Political Parties,State Capacity,and Economic Rise And Fall ——Evidence From East Asian Economies

For decades,academic circles have had heated discussions on the origins behind the East Asian economic developments.Most economists have affirmed the importance of internal factors such as government,industrial policy,institutions and culture in the economic growth of countries from an economic perspective.However,the deeper roots behind the region’s economic rise and fall are still controversial and continue to attract academic attention,especially for political parties,a key variable that continues to shape the political economy of countries and is ignored by most studies.Having experienced the global financial crisis,the wave of reverse globalization,and the recent shock of COVID-19,the world economy has provided us with a new series of quasinatural experiments to revisit this issue;at the same time,as the global economy enters a new mediocrity,effective responding to many negative shocks in the economic and social fields and revitalizing the national economy has become the top priority of policy makers in various countries,so the in-depth discussion of this issue has unique practical significance.Based on a perspective of state capacity,this paper establishes a theoretical analysis framework on political parties and the rise and fall of national economies,and empirically tests the causal relationship between political party strength and national economic development using the instrumental variables approach with data from 1950-2019 for East Asian economies,and analyzes the impact mechanism behind it from the perspective of state capacity.The results show that there is a significant causal relationship between strong political parties and the sustained and stable operation of the macro economy.It significantly increases the short-term and long-term economic growth rates of East Asian economies,and reduces the probability of crises.Considering that there may be constraints on the impact of party power on a country’s economic growth,especially when there are differences in the structure of the party system and party relations,the impact of party strength on the economy may also have different characteristics,we conduct an extended analysis to discuss the impact of government fragmentation and political polarization on both.The results show that the role of party strength in driving economic growth decreases with increasing government fragmentation and political polarization,and the political games of different groups significantly limit the role of party power in promoting a country’s economy.Mechanistic studies show that state capacity is the main channel through which political parties enhance economic performance: strong parties can bring about significant increases in social control and give governments greater resource extraction capacity;strong parties will also bring about more efficient resource allocation and use.Strong political parties bring about an overall increase in state capacity,which in turn has contributed to the rise of East Asian economies.The tests and case studies based on the COVID-19 also reconfirm the above conclusions.The research in this paper provides a new perspective to explain the economic development of East Asia;it also implies that strengthening China’s ruling party can shape strong state capacity and contribute to healthy domestic economic and social development in the midst of major world changes.