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 -- has risen disproportionately among single party regimes as a way to address these dual threats. Single 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.

Richard W. Carney is a Fellow in the Department of International Relations located in the College of Asia and the Pacific at the Australian National University. His research and teaching are in the areas of international and comparative political economy with a focus on corporate governance and finance in East Asia. He has published articles in many academic journals including the Journal of Financial Economics, the Journal of East Asian Studies, and Business and Politics. He is also the author of the book Contested Capitalism: The Political Origins of Financial Institutions, and editor of the book Lessons from the Asian Financial Crisis. He was a Jean Monnet Fellow at the European University Institute in Fiesole, Italy (2003-04), and has held visiting positions at INSEAD. He holds a Ph.D. in Political Science (UCSD 2003). Before joining the ANU in 2011, he was an Assistant Professor in Singapore.

In Singapore the People’s Action Party has held power continuously since 1959, having won 13 more or less constrained legislative elections in a row over more than half a century. In Malaysia the Alliance Party and its heir, the National Front, have done nearly as well, racking up a dozen such victories over the same 54-year stretch. These records of unbroken incumbency were built by combining rapid economic growth with varying degrees and types of political manipulation, cooptation, and control. 

In both countries, as living standards improved, most people were content to live their lives quietly and to leave politics to the ruling elite. In the last decade, however, quiescence has given way to questioning, apathy to activism, due to policy missteps by the ruling parties, the rise of credible opposition candidates, increasing economic inequality, and the internet-driven expansion of venues for dissent. 

As the ground appears to shift beneath them, how are the rulers responding? Will their top-down politics survive? How (un)persuasive have official warnings against chaotically liberal democracy become? Are ethno-religious and even national identities at stake? Are comforting but slanted historical narratives being rethought? And how principled or opportunistic are the agents of would-be bottom-up change? 

Sudhir Thomas Vadaketh is the author most recently of Floating on a Malayan Breeze:  Travels in Malaysia and Singapore (2012) and The End of Identity? (2012). Before joining The Economist Group in Singapore in 2006 he was a policy analyst on foreign investment for the government of Dubai. He has written for many publications, including The Economist, ViewsWire, and The Straits Times, and been widely interviewed by the BBC and other media. He earned a master’s degree in public policy from the Kennedy School (Harvard, 2005) after receiving bachelor degrees in Southeast Asian studies and business administration (UC-Berkeley, 2002). His service in the Singapore Armed Forces in the late 1990s took him to Thailand, Taiwan, and Australia.