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

Tao Xu ()

MPRA Paper from University Library of Munich, Germany

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.

Keywords: political settlements framework; industrial policy; selective neoliberalism; automotive manufacturing; China; Indonesia (search for similar items in EconPapers)
JEL-codes: B5 B52 L5 L6 N4 N6 O1 O2 O3 O4 P5 (search for similar items in EconPapers)
Date: 2024-08-02
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