Foreign direct investment and the politics of autocratic survival

Abstract

In this dissertation, I argue and show that foreign direct investment (FDI) bolsters autocratic rule and hinders democratization. FDI helps to coopt the regime elite and intensifies the belief of the middle class in the legitimacy of autocratic rule through its distributional consequences. Because both so-cietal groups see no reason to act against the incumbent regime on material grounds, FDI weakens pressures for regime change among the essential mem-bers of the autocratic support coalition. Consequently, I hypothesize that au-tocratic regimes are less likely to experience elite coups and popular uprisings and are, thus, more likely to maintain power. I substantiate this argument with a detailed empirical analysis. I demonstrate that dictators consciously choose the level and form of exposure to FDI in line with the preferences of their support coalition. I also show that the beneficiaries of FDI hold a much more favorable view of the incumbent regime and are less likely to instigate public protests than the adversely affected part of the population. Lastly, I find that FDI lowers the probability of autocratic regime breakdown. In essence, FDI has not only become the new pacemaker of economic globalization, but portrays sizable and lasting, but often unintended political consequences.