Crisis management and the varieties of capitalism: Fiscal stimulus packages and the transformation of East Asian state-led capitalism since 2008

This paper contributes to the understanding of the diversity of capitalism by combining approaches from comparative political economy and development studies, notably developmental state theory. We show that different types of capitalism react differently to global shocks and offer some support for the classic varieties of capitalism argument that external pressure leads to the reinforcement of historically evolved institutions. Moreover, we make several departures from established theories on the variety of capitalism, namely, their Eurocentric bias, their under-theorization of the role of the state, and the methodological conservative bias of institutionalist approaches. At the empirical level, this paper studies the reaction of East Asian countries (China, Japan and Korea) to the global financial crisis with a focus on fiscal stimulus packages that were implemented from 2008 to 2010. Unlike in the West, where a (short-lived) revival of Keynesianism could be observed, East Asian governments implemented large fiscal stimulus packages with strong elements of industrial policies. This paper argues that the size and character of fiscal stimulus packages can be explained by a path dependency of developmental state capitalism. In addition, the paper examines the substantial changes in the transformation from an old-style developmental state to a neo-developmental state.