Financialization under state capitalism: a comparative analysis of state and capital markets in emerging markets
Funded by the German Research Foundation (DFG), Goethe University Frankfurt (project-no.: NO 855/7-1; 2020-2024)
Andreas Nölke, Kai Koddenbrock and Johannes Petry (PI)

In recent years, a large literature has emerged around the concept of state capitalism as a central feature for successful catch-up industrialization, economic coordination and national development. In discussions about state capitalism, finance plays a major role; some scholars even suggest that state capitalism emerged as a response to financial globalisation as emerging economies vowed to decrease their dependence on global capital markets. However, when it comes to detailed empirical studies on finance, most state-capitalism literature focuses on banks, which have historically been the main providers of corporate financing. In recent years, however, capital markets have grown rapidly and taken on more important roles in many state capitalisms.

Yet, in the existing state capitalism literature, capital markets have only been systematically analysed with regard to the state ownership of listed firms (e.g. SOEs, SWFs). Processes of financialization and thus the growing role of capital markets in general have often not been a focus of analysis. This is unfortunate, as findings from the literature on financialization in emerging markets highlight an increasing state involvement in the development and functioning of capital markets. According to this literature, in some cases, the relationship between the state and finance in these economies is fundamentally different from institutional arrangements in the Global North. The questions then are (1) to what extent these differences exist and (2) how state capitalist economies facilitate capital market development and make it compatible with developmental logics or state-led economic coordination. Hence, instead of looking at capital markets as uniform entities, we propose to analyse them as variegated – while characterised by market mechanisms, different institutional logics can underlie capital markets, leading to very different market dynamics and outcomes.

However, there is an absence of systematic and theory-led cross-country studies on these issues. With the increasing financialization of emerging markets, the link between state capitalism and capital markets requires closer scrutiny. By situating capital markets within state capitalism, this project proposes a theory-led comparative analysis of financialization processes across emerging markets that explores whether capital markets in state capitalist economies function differently, fulfil a different socio-economic role and lead to different societal outcomes than ‘global’ capital markets which often supersede state logic and constrain state power.

Therefore, project develops a ‘varieties of emerging capital markets’ typology through a comparative analysis of capital markets in emerging economies. For this purpose it establishes ‘state-capitalist capital markets’ as an ideal type and distinct form of capital market, separate from ‘neoliberal capital markets’ and conducts a comparative institutional analysis of capital markets and their development in increasingly financialised state capitalist economies, including Brazil, China, India, Russia, South Africa and South Korea.

Through this project, we bring together three central concepts in political economy literature: state capitalism, neoliberalism and financialization. We argue that rather than being uniform, capital markets can function according to different logics – which we place on a continuum between neoliberalism and state capitalism – and which consequently has important consequences for the socio-economic outcomes these markets produce. Therefore, our findings have important implications for political economy debates on the transformation of state capitalisms, trajectories of financialisation, neoliberalism as a policy paradigm as well as the study of capital markets.