OPEN ECONOMIES, CLOSED POLITIES: FINANCIAL GLOBALIZATION and AUTHORITARIAN POLITICS a Dissertation Presented to the Faculty of T
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OPEN ECONOMIES, CLOSED POLITIES: FINANCIAL GLOBALIZATION AND AUTHORITARIAN POLITICS A Dissertation Presented to the Faculty of the Graduate School of Cornell University in Partial Fulfillment of the Requirement for the Degree of Doctor of Philosophy by Igor O. Logvinenko January 2015 © 2015 Igor O. Logvinenko OPEN ECONOMIES, CLOSED POLITIES: FINANCIAL GLOBALIZATION AND AUTHORITARIAN POLITICS Igor O. Logvinenko, Ph. D. Cornell University 2015 This project investigates financial openness policies of authoritarian regimes during the modern age of globalized finance. Over the last quarter-century, increasingly restive publics and heightened international mobility of capital have complicated the task of governing authoritarian regimes. Financial globalization created immense opportunities for enrichment and further power consolidation, but it also made authoritarian elites increasingly vulnerable to political challenges that some regimes are better equipped to handle than others. Given this conundrum, I set out to explore the answers to the following questions: Why do some authoritarian regimes opt for greater financial openness than others? How are these decisions related to the tactics these regimes employ to remain in power? How does the nature of the asset base in the economy impact these decisions? This thesis develops a theoretical framework to address these questions, and also evaluates this theory empirically. I construct a game-theoretical argument that endogenizes financial openness policies in a model that accounts for the profit opportunities from openness and the risks associated with increased economic volatility for the authoritarian elites. I argue that when rulers consider adopting a policy of financial openness, they also take into account their ability to maintain political stability after doing so. Greater financial openness is a “double-edged sword”: it can increase the value of specific assets, but it can also make the economy more susceptible to external crises. Capacity to use distributive policies to deal with political instability resulting from greater exposure to global financial markets allows authoritarian regimes to afford more financial openness. The argument is then evaluated in the cases of Russia, China and Kazakhstan. The empirical assessment confirms that a combination of control over country-specific wealth and a developed capacity for redistribution allow an authoritarian regime to “have it all,” that is to maintain both openness and political stability. BIOGRAPHICAL SKETCH Igor Logvinenko was born in 1983 in Bishkek, Kyrgyzstan (formerly Frunze, Kyrgyz Soviet Socialist Republic, USSR). After graduating from Physics & Math School-Lyceum No 61 in 2000, he was selected to participate in the Foreign Leaders Exchange (FLEX) Program sponsored by the United Stated Department of State. He spent the 2000-01 academic year at Green Valley High School in Henderson, Nevada. Before enrolling in the doctoral program at Cornell, Igor earned an associate’s degree from the Southwestern Community College in Chula Vista, California (2003); a Bachelor’s of Arts in International Relations and Economics with highest honors from the University of Redlands (2005); and an M.A. in political science from Villanova University (2007). In 2011 he received an M.A., and in 2014 a Ph.D., both in Government from Cornell University. In September of 2014, Igor began his appointment as a Postdoctoral Fellow at the Harriman Institute at Columbia University in the City of New York. v To my parents, Oleg and Elena Logvinenko. vi ACKNOWLEDGEMENTS This dissertation has occupied the center stage of my life for the past four years. Looking back, it seems clear that intellectual fulfillment, opportunities, friends and colleagues it has brought to me far outweigh the anxieties that accompanied me on this journey. But it appears this way only in retrospect. There were long periods of time when I did not see the light at the end of the tunnel, or even the tunnel itself. I succeeded because of the kindness and generosity of other people. They say that dissertation writing is a lonely endeavor, but I never felt isolated because of the support of my family, friends and advisors provided. It took a small village of smart and kind people to make the dissertation possible, and it would be impossible to properly acknowledge everyone’s contribution. This is my imperfect attempt. To my chair, Valerie Bunce, you were an ideal dissertation advisor and mentor. Your almost instinctual acumen for authoritarian politics was surpassed only by your encyclopedic knowledge of political science and the history of Eastern Europe and Eurasia. Your patience and kindness over the past few years will always inspire me to be a better teacher and mentor to my own students. To Tom Pepinsky, thank you for your professionalism, sharp intellect, and generosity. I hope you know how much I appreciate your taking the time to read the second, and the third drafts with the same keen attention to detail. You went far beyond your duty, and for that I am so thankful. To Jonathan Kirshner, your seminars created some of the most lasting memories during my time at Cornell, and your critiques of my work were always the most piercing. Should I ever produce a piece of scholarship that possesses half of the clarity and conviction of your own writing, I shall consider my academic career a success. vii I am profoundly indebted to Rawi Abdelal, Christopher Anderson, Ron Herring, Peter Katzenstein, Kevin Morrison, Eswar Prasad and Christopher Way. To Andrew Little, I deeply appreciate your time and the wonderful feedback you provided as my external reader. Special thanks go to my Villanova mentors and friends Jeff Hahn, Maria Toyoda and Markus Kreuzer. Without you, none of this would have been possible. In a very practical sense, however this dissertation could not have been completed without the Government Department’s real bosses: Tina Slater and Judy Virgilio. Thank you both for the dozens of instances of everyday kindness that you extended to me, both in the environs of White Hall and when I was thousands of miles away. We are so lucky to have you. I was surrounded by a group of extraordinary people in graduate school whom I am now proud to call my friends. I am grateful for all the support, encouragement and the late night conversations on our walks down that hill. I learned more important lessons from my fellow doctoral students than from any other source in the program, and most of it had relatively little to do with political science. Phil Ayoub, Jaimie Bleck, Michael Dichio, Don Leonard and Pablo Yanguas, you were there for the highs and the lows. I could try searching for words to express how much your friendship means to me, but the beautiful thing is that I don’t have to. I cannot wait to see what kinds of adventures await us in the coming years and decades. I would like to especially mention Julie Ajinkya, Ben Brake, Berk Esen, Simon Gilhooley, Janice Gallagher, Desmond Jagmohan, Pinar Kemerli, Deondra Rose, Tariq Thachil and Chris Zepeda. The memories that we share are what I will treasure most of all from my years at Cornell. To my dear friends Frank and Ruth Ann Walker, Lauren viii McCarthy, Daniel McKenna-Foster, Joshua Naggar, Po Saidi, David Scherer and Jack Welch, thank you for being there when the going got tough. I am thankful for the financial support of my fieldwork and data collection to a number of institutions, including the Mario Einaudi Center for International Studies, the Judith Reppy Institute for Peace and Conflict Studies, the Graduate School (all at Cornell), and the Open Society Institute. I am also indebted to the organizers and participants of three workshops that bookended the research and writing process: the “Globalizing Eurasia'' workshop sponsored by the Social Science Research Council and the Davis Center for Russian and Eurasian Studies at Harvard University; the DC Area Postcommunist Political Science Workshop at George Washington University; and finally the Dissertation Workshop in Global Political Economy organized by the Balsillie School of International Affairs. My fieldwork took me to four cities in three countries over the course of one difficult but rewarding year. Looking back, I am endlessly amazed by the consideration extended to me by the erstwhile strangers I met in Moscow, Almaty, Astana and Beijing. I would like to especially thank Paul Abelsky, Miriam Elder, Maria Snegovaya, Aytym Nukenov, Caress and Brian Schenk, and Elena Lim. I am also deeply appreciative of all the individuals who agreed to be interviewed for the project. Without the willingness to share your time and knowledge, this project would have never gotten off the ground. To my fiancée, Sayda Zelaya, I thank you for your patience during all those late nights and weekends. I am so grateful for the good fortune that brought us both to Washington D.C., and I am so excited for the new beginnings that lay before us. ix Finally, the biggest debt of gratitude — one that I will never be able to fully repay — is owed to my parents and my sister. To Alena, thank you for your thoughtful support, willingness to occasionally take on tough assignments and your inexorable optimism. I know that in many ways I can be here, because you are there. To my parents, your unrelenting love and unconditional support have given me the confidence to complete this project. I am so glad that we are so close, despite being so far away. With all my love and deepest gratitude, I dedicate this