Overview:

How do authoritarian regimes manage the political risks resulting from globalization? I argue that economic interdependence presents a double-edged sword. Openness facilitates the economic growth necessary for maintaining popular and elite support. At the same time, uneven distributional effects can pose both short and long-term risks to authoritarian stability. My book project focuses on the case of China, the world’s largest trading nation and one of its most durable authoritarian regimes. Using evidence from fieldwork in five Chinese cities and an original, subnational panel, I show that the Chinese regime has managed globalization through a mix of state-led redistributive strategies, including decentralized social policy and targeted compensation, which I call '“embedded liberalism with Chinese characteristics”. At the same time, responding to the political risks caused by globalization can require the use of statist interventions in the economy, interventions for which authoritarian regimes have both means and motive. These statist interventions, designed to maintain stability, constitute a political limit to economic liberalization in authoritarian regimes. I argue that in the face of trade shocks, regimes turn to statist interventions that facilitate spatial redistribution and industrial reallocation, reducing short and long-term political risks. To test my argument, I create a subnationally-disaggregated measure of trade shock exposure for China, based on the location and industrial classification of all Chinese firms, combined with product-level data on changes in US imports following the 2008 financial crisis. Leveraging the crisis as an exogenous shock, I show that, counter-intuitively, the Chinese regime responded with a state-led geographical reallocation, shifting government investment toward regions less negatively impacted by the shock, reinvesting in state-owned enterprises, and catalyzing industrial upgrading to reduce economic interdependence and future risks. This statist intervention partially attenuated political risks, but also halted broader market-based reforms and empowered local state actors. The legacy of China's responses include industrial overcapacity, excessive debt, and active state-directed industrial and technology policies, such as "Made in China 2025". This project advances research on how authoritarian regimes respond to the distributional effects of globalization, as well as the consequences of these responses for economic liberalization and authoritarian trade and industrial policies.

 

Chapter Outline:

1. Theoretical Framework: Political Risks and the Limits to Economic Liberalization

2. Political Risks of Economic Interdependence

3. Embedded Liberalism with Chinese Characteristics: Fiscal Dimensions

4. Embedded Liberalism with Chinese Characteristics: Social Policy

5. Trade Shocks: Global Crises, Domestic Stability

6. Statist Legacies: China's Trade and Industrial Policies

7. Economic Interdependence and Democratic Redistribution: China in Comparative Perspective

8. Concluding Implications