Foreign Direct Investment and Political Preferences in Non-Democratic Regimes

• Published date: 01 July 2024
• DOI: http://doi.org/10.1177/00104140231194058
• Author: Tobias Rommel
• Date: 01 July 2024
• Subject Matter: Articles

Article

Comparative Political Studies

2024, Vol. 57(8) 1276–1309

© The Author(s) 2023

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DOI: 10.1177/00104140231194058

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Foreign Direct

Investment and Political

Preferences in

Non-Democratic

Regimes

Tobias Rommel

1



Abstract

How does economic globalization affect regime support in non-democratic

regimes? While we know a lot about how globalization affects politics in

democracies, we know only little about its impact on political preferences in

autocracies. I focus on FDI, which has increased considerably over the last

decades and affects low- and high-skilled individuals differently. Material risks

associated with FDI decrease regime support only among the poorly edu-

cated; economic gains from FDI bolster support for the incumbent regime for

well-educated individuals. I present two analyses that corroborate these

hypotheses. Study 1 uses Afrobarometer data and matches respondents with

geo-located data on FDI. To mitigate selection problems, I only compare

individuals that are exposed to FDI with individuals that are not yet exposed at

the time the survey was administered. Study 2 utilizes cross-national survey

data from 14 autocracies. My f‌indings explain why some citizens favor the

political status quo, even in autocracies.

1

Technical University of Munich, München, Germany

Corresponding Author:

Tobias Rommel, Hochschule für Politik München, Technical University of Munich, Richard-

Wagner-Straße 1, München 80333, Germany.

Email: tobias.rommel@hfp.tum.de

Data Availability Statement included at the end of the article

Keywords

foreign direct investment, autocratic regimes, citizen support, economic

globalization

Introduction

How does economic globalization affect autocratic regime support? While the

answer to this question is crucial for autocratic governance in open world

markets, we still only have a limited understanding of the micro-foundations

of economic globalization in non-democracies. Nevertheless, prominent ar-

guments assert that globalization supposedly undercuts autocratic regime

stability. Such arguments on the macro-level usually rest on two different

theoretical mechanisms on the micro-level. On the one hand, economic

globalization increases market income, which ultimately strengthens and

reinforces attitudes in favor of democracy among members of the middle

class, which have long been described as drivers of democratization (Lipset,

1959;Rosenfeld, 2021;Welzel, 2007). On the other hand, economic glob-

alization in developing countries reallocates market income from capital to

labor, which causes democratization because the latter develop preferences for

democracy and the former face fewer redistributive losses under democracy

(Acemoglu & Robinson, 2006;Ahlquist & Wibbels, 2012;Boix, 2003).

This article sets out to put both micro-level mechanisms under scrutiny and

thus contributes to two ongoing debates: First, in international political

economy scholars disagree about the nature of the distributional consequences

of globalization (Men´

endez Gonz´

alez et al., 2023), that is, it remains unclear

who the most likely benef‌iciaries and losers from international openness are.

Factoral or Heckscher–Ohlin models posit that skill-level is the only decisive

factor to distinguish between winners and losers. Sectoral or Ricardo–Viner

models arrive at predictions about distributional consequences based on actual

exposure. In applying new insights from the trade literature (Helpman, 2014;

Helpman et al., 2010;Melitz, 2003;Palmtag et al., 2020;Walter, 2017), I

argue that the distributional implications are more heterogeneous than pre-

viously assumed. Whether an individual gains or stands to lose is contingent

on both skill-level and actual exposure to international markets.

Second, in comparative politics scholars ascribe mass attitudes a crucial

role in regime trajectories (Mainwaring & P´

erez-Liñ´

an, 2014;Neundorf et al.,

2022;Przeworski, 2022), despite the institutional turn in comparative research

on authoritarianism (Pepinsky, 2014). Yet,there is considerable disagreement

as to how economic developments shape individuals’attitudes toward po-

litical regimes. One strand of research argues that economic performanc e

caused by modernization amplif‌ies citizens’beliefs in the legitimacy of the

authoritarian rule, which increases the stability of autocracies (Gerschewski,

Rommel 1277

2013;Guriev & Treisman, 2020;Wintrobe, 1998), especially when the

emerging middle class is dependent on the state (Bellin, 2010;Rosenfeld,

2021). Others contend that modernization strengthens demands for democ-

racy, for instance, by enhancing education levels (Lipset, 1959;Sanborn &

Thyne, 2014), reinforcing self-expression or emancipatory values (Inglehart

& Welzel, 2005;Welzel, 2007), or via demands for income redistribution

(Acemoglu & Robinson, 2006;Boix, 2003). A third group of scholars doubts

that modernization has the potential to shape regime preferences, as they argue

that people’s demands for specif‌ic regimes are biased toward the regime they

currently live in (Dahlum & Knutsen, 2017;Hadenius & Jan, 2005;Seligson,

2002).

I focus on the globalization of production in the form of foreign direct

investment (FDI). FDI has been on an astounding rise over the last decades—

in democracies and in autocracies—and has become one of the most important

facets of international economic openness (Pandya, 2016). Technological

advances allowed countries to attract international sources of capital. And

multinational corporations frequently exploited locational advantages outside

their home countries to increase revenues (Jensen, 2006). Simultaneously,

developing and developed countries have progressively granted multinational

corporations access. As such, foreign investment has had and continues to

have a tremendous potential to restructure the domestic economy of host

countries (Feenstra & Hanson, 1997;Pandya, 2014). Unsurprisingly, studies

have uncovered sizable political consequences. Scheve and Slaughter (2004)

f‌ind that FDI increases feelings of economic insecurity. Owen (2019) argues

and f‌inds that FDI is mostly benef‌icial for the population and thus increases

the probability of incumbent party re-election in local elections. Going a step

further, Walter (2010) argues for heterogeneous effects. She shows that

economic insecurity induced by FDI translates into preferences for redistri-

bution and leads citizens to support those parties that tend to provide a

generous social security net. In contrast, individuals benef‌iting from FDI turn

to parties that aim at deepening international integration.

1

This paper goes one step further and assesses whether the economic

consequences of FDI also translate into regime support in autocracies. I argue

that, although benef‌icial in the aggregate, not all citizens benef‌it from FDI.

Low-skilled individuals face downward pressure on their economic well-

being the more they are exposed to FDI. To the contrary, highly skilled

individuals’wage levels increase when they work for multinational com-

panies. Concerning market income, FDI thus widens the gap between dif-

ferently skilled individuals. Exposure to FDI translates into regime support

through its effect on satisfaction with the performance of the incumbent

government. Seeing to overcome economic insecurity, low-skilled exposed

individuals should be more likely to oppose the autocratic regime in place on

economic grounds. Contrarily, economic gains from FDI increase perceived

1278 Comparative Political Studies 57(8)