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The Road Not Taken? Industrial Policy and Political Settlements in China and Indonesia 1990–2022

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  • Xu, Tao Louie

Abstract

This research investigates the role of political settlements in industrial policy, either facilitating or hindering capability development and structural transformation. The Global South’s power relations and institutions within policy processes, however, are not properly grasped. With the political settlements framework, the comparative research dissects the continuity and change of power and rent distribution in China and Indonesia under selective neoliberalism from 1990 to 2022, followed by case studies of First Automotive Works and Astra in auto manufacturing. The results illustrate that China has transitioned from a developmental settlement to vulnerable authoritarianism and back, while Indonesia has moved to competitive clientelism and elite ruling. The findings indicate that effective rent distribution of industrial policy counts on vertical legitimacy, whereas horizontal opposition exacerbates policy coherence. The interplay between industrial policy rents and the settlements concludes that consolidated power enables efficient resource allocation and policy efficacy; by contrast, power dispersal erodes development capacity due to political instability and interest divergences. For capability development and structural transformation, industrial policy design ought to align with specific power dynamics within varied institutions.

Suggested Citation

  • Xu, Tao Louie, 2024. "The Road Not Taken? Industrial Policy and Political Settlements in China and Indonesia 1990–2022," MPRA Paper 122669, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:122669
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    More about this item

    Keywords

    political settlements framework; industrial policy; selective neoliberalism; automotive manufacturing; China; Indonesia;
    All these keywords.

    JEL classification:

    • B5 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches
    • B52 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Historical; Institutional; Evolutionary; Modern Monetary Theory;
    • L5 - Industrial Organization - - Regulation and Industrial Policy
    • L6 - Industrial Organization - - Industry Studies: Manufacturing
    • N4 - Economic History - - Government, War, Law, International Relations, and Regulation
    • N6 - Economic History - - Manufacturing and Construction
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • O2 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
    • P5 - Political Economy and Comparative Economic Systems - - Comparative Economic Systems

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