State-Sponsored Capitalism and the Erosion of Liberal Democracy

Can consolidated democracies experience "de-democratisation"? This chapter examines how state-sponsored capitalism undermines liberal democracy by enabling clientelism. Governments in state-dominated economies allocate privileges such as subsidies, contracts, and regulatory permits to reward loyalty and silence dissent. This compromises civil society's autonomy, creating conditions for political hegemony and democratic backsliding.

This paper emphasizes how clientelist networks empower incumbents to weaken opposition, manipulate elections, and escalate repression with electoral impunity. It identifies state sponsorship as a critical factor enabling autocratisation, where socioeconomic dependence on government discretion stifles contestation. To counter this trend, institutional reforms are essential to limit state discretion, promote impartiality in economic regulation, and preserve democratic resilience.