Table Of Content

ThePerilsofInternationalCapital Can foreign capital empower dictatorships? In this book, Faisal Z. Ahmed offers a unified theory of the impact of three prominent types of international capital – foreign aid, migrant remittances, and foreign direct investment – on the survival of dictatorships. Existing scholarship that examines different types of international capital in isolation misestimates their effects. The book’s unified theoretical approach clarifies the channels through which a strategically oriented government can leverage each type of capital flow to finance two important instruments of nondemocratic politics: repression and patronage.Thebook’smethodologicalapproachtakesseriouslyques- tionsofcausalidentification,exploitingplausiblyexogenousvariation in capital flows to more precisely estimate their effects. In doing so, Ahmed introduces creative ways to turn the observable world into a quasi-experimentallaboratory.Thebook’s theory,casestudies, and cross-nationalstatisticalevidencedemonstratehowinternationalcapi- tal can foster authoritarian politics. These findings challenge many existing studies andcontribute toseveral importantliteratures in eco- nomicsandpoliticalscience. Faisal Z. Ahmed is an assistant professor of politics at Princeton University.Hisresearchfocusesonpoliticaleconomyandinternational economics.Ahmed’s workonthepoliticaleconomyofforeigncapital has appeared in journals in economics and politics, including the American Political Science Review and Review of Economics and Statistics.HehasheldfellowshipsatNuffieldCollegeandtheHoover Institute and served as an international and macroeconomist at the White House Council of Economic Advisers and the Federal Reserve BankofChicago. The Perils of International Capital FAISAL Z. AHMED PrincetonUniversity UniversityPrintingHouse,CambridgeCB28BS,UnitedKingdom OneLibertyPlaza,20thFloor,NewYork,NY10006,USA 477WilliamstownRoad,PortMelbourne,VIC3207,Australia 314–321,3rdFloor,Plot3,SplendorForum,JasolaDistrictCentre, NewDelhi–110025,India 79AnsonRoad,#06–04/06,Singapore079906 CambridgeUniversityPressispartoftheUniversityofCambridge. ItfurtherstheUniversity’smissionbydisseminatingknowledgeinthepursuitof education,learning,andresearchatthehighestinternationallevelsofexcellence. www.cambridge.org Informationonthistitle:www.cambridge.org/9781108488655 DOI:10.1017/9781108771146 ©FaisalZ.Ahmed2020 Thispublicationisincopyright.Subjecttostatutoryexception andtotheprovisionsofrelevantcollectivelicensingagreements, noreproductionofanypartmaytakeplacewithoutthewritten permissionofCambridgeUniversityPress. Firstpublished2020 PrintedintheUnitedKingdombyTJInternationalLtd.PadstowCornwall AcataloguerecordforthispublicationisavailablefromtheBritishLibrary. LibraryofCongressCataloging-in-PublicationData Names:Ahmed,FaisalZ.,author. Title:Theperilsofinternationalcapital/FaisalZ.Ahmed. Description:Cambridge,UK;NewYork,NY:CambridgeUniversityPress, 2019.|Includesbibliographicalreferences. Identifiers:LCCN2019020883|ISBN9781108488655(hardback)| ISBN9781108726856(paperback) Subjects:LCSH:Economicassistance–Politicalaspects–Developingcountries.| Investments,Foreign–Politicalaspects–Developingcountries.|Economic development–Politicalaspects–Developingcountries. Classification:LCCHC60.A452252019|DDC338.9109172/4–dc23 LCrecordavailableathttps://lccn.loc.gov/2019020883 ISBN978-1-108-48865-5Hardback ISBN978-1-108-72685-6Paperback CambridgeUniversityPresshasnoresponsibilityforthepersistenceoraccuracyof URLsforexternalorthird-partyinternetwebsitesreferredtointhispublication anddoesnotguaranteethatanycontentonsuchwebsitesis,orwillremain, accurateorappropriate. Tomyparents,SuraiyaandZiauddinAhmed Contents ListofFigures pageviii ListofTables ix Acknowledgments x 1 ThePoliticsofInternationalCapital 1 2 InternationalCapitalandAuthoritarianSurvival:ADescriptive Overview 24 3 ForeignRentsandRule 42 4 AidingRepression 76 5 RemittancesandAutocraticPower 103 6 ForeignDirectInvestmentinMilitarism 126 7 Conclusion 152 References 167 Index 181 vii Figures 1.1 Totalinflowsofforeignaid,migrantremittances,andFDI todevelopingcountries page4 1.2 Cumulativeinflowsofinternationalcapital,2000–2015 5 2.1 Totalforeignaid,remittances,andFDIworldwide,1970–2015 28 2.2 Leadertenureandinternationalcapitalinstrongautocracies 33 2.3 Leadertenureandinternationalcapitalinweakautocracies 34 2.4 Leadertenureandinternationalcapitalindemocracies 35 2.5 Marginaleffectofinternationalcapitalonleaderexitatvarying levelsofautocracy 39 2.6 Marginaleffectofinternationalcapitalonleaderexitatvarying levelsofautocracy,withcountryandyearfixedeffects 40 3.1 Taxeffortandpoliticalrights 47 3.2 Publicsectorcompensationanddemocraticgovernance 54 3.3 Governmentwelfarepaymentsanddemocraticgovernance 57 3.4 Defenseburdenanddemocraticgovernance 58 3.5 Defenseburdeninautocraciesanddemocracies,1986–2015 58 3.6 Corruptionanddemocraticgovernance 60 4.1 USbilateraleconomicaid,1960–2009 80 4.2 USeconomicaidtoSomalia,1960–1990 85 4.3 FragmentationintheUSHouseofRepresentativesandaverage USbilateralaiddisbursements 88 4.4 AnnualprobabilityofreceivingUSaid(P)andaverageUSbilateral i economicaid 89 4.5 AnnualprobabilityofreceivingUSaid(P)andannualvariation i (standarddeviation)inUSbilateraleconomicaid(bycountry) 90 5.1 Oilpricesandremittances 108 5.2 ForeignrentsandexecutiveconstraintsinEgypt 123 5.3 ForeignrentsandexecutiveconstraintsinJordan 124 viii Tables 2.1 Toprecipients(asapercentageofGDP)offoreignaid,remittances, andFDI:Countryaverageoverthe2000–2015period 29 2.2 Compositionofinternationalcapital,1970–2015 30 2.3 Politicalinstitutionsandthetenureofleaderssince1960 32 2.4 Marginaleffectofinternationalcapitalandpoliticalinstitutions onleaderexit 38 3.1 Politicalrepressioninautocraciesanddemocracies 51 3.2 Channels 63 4.1 PoliticalinstitutionsandpoliticalrepressioninSomalia,1960–2010 83 4.2 USaidharmspoliticalrights 94 4.3 Evaluatingthechannels 97 4.4 USaidfostersauthoritarianstability 99 4.5 PoliticalsurvivalinUSaidrecipients 101 5.1 RemittancesanddistancetoMecca 109 5.2 Executiveconstraintsandpoliticalsurvival 111 5.3 PretreatmentcharacteristicsbetweenMuslimandnon-Muslim countriespriortooilpriceshock 113 5.4 Remittancesstrengthenauthoritarianpolitics 114 5.5 Remittancesandpublicfinances 117 5.6 Remittancesraisecorruption 119 5.7 Discountingotherchannels 120 6.1 Aresuccessfulandfailedoilexplorationssimilar? 134 6.2 Newoildiscoveriesincreasemilitaryspendinginnondemocracies 136 6.3 Oildiscoveriesdonotspursecuritycompetition 139 6.4 OildiscoveriesincreaseFDIandmilitaryspending 140 6.5 Discountingotherchannels 142 6.6 Oildiscoveriesarenotpoliticallydestabilizing 144 7.1 Theperilsofinternationalcapital:Summaryoffindings 154 ix