VYTAUTAS MAGNUS UNIVERSITY THE FACULTY OF POLITICAL SCIENCE AND DIPLOMACY THE DEPARTMENT OF REGIONAL STUDIES Ana Novikaite INDUSTRIAL LOCATION AND CONCENTRATION: POLITICAL LOGIC BEHIND AUTHORITARIAN LEADER’S REDISTRIBUTIVE POLICIES. THE CASE OF THE PRC Final Master‟s Thesis East Asia Region Studies programme, Code 62602S106 Field of Studies: Political Sciences Supervisor Dr.Vincentas Vobolevicius ____________ _______ (degree, name, surname) (signature) (date) Defended Prof. Sarunas Liekis_______ ___________ _______ (Dean of the Faculty) (signature) (date) Kaunas, 2011 VYTAUTO DIDŽIOJO UNIVERSITETAS POLITIKOS MOKSLŲ IR DIPLOMATIJOS FAKULTETAS REGIONISTIKOS KATEDRA Ana Novikaitė PRAMONĖS GEOGRAFINĖ PADĖTIS IR KONCENTRACIJA: AUTORITARINIO LYDERIO VYKDOMOS PERSKIRSTYMO POLITIKOS LOGIKA. KINIJOS LIAUDIES RESPUBLIKOS ATVEJIS Magistro baigiamasis darbas Rytų Azijos regiono studijų programa, valstybinis kodas 62602S106 Politikos mokslų studijų kryptis Vadovas Dr.Vincentas Vobolevičius __________ ______ (Moks. laipsnis, vardas, pavardė) (parašas) (data) Apginta Prof. Šarūnas Liekis_______ ___________ _______ (PMDF dekanas) (parašas) (data) Kaunas, 2011 CONTENTS Summary (English) .................................................................................................................................. 2 Summary (Lithuanian) ............................................................................................................................. 3 Abbreviations ........................................................................................................................................... 5 List of figures and tables .......................................................................................................................... 6 Introduction .............................................................................................................................................. 8 1. The logic of political survival of authoritarian leader: model in details ........................................ 12 1.1 Main variables and implications of the selectorate theory .............................................................. 12 1.2 Critical views and adjustment of the selectorate theory: single-party system ................................ 15 2. Redistributive policies as tools of authoritarian leader‟s political survivaL ...................................... 18 2.1. Redistribution in the context of an authoritarian state .................................................................... 18 2.1.1 Redistribution target groups in an authoritarian state ........................................................... 19 2.1.2 Forms and providers of redistribution in an authoritarian developing state ......................... 21 2.2 Industrial policies and redistribution ................................................................................................ 23 2.2.1 Non-tariff measures as a form of redistribution .................................................................... 23 2.2.2 Government-funded R&D as a form of redistribution ......................................................... 24 2.2.3 Industrial concentration as a variable for selective redistributive policies ........................... 25 2.2.4 Location as a variable for selective redistributive policies ................................................... 27 3. The people‟s republic of china as a case study .................................................................................. 29 3.1 Overestimated prospects of growing economy of the PRC ............................................................. 30 3.2 Institutional setting of the PRC and its functioning in the context of redistribution ....................... 33 3.3 Geographical concentration and industrial concentration of industrial sectors in the PRC .......... 37 4. Methods of analysis ............................................................................................................................ 43 5. Industries as receivers of selective redistributive policies: descriptive analysis ............................. 48 5.1 Redistribution and oil & gas extraction and oil processing industries in the PRC ......................... 48 5.2 Redistribution and electronics and telecommunications industry in the PRC ................................ 52 5.3 Redistribution and pharmaceuticals industry in the PRC ............................................................... 54 5.4 Redistribution and tobacco industry in the PRC .............................................................................. 56 6. Relations between factors influencing redistribution to industries in the prc: statistical analysis .. 60 Conclusions ............................................................................................................................................ 65 List of references and sources ................................................................................................................ 68 SUMMARY (ENGLISH) INDUSTRIAL LOCATION AND CONCENTRATION: POLITICAL LOGIC BEHIND AUTHORITARIAN LEADER’S REDISTRIBUTIVE POLICIES. THE CASE OF THE PRC Specialists of political, economic, and other related sciences have been argueing on whether successful economic development is inherent to democratic states, or high levels of economic development are achievel in authoritarian states as well. Witnessing seemingly rapid economic development of China, one could draw a conclusion that authoritarian states may also achieve high levels of economic growth. However, there are scholars, such as P. Krugman, who argue that rapid economic growth is based on the factors that do not ensure its robustness. One of the issues related to the level of economic development is redistribution, which is the object of the paper. The paper aims at finding out what attributes an industry should possess to successfully bargain for political authoritarian leader’s preferential policies in return for its support to the leader. The first hypothesis rests on the selectorate theory related to leader‟s survival, suggested by B.B. de Mesquita, and assumes that an authoritarian leader would choose to support a highly industrially concentrated industry, regardless of its efficiency or social implications. The second assumption contradicts the idea of the most of scholars stating that geographical concentration has no effect on governmental policies in China. Based on the analysis of theories presented by F. McGillivray and Boyer P. who talk, respectively, about redistributive policies and two-tier governments, the second hypothesis suggests that to receive more preferential redistributive policies by an authoritarian leader, an industry would have to be geographically dispersed. The paper is based on the case study of the People‟s Republic of China (PRC). Five industries with different characteristics in industrial and geographical concentration were selected for descriptive and statistical analysis: oil and gas extraction, oil processing, electronics and telecommunications, pharmaceuticals and tobacco industries. The hypotheses have been tested with variables attributable to redistributive policies, and looking at such social factors as percentage of loss suffering companies and number of employees to see whether social implications have influence on redistributive policies directed to industries by an authoritarian leader. By the example of the PRC, the analysis has proven that authoritarian leader chooses to redistribute more to highly industrially concentrated industries. While the hypothesis related to geographical concentration has been partially verified, the descriptive analysis has shown strong tendency by the authoritarian leader to exercise policies aimed at decreasing geographical concentration of industries. 2 SUMMARY (LITHUANIAN) PRAMONĖS GEOGRAFINĖ PADĖTIS IR KONCENTRACIJA: AUTORITARINIO LYDERIO VYKDOMOS PERSKIRSTYMO POLITIKOS LOGIKA. KINIJOS LIAUDIES RESPUBLIKOS ATVEJIS Politikos, ekonomikos ir kitų susijusių mokslo šakų atstovai jau kelis dešimtmečius bando išspręsti klausimą, ar valstybė būtinai turi būti demokratinė, kad jos ekonomika galėtų sėkmingai augti. Stebint spartų Kinijos ekonomikos augimą galima būtų teigti, jog aukštą ekonominio išsivystymo lygį gali pasiekti ne tik demokratinės, bet ir autoritarinės valstybės. Visgi yra tam tikrų mokslininkų, pavyzdžiui, P. Krugman, teigiančių, jog spartus ekonominis augimas remiasi veiksniais, negalinčiais užtikrinti gajaus augimo. Vienas iš tokių veiksnių, turinčių įtakos valstybės ekonominiam išsivystymui, yra perskirstymo politika, kuri ir yra šio darbo objektas. Darbo tikslas yra nustatyti, kokią pramonės šaką bus linkęs palaikyti autoritarinės valstybės lyderis, kad galėtų užsitikrinti jos paramą mainais už palankią perskirstymo politiką. Iškeltos dvi hipotezės. Pirma hipotezė teigia, kad kuo pramonės koncentracija yra didesnė (t.y., kuo mažiau įmonių užima rinką), tuo labiau lyderis yra linkęs palaikyti būtent tą pramonės šaką, nepriklausomai nuo jos našumo ir socialinių aspektų (pvz., darbuotojų skaičiaus ar nuostolingai dirbančių įmonių skaičiaus). Pirma hipotezė remiasi prielaidomis, išvestomis iš B.B. de Mesquita selektorato teorijos, kalbančios apie lyderio politinio išlikimo principus ir logiką. Svarbu paminėti, jog selektorato teorijoje terminu „lyderis“ yra vadinamas ne vienas asmuo, o grupė, užimanti lyderio poziciją valstybėje. Antra hipotezė teigia, kad kuo labiau geografiškai paplitusi yra pramonė, tuo labiau