downwards in Development Effectiveness

3.3 Determining State Capitalist Countries

3.3.1 Proxies for State Capitalist Constituents

3.3.2 Applying the Proxies to Upper Middle-Income Countries

3.3.3 Competition between State and Market Capitalism

3.4 Determining State Capitalist Groups

3.4.1 Proxies for the Taxonomy and Application to upper middle-income Countries

3.4.2 Performance Divergences among Varieties of State Capitalism

4 Case Studies

4.1 Case Studies in Theory and as a Method in this Study

4.1.1 Case Studies as a Method of Qualitative Analysis

4.1.2 Design of the selected Case Study

Propositions of the Case Studies

Justification of Case Selection

Case definition and Methods applied

4.2 Russia

4.2.1 Preliminaries

4.2.2 Structure

Quality of the Bureaucracy

Low autonomy for Russian bureaucracy

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Structure of the Corporate Sector

Degree of Rule of Law

4.2.3 Policies

The Case of a target-orientated Industrial Policy

Target Setting as Part of Russian Industrial Policy

Content of Russian Industrial Policy

Attainability of Developmental Goals

Straddling liberal and State Capitalist Policies

4.2.4 Performance

4.2.5 Actor Centricity

4.2.6 Russian State Capitalism

Reasons for Russia under-shooting its own Developmental Goals

Russia as a Crony State Capitalist Economic Order

Avenues for Institutional Change

4.3 Kazakhstan

4.3.1 Preliminaries

4.3.2 Structure

Quality of Civil Service

Structure of the Corporate Sector

Degree of Rule of Law

4.3.3 Policies

Target-orientated Industrial Policy of Kazakhstan

Picking the Winners

Policy Mix relies on various Role Models

Strong Emphasis on Planning

Relevance of Business Organization

4.3.4 Performance

4.3.5 Actor Centricity

4.3.6 Kazakh State Capitalism

Reasons for a Mixed Picture in Performance

Kazakhstan as a Dual Economy State Capitalist System

Avenues for institutional Change

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4.4 Singapore

4.4.1 Preliminaries

4.4.2 Structure

Quality of the Civil service

Structure of the Corporate Sector

Degree of Rule of Law

4.4.3 Policies

Long-term orientation of the state

Changing policy focuses in the course of development

Policy content

Entrepreneurial state

4.4.4 Performance

4.4.5 Actor-centricity

Development as the Basis for Legitimacy

Vulnerability of Singapore

4.4.6 Singapore’s Hybrid Form of Capitalism

Reasons for Singapore’s strong developmental Performance

Singapore as a hybrid form of State Capitalism

Avenues for Institutional Change

4.5 South Korea

4.5.1 Preliminaries

4.5.2 Structure

Quality of the Bureaucracy

Structure of the Corporate Sector

Degree of Rule of Law

4.5.3 Policies

4.5.4 Performance

4.5.5 Actor Centricity

4.5.6 State Capitalism in South Korea

South Korea as State Capitalist

South Korea as state capitalist of the developmental state variant

Institutional Change

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Combination of Market and State Capitalism

End of the EPB

5 Conclusion: Comparative Analysis of Case Studies

Relevance of a capable Bureaucracy

Interdependence of Policies and Structural Components

Goal orientation during Developmental Phases

Credible Commitments as a Functional Equivalent for a limited Degree of Rule of Law

Actor Centricity

Reasons for Performance Differences

6 Annex

6.1 Questionnaire for Field Trips to Russia and Kazakhstan

6.2 Codesystem for Russia

6.3 Codesystem for Kazakhstan

7 Literature