Prospects and Challenges of State Capitalism as Economic Policy: A Review

Abstract

The renewed prominence of state-capitalism in contemporary economic policy debates reflects increasing concerns over market failures, global economic volatility, and the limitations of liberal market–oriented models. Across diverse political economic contexts, governments have expanded their use of state-led instruments to manage strategic sectors, stabilize macroeconomic conditions, and support long-term development. At the same time, the growing role of the state has intensified debates regarding efficiency, governance quality, and global economic integration. This study systematically reviews and synthesizes the contemporary academic literature on state capitalism as an economic policy framework, with a focus on its prospects and challenges across varying
institutional environments. This study employs a qualitative Systematic Literature Review (SLR) methodology. Data were collected through a structured search of the Scopus database. An initial search using the keywords “State Capitalism AND Economic Policy” yielded 2,098 articles. Through sequential screening based on relevance, publication period (2020–2025), language, and open-access availability, 39 peer-reviewed journal articles were selected for final analysis. The selected studies were examined using thematic synthesis to identify recurring patterns in conceptual, institutional, economic, and governance-related areas. The review identifies five dominant thematic domains: conceptual diversity and typologies of state-capitalism; policy instruments and institutional mechanisms; economic performance and developmental outcomes; governance risks and market distortions; and political and global integration constraints. The findings indicate that state-capitalism can enhance strategic coordination, crisis resilience, and early-stage development in contexts with strong institutional capacity. However, weak governance structures are associated with persistent challenges, including inefficiency, accountability deficits, elite capture, and international economic frictions. In conclusion, state-capitalism should be understood as a context-dependent economic policy framework whose outcomes are shaped by institutional design, governance quality, and political–economic conditions. Future research should prioritize comparative and longitudinal approaches to better capture the evolving dynamics and long-term implications of state-capitalist policies.