I. The Neutral State as Referee

In a healthy market economy, the state acts as a referee. It establishes the rules—antitrust legislation, consumer protection regimes, and financial regulatory frameworks—and then steps behind the curtain, allowing firms to compete within those boundaries. The authority of the state derives from its neutrality, not from any preference for particular actors or outcomes.

Under political capitalism, however, this role begins to shift. The state no longer merely sets the rules; it increasingly shapes outcomes. It no longer simply safeguards competitive order but actively selects winners. Market competition is gradually supplemented—and at times supplanted—by political selection.

II. South Korea: The Chaebol System

Following the Korean War, South Korea did not rely on laissez-faire market mechanisms. From the 1960s onward, under Park Chung-hee’s administration, the government deliberately supported specific family-controlled conglomerates—such as Samsung and Hyundai—through centralized administrative power, preferential credit, and policy protection.

This arrangement formed the foundation of the chaebol system. The state provided cheap capital, regulatory advantages, and protected market access; in return, the conglomerates carried out state-directed industrial expansion and export growth strategies. In the short term, this model propelled rapid development, contributing to what became known as the “Miracle on the Han River.”

Over time, however, policy support gradually solidified into structural privilege. Chaebols ceased to function merely as instruments of national development and instead became deeply embedded power centres within South Korea’s political and economic order.

III. The United States: The Transformation of the Trump Era

In the United States, the transformation took a different form. Rather than emerging through systematic industrial planning, it manifested in the expansion of executive discretion and the increasingly tailored application of policy instruments.

Trade tariffs, for example, were no longer solely macroeconomic tools but became politically negotiable instruments. Firms faced not only a general legal framework but also direct administrative pressure, public scrutiny, and individualised negotiation. Economic policymaking began to display increasingly transactional characteristics.

In such an environment, the conditions for corporate success subtly changed. Beyond product competitiveness and market adaptability, political positioning and proximity to policy decision-makers grew in importance. The boundary between commercial logic and political calculation became blurred.

Business success no longer depended entirely on market fit; alignment with power structures became increasingly consequential.

IV. The Subtle Transformation of Markets under Alignment Capitalism

When a company’s success no longer hinges solely on market alignment but increasingly depends on alignment with power structures, the market itself does not collapse immediately. Instead, it undergoes a more subtle yet profound transformation.

In such a transformation, price signals are increasingly influenced by policy signals. The strategic focus of enterprises is gradually shifting from enhancing efficiency and innovation towards maintaining relationships, mitigating political risks, and securing policy space. Competition persists, yet its core variables have undergone a shift. Success or failure no longer hinges solely on cost control or technological breakthroughs, but rather on whether one can gain visibility on the policy radar and secure inclusion within the national economic sphere.

This system is neither a planned economy in the traditional sense nor pure free-market capitalism. It resembles capitalism with a political screening mechanism, which is more suitable to call “Alignment Capitalism”. The market has not been abolished but reordered—the rules remain, yet their intensity and direction of application have become differentiated.

Crucially, why do governments gradually accept, and even actively promote, such transformations? The answer is often straightforward. When economic growth becomes the primary source of political legitimacy, states tend to rely on entities capable of rapidly generating growth. Enterprises, monopolistic conglomerates, and state-backed enterprises thus became crucial pillars of power stability. While the neutrality of the system was not openly repudiated during this process, it began to recede into the background.

However, this arrangement is not without its costs. Small and medium-sized enterprises find themselves marginalised in asymmetric competition, while entrepreneurs adopt a more conservative stance within an uncertain policy environment, with innovation being supplanted by risk aversion. When power becomes a variable in competition, the losers are no longer merely the less efficient, but may well be those deemed politically inappropriate. Consequently, the market’s sense of fairness is eroded.

The structure of political capitalism often appears most stable during periods of prosperity. Growth masks privilege, efficiency conceals dependency, and success obscures structural bias, as exemplified by South Korea. The problem lies in the fact that this stability is highly dependent on sustained expansion. Once growth slows, the interdependence between power and capital quickly exposes its inherent fragility. The state becomes more reliant on corporations, corporations grow more dependent on the state, and institutional space contracts further.

The transition did not occur overnight. It represents a gradual shift in logic, a reordering of the sources of legitimacy, and a redefinition of market roles. This, precisely, constitutes the most alarming structural transformation of political capitalism within contemporary democracies.

Featured image: Nelson Ndongala via Unsplash