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The Journal of Politics

and International Affairs
Volume IX, Issue I
Spring 2015

The Ohio State University

Cormac Bloomfield

David Nield

Editors in Chief
Wesley Swanson
Managing Editor for Content

Caroline Kinnen
Internal Communications

Gabriel Giddens
External Communications

Adrienne Michelson
Layout Editor
JPIA Editorial Staff

Jeffrey Glazner
Alex Lappert
Cara Schaefer

Catey Stanley
Erik Wisniewski

A special thanks to our faculty advisors, Dr. Paul A. Beck and Ms. Christina Murphy, and The
Ohio State Department of Political Science Chair, Dr. Richard Herrmann, for guiding us and
making this journal possible.

The Journal of Politics

JPIA

and International Affiars
Volume IX | Issue I | Spring 2015 | Print Edition

Contents
A Theoretical Analysis of Permanent Employment in China’s
Labor Contract Law

8

Taming a Friend: China, North Korea, and the Security
Dilemma in East Asia

36

Ideological Protest in Post-Reform China: Does Ideology
Matter?

58

A Sustainable Model of Authoritarian Capitalism?

70

Remedy’s Rhetoric: Differences in the Banking Crises of
Ireland and Cyprus

82

Nuclear Iran and the International Community

102

Thomas Joe, University of Chicago

Jason Kwon, Harvard University

Daniel Shats, Johns Hopkins University

Jeremy Lin, Johns Hopkins University

Alison Dorsi, Boston University

Alex Kneib, Loyola University New Orleans

Cosponsorship in Congress: How Many Cosponsors Does It
Take to Pass a Bill?
Sharif Amlani, University of New Mexico

120

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COPYRIGHT © 2015 THE OHIO STATE JOURNAL OF POLITICS AND INTERNATIONAL AFFAIRS. ALL RIGHTS
RESERVED

5

Editorial Foreword

Cormac Bloomfield
David Nield
Editors in Chief

Welcome,
It is our pleasure to present the Spring 2015 edition of the Journal of Politics & International Affairs. This issue
features seven papers chosen from over one hundred submissions from across the nation, making this issue
our most competitive in the history of the journal. Together, these papers showcase the best of undergraduate
political science and economics in a variety of subfields including: international relations, American politics,
comparative politics, political theory, and labor economics.
This is our first volume as editors in chief of the Journal and we could not be more honored and humbled by the
quality and volume of submissions for this issue and consequently the hard work and dedication of our editorial
team. We look forward to continuing to publish the highest quality undergraduate social science research as it
relates to politics in the world today.
This issue would not be in your hands or on your screen today without the support of the Ohio State
University’s Political Science department. We would like to thank Dr. Richard Herrmann for his vision and
belief in the Journal, Dr. Paul Beck for his guidance and advice, and Ms. Christina Murphy, whose assistance
and support is invaluable to the Journal.
We would also like to thank you, the reader, for taking the time to read the Journal. We hope that in reading this
journal you learn about a new topic, a new perspective, or gain an appreciation for the quality of social science
research that can be, and is being, done at the undergraduate level. It is through you that the research contained
within these pages finds meaning.
Cormac Bloomfield and David Nield
Editors in Chief

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The Journal of Politics and International Affairs

A Theoretical Analysis of Permanent Employment in
China’s Labor Contract Law
Thomas Joe

Following a surge of labor protests in recent years, China in early 2007 passed the
Labor Contract Law (LCL)1 , hailed as the most significant labor legislation in over
a decade. In analyzing the implications of the LCL, scholars take for granted that
firms will consequentially suffer some cost, whether it be direct wage increases and
fines, or more subtle costs such as less flexibility due to the permanent employment
clause. This paper seeks to apply rigorous theoretical analysis to the permanent
employment clause of the LCL to determine the particular mechanisms underlying
permanent employment.

O

ver the past three decades, China has not only experienced dramatic economic growth, it has
also experienced what Mary Gallagher calls a “Transformation of Labor Relations.”2  In her

account, this period saw a shift towards capitalism and managerial control, as well as a “subjugation of workers’ organization.” 3 From the 1950s to the reforms of the 1980s, China’s labor system
reflected the Chinese expression of the “iron rice bowl,” in which urban employees enjoyed job
tenure, “cradle to grave” welfare, pensions, housing and medical care, and the like. 4 While job
security was solid for these employees, labor lacked mobility as the state assigned workers jobs at
State Owned Enterprises and various collective enterprises. 5 Moreover, because there was no true
labor market, mismatches in job assignment were often made as workers were frequently assigned
to jobs without consideration of their own skills and interests. In the “iron rice bowl” system, em1
National People’s Congress, “Labor Contract Law of the People’s Republic of China,” http://www.npc.gov.
cn/englishnpc/Law/2009-02/20/content_1471106.htm.
2
Mary E. Gallagher, “Time is Money, Efficiency is Life”: The Transformation of Labor Relations in China,”
Studies in Comparative International Development 39, no. 2 (2004): p. 1.

3

Ibid. p. 35.

5

Ibid.: p. 509.

4
Eli Friedman and Ching Kwan Lee, “Remaking the World of Chinese Labour: A 30-Year Retrospective,” British Journal of Industrial Relations 48, no. 3 (2010): pp. 508-9).

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Theoretical Analysis of Permanent Employment in China

ployees were not allowed to leave their assigned job, nor could they be fired.6

Starting with experiments like joint ventures in Shenzhen and later recognized through

the Provisions for Labor Management in Sino-Foreign Joint Ventures of 1980, the Chinese
leadership began to test labor contracts that stipulated terms such as dismissal and resignation of
workers in joint ventures. For the next decade and a half, China’s labor laws were characterized
by confusion and inconsistency, partially because they distinguished state-owned enterprises
from foreign-invested enterprises and stipulated different regulations for the two. 7 During this
time, Chinese labor began to move away from the “iron rice bowl” system until 1995, when the
National Labor Law (NLL) was passed. Passage of the NLL was a most momentous shift, as it
took priority over all prior labor laws and gave employers broad discretion over employment.8
While the 1995 NLL did retain “open-term” contracts, these had to be requested by the employee
and mutually agreed upon with the employer.9

Since 1995, China experienced a steady growth of labor disputes and labor discontent. To

see this, refer to Figure 110 below:

6
Susan Leung, “China’s Labor Contract System from Planned to Market Economy,” Journal of Law, Ethics, and
Intellectual Property 3, no. 1 (2012): p. 2.
7
Ibid. p. 3.
8
Virginia Ho, “From Contracts to Compliance? An Early Look at Implementation under China’s New Labor
Legislation,” Columbia Journal of Asian Law 23, no. 1: p. 39.
9
Susan Leung, “China’s Labor Contract System from Planned to Market Economy,” Journal of Law, Ethics, and
Intellectual Property 3, no. 1 (2012): p. 3.
10
This graph was produced with data from China Data Statistical Yearbook, accessed through China Data Online.

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The Journal of Politics and International Affairs

In light of this consistent rise in labor discontent, on the 29th of January, 2007, the Peo-

ple’s Republic of China (PRC) promulgated its Labor Contract Law. In effect since January 1st,
200811 , the Law formalized workers’ rights and included within it an exceptionally controversial
permanent employment clause: Article 14 grants workers the right to work for their employer indefinitely after 10 years or after two consecutive fixed-term contracts (typically six to ten years).
In its original form, only serious transgressions (i.e.: criminal) or an inability to work can nullify
this right. In contrast with the 1995 National Labor Law, the Labor Contract Law represents a shift
in the opposite direction: empowerment of workers and constraint on employers. The dominant
consensus among scholars holds that a growing tension between employers and their employees,
as evidenced by the massive rise in public protests—from 15,000 in 1990 to 74,000 in 2007—is
responsible for this move12 . The Labor Contract Law presents a way to appease the increasingly discontent working class. However in doing so, the government upset many employers, who
feared a constraint on their power and potentially significant costs, both direct and indirect. Unsurprisingly, many firms warned of massive increases in labor costs, and some even threatened to
leave the Chinese market and move their business elsewhere.13

To what extent are employers’ fears justified? More importantly, what are the implica-

tions of the new Labor Contract Law? In this paper, I will focus on the permanent employment
clause of the Labor Contract Law, as it is the most prominent feature of the Labor Contract Law,
and doing so also allows for a sufficiently narrow and focused analysis. In essence, the permanent employment clause intends to benefit employees by granting them job security, but comes
at the cost of making it harder for employers to fire their workers and thus imposing an implicit
cost upon them.

While reactions from both labor and employers have been well documented by scholars

such as Wang et al. and Han et al., the literature is vague about the particular nature of the costs
associated with the permanent employment clause. While supporters and critics disagree about
11
This same year, China’s Labor Dispute Mediation and Arbitration Law, and Employment Promotion Law, both
went active. However, the Labor Contract Law drew the most attention, attracting nearly 200,000 comments during its
public comment period. Many comments came from ordinary Chinese workers, but US and European corporations and
lobbying organizations also responded. Most notably, the American Chamber of Commerce in Shanghai warned that the
new Labor Contract Law could result in job loss and capital flight out of China (Global Labor Strategies 5, 38).
12
Haiyan Wang, Richard P Appelbaum, Francesca Degiuli, and Nelson Lichtenstein, “China’s New Labour Contract Law: is China moving towards increased power for workers?,” Third World Quarterly 30, no. 3 (2009): p. 488.
13
Zhaozhou Han, Vincent Mok, Lina Kong, and Kang An, “China’s Labour Contract Law and Labour Costs of
Production,” China Perspectives, no. 3 (2011): p. 66.

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Theoretical Analysis of Permanent Employment in China

the relative magnitudes of cost and benefit, both sides take for granted that the permanent employment
clause will impose some cost on employers. But how does one measure the costs associated with losing
the freedom to fire an employee after she has worked for either ten years or two full contract terms? At
the same time, how might worker behavior change in response to permanent employment? To provide
some insight on this ambiguity in the literature, I will approach the problem through a theoretical microeconomic framework in order to understand the key mechanisms under the permanent employment
clause of the Labor Contract Law. In adopting this framework, I will first delineate how we can expect
employee and employer behavior to respond; for employees, as seen in classic cases where workers are
granted permanent employment, while for employers, as seen in their attempts to evade the effects of the
permanent employment clause or maintain high productivity. Rather than treating employers and employees independently, I will also examine how their choices impact each other’s own circumstances and
behavior.
Part II
Literature Review
China’s labor relations over the past several decades have attracted scholars from a wide range of fields,
resulting in a large body of literature that includes economic, sociological, and historical analysis among
others. Despite the diversity of perspectives, there is remarkable consistency in scholars’ depictions
ofthe transformation of labor relations over the past several decades up until the start of the 21st century.
Ching Kwan Lee follows labor unrest in China and the subsequent decline of State Owned Enterprises
(SOEs)14 , while Mary Gallagher follows Chinese economic reform over the final quarter of the 20th
century15. In both, the authors depict a broad decentralization as China moved towards a more capitalist
regime that allowed for more managerial control and less welfare responsibility from government.

In the last several years, however, this general trend has been interrupted. Growing tensions be-

tween labor and managerial classes led to the passing of the Labor Contract Law in 2007. The passage of
this law has been interpreted by most China scholars as reflecting a reversal or at least a slowing of the
previous trends of increasing managerial control and decreasing government involvement and interest in
directly assuming responsibility for workers’ welfare. For example, Feng Chen and Xin Xu note that the
14
Ching Kwan Lee, Against the Law: Labor Protests in China’s Rustbelt and Sunbelt (Berkeley: University of California, 2007).
15
Mary E. Gallagher, “Time is Money, Efficiency is Life”: The Transformation of Labor Relations in China,” Studies in
Comparative International Development 39, no. 2 (2004): 11-44.

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Supreme People’s Court, the highest court in the PRC, have explicitly ordered lower level courts
to promote social stability and harmony in addition to economic progress.16

Though the predominant literature seems to agree on the general intent behind China’s

Labor Contract Law, there is immense controversy surrounding the implications of the Contract
Law itself. In their field study of firms in Guangdong Province, Han et al. attempt to calculate
the direct and indirect costs of the new Labor Contract Law, and find that the increase in labor
costs seems to be quite low, at 2.54-4.90% per capita17. In another study, Wang et al. reach a very
different conclusion: the Labor Contract Law appears to impose a powerful cost on employers,
pushing some to spend millions of dollars in an attempt to avoid the Law18. In particular, Wang
et al. discover firms blatantly attempting to avoid the permanent employment clause—the most
prominent method being coercing employees to quit and then reemploying them19. For instance,
Huawei Technologies Co. Ltd., one of the largest telecommunication firms in China, asked all
employees who had worked for eight or more years to terminate their contracts, after which they
would reapply20. This occurred only three months after the publication of the Labor Contract
Law and attracted a media furor.

While the literature provides valuable analysis from particular perspectives, they are lack-

ing in two respects. First, in part due to how little time has passed since the implementation of
the Labor Contract Law, the literature lacks a fleshed out analysis of the permanent employment
clause of the Labor Contract Law. While scholars like Han et al. focus on more easily calculated
costs such as severance pay and social security fees and do not attempt to measure the cost of the
permanent employment clause21, scholars like Wang et al. attempt to measure this cost by looking
at publicized company closures following the announcement of the Contract Law22. This tendency to avoid rigorous analysis of the permanent employment clause results in a very vague sense
16
Feng Chen and Xin Xu, “‘Active Judiciary’: Judicial Dismantling of Workers’ Collective Action in China,”
China Journal no. 67 (2012): pg. 93.
17
Zhaozhou Han, Vincent Mok, Lina Kong, Kang An, “China’s Labour Contract Law and Labour Costs of
Production,” China Perspectives, no. 3 (2011): p. 66.
18
Haiyan Wang, Richard P Appelbaum, Francesca Degiuli, and Nelson Lichtenstein, “China’s New Labour Contract Law: is China moving towards increased power for workers?,” Third World Quarterly 30, no. 3 (2009): p. 493.
19
Haiyan Wang, Richard P Appelbaum, Francesca Degiuli, and Nelson Lichtenstein, “China’s New Labour Contract Law: is China moving towards increased power for workers?,” Third World Quarterly 30, no. 3 (2009): p. 485.
20
Ibid.: pp. 492-3.
21
Zhaozhou Han, Vincent Mok, Lina Kong, Kang An, “China’s Labour Contract Law and Labour Costs of
Production,” China Perspectives, no. 3 (2011): pp. 60-61.
22
Haiyan Wang, Richard P Appelbaum, Francesca Degiuli, and Nelson Lichtenstein, “China’s New Labour Contract Law: is China moving towards increased power for workers?,” Third World Quarterly 30, no. 3 (2009): pp. 497-498.

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Theoretical Analysis of Permanent Employment in China

of the clause’s particular nature. Scholars take for granted that by reducing flexibility through
permanent employment and imposing direct costs through fines for violating the Labor Contract
Law, firms will experience a cost. In this paper, I seek to analyze the mechanisms underlying the
cost of permanent employment.
Part III
Approach and Methods
A theoretical analysis of the permanent employment clause of China’s Labor Contract Law has
two key advantages. First, the empirical data is incredibly distorted because of the effects of the
Global Financial Crisis that struck in late 2008, the same year that the Labor Contract Law was
implemented; and second very shortly after implementation of the law (perhaps in part due to the
difficult economic environment), China’s State Council issued an implementation regulation that
stipulated fourteen circumstances under which workers with permanent employment could be
terminated23. This gave employers great flexibility in granting permanent employment and in so
doing, significantly weakened the clause. Because the government backed out of implementing a
true permanent employment clause, for the time being, we cannot know for certain what its effect
would have been. However, theoretical analysis provides insight into what we might expect if the
Chinese Communist Party decides at some point to impose permanent employment in full force.
Given the recent domestic unrest, rising number of labor disputes, and increasing dissatisfaction
with the unequal gains economic liberalization has brought, this is a real possibility when the
economy recovers.

Perhaps not surprisingly, economists have generally found that increased job security

leads to increased firing costs, and that increased employment cost in turn leads to increased
unemployment.24 Notably, Lazear analyzes macroeconomic data from 22 countries over a 29year period. In this study, he found that a change from no required severance pay to 3 months of
required severance pay to employees with ten years of service reduced the employment-population ratio by about 1%25. However, empirical data on China’s 2008 Labor Contract Law, and in
particular its permanent employment clause, is remarkably insubstantial. Partially, this is due to
23
“New Regulation Clears Labor Contract Law Misunderstanding,” Xinhua News Agency, Sept. 20, 2008.
http://news.xinhuanet.com/english/2008-09/18/content_10076098.htm.
24
See Dertouzos and Karoly (1992), DeLeire (2000), Acemoglou and Angrist (2001).
25
Edward P. Lazear, Inside the Firm: Contributions to Personnel Economics. New York: Oxford University Press, 2011.

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the recency of the Law, but perhaps most significant is the timing of the Global Financial Crisis
and subsequent economic recession, which enormously confounded virtually all macroeconomic
indicators one could use to empirically analyze the law. While there is much speculation about
why the Chinese Communist Party has pulled out of implementing a true permanent employment clause, one plausible factor is the state of the world economy and the risk accompanying an
effort to impose new regulations on firms in the midst of slowing economic growth.

While we cannot know with certainty just how weak the permanent employment clause

currently is in practice, the World Bank’s 2012 Enterprise Survey presents evidence that in its
current state, the Labor Contract Law is not a significant issue for most firms. The Enterprise
Survey interviewed 2,700 privately-owned and 148 state-owned enterprises in China between
December 2011 and February 2013. In its surveys of privately owned firms, the Enterprise Survey takes the population under study to be all non-agricultural firms with at least five employees
and positive amounts of private ownership.

One of the implications of a fully active permanent employment clause is the possibility

of a reduction in the number of permanent, full-time workers at firms as they move towards temporary workers. This is one method firms might use to evade binding permanent employment.
According to the 2012 Enterprise Survey, the average number of permanent, full time workers
enterprises employed in 2009 was 191. However, the average reported number of permanent, full
time workers enterprises employed in 2011 was 236. This means that between those two years,
enterprises reported an increase in the number of permanent, full-time employees. Meanwhile,
the average reported number of full-time seasonal or temporary workers employed in 2011 was
only about 12. Thus firms seem to have a significant preference for permanent, full-time employees. It should be noted that the Enterprise Survey defined permanent, full-time employees as
those “contracted for a term of one or more fiscal years and/or have a guaranteed renewal of their
employment contract and that work a full shift.”26 27 This suggests that employees who are not
guaranteed a continued contract, and who may after the contract term be fired, can still count as
permanent, full-time employees. Since the Labor Contract Law’s permanent employment clause
requires two full contract cycles or 10 years of service, permanent, full-time employment status
26
The italics were not in the original survey. I include them here to emphasize an important feature of the Enterprise Survey’s definition.
27
World Bank, “China-Enterprise Survey Manufacturing Module (2012),” World Bank Enterprise Surveys: pg.
35.

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Theoretical Analysis of Permanent Employment in China

on the survey does not necessarily mean that the employees have permanent employment. Nonetheless,
it is interesting to see that at the aggregate level, between 2009 and 2011, the number of permanent
employees increased. As a complication, it is quite possible that this growth is due to global economic
recovery.

One of the easiest ways to determine how enterprises feel about the Labor Contract Law is by

asking them to what degree they view labor regulations as an obstacle to their current operations. The
2012 Enterprise Survey asked precisely this, and in response, nearly 60% (1609 out of the 2700 enterprises) stated that labor regulations were “No Obstacle”, 30% of enterprises responded that labor regulations were only a “Minor Obstacle”, only 8% viewed labor regulations as a “Moderate Obstacle”, and
only 5 out of the 2700 enterprises viewed labor regulations as a “Major Obstacle”. Assuming truthful responses, this data suggests that enterprises do not seem to view labor regulations as particularly adverse.
For comparison, 6.4% of enterprises in East Asia and the Pacific identified labor regulations as a major
constraint, and the average for all countries combined is 12.2%. Thus it seems that China’s enterprises
view labor regulations as less problematic than enterprises in other countries.

In a similar question, the 2012 Enterprise Survey asked firms to state which element of the busi-

ness environment represented the biggest obstacle. Only 6 firms stated the Courts as the biggest obstacle,
and only 49 stated labor regulations as the biggest obstacle to business. Out of the 2700 firms surveyed,
these respondents represent a small minority.

In light of the responses to its labor regulation questions, the 2012 Enterprise Survey suggests

that the Labor Contract Law seems fairly weakly enforced and motivates my focus on theoretical rather
than empirical analysis. I acknowledge that a theoretical analysis is unrealistic in the sense that it ignores
the multitude of variables that operate in practice. But by stripping away everything except the most essential features, a theoretical model creates a simplistic image of the world, and in so doing, makes clear
the key mechanisms of the variables that interest us.
Part IV
The Formal Model
0.1

The Employee

Let us model an employee paid hourly, and suppose the employee distastes working.

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The Journal of Politics and International Affairs

The employee finds positive utility in getting paid, leisure outside of work, and leisure at

work.

Then the employee has the problem:

Max: (Income) + (Leisure) - Cost(Effort) - (Probability of getting caught shirking)(Cost of getting fired) +
(Probability of not getting caught shirking)(Leisure at work)

Where,

The Probability of getting caught shirking is conditional on the employee’s level of shirk-

ing (which we assume to be observable);

And likewise, the Probability of not getting caught shirking is conditional on the employ-

ee’s level of shirking;

Subject to:
Wage ≥  Alternative Wage

That is, the wage paid to the employee must be higher than the alternative wage the work-

er could get by quitting her current job and working elsewhere.

This produces the maximization problem:
Max{e}: (wh) + l − C(e) − p(e)(α) + (1 − p(e))f(e),

(1)

Subject to the conditions that:

w ≥ w̄ (2),

α = w − w̄ (3),

Where w is the employee’s wage (per hour), h is the number of hours worked, l is the em-

ployee’s leisure outside of work, C(e) is the cost of effort, p is the probability of getting caught
shirking conditional on the observable amount the employee shirks, α is the cost of getting fired,
1 - p(e) is the probability of not getting caught shirking conditional on the observable amount the
employee shirks, and f(e) is the leisure the employee enjoys while at work (i.e.: from shirking).
Note that f(e) is decreasing in e (that is, higher levels of effort produce less opportunities to enjoy

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Theoretical Analysis of Permanent Employment in China

leisure at work), p(e) is decreasing in e (so the more effort the employee puts in, the lower the
likelihood of her getting caught shirking and subsequently fired), which makes (1-p(e)) increasing in e (the less effort the employee puts in, the higher the likelihood of her getting caught shirking and subsequently fired). Also, note that C’(e) < 0, while C’’(e) > 0.

Furthermore, constraints (2) and (3) are especially important. In (2), w̄ is the alterna-

tive, market wage, which must be less than the employee’s current wage, or else she would quit
her job and take the alternative wage. In (3), note that the cost of getting fired is the difference
between the employee’s current wage and the wage she would get if she left her current job and
accepted the wage at an alternative job.

Given the employee’s problem, we would expect to see the risk of getting caught shirking

and then fired as a deterring factor that would induce higher effort.

And given the employee’s Maximization Problem, we have the following Lagrangian:
ℒ = (wh) + l − C(e) − p(e)(α) + (1 − p(e))f(e) − λ(w̄ − w) − λ2(α − (w − w̄ )) (4)

Differentiating with respect to e, we find the first order condition:
[e]: − C’(e) − p’(e)(α) + f’(e) − (p’(e)f(e) − (p(e)f’(e)) = 0

f’(e) − f’(e)p(e) = C’(e) + p’(e)(α) + p’(e)f(e)

f’(e)(1 − p(e)) = C’(e) + p’(e)(α + f(e))

C’(e) = (1 − p(e))f’(e) − p’(e)(α + f(e)) (5)

Note: I can also describe Equation (5) as: (1 - p(e))f’(e)) = C’(e) + p’(e)(a + f(e)).

Importantly, recall that α = w − w̄ . Plugging into (5), we find that

C’(e) = (1 − p(e))f’(e) − p’(e)((w − w̄ ) + f(e))

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(6)

The Journal of Politics and International Affairs

Equation (6) tells us that the marginal cost of effort for an employee entails not only

the likelihood of getting away with marginal increases in shirking and enjoying that leisure at
work, but also the loss in wage from getting fired and taking an alternative, lower wage, and
the extent to which the employee enjoys leisure at work, weighted by the increased risk from
shirking. It is especially interesting that the difference between the current wage and alternative
wage, embodying the cost of getting fired, plays a major role in determining the marginal cost of
exerting effort. A very large gap between current and market wage would correspondingly result
in a much lower marginal cost of exerting effort, unless either the employee enjoys being lazy at
work (high f(e) term), or the employee is very unlikely to get caught shirking. Also note that the
marginal benefit the employee gets from shirking a small amount more, weighted by the likelihood of getting away with it, increases the cost of exerting effort.

This relationship has profound implications for the employer, as a small gap between

the current wage and market wage, by reducing the cost of getting fired, likely results in a high
marginal cost of exerting effort. But if such a gap is significant, and the cost to the employee of
getting fired is quite high, then the threat of getting fired can significantly reduce the marginal
cost of exerting effort at work.

Recall that α > 0, P’(e) < 0, f(e) > 0.

From Equation (6), we see that the employee will exert effort up until the point that the

marginal cost of effort equals the marginal benefit from shirking weighted by the probability of
not getting caught, added to the cost of getting fired and utility from shirking, weighted by the
marginal increase in probability of getting caught.

However, now consider an employee under permanent employment. Then her problem

changes:

The employee now has the problem:

Max: (wh) + l − C(e) + f(e),

(7)

Where there is much higher incentive to put in less effort. The risk of getting fired for putting in
low effort produces a tradeoff between shirking and possibly getting fired (the term p(e)(α)), and
the utility from attaining leisure at work (the term (1 - p(e))f(e)). But without this risk of getting

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Theoretical Analysis of Permanent Employment in China

fired, the employee in this model has an incentive to shirk due to leisure yielding positive utility
and effort being costly. Lower levels of effort reduce the C(e) term while also raising the f(e)
term, and in so doing, provide utility to the employee. That is, removing the firing term reduces
the costs of shirking and thereby increases the employee’s incentive to shirk.

Given the new Maximization Problem, we get a new Lagrangian:
ℒ = (wh) + l − C(e) + f(e) − λ(w̄  − w)

Differentiating with respect to e, we now find the new first order condition:
[e]: − C’(e) + f’(e) = 0
C’(e) = f’(e)

(8)

From Equation (8), we see that the worker exerts effort up until the point at which the marginal cost of exerting effort equals the marginal benefit from shirking (i.e.: the marginal benefit of
attaining leisure at work). In a way, Equation (6) (the case under which the employee does not
have permanent employment) approaches Equation (8) (the case under which the employee does
have permanent employment), as the probability of getting caught shirking diminishes. Let δ1, δ2
denote arbitrarily small values such that δ1, δ2 > 0. Then for every p(e) ≤ δ1 and p’(e) ≤ δ2, there
exists some ξ1, ξ2  > 0 such that f’(e) − (1 − p(e))f’(e) ≤ ξ1 and p’(e)((w − w̄ ) + f(e)) ≤ ξ2.

But so long as the probability of getting caught shirking is sufficiently high, the employ-

ee with permanent employment has a greater incentive to shirk unless the difference between
current wage and market wage is insignificant. That is, if the cost of getting fired is sufficiently
high, and the likelihood of getting caught shirking and then fired is non-negligible, the employee
without permanent employment is induced to exert effort and not to shirk.
0.2

The Employer

Now let us examine the employer.

The employer wishes to maximize profits, which is the revenue from what the employee

produces minus wage paid to her.

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That is, the employer wishes to maximize Q − wh, where Q is revenue from production,

w is the hourly wage, and h is the number of hours worked.

But let us assume that productivity is a function of effort.

Then we have:
Q = f(e) = klog(e) + ε,

(9)

Where ε is some exogenous shock. This exogenous shock could come in the form of the

employee feeling tired that day, mechanical problems at the factory, cold weather, etc. Here I define output as a logarithmic function of effort. This is an assumption meant to simplify the model,
while retaining its key features: output as some function of effort, and output increasing in effort
but increasing at a decreasing rate. That is, higher levels of effort will produce higher output, but
at lower levels of effort, additional effort produces larger increases in output than at higher levels
of effort. This is due to diminishing marginal returns. Mathematically, we have that Q’ > 0 and
Q’’ < 0.

Figure 2 illustrates these key properties:

Put another way, the employer’s maximization problem can be reformulated thus:
Max{w}: f(e) − wh (10)

Now suppose that some drop in effort is expected from granting permanent employment to

20

Theoretical Analysis of Permanent Employment in China

employees, and denote this new level of effort as e1.

Then after the law, we have the production function:
Q = f(e1) = klog(e1) + ε (11)

Again, we assume output as some function of effort, Q’ > 0, and Q’’ < 0.

In this case, the employer has the new maximization problem:
Max{w}: f(e1) − wh (12)

But suppose that the employer has the option of firing the employee before granting perma-

nent employment and in so doing potentially avoiding the drop in effort.

In that case, the employer must suffer the cost of search and other transaction costs associ-

ated with replacing the employee, and also the cost of retraining a new employee.

That is, the employer may fire an employee and have the new maximization problem:
Max: f(e2) − wh − λ, (13)

Where λ

is the cost of firing the employee about to attain permanent employment,

searching for a new employee, hiring that replacement, and training her. Meanwhile, e2 is the effort
level of the new employee which the employer would hope to be greater than e1 (otherwise, there
is no point in firing the employee and finding a replacement).

The employer has an incentive to choose the option that will maximize profits, but in ei-

ther case, there is some cost to the employer compared to the absence of permanent employment.
Empirically, we would expect to see a rise in unemployment due to this sort of law. The theoretical
model of the employer confirms the literature’s claim that permanent employment raises costs for
employers, but what is most important is the key mechanisms through which permanent employment does this. If the employer expects permanent employment to reduce productivity, then the
employer has to face a tradeoff between a potentially less productive worker (which is conditional
on a variety of factors such as the worker’s individual personality and work ethic), and the transaction costs of firing and subsequently training a new worker. If the employer does not have much
confidence in influencing the behavior of her employees, then she may resort to avoiding permanent employment in the cheapest way possible. This might include firing employees shortly before

21

The Journal of Politics and International Affairs

they would obtain permanent employment or hiring significantly more temporary workers.

Now recall that the employee works for the employer if the wage is at least as much as the

alternative, market wage:
w ≥  w̄

Since this constrains the employer’s Maximization Problem, we end up with the following

Lagrangians:

Before permanent employment is granted, the employer has the Lagrangian:
ℒ = f(e) − wh + λ1(w − w̄ )

And if the employer chooses to fire the employee and replace her with another, the employ-

er has the Lagrangian:
ℒ = f(e2) − wh − λ + λ1(w − w̄ )
It is important to note here that the employer can choose the wage, but all other variables are exogenously provided. Differentiating with respect to w, we find
[e]: − h + λ1 = 0
λ1 = h (14)
Plugging (14) back into the Lagrangian produces the following:
ℒ = f(e2) − wh − λ + h(w −  w̄ )

Remarkably, just as in the employee’s problem, (w- w̄ ) plays a critical role. Whether the

employer fires the employee and replaces her or gives her permanent employment, she seems
to prefer a significant gap between the employee’s wage and the employee’s alternative, market
wage. However, let us perform one more step:
ℒ = f(e2) − wh − λ + h(w −  w̄ )
ℒ = f(e2) − wh − λ + hw − h w̄
ℒ = f(e2) − hw − λ + hw − h w̄
ℒ = f(e2) − λ − h w̄

Here, it is clear that the employer prefers a lower alternative, market wage. Intuitively, this

makes quite a lot of sense: if the employer faces a low market wage, she could correspondingly

22

Theoretical Analysis of Permanent Employment in China

offer a low wage to induce employees to work for her. Furthermore, a low alternative wage means
that the cost of getting fired is correspondingly high for the employee, as her next best alternative
is undesirable. Underlying both the employee and employer Maximization Problems, the market
wage plays a critical role by inducing effort in the employee, while also determining the wage the
employer needs to offer to retain the employee and induce effort.
0.3

Extension I

As an extension, what if employers could raise employee productivity before they obtain

permanent employment? Then we have an equilibrium condition, as explained below:

Let Q be the output of the worker with the labor contract law in effect, and V be the output

of the worker with the labor contract law not in effect. Furthermore, let T be the point at which the
worker would obtain permanent employment, and N be the point at which the worker would stop
working for the employer. Now take

Where t = time, r = interest rate, and e is the natural logarithm28.

28
I understand that I also use the variable e to denote effort. To clear up any possible confusion, note that
anytime e occurs within an integral, it denotes effort only if it is in parenthesis (that is, if some value is a function of
this effort). Anytime e occurs in an integral but not in parentheses, it denotes the natural log. I only ever use the natural
logarithm in this paper in the context of a Present Value.

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The Journal of Politics and International Affairs

Note that Equation (15) denotes the present value of the productivity of the employee from

when she gets hired up until when she would obtain permanent employment, while (16) denotes
the present value of the productivity of the employee from when she obtains permanent employment to when she stops working for the employer. For simplicity, let’s suppose this is retirement,
in which case N = time at which the employee retires. Equation (17) reflects the present value of
the productivity of the employee for the same time period as (15), except without the expectation
of permanent employment at time T, while (18) reflects the present value of the productivity of the
employee for the same time period as (16), except without the expectation of permanent employment at time T.

Now suppose that the employer can push the employee to exert more effort before perma-

nent employment.

Then if

We would have an equilibrium, and producers would be indifferent between granting permanent
employment and not granting it.

Note that if Q(t) ≠ V(t) (the likely case, as was shown earlier through Equations (6) and (8)

that the labor contract law will influence effort), the relation in Equation (19) still holds if

and

That is, if the employee works harder up until she obtains permanent employment (either

24

Theoretical Analysis of Permanent Employment in China

by her own desire to obtain permanent employment or through the efforts of the employer) and
shirks after she obtains permanent employment, we can still have equilibrium if the overall productivity is the same as in the case where the employee does not receive permanent employment.

In order for Equation (19) to hold when Q(t) ≠ V(t), we need the employee to exactly make

up for lost productivity after permanent employment with increased productivity before permanent
employment. That is, we must have

But so long as we at least have that

the employer prefers to keep the employee and offer permanent employment. Put another way,
Equation (23) states that so long as employees make up for lost productivity after permanent employment by working harder before obtaining permanent employment, employers would want to
offer permanent employment.
0.4

Extension II

Now consider another extension of the model. Recall the employee’s Maximization Problem: she
wants to choose to exert some amount of effort that maximizes her utility, the sum of her income
and leisure, less the cost of exerting effort and the cost of getting fired, with leisure at work and
cost of getting fired weighted by the chances of her getting caught shirking. Employers can influence employee behavior by offering a higher wage, thereby increasing the cost of getting fired
and incentivizing the employee to shirk less, as seen in Equation (1). But now take the probability
term: changing this value too can influence employee behavior. For instance, suppose that employers can monitor their employees and thereby increase the likelihood of getting caught shirking. If
employers can increase the value of p, they may be able to induce higher effort.
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The Journal of Politics and International Affairs

Recall that we found the marginal cost of effort to be as follows:
C’(e) = (1 − p(e))f’(e) − p’(e)((w − w̄ ) + f(e))

Now take p1, p2 such that p2 > p1. Then
C’p2(e) = (1 − p2(e))f‘(e) − p2’(e)((w − w̄ ) + f(e)) < (1 − p1(e))f’(e) − p1’(e)
((w − w̄ ) + f(e)) = C’p1(e)

That is, the marginal cost of exerting effort drops when the likelihood of getting caught

shirking increases. However, monitoring employees is likely to impose some cost on the firm. If
this were the case, the employer’s problem would change thus:
Max{w}: f(e’’) − wh − λ2, 
where λ2 is the cost of monitoring employees.

Then we have a clear equilibrium where the cost of monitoring = the increased effort

induced by monitoring.

Mathematically, the equilibrium can be stated thus:

Where is the cost of monitoring, e’’ is the new level of effort induced with monitoring,

and e’ is the level of effort induced in the absence of monitoring. That is, as long as the present
value of monitoring costs equals the present value of the additional productivity induced, we
have an equilibrium. Additionally, so long as we at least have

the employer weakly prefers to monitor (at equality, the employer is indifferent).

In the case that the present value of monitoring falls short of the present value of the

26

Theoretical Analysis of Permanent Employment in China

additional effort it would induce, the employer would not want to monitor. If we have equality,
the employer would be indifferent between monitoring and not monitoring. And finally, note that
the lower the cost of monitoring,

, the more likely the employer is to monitor. In

the same vein, the more effective monitoring is (by increasing p, the likelihood of getting caught
shirking), the more likely the employer is to monitor.
0.5

Bringing Extension I and II Together

Extension II analyzed monitoring as a way to induce effort in employees and keep them productive
after they obtain permanent employment (which is why the bounds were set as t=[T,N]). However,
Extension I considered the possibility of employers inducing employees to exert more effort before they obtain permanent employment. In light of this, we can combine the two into one model:
Let λ be the cost of monitoring, Q be the output of the worker in the absence of monitoring
and with the Labor Contract Law in effect, Qm be the output of the worker who is monitored and
with the Labor Contract Law in effect, V be the output of the worker with the labor contract law
not in effect, T be the point at which the worker would obtain permanent employment, and N be
the point at which the worker would stop working for the employer. Now take the following:

And,

Whenever relations (25) and (26) hold, all other things equal, the employer would want to

monitor employees up until they would obtain permanent employment, and then offer permanent
employment.

Further, if we also have that

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The Journal of Politics and International Affairs

And,

Then the employer will want to monitor employees both before employees would obtain

permanent employment and after they would obtain it, and also make the choice to keep the employee and offer permanent employment.

The results of this extension are particularly interesting because they suggest that employ-

ers might want to monitor employees both before they obtain permanent employment and after
they obtain it, so long as the cost of monitoring falls below the additional productivity it produces.
But it’s possible that even without monitoring, employees make up for reduced productivity after
permanent employment by working harder before they obtain it. Thus Equations (26) and (28)
serve as constraints to make sure that it makes sense for employers to monitor at all.
0.6

Implications of the Model

Theoretically, we see that in cases where permanent employment is granted, the key mechanism
through which we can expect the employee to be less productive is the removal of the threat of
getting fired. Given this, employers have two primary choices: give the employee permanent employment and hope that the level of effort after permanent employment is sufficiently high, or fire
the employee and suffer the transaction and retraining costs of doing so. The latter case also introduces the complication that the new employee may have a different effort level than the older one.
It is likely that after working with an employee for several years, the employer has more information about that employee than a new one that the employer would bring in to replace her. Thus the

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Theoretical Analysis of Permanent Employment in China

influence of risk aversion on employers’ decision making may be ambiguous.

If the employer chooses to grant permanent employment to an employee, the employer

may be uncertain about what levels of effort and output the employee will yield several years later.
Likewise, if the employer fires the employee and does not grant permanent employment, the employer may be uncertain about the levels of effort and output the new employee will yield. However, if transaction and retraining costs are sufficiently low, the employer may fire any new employee
that works at an unsatisfactory level, and to an extent, mitigate the uncertainty. Either way, the
requirement of permanent employment after 6-10 years of service complicates the employer’s
problem, and inherently imposes a cost in the form of risk in keeping an employee. However, an
equilibrium may arise if employees are sufficiently more productive during the years before which
they obtain permanent employment.

One feature of the employer-employee relationship that is pertinent, but thus far over-

looked, is the extent to which the job is labor-intensive. While the model does not necessarily make
the distinction between kinds of work, we can expect that the permanent employment clause will
influence low-skill, labor intensive workers and their employers the most. This is because highskill workers with firm-specific capital are generally more costly to retrain (but also less likely to
move to other firms), and the transaction costs associated with firing and replacing them tend to
be higher. Furthermore, high-skill workers who have worked at a firm for a decade and would be
eligible for permanent employment are likely already valued significantly by the firm at that point.
In less-specialized, low-skill industries however, matching employee and employer may be less
of a concern as the costs and benefits of better matches are significantly lower than in high-skill
industries.
0.7

Potential Solutions to the Uncertainty Produced by the Permanent Employment

Clause
Fundamentally, the employer fears a higher likelihood of shirking once permanent employment is
granted because the employee is no longer under the threat of getting fired. If the employee exactly
makes up for this reduced productivity by working harder during the years before permanent em-

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The Journal of Politics and International Affairs

ployment is granted, the employer would be indifferent. However, if the employer cannot get the
employee to exert more effort in the years before permanent employment is granted, another solution may be to attempt to mitigate the reduction in effort once permanent employment is granted.
In order to accomplish this, the employer might establish a substitute that essentially replaces the
threat of getting fired. That is, the employer could offer bonuses for higher productivity, essentially
acting as a wage increase, but one that the employer has the power to take away. Similarly, the employer could implement her own pension system, whereby the employee must maintain a certain
level of productivity until retirement in order to receive it. Leung and So actually note that some
Chinese factories force employees to pay a ‘deposit’ of half a month to a month’s wages, which
employees lose if they quit or get fired.29 It would be interesting to see just how effective such a
policy is in maintaining productivity.

Kahneman’s prospect theory may also apply here, as shirking seems to be the clearly risky

option for the employee. In that case, framing permanent employment as a gain in some way for
the employee may contribute to behavior that is relatively risk-averse. That is, if employees frame
permanent employment as a large bonus for good performance, employees may be more likely to
be risk averse, wanting such a bonus.30
Part V
Discussion
In constructing my models, I make the key assumption that effort poses a disutility to employees.
While I posit that this is a fairly weak assumption, it is quite possible for employees to enjoy the
work they perform. For these employees, obtaining permanent employment would not necessarily
incentivize them to shirk.

Furthermore, the cost and speed of retraining new employees presents an additional com-

plication that deserves consideration. If firms can cheaply retrain employees for a job such as in
29
Parry Leung and Alvin Y. So, “The New Labor Contract Law in 2008: China’s Legal Absorption of Labor
Unrest,” Journal of Studies in Social Sciences 4, no. 1 (2013): 131-160.
30
Amos Tversky, and Daniel Kahneman. “The framing of decisions and the psychology of choice. Science, 211
(1981).

30

Theoretical Analysis of Permanent Employment in China

low-skill industries, employers may have an incentive to cycle through many employees and grant
no one permanent employment (or only the very best).

In the model of the employee, one important term is the conditional probability of getting

caught shirking (and subsequently fired). I formulate the probability as conditional upon some
function of effort, as I assume that effort is observable. This presents possible options for both
employees and employers. Employees who wish to avoid detection might attempt to distort the
observable level of effort in order to reduce the probability of getting caught shirking. At the same
time, employers might more carefully monitor employees (which is likely to be costly) in order to
increase the conditional probability of catching a lazy employee.

But if permanent employment eliminates the employer’s ability to fire an employee after a

certain period of time (say ten years), then the employer might invest more resources in carefully
observing employees during their first ten years. The employer might then want to be more stringent in firing lazy employees during the first ten years to reduce the extent to which productivity
might decline after permanent employment is granted. Assuming lazy employees are more likely
to shirk after permanent employment is granted while productive employees are expected to remain at least comparatively more productive, investment of this kind may be a viable strategy for
employers. If employees can anticipate this, and sufficiently value permanent employment, asymmetry in effort about the point at which permanent employment is granted may also arise. That is,
if employers monitor their employers carefully and employees are aware of this, employees have
an incentive to work particularly hard up until the point at which they obtain permanent employment, and then reduce their effort once permanent employment is granted.

While the theoretical models confirm the literature’s predominant claim that permanent

employment imposes a cost on employers, can we also expect permanent employment to increase
job security for employees, and moreover, produce better employer-employee relations? Like the
implicit costs of permanent employment, the realized benefits of permanent employment in the
form of job security have multiple features. On one hand, permanent employment may very well
transform the very nature of the employer-employee relationship. Rather than paying for the prod-

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The Journal of Politics and International Affairs

ucts of one’s labor, employers in a sense pay for the employee herself after granting permanent
employment. When employees do not have significant job security, employers can fire them at
will the moment they become unproductive. But when a worker has permanent employment, the
employer must bear the substantial costs of a drop in productivity, and therefore has an incentive
to maintain the productivity of that worker. One obvious way to accomplish this is through better
treatment of employees and higher wages31.

On the other hand, employers may react adversely to permanent employment and accept

significant costs in order to avoid it. In order to maintain flexibility over expansion and reduction
of employees, employers might shift towards hiring employees for only short periods of time. In
so doing, they might face significant transaction costs in addition to lower productivity (temporary
workers may be much less productive than long term workers). This would result in some employees experiencing even worse outcomes than in the absence of permanent employment, as some
of those employees who otherwise would have had long-term employment at a single firm might
now work short-term jobs at several firms. In attempting to avoid granting permanent employment,
employers might be incentivized towards behavior that would actually worsen both the well-being
of employees and their relationships with employers. Ironically, by limiting employers’ ability to
fire their employees, the permanent employment clause may actually result in shorter and more
exploitative employment.

Depending on the effectiveness of such strategies as monitoring, offering permanent em-

ployment as a bonus that could induce effort in employees, or substitutes for the threat of getting
fired that essentially create a cost of firing in the absence of one, employers may find it in their
best interest to offer permanent employment. Crucially, the alternative, market wage is an exogenously determined variable that employers have no control over, and which shapes just how much
employees would prefer not to get fired. Consequentially, the market wage determines how much
effort employees are likely to exert and the wage the employer needs to offer to induce high levels
of effort.

Further extensions of the model are possible, such as offering monetary incentives or “bo-

31

This draws on Fogel’s Time on the Cross, where he analyzes the economic concepts underlying slavery.

32

Theoretical Analysis of Permanent Employment in China

nuses” after an employee has obtained permanent employment. In these cases, the bonuses would
likely be obtained once employees reach some threshold performance benchmark. Thus a step
wise-function could be tied into the model to produce a picture of a scheme that pays employees
bonuses once they no longer fear the loss of their job.

One crucial weakness of developing a simple model lies in the multitude of variables that

are ignored. In order to test the key conclusions of the model and determine the practical realities
of the Labor Contract Law, empirical research is crucial. While the global economic recession distorted recent data greatly, data collected in future years may no longer be under the grip of recessionary forces. Comparing future costs of production under the Labor Contract Law to past costs
when the economic milieu was similar might be interesting, especially if researchers can come up
with a reliable estimate of the implementation of the Labor Contract Law.

Because China is such a diverse, large country, micro-level data collected at individual

firms could also prove to be immensely useful. In the ideal case, researchers would take a random
assortment of enterprises from a wide array of industries, and examine the relationship between
turnover rates and how long employees have worked for each enterprise, controlling for age, skill,
and other possible confounding variables. Depending on how long researchers collect data for,
they might also be able to examine this relationship in light of the extent to which the Labor Contract Law is implemented.

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The Journal of Politics and International Affairs

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Americans with Disabilities Act, Journal of Political Economy 109, no. 5 (2001): 915-957.
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[3] DeLeire, Thomas, “The Wage and Employment Effects of the Americans with Disabilities Act,”
Journal of Human Resources 35, no. 4: pages 693-715.
[4] Dertouzos, James N., and Karoly, Lynn A., Labor Market Responses to Employer Liability (Santa
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[5] Feng, Chen, and Xu, Xin. 2012,“’Active Judiciary’: Judicial Dismantling of Workers’ Collective
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[6] Fogel, Robert, Time on the Cross: The Economics of American Negro Slavery (New York: Norton,
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[7] Friedman, Eli, and Lee, Ching Kwan, “Remaking the World of Chinese Labour: A 30-Year
Retrospective,” British Journal of Industrial Relations 48, no. 3 (2010): 507-533.
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Labour Costs of Production.” China Perspectives, no. 3 (2011): 59-66.
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China’s New Labor Legislation,” Columbia Journal of Asian Law, Vol. 23, no. 1 (2009): 35-107.
[12] Lazear, Edward P., Inside the Firm: Contributions to Personnel Economics (New York: Oxford
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Ethics, and Intellectual Property 3, no. 1 (2012):
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Theoretical Analysis of Permanent Employment in China

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Taming a Friend: China, North Korea, and the
Security Dilemma in East Asia
Jason Kwon

F

or some years, scholars and foreign policy experts of the Asia-Pacific area have debated the
apparent rift in the China-North Korean relationship. The strain in the ties between the two

countries seems to have emerged since North Korea began acting radically, or “irrationally” on the
international stage. An alliance that was once dubbed as “as close as lips and teeth” (Plant, 2013,
p.61) was apparently no longer so rock-solid. Speculations about China’s change of strategy towards the Korean peninsula have abounded since the second half of the last decade, and especially
the last few years. There are numerous signs that indicate China’s frustration with North Korea
both at the public and the elite levels. For example, Chinese newspapers have frequently engaged
in criticisms of North Korea, and Chinese Internet users have repeatedly ridiculed and criticized
North Korea on their social media, and notably, some of their ridicules of Kim Jong-Un have been
“left intact” by Chinese censorship (Perlez, 2013a).

At the same time, however, China has not shown a desire to completely distance itself

from, let alone abandon, North Korea. Many scholars who observe the public rift between the
two nations have also concluded that China has not shown a willingness to fundamentally rethink
its strategy towards North Korea (Scobell & Cozad, 2014). China remains by far the largest trading partner of North Korea and the economic ties between the two countries continue to grow.

The result has been a seemingly incoherent set of policies towards North Korea from

Beijing. Chinese policy towards North Korea does not show a discernable, overarching direction.
In some cases, China has downright criticized and condemned North Korean behavior. In other cases, China refrained from blaming or pressuring North Korea even when the international
community overwhelmingly stood against North Korea. At times, even, China displayed amity,
pledging that it would “strengthen” military ties with North Korea and “promote the all-around

36

Taming a Friend

development” of the bilateral relations, which Beijing described as “neighborly and friendly”
(Associated Press, 2011). This inconsistency in Chinese policy behavior towards North Korea is
puzzling. What explains the variance in Chinese reactions to North Korea’s radical behavior in
the last ten years? More specifically, what motivates and determines Chinese policy reactions to
North Korea’s radical behavior in the last ten years?

This article presents one lens through which to analyze Chinese policy towards North Ko-

rea. In this paper, I hypothesize that the variance in China’s policy towards North Korea can be
explained by China’s strategic position vis-à-vis the United States and Japan. I demonstrate that
Chinese concerns become heightened when certain North Korea takes actions that are perceived
as direct threats to the security of the United States and Japan. China reacts more strongly against
North Korean behavior in these instances to rein in North Korean behavior. When North Korean
behavior prompts other regional powers to shore up their military strength in a way that results
in overall weakening of China’s security position, especially in the form of nuclear deterrence or
missile defense system installations, China voices strong disapproval to restrain North Korean
behavior. On the other hand, when North Korean provocative behavior does not pose a threat to
the U.S. or Japan, China takes a much softer stance on North Korea.

The topic of this paper is one of great significance for both policymakers and scholars

for numerous reasons. First, this paper can help identify the primary security concerns that drive
China’s policy in the Korean Peninsula. Given that the U.S. and South Korea must work closely
with China to deal with Pyongyang, this paper could shed light on the most important factors
on which the policymakers should focus on. Second, this paper provides insights into the most
sensitive issues in the regional security environment, including nuclear proliferation and missile
defense systems. This paper can help explain each country’s position with regard to these issues.
Last, this paper makes an important contribution to the existing literature on the topic of security
dilemma, especially in East Asia. It introduces a relatively new version of the idea of security dilemma, in which actions of a nation’s ally leads the nation’s rivals to take strong measures, hence
putting the nation at a comparative disadvantage and ratcheting up tension.
A Vicious Cycle: the Security Dilemma in the Region
In this section I propose a causal mechanism, illustrated below in Figure 1. North Korean radical

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actions create a security dilemma in the region, by creating heightened fears in the United States
and Japan and resulting in increased security measures by both countries. These responses by
the United States and Japan consequently put China at a competitive disadvantage in its security
environment. The security dilemma in the region is further intensified by region-specific material
factors and non-material factors. Thus, Beijing seeks to discourage certain North Korean behaviors that lead to such strong reactions and further security commitments from the United States
and Japan. In the sections below, I build this causal theory and show why this should hold true.

Figure 1. Regional security dilemma and the causal mechanism
North Korean Threat to the United States
For the United States, North Korean nuclear weapons and ballistic missiles technology pose
direct threats to its national security. Pyongyang routinely threatens to strike U.S. military bases
in the Pacific, and even the U.S. mainland, with its ballistic missiles containing nuclear weapons. The official report issued by the U.S. Department of Defense on North Korea explicitly
mentioned North Korea’s nuclear weapons and ballistic missiles as threats to the U.S. national
security. It notes, “North Korea’s continued pursuit of nuclear technology and capabilities and
development of intermediate- and long-range ballistic missile programs…underscore the threat
to regional stability and U.S. national security” (Department of Defense, 2013, p.1).

The United States countered this threat by taking several measures. In order to deter

North Korea, the U.S. has strengthened its missile defense systems on the Pacific Coast. The
Pentagon announced last year that it will spend $1 billion to “deploy additional ballistic missile
interceptors,” which would neutralize the North Korean threat, and the decision was known to
be accelerated by North Korean “recent belligerence” (Shanker, Sanger, & Fackler, 2013). The
U.S. Navy also deployed warships that had missile defense capabilities to the Korean Peninsula
(Shanker et al., 2013). The US Pacific Fleet Commander said, “Our number one security concern

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is North Korea” (Holzer & Truver, 2014). These moves and statements show that Washington
perceives threats from North Korean development of nuclear weapons and ballistic missiles, and
also demonstrates Washington’s desire and ability to actively deter North Korean threats.
North Korean Threat to Japan
For Japan, also, North Korean nuclear weapons and ballistic missiles pose direct threats to its national security. The perception of threat may be even larger due to the fact that missiles tested by
North Korea have flown over Japan. Defense White Papers issued by the Japanese government
noted threats made by the North Korean government, including that it can hit Japan with nuclear
weapons in its missiles, even naming specific cities (Ministry of Defense, 2014, p.16). For Japan,
“the development of WMDs and missiles by North Korea constitutes, coupled with provocative
words and actions, including missile attacks against Japan, a serious and imminent threat to the
security of Japan” (MoD, 2014, p.17). In its section of Ballistic Missile Defense (BMD) system,
the Defense White Paper makes note of every single missile test conducted by North Korea in a
timeline of Japan’s Ballistic Missile Defense development, suggesting that North Korean missiles constitute a significant threat to Japan’s national security and a major reason for its development of the BMD system. Also, it cannot be ruled out that the security dilemma triggered by
North Korea’s continued development and possession of nuclear force could lead to a decision
by Japan to nuclearize in the future. Following North Korean nuclear tests, some in Japan have
indeed suggested the need for Japan to obtain its own nuclear weapons (Hughes, 2009, p.292;
Cheng, 2013, p.25).

Furthermore, it has been argued that Japan perceives in North Korea an exceptionally

large threat to its national security, thus intensifying the security dilemma. A prominent scholar
on Japan, Christopher Hughes, showed that Japan “supersizes” the North Korean threat because
of a combination of four factors: “existential military threats” and “legitimate security concerns”
from North Korea’s missile and nuclear capabilities, North Korean threat to its alliance with the
U.S., which is the very “foundation” of Japan’s security policy, North Korea’s abductions of Japanese citizens, and North Korea’s poor international standing and the Japanese officials’ use of
North Korea as a reason for remilitarization (Hughes, 2009). These other factors that accentuate
and even exaggerate North Korea’s security threat exacerbate the security dilemma of the region.

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In security dilemmas, these non-material factors often play an important role. As Charles Glaser
notes, the intensity of a security dilemma “depends on states’ beliefs about one another’s motives
and goals” (C. Glaser, 2011, p.82). The non-material factors suggest that Japan has and will continue to have a highly acute sense of threat from North Korea.
The U.S. and Japanese Threat to China

The measures taken by the U.S. and Japan to deter North Korean threats are, in turn, re-

garded by China as threats to its national security. An extensive U.S. missile defense system built
in the Western Pacific would significantly undermine the effectiveness of China’s ballistic missile
force and thus weaken China’s relative security position, Moreover, China has reasons to fear the
possibility that Japan might try to pursue nuclear weapons in response to North Korea. Japan’s
nuclearization would be a major game-changer, one that would provide it with nuclear deterrence
capability to alter the regional security environment against China’s interests.

The security dilemma felt by China is intensified because of several reasons. In a classic

piece on the security dilemma in East Asia, Thomas Christensen (1999) showed that this particular region is conducive to intensified security dilemma because of several reasons. First, he notes
“the importance of sea-lanes and secure energy supplies” which would encourage states to pursue “power-projection capabilities on the seas and in the skies” (Christensen, 1999, p.50). Also,
he argues that “psychological factors”, such as “the historically based mistrust and animosity
among regional actors”, can contribute significantly to the security dilemma (Christensen, 1999,
p.50). In these circumstances, even “defensively motivated measures” would be perceived as “offensive threats” (Christensen, 1999, p.49-50). Chinese nationalism, known as a factor especially
in relation to Japan, should also be an important variable in the security dilemma. Moreover, Iain
Johnston argues that the “containment meme in China” frequently used by Chinese analysts to
describe U.S. policy could amplify the security dilemma between the two countries because “talk
is consequential” during “intensifying security dilemmas and strategic rivalries” (Johnston, 2013,
p.7-8). These variables amplify the perception of threat that China feels from the U.S. and Japan,
providing further incentives to rein in North Korean provocative and radical behavior.
Hypotheses
The United States and Japan have made clear that North Korea’s development of nuclear weap-

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ons, combined with its ballistic missile program, pose direct threats to their national security.
They have responded to this threat by shoring up their military capabilities, notably in their missile defense systems. These measures, although defensive in nature, deepen the security dilemma
and weaken China’s strategic position, placing China at a disadvantage. Thus, we should expect
China to try to restrain particular North Korean behaviors that trigger such a vicious cycle. Using
the regional security dilemma framework as the theoretical basis, I propose a hypothesis.

H1: China is more likely to take a tougher stance on North Korean behaviors that directly

threaten the national security of the United States and Japan.
Because the theory uses the security dilemma as it involves the United States and Japan, we
should expect to observe China to act less critically of the actions of its ally if they do not threaten directly the United States or Japan. Thus, I propose a second hypothesis.

H2: China is less likely to take a tougher stance on North Korean behaviors that do not

directly threaten the national security of the United States of Japan.
In the next section, I will conduct case studies of Chinese policy behavior with regard to North
Korea’s provocative actions. I look at three sets of events: nuclear tests, conventional provocations against South Korea, and ballistic missile tests. The theory predicts that China will take a
harder stance against North Korea on nuclear weapons and ballistic missiles tests, especially with
regard to nuclear weapons tests because of its huge strategic impact; it also predicts that China
will take a less forceful stance against North Korea for its conventional provocations against
South Korea.
Case Studies
Case Study: 2006 Nuclear Test
On October 3, 2006, North Korea announced publicly that it would conduct a nuclear test. This
announcement drew an unusually heavy rebuke from China. Following this announcement, the
Chinese Ambassador to the United Nations warned in that North Korea will face “serious consequences” and that “no one is going to protect” North Korea (Coonan, 2006).

Several days later, North Korea conducted the first nuclear test. Chinese response was

unusually forceful, much stronger than any other stances it had taken on North Korea on its
previous belligerent behaviors. The Chinese government publicly criticized North Korea and said

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that Beijing is “resolutely opposed” to the nuclear test (Xinhua, 2006). Beijing’s language carried
a sternness not usually adopted towards Pyongyang on previous occasions. The official statement
said that Pyongyang “ignored universal opposition” to the nuclear test, which it conducted “flagrantly” (Xinhua, 2006). That China joined the international community to voice the universal
rebuke on North Korea was highly unusual and therefore significant.

About a week later, China joined the other members of the United Nations Security

Council to adopt a resolution condemning the North Korean action and imposing financial and
arms sanctions (Michaud, 2006). In this resolution, China agreed not only to a ban on trade of
weapons and nuclear material, but also a U.N. imposed ban on the trade of luxury goods, a financial freeze and travel ban on those involved in missile or nuclear programs (Moore, 2008, p.11).
Beijing hence showed a willingness to send a strong message to the North Korean leadership.
Moreover, at least four Chinese banks reportedly stopped dealing with China after the nuclear
test, and this suggests that China was using various methods at its disposal to get across to North
Korea its displeasure at the nuclear test (Kessler, 2006). It was also observed that China reduced
its crude oil exports to North Korea following its nuclear test during this period (Khan, 2006).
Although the Chinese government did not announce this move or reveal the intentions behind it,
such a change, even if it is accidental, could send a message to the North Korea leadership given
North Korea’s almost complete reliance on China for oil.

These responses by China are consistent with the prediction made in H1. In the run-up to

and in response to Pyongyang’s nuclear test, China reacted in an unprecedented manner, forcefully criticizing North Korea for its actions and taking measures to punish and pressure North
Korea.
Case Study: 2009 Nuclear Test
To the dismay of the international community, on May 25, 2009, North Korea conducted its
second nuclear test. The international community was swift in criticizing the action. The Chinese
government again came out forcefully against North Korea and joined other nations in criticizing the move. Its reaction was mostly consistent with its previous response to the nuclear test in
2006. Right after the nuclear test, Chinese Foreign Ministry issued a strong statement in expressing its disapproval. “The DPRK ignored universal opposition of the international community

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and once more conducted the nuclear test. The Chinese government is resolutely opposed to it”
(Xinhua, 2009a). It also voiced a “strong demand that the DPRK live up to its commitment to
non-nuclearization” and stop “any activity that might worsen the situation” (Xinhua, 2009a). It
claimed that China would “continue its unremitting efforts” to achieve de-nuclearization of the
Korean Peninsula (Xinhua, 2009a). The official Chinese position came in the form of a Foreign
Ministry statement, just as it did in 2006. It is notable that the Chinese government issues official
statements rarely, only eight times since 1992 only in response to vital issues such as the Taiwanese President’s visit to the U.S., which highlights the seriousness with which China regards
the issue of North Korean nuclearization (B. Glaser, 2009, p.2).

China also joined the United Nations resolution on North Korea in the U.N. Security

Council. China voted in favor of the resolution, which condemned North Korea’s nuclear test “in
the strongest terms” (Xinhua, 2009b). The round of sanctions imposed in 2009, which expanded
the sanctions imposed in 2006, was believed to be one of the strongest sanctions that the Security Council had ever drafted (Kim, 2010, p.3-4). These sanctions include interdicting vessels on
suspicion of transporting WMDs or WMD materials and also preventing Pyongyang from conducting any kind of arms trade and training and assistance related to it (Kim, 2010, p.3-4). Upon
agreeing to U.N. Security Council’s resolution, a Chinese official added that North Korea action
“violates relevant UN Security Council resolutions, impairs the effectiveness of the international
mechanism of nuclear non-proliferation, and also undermines peace and stability in the Northeast Asia” (Xinhua, 2009c). Perhaps more significantly, it was observed again that China cut
off its crude oil exports to North Korea for about four months following the second nuclear test
(Chosun, 2013).

China’s actions in 2009 are also consistent with the predictions made by H1. China took

a firm stance on North Korea, criticizing in no uncertain terms the highly provocative nuclear
test. China’s position was mostly consistent with that of the previous nuclear test case in 2006,
suggesting that there is a continuity in the strategic thought behind China’s responses to the two
nuclear tests.
Case Study: 2013 Nuclear Test
The third nuclear test was the first one to be conducted after the new leader Kim Jong-un came

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to power. Weeks before North Korea conducted its third nuclear test, North Korea publicly
threatened another nuclear test (Ramzy, 2013). In reaction to this public announcement, the
Global Times, a Chinese newspaper under People’s Daily known for its pro-government stance
on issues, publicly warned that “If North Korea conducts a new nuclear test or launch ‘satellite’
again, China would have no hesitation at all reducing its assistance to it” (Cheng, 2013, p.37).
The Global Times is subject to censorship and influence by the Chinese government and hence
its views are reflective of official positions of Chinese policymakers (Wan, 2013).

This warning was followed by another subsequent warning in the Global Times, “if North

Korea treats China harsh and unreasonable, we wish China would reciprocate in kind, and never
hoax and concede in order to appease it. If the Sino-North Korean relations suffers a significant
setback, let it be… If North Korea does not listen to advice and finally conducts the third nuclear
test, it must pay a high price, it deserves less assistance from China” (Cheng, 2013, p.37).

North Korea would not listen. On February 12, 2013, North Korea conducted its third

nuclear test. Promptly, China joined the other members of the Security Council in an emergency
meeting to “strongly condemn” the third nuclear test (Change & Kim, 2013). On March 7, 2013,
China, together with the other nations, voted in favor of new sanctions, which targeted “North
Korean banking, trade and travel,” urged countries “to search suspect North Korean cargo” and
also included “new enforcement language absent from previous measures” (Gladstone & Sanger,
2013). It was notable that China itself participated in drafting the United Nations resolution
against North Korea; China’s co-sponsorship indicates China’s deep dissatisfaction and its willingness to send a clear signal to North Korea (Gladstone & Sanger, 2013).

Chinese Foreign Minister stated that China was “strongly dissatisfied and resolutely op-

posed” and urged Pyongyang to “stop any rhetoric or acts that could worsen situations and return
to the right course of dialogue and consultation as soon as possible,” thereby using the same
strong language, if not stronger, to denounce North Korean action (Change & Kim, 2013). China
also took an unusual step, summoning the North Korea’s ambassador to China to convey the
message that China was “strongly dissatisfied and resolutely opposed” to the third nuclear test
(Wan, 2013). China criticized the nuclear test in no uncertain terms. After North Korea conducted the nuclear test, the Global Times argued “China should reduce its assistance to North Korea
as a reaction to its third nuclear test. We oppose North Korea’s nuclear test, such opposition

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should be expressed by action. No matter how unhappy Pyongyang might be, we must do so…
China’s attitude is unswerving” (Cheng, 2013, p.38).

Again, in 2013 China policy decisions fit the results in the two previous cases and the

prediction made by H1. Before Pyongyang conducted the test, China publicly discouraged the
North from following through with the test. When its warnings fell on deaf ears, China moved
swiftly on the international stage to isolate and rebuke North Korea for its radical behavior.
Case Study: After the 2013 Nuclear Test to the Present
No major event has occurred between the two nations since the third nuclear test. The bilateral
relations have not seen a breakthrough. North Korea is continuing its dual-policy of nuclear armament and economic development, and the terms of the bilateral relationship remain the same.
Hence, we should expect China to discourage additional nuclear tests and treat North Korea
coolly.

Evidence suggests that this is the case. Experts noted that China’s new President Xi Jin-

ping had been “noticeably cool” towards North Korea after it congratulated Xi on assuming the
presidency (Waterman, 2013). Considering the long history between the two nations, this can be
interpreted as a public snub against North Korea. President Xi Jinping has also not visited North
Korea whereas he has frequently met with South Korean President Park. Notably, Xi’s visit to
Seoul marks the first time that a Chinese president visited South Korea ahead of the North (Snyder, 2014). To this day, Xi has not met with the North Korean leader Kim Jong-un.
Pyongyang has shown no signs of backing down. Following its nuclear test in February 2013,
North Korea announced in April that it would seek a new strategic line based on the two pillars
of nuclear programme and economy and would accordingly reopen the Yongbyon nuclear reactor, which had been closed per agreement reached in multilateral dialogue in 2007 (McCurry,
2013). China reacted to this announcement, stating that the restart of the nuclear facility is “regrettable” (McCurry, 2013). About a month later, when a special North Korean envoy visited Xi
in Beijing, Xi “bluntly told” him that Pyongyang should participate in nuclear talks to “rid it of
its nuclear weapons” (Perlez, 2013). Xi Jinping’s forceful tone was a public warning that demonstrated China’s frustration with North Korean behavior (Perlez, 2013).

In 2014, North Korea threatened to conduct another nuclear test, which many observers

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believe could test the “small and sophisticated” devices that can be used in ballistic missiles
(Choe, 2014). As North Korea continues to follow its policy of nuclear armament, China warned
that it could impose sanctions, international and unilateral, on North Korea if Pyongyang were to
conduct a fourth nuclear test (Gertz, 2014). A pro-government newspaper in Hong Kong quoted
a professor, who stated that China will “definitely be prepared to play a leading role” in international action against North Korea and, moreover, “China will impose its own unilateral sanctions
on the DPRK” in addition to international sanctions (Gertz, 2014).

The evidence demonstrates China’s genuine frustration with North Korea and its desire to

rein in further provocative North Korea behavior. While how China would react to a fourth nuclear test by North Korea is unknown, all the evidence suggests that China will take a firm stance
and condemn it, possibly to be followed by concrete measures to pressure North Korea. Thus the
findings in the case study of the most recent China-North Korean relations add support for H1.
Case Study: 2010 March Cheonan sinking
In March of 2010, a South Korean corvette sank off the western coast of the Korean Peninsula.
While the reasons for the sinking initially were unknown, it was widely speculated that North
Korea had torpedoed the South Korean navy warship. In this moment of crisis, Beijing was much
slower to react. On April 27, Chinese Foreign Ministry merely said that China was “very concerned” about the sinking of Cheonan and hoped that the issue be “properly handled” (Xinhua,
2010a).

It was almost a month after the sinking, and much later than most of the other states, that

China officially offered South Korea condolences (Pomfret, 2010). In early May, Beijing hosted
the then-leader Kim Jong-Il to Beijing just five weeks after the sinking while the issue was unresolved and being investigated (FlorCruz, 2010). During this meeting, China reportedly offered
Kim “another large package of aid,” and this attitude understandably infuriated South Korean
diplomats (Pomfret, 2010). This prompted the South Korean government to summon China’s
ambassador to Korea to convey its strong disappointment (Lee, 2010).

On May 15, China officially called for related parties to “keep calm, exercise restraint

and appropriately handle Cheonan incident” (Xinhua, 2010b), refraining from blaming or criticizing North Korea for the action. China did not acknowledge the results of the report of the joint

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investigation—conducted by an international team comprised of experts from different countries— which implicated North Korea in the attack. Even after results of the report were made
public, China refused to acknowledge the report and denounce North Korean action. On May
25, Chinese Foreign Ministry stated that it “noted” the results of the international investigation
(Xinhua, 2010c). China’s position did not change. China’s Foreign Ministry only stated that it
would “objectively and fairly deal with the incident in accordance with the facts” and stressed
the importance of “calm and restraint” in the region (Xinhua, 2010d). When the United States
and South Korea asked the U.N. Security Council to impose sanctions and punitive measures on
North Korea, China refused to cooperate but “obfuscated international efforts” to punish Pyongyang for its actions (Song, 2011, p.1142).

A few weeks after, Premier Wen came to Seoul in a widely anticipated visit, but he also

stopped short of criticizing or condemning North Korean action. He said that China would take
an “objective and fair judgment based upon facts” and urged calm on both sides, more or less
repeating China’s ambivalent stance on the issue (FlorCruz, 2010). Even as South Korea and the
United States steadfastly pressured China to condemn its ally, with the U.S. accusing Beijing
of “willful blindness” toward North Korean behavior, China did not budge (Jacobs & Sanger,
2010). China “led the opposition” to the Security’s Council’s move towards acknowledging
South Korean findings and condemning North Korea for the attack (Jacobs & Sanger, 2010).
By refusing to renounce North Korea, China in effect backed North Korea and shielded it from
facing universal diplomatic condemnation and, possibly, punitive measures.

Finally in July, the United Nations Security Council, with Chinese approval, agreed to a

presidential statement on the incident. Most notably, however, the statement did not explicitly
mention North Korea because of, as many officials noted, China’s steadfast refusal to publicly
blame North Korea (Harlan & Lynch, 2010). South Korea had sought a more direct and sweeping
condemnation, but was in the end had to settle for the rather ambiguous presidential statement.
Such a result was both a major disappointment and a reality check for South Korea and the United States.

The findings of the case study support H2. The conventional military provocation against

a South Korean warship did not directly threaten the national security of Japan or the United
States. The attack did not lead the two nations to adopt macro security measures that would

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destabilize China’s overall security environment. Hence China was more supportive of its ally, in
fact almost shielding it from international rebuke, and this way China behaved according to the
prediction made by H2.
Case Study: 2010 November Yeonpyeong shelling
Another important test for China came in 2010, this time in a much more blatant and dangerous
form. On November 23, 2010, North Korea fired around 170 artillery shells and rockets straight
at South Korea’s Yeonpyeong Island, causing military and civilian casualties. South Korea retaliated by firing its own shells and rockets. Both sides exchanged shells for hours. Such major
exchange of fire was unprecedented since the end of the Cold War, and tension on the Korean
Peninsula escalated to the highest level since the 1950’s. This was a clear and an open provocation initiated by the North on South Korea.

Even though it was a clear provocation by North Korea, China again did not criticize or

condemn North Korean action. On the day of the crossfire, the Chinese foreign ministry stated
that the two sides should “do things conducive to peace and stability in the Korea Peninsula” and
to “keep calm and restraint” (Xinhua, 2010e). Throughout the crisis China continuously refused
to rebuke or blame North Korea for starting the conflict. A week after the crossfire, amid reports
that the U.S. and South Korea were to begin military exercises in the seas surrounding the Korean Peninsula, China’s responded by calling for an emergency meeting of the United Nations
Security Council to resolve this issue, an initiative not accepted by other nations. Later on, President Hu reportedly told President Obama that China was looking for “an easing, not a ratcheting
up; dialogue, not confrontation; peace, not war” (People’s Daily, 2010) while refusing to hold
North Korea accountable for the escalation or even mention North Korea.

Following the attack, China again stalled South Korea’s efforts to condemn the North

Korean attack in a resolution in the United Nations Security Council. China refused to support a
resolution that would condemn North Korea for the attack (Green & Yoon, 2010). American officials reported that China blocked “language condemning North Korea” and did not even agree to
“a mention of the island” (Harlan, 2010). China insisted that a resolution that condemned North
Korea would be a “provocation” and refused to agree to the resolution (MacFarquhar, 2010).

The contrast to Chinese reaction this time with North Korea’s nuclear tests was very

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clear. China stymied nearly all efforts to isolate or punish North Korea for the provocation after
this more conventional and regionally-limited provocation. China’s rather supportive position towards North Korea greatly disappointed and angered officials in South Korea. Chinese behavior
fits perfectly my model and H2, which predicts that China would not take a firm stance against
North Korea on this particular type of provocation.
Case Study: North Korean Ballistic Missile Tests
North Korea launched “satellite rockets,” or what other believe to be missiles tests, multiple
times in the last few years. Some of them were short-range, fired from multiple-rocket launchers
and fell into the waters off the Korean peninsula. Other long-range rockets, some of which can
travel thousands of miles, have raised more concerns. In response to North Korea’s continuous
launches of missiles, especially the long-range ones, China has responded forcefully.

In both 2009 and 2012, when North Korea launched test ballistic missiles, China agreed

to the drafting of a presidential statement at the United Nations Security Council, both of which
used the word “condemned” to criticize North Korean behavior (AP, 2009; Lynch, 2012). In late
2012, after North Korea announced its plan to launch a long-range missile, China made clear
efforts to restrain Pyongyang from conducting the test. Beijing sent a delegation led by Li Jiangguo, a member of China’s Politburo, who carried a letter from Chinese president Xi Jingping
that reportedly urged North Korea not to go ahead with the ballistic missile launch test (Perlez,
2013a). North Korea did not comply and followed through with the missile launch.

After the launch of the missile, China joined the other members of the United Nations

Security Council for a resolution that condemned North Korean action. The resolution extended United Nations sanctions, to which Beijing agreed, and warned of “significant action” if the
North were to conduct further missile or nuclear tests (Branigan, 2013b). Chinese Ambassador
to the United Nations described the resolution as “generally balanced,” suggesting that Beijing
was willing to agree to UNSC condemnations and even sanctions against North Korea (Branigan,
2013a).

In 2013, when North Korea again threatened “satellite” launches and publicly declared its

preparation for the missile test, the Chinese media urged calm and restraint, meanwhile issuing
a stern warning that North Korea has suffered the most from the escalation and that “China and

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China’s mightiness and security are the ultimate guarantee to North Korea’s long-term security
and stability, and its importance is no less than the nuclear weapons,” thus implying that North
Korean behavior risks losing the support of China (Cheng, 2013, p.34). In the end, North Korea
did not actually launch the missiles, a result some attribute to Chinese pressure on Pyongyang.

In sum, North Korea’s missile tests have led China to agree to two United Nations Secu-

rity Council presidential statements and a resolution, which included sanctions. Evidence shows
that China also took unilateral steps to dissuade North Korea from conducting the missile tests
and publicly warned North Korea of the consequences. These findings support H1. Because ballistic missiles are an issue that can trigger a regional security dilemma and consequently weaken
China’s security, China took a firm, public stance against North Korea’s ballistic missile tests.
Results
Having tested H1 and H2 against a series of North Korea’s provocative actions, I find that H1
and H2 hold true. Analysis of Chinese policies on North Korean nuclear and ballistic missile
tests shows that China took a harsher stance against these actions by North Korea. The findings
validate H1. In cases in which North Korean action was not likely to lead to a regional security
dilemma, such as conventional arms provocations against South Korea limited in scope, China
was much less willing to rebuke North Korea for its behavior.

If my theory is correct, China should be taking other measures that lessen the regional

security dilemma. Indeed, there are many other signs that suggest China is seeking this end. The
findings in the case studies show that, notably, China not only took forceful public measures
but also made proactive efforts to discourage North Korea from behaviors that have nettled the
United States and Japan. The fact that China is not just putting on a public show substantiates
my argument that China is acutely concerned about the regional security dilemma that North
Korea causes. Moreover, China has fervently protested the installation of American missile
defense systems along its periphery. According to my theory, China should be highly sensitive to
the missile defense systems, which could undermine the effectiveness of its missile force. Much
evidence confirms that this is the case. China has criticized Washington’s decision to position a
missile defense radar in Japan, saying the U.S. was “damaging stability” in the region (Reuters,
2014; Shanker & Johnson, 2012). China also has strongly protested to the idea of U.S. missile

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defense systems being installed in South Korea (Yonhap, 2014). These positions by the Chinese
support my theory of regional security dilemma.

Last, China observers noted that China has been much less provocative in the Senkaku

Islands recently than in the past (Fravel & Johnston, 2014). This behavior is consistent with my
theory. While Chinese intentions behind the sudden restraint are not clear, one previous consequence of Chinese provocations was the U.S. signaling its increased security commitment to
Japan and the Senkaku Islands. In the last few years, U.S. high officials have publicly offered reassurances that the Senkaku islands fall within the purview of the security treaty, culminating in
President Obama’s first announcement on the U.S. position April 2014 (Panda, 2014). In light of
this situation, China’s restraint indicates that it stays sensitive to the security commitments made
by the U.S. in the region and the changes in the regional security environment. China is careful
not to increase the security commitments Japan makes and, in particular, causes the United States
actions that could place China at a disadvantage.
Alternative Explanations
There are a couple of alternative explanations that this section addresses. First, some scholars
have suggested that China’s concern for international reputation, or its “great power status”
(Larsen & Shevchenko, 2010; Kleine-Ahlbrandt & Small, 2008). It is argued that the important motivator behind Chinese policymaking has been “the West’s heightened expectations for
China’s global role” and that “China has no choice but to worry about its international image”
(Kleine-Ahlbrandt & Small, 2008, p.39). This school of thought focuses on public image as an
independent variable explaining China’s policies. However, China’s concern for image fails
to explain its behavior towards the Korean Peninsula. It does not explain why China refrained
from criticizing North Korea after the North’s sinking of a South Korean naval ship and shelling
of a South Korean island. Most of the international community recognized the results of joint
investigation and blamed North Korea for escalating the tension in both cases. China chose not
to blame North Korea in either of the cases, thereby drawing wide criticism and anger from the
international community. The concern for international reputation or image certainly was not the
primary factor in driving Chinese policy. Security concerns were an overriding factor. Moreover,
China’s commitment to de-nuclearization of Iran has been ambivalent at best and it also drew

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wide criticism from around the world. In fact, some have suggested that China “abetted Iran’s
quest for nuclear capacity” (Berman, 2011), and the lack of commitment from the Chinese has
not helped strengthen its international reputation. It is therefore hard to believe that Chinese behavior can be explained best by its concern for international reputation.

A second commonly known explanation is that China’s policy is determined by its de-

sire to maintain stability in North Korea, possibly as a buffer sate. China’s biggest concern is
therefore “preventing domestic insecurity and maintaining a stable buffer at the gateway to
China’s political and economic heartland” (Scobell & Cozad, 2014, p.62-63). This may well be
true - preventing a collapse of an ally should be an important security concern, especially if it
can lead to facing a democratic and U.S.-friendly South Korea across the border. But this factor
alone does not explain the variance in China’s policies with regard to North Korea. North Korea
has constantly been unstable for the last few years. The health of Kim Jong-Il was known to be
dwindling for years, thus fueling concerns of instability. His death in 2011 led to the transition in
leadership to Kim Jong-un, followed by a series of domestic purges and change in policy. Kim
Jong-un’s rule has constantly been marked by domestic political turmoil and uncertainty. Fear of
instability, therefore, should be a constant factor on the Korean Peninsula. It cannot account for
the differences in the policy actions of China.
Conclusion
In this paper, I argue that China’s policy towards North Korea can be best explained by China’s
security position vis-à-vis the United States and Japan. I demonstrate that China takes a hard
stance towards North Korea if the North Korean behavior directly threatens the national security
of the U.S. and Japan which would lead the two nations to adopt enhanced security measures.
Because certain North Korean behaviors, such as nuclear tests and ballistic missiles tests, create a regional security dilemma that ends up undermining China’s security, China restrains and
criticizes North Korea for taking these actions. On the other hand, for North Korean provocative
actions that do not pose a direct threat to the U.S. or Japan, China takes a softer line. It does not
blame or isolate North Korea and even shields it from international pressure.

Together, the findings of this paper pose certain policy implications for U.S. officials. Ac-

cording to my theory, increased American and Japanese security measures and commitments in

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response to North Korean belligerence should put a considerable amount of pressure on Beijing,
encouraging it to restrain North Korean radical behavior. If these measures have the effect of
countering Chinese military strengths, this would create a bigger incentive for China to restrain
North Korean behavior and would make North Korea more a strategic liability than an asset. It
follows that if the U.S. threatens enhanced security commitments to the region, China would try
harder to dissuade North Korea from acting “irrationally.” U.S. officials should keep in mind that
China stays hypersensitive to U.S. security moves in the region. The caveat, of course, is that
too much pressure could trigger a vicious cycle, creating an all-out arms race among the regional
players. In addition, my research provides U.S. policymakers with a framework with which to
manage the U.S.-Japanese alliance vis-à-vis China. Since China feels an acute sense of threat
from a potentially aggressive Japan for various reasons, the United States can defuse the tension
and check the development of a security dilemma by reining in Japan’s aggressiveness in security policy.

Iain Johnston wrote that “in security dilemmas, discourses about Self and Other tend to

simplify and to polarize as attribution errors multiply and ingroup-outgroup differentiation intensifies” (Johnston, 2013, p.48). Further research on whether the U.S. or Japan had a tendency to
lump China and North Korea together as the “Other” would provide important insights into the
nature of U.S and Japanese security policies. Such analysis of psychological and historical factors that influence the security dilemma in East Asia can broaden our understanding of the many
factors that underlie the regional security dynamics of East Asia.

Understanding the security environment in East Asia is an important task for all of us.

East Asia is known to be the future center of gravity in international relations. The world’s strongest powers, the U.S., China, Japan, and Russia, are all keen to promote their national interest in
this vastly complex security environment. North Korea stands at the very center of the regional
security dynamics, as a place where the interests of all the regional players overlap. The question
of how to manage North Korea is, therefore, directly linked with the question of how to preserve
peace in East Asia, perhaps the biggest security challenge of our day.

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Ideological Protest in Post-Reform China:
Does Ideology Matter?
Daniel Shats

In the years following the death of Mao Zedong and the end of the Cultural Revolution, Deng Xiaoping implemented the Reform and Opening Up policy, which
brought much-needed economic growth and prosperity to a China that had suffered
greatly from the catastrophic policies of the late Mao years. The resultant economic
openness and changing societal conditions have given rise to a robust culture of
political activism that seems out of place in an authoritarian state. As citizens organize into movements in protest of issues that affect their lives, the citizenry’s influence on policy continues to grow and dissent becomes increasingly visible, posing
a challenge to the legitimacy and endurance of the Communist party-state. Some
movements have sprung up in Chinese society that go beyond single-issue protests
and are guided by ideology rather than self-interest. This paper examines liberal,
nationalist and communist popular movements and evaluates the state’s response
to each. It finds that while the ideological stance of a movement affects whether it
is repressed, tolerated, encouraged or co-opted by the state, the primary reason for
this discrimination is not simply ideological favoritism. Rather, the logic guiding
the Chinese Communist Party’s response to ideological protests is based on the
Party’s deep insecurity over the legitimacy of its rule. Therefore, the CCP considers
both the threat posed by the protests to its legitimacy, and the potential costs and
benefits to legitimacy of each possible course of action. Understanding this sort of
legitimacy-centered logic is essential to understanding the domestic policy of China and predicting future trends in Chinese state-society relations.

T

he phenomenon of popular protest in the People’s Republic of China is still a relatively new
area of study. It came to Western attention only after the Mao era and its growing power and

prevalence in Chinese society was catalyzed by the post-Mao reforms of the 1980s and 1990s. In
today’s China, as in most countries, the majority of popular protests focus on specific issues directly affecting the protesters: rural villagers protest against land seizures and polluting factories,
urban workers against wage cuts, householders against eviction, ethnic minorities against state repression, and so on. The increasing frequency and success of these protests since the reforms is evidence of a gradual loosening of centralized authoritarian control, brought on by the combination
of economic liberalization, “blind-eye governance”, and an increasingly informed populace that is
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becoming aware of its rights as Chinese citizens. The effect of this has been to create what appears
to be an increasingly liberal atmosphere for popular contention. However, most issue-based popular protests are comparatively non-threatening to the regime’s legitimacy. This is why the state
prefers to deal with the loudest of them by making concessions, rather than risk the regime-threatening public ire that violent repression could bring. A better test of political liberalization is the
state’s response to ideological contention, which goes beyond seeking redress of grievances and
calls into question the ideological underpinnings of the ruling party.

The rapidly changing dynamics of state-society relations in China have given its people

more influence over state policy than they have had since the founding of the People’s Republic
of China in 1949. This paper seeks to evaluate state policy toward popular ideological movements by comparing liberal (or democratic), nationalist and communist movements in modern
China: their natures and operations, their success in influencing policy, and the state’s response to
each. It will further seek to answer the question of whether the specific ideology of a movement
matters in its success and treatment by the state.
Liberal and democratic movements
Of the three ideologies examined in this paper, liberalism is most at odds with the official ideology of the ruling government, despite the economic and political liberalization China has undergone in recent decades. According to Dr. Leigh Jenco of the London School of Economics,
liberalism in China originated as an import from the West during the Qing dynasty (Jenco 164).
It manifested itself in movements such as the May Fourth Movement of 1919, advocating individual freedom and limited government and generally running counter to the dominant ideology
of first Confucianism and later Maoism. During the Maoist era of Communist rule in China,
liberalism was strongly suppressed, and the Cultural Revolution appeared to wipe it out completely, as intellectuals were victimized and subject to violence and imprisonment. Following
the Cultural Revolution, liberalism reemerged as a significant philosophical challenge to official
state ideology. The state itself came under the influence of Western neoliberalism and began to
implement liberal economic reforms (Jenco 165-166).

The most renowned liberal movement in China after the Cultural Revolution was the

pro-democracy student movement of 1989, best known for the state-orchestrated massacre in

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Beijing’s Tiananmen Square that ended it. The movement was sparked by the death of liberal reformist Party leader Hu Yaobang. Students took to the streets in cities all over China, demanding
a wide range of liberal and democratic reforms including the dissolution of the current government, broad and open elections, and freedom of the press (Zhang 71). The protests which eventually culminated in an extended occupation of Tiananmen Square came as a massive shock to top
Party leadership, with Deng Xiaoping and several other leaders believing the protests to be the
work of some Machiavellian “black hand” trying to sow discord (72). The regime initially made
attempts at conciliation with student protesters while still attempting to discredit their cause.
However, after the protestors disrupted the Sino-Soviet summit in Beijing and attracted Western
media attention, the state imposed martial law and violently ended the protests, killing from several hundred to several thousand protestors (Zhao, “State-Society Relations” 1599-1600).

The incident taught enduring lessons to both sides. Since 1989 the government has pre-

ferred to negotiate with and make concessions to the most disruptive popular movements in order
to avoid another violent crackdown. The protests also indicated that the foundation of Chinese
government legitimacy had shifted from ideology to performance (Zhao 1622) with people no
longer blindly accepting Party doctrine. On the other hand, there have been no pro-democracy
movements equivalent to the 1989 student movement, since few are willing to challenge regime
legitimacy in such an overt and direct way. However, some popular movements for liberalism
and democracy have arisen. One such movement manifested itself in the China Democracy Party,
a group that emerged in the 1990s with the intent of forming a real opposition party to the CCP.
The CDP promoted the idea that sovereignty comes from the people, not from a “righteous”
government (Gries and Wright, 123). The CDP tried to register itself through legal channels and
focused on ground-level organization, establishing committees in 24 provinces and cities. The
state’s response was at first inconsistent, with some local officials tolerating the group and others
repressing it. Eventually, the central government decided to crack down on the CDP and arrested
many of its top leaders (126-130).

The year 2011 saw a wave of pro-democracy protests across China, inspired by the ap-

parent success of the Arab Spring. This so-called “Jasmine Revolution” was relatively small, and
began initially through Internet activism on Chinese dissident websites and social media. Unlike the CDP, the Chinese Jasmine Revolution was immediately and unambiguously suppressed

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by the Communist Party regime. The government arrested pro-democracy protestors, censored
the Internet to prevent information from going out (for example, by blocking the search term
“jasmine”), and even established “no-reporting” zones in parts of Shanghai and Beijing so that
protests, those very open challenges to regime legitimacy, did not receive even greater publicity
(Johnson).

The most recent incident significant pro-democracy activism occurred in the fall of 2014,

when Beijing stated that all candidates for Chief Executive of Hong Kong must be approved by
a nomination committee before being voted on in a general election (Xinhua). In response the
group Occupy Central, the Hong Kong Federation of Students, and others organized massive
demonstrations in downtown Hong Kong, demanding free elections. In an attempt to disperse the
large crowds of protestors, the local government employed riot police armed with tear gas and
pepper spray (McCarthy).

Though the demands of the Hong Kong protestors were explicitly pro-democracy, cen-

tral leadership in Beijing was limited in its ability to directly intervene because of Hong Kong’s
semi-autonomous status. Instead, it employed a comprehensive media strategy on the mainland,
with the dual goals of containing the spread of information about the demonstrations and discrediting the protestors in whatever minimal news coverage they received. This strategy was
exemplified by Xinhua, China’s central state-owned news agency; all mention of the protests
were kept off the front page of the Xinhua website and state-controlled newspapers, photographs
of the events were completely absent from all coverage (Tang), new stories about the protests
focused on their disruptiveness and gave no mention of the causes or demands of the demonstrations, Occupy Central was portrayed as a radical, illegal organization linked to “anti-China” forces abroad (Taylor). The strategy was by all measures very successful, with few mainland Chinese
having specific knowledge of the demonstrations or professing any sympathy for them (Tang).

As with most protests in China, the state’s response to democratic and liberal movements

is colored by its strong interest in maintaining legitimacy. Unlike most issue-based protests,
democratic and politically liberal movements are very clear threats to regime legitimacy and repression is still the state’s favored means of dealing with them. Though the CCP is wary to avoid
another disaster like the Tiananmen Square incident, it does not shy away from arresting pro-democracy activists and restricting access to information about their activities.

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Nationalist movements
On the surface, nationalist movements in China pose less of a threat to the Chinese regime than
pro-democracy movements. After all, the Communist Party originally was as much nationalist
as it was Communist, and still uses nationalism in large part to justify its claim to power. For a
long time, the CCP maintained a monopoly on Chinese nationalism and intentionally conflated
Chinese allegiance to the homeland with allegiance to the Communist Party, its ideology and its
goals. Therefore, many nationalist movements in China today do not conflict directly with the
aims of the central government. In fact, most nationalist protests are not directed at the government at all, but rather at foreign countries (Gries, “Nationalism” 191). Such protests commonly
employ Chinese national flags, pictures of Chairman Mao, and other national symbols. As a result, the CCP has been relatively lenient in its treatment of nationalist protests compared to other
ideological movements (Saich 203-204).

However, popular nationalist movements can be threatening to party rule because they

organize independently of the government and implicitly (and sometimes explicitly) promote the
idea that nationalism derives from the people, not from the government. In some ways, popular
nationalism that distances itself from the state can be even more dangerous for legitimacy than
the democratic movement because it is more difficult to suppress. If a significant portion of the
population feels the state is not adequately defending the nationalist interests of China, they may
start to question the Communist Party’s right of rule. Suppression of nationalist movements runs
the risk of provoking the ire of even non-radicalized Chinese (Gries, “Nationalism” 180-181).
Another unique aspect of nationalist movements that makes them hard to quell is that they tend
to be fairly spontaneous, triggered by often uncontrollable events that offend the people’s sense
of national pride. Nationalist protestors are not necessarily committed ideologues who seek
sweeping policy changes, but rather ordinary people who are temporarily riled up in response
to crises (Zhao, “Nationalism” 27; 31). The coincidence of nationalism with the official Party
philosophy combined with the transitory nature of most popular nationalist movements makes it
difficult to use media propaganda against the movements.

In 1999, NATO’s bombing of the Chinese embassy in Belgrade sparked a furious bout

of popular nationalism in China (Zhao, “Nationalism” 6). Party leaders struggled to appease the

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Ideological Protest in Post-Reform China

enraged public or to get the protestors off the streets. Instead of repression, the CCP attempted
to co-opt and control the nationalist sentiment, with moderate success (26). It condemned NATO
and the bombing with fiery rhetoric, and used propaganda to convey the impression that it, the
Chinese Communist Party, had convinced the international community to take China’s side
(Gries, “Nationalism” 189-191).

A recurring source of popular nationalism over the last two decades has been the dispute

over the Diaoyu Islands, a small uninhabited archipelago claimed by both China and Japan. The
Diaoyu Islands, called Senkaku in Japanese, were first occupied by Japan in late 19th Century.
After Japan’s defeat in World War II, the islands came under the control of the United States,
which in 1971 returned them to Japan. Afterwards, China (and Taiwan, separately) began to
contest the Japanese claim to the islands on the grounds that the Chinese had discovered these
islands centuries before. In fact, the Chinese interest in these uninhabited islands stemmed from
their strategic location and their proximity to an oil field. However, anti-Japanese sentiment in
China turned the issue into fuel for Chinese nationalism (“Uninhabited Islands”).

In 1996, there were angry anti-Japanese protests in the streets of Hong Kong and Taiwan,

in response to Japan reasserting sovereignty over the Diaoyu islands. Similar protests would
no doubt have occurred on the mainland if the CCP hadn’t discouraged and suppressed popular
demonstrations and spontaneous organization in general. However, the government tolerated nationalist sentiments on the Internet and in print, and some nationalist writers became increasingly
bold, not only attacking Japan for infringing on Chinese sovereignty but also criticizing the CCP
for its inadequate handling of the issue (Gries, “Nationalism” 183-185).

The Diaoyu islands issue has flared up on a few other occasions since 1996, most recent-

ly in September 2012, after the Japanese government purchased some of the islands from their
private owner. This prompted China to reassert its sovereignty claim over the islands, and ignited
furious anti-Japanese protests in many cities on the Chinese mainland. This time, central leadership allowed these protests and even encouraged them with nationalistic and militaristic rhetoric
in official statements and media coverage. However, the protests soon escalated out of control, as
protestors engaged in violence and property damage, and in some cases lambasted the Communist Party directly (Reilly 208-210). Trying to restore order, the government began to urge calmer
and more responsible expression of patriotism, while also blocking certain protest-related phras-

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es from Internet searches. These efforts were successful: the street protests ended almost abruptly
and were quickly replaced by a nonviolent boycott of Japanese goods, which was supported by
the central government (211-214).

As this incident showed, tolerance or encouragement of popular nationalism runs the risk

of fomenting disorder and public discontent, which could backfire on the Party and draw attention to its perceived foreign policy failings. However, some analysts argue that the CCP now
relies a great deal on nationalism to justify its legitimacy, because liberal reforms have made it
difficult to flaunt the party’s ideological Communist credentials. Popular nationalism is therefore
an opportunity for the CCP as much as it is a possible threat: in an era where public opinion matters, appealing to Chinese nationalism along is one of the surest ways to earn popular goodwill.
Communist movements: the New Left

In the West, conservatism is associated with the political right wing. In China, the conservatives
are hardline communists who wish to see a return to the egalitarian, proletarian-friendly principles that a Communist Party is theoretically supposed to espouse. Some of these staunch Communists and nostalgic Marxists hold offices within the government: for example, now-disgraced
former Chongqing Party chief Bo Xilai tried to revive old Marxist ideals with the “singing red”
campaign (Li). But there is also a strong leftist movement outside the Communist Party, called
the New Left, which is critical of the Party and its performance.

China’s New Left is primarily an intellectual movement concerned with problems of

income inequality and a growing urban-rural gap caused by the liberal economic reforms of the
1980s and 1990s. The movement rarely engages in street demonstrations and instead manifests
itself on the Internet, where it frequently finds itself in conflict with China’s liberal intellectuals,
as well as in printed publications such as books, journals and pamphlets. For example, one of
the leading New Leftists in China is Wang Hui, co-editor of one of China’s leading intellectual
journals, Dushu (Mishra).

State repression of its leftist critics is not unheard of. For example, in 2004, four Mao-

ist protestors in the city of Zhengzhou were arrested and jailed for distributing leaflets praising
Chairman Mao and criticizing the Communist Party for straying from the socialist path (Monthly
Review).

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However, as with nationalist movements, the New Left is somewhat difficult for the CCP

to repress, for a few reasons. First, like nationalism, communism is integral to the official state
ideology, and the New Leftist claim that the CCP has strayed from its ideological foundations
is realistically indisputable. Second, the Communist Party and the government of China include
officials who sympathize with the ideology of the New Left, such as former Chongqing party
chief Bo Xilai. This gives the movement some influence over policy without having to be disruptive, as New Leftists can exploit ideological rifts within the Communist Party to their advantage.
Third, the very non-disruptive nature of the movement deprives the CCP of a commonly-used
excuse to crack down on it. Persecuting intellectuals and writers is rather less popular since the
horrific excesses of the Cultural Revolution, especially when those intellectuals are truer Communists than most government officials. Finally, since the early days of the Chinese Communist
Party, communism has been strongly linked with nationalism both in official rhetoric and in the
public perception, and the New Left frequently invokes this association. Mao Zedong and his
revolutionary ideals still hold a high place in Chinese national identity, and an attack on Mao’s or
Marx’s more devout ideological followers could cause people to question the CCP’s legitimacy,
which of course the Party would like to avoid.
Conclusion
China’s central government’s primary interest in social policy is to preserve the legitimacy of
Communist Party rule. With limited issue-based protests, the government tends to make concessions to the most disruptive and potentially troublesome movements while ignoring the ones who
cannot make themselves heard, regardless of the issue they are protesting, because crushing large
movements is likely to provoke public ire. While this consideration is present in dealing with
ideological protests as well, the ideology in question matters very much to state policy.

Movements that are far removed from the official ideology are, unsurprisingly, treat-

ed more harshly than those closely aligned with the ideals of the party. Liberal and democratic
movements like the China Democracy Party or the “Jasmine Revolution” were suppressed and
their leaders arrested, and in the latter case as well as that of the recent Hong Kong protests, the
state utilized heavy media censorship to prevent the spread of the movement.

Communist and nationalist movements, even those critical of the state, are more likely

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to be tolerated by the state because repressing them runs a higher risk of harming legitimacy, as
it could be interpreted as an attack on the founding principles of the People’s Republic of China.
Nationalist movements are sometimes co-opted and even encouraged, while leftist dissent, which
is typically the least disruptive of the three, is allowed to influence policy from the intellectual
realm.

It is important to note, however, that the ideological motivations of these movements

are still not the only consideration affection state policy toward them. The methods used by the
movements matter as well. For instance, popular nationalism is usually a fleeting and spontaneous phenomenon that can be mollified by an appropriate response to the issue that triggered it,
rather than any sort of far-reaching political reforms. The New Left movement is active mostly in
publications and on the Internet, and doesn’t typically disrupt social order. On the other hand, a
liberal movement like the attempted Jasmine Revolution could be very costly to ignore or concede to, making quick and thorough repression the safest way for the Party to deal with it.

The Internet provides somewhat of a safe haven for dissidents of all ideologies. Though it

is monitored and censored by the state, it is still a much less risky medium of contention for the
average person than disruptive street protests or formal legal action. On the Internet, liberal and
pro-democracy citizens can express their opinions, criticize the state, debate with their ideological rivals, and so on with little immediate risk to themselves or to the state. In general, Party
leadership is far more concerned with preventing spontaneous organization than with silencing
individual critics.

All three ideological movements are also able to take advantage of divisions in the CCP

and between local and central governments to influence policy and avoid repression. Clearly,
leftists are best equipped to do this by allying themselves with sympathetic officials. But while
liberal movements would be hard-pressed to find a Standing Committee member who supports
democracy, even they can find some liberal-minded officials who, if the issues are properly
framed, can be persuaded to support certain policy changes. The example of General Secretary
Zhao Ziyang, who was sympathetic to the 1989 student protests, illustrates this.

All in all, the political and economic reforms of the last few decades have created a di-

lemma for the Communist Party. On the one hand, political coercion and information control are
more difficult than ever, because the citizens are more informed and less willing to accept re-

66

Ideological Protest in Post-Reform China

strictions of their freedom. The state must allow some political expression and protest in order to
gauge public opinion, allow citizens to peacefully express their grievances, and prevent pent-up
anger from being directed at the Party itself. On the other hand, allowing free speech and assembly can only increase the number of protests, promote disorder and popular discontent, and expose the people to regime-threatening ideologies. The pragmatic logic the CCP employs in trying
to balance repression and tolerance may make such a balance impossible, as people who become
used to a more liberal status quo will become more and more critical of authoritarian methods.
In other words, the Pandora’s Box of political liberalism has been opened and cannot be closed;
it remains to be seen how future Chinese leaders will attempt to salvage the party-state’s ever-diminishing authoritarian capability.

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“Full Text of NPC Decision on Universal Suffrage for HKSAR Chief Selection.” Xinhuanet,
August 31, 2014. Accessed December 6, 2014. http://news.xinhuanet.com/english/china/201408/31/c_133609238_2.htm.
Gries, Peter Hays, and Teresa Wright. “Contesting State Legitimacy in the 1990s: the China Democracy
Party and the China labor bulletin.” In State and society in 21st century China: crisis, contention,
and legitimation. New York: RoutledgeCurzon, 2004.
Gries, Peter Hays. “Popular Nationalism and State Legitimation in China.” In State and society in 21st
century China: crisis, contention, and legitimation. New York: RoutledgeCurzon, 2004.
Jenco, Leigh K. “Chinese Liberalism.” In Encyclopedia of Political Theory, edited by Mark Bevir, 164166. London: SAGE, 2010.
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Times. http://www.nytimes.com/2011/02/24/world/asia/24china.html.
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McCarthy, Tom. “Under the Umbrellas: What Do Hong Kong’s Protesters Want from China?” The
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world/2014/sep/29/hong-kong-democracy-protests-china-umbrellas-police.
Mishra, Pankaj. “China’s New Leftist.” The New York Times. http://www.nytimes.com/2006/10/15/
magazine/15leftist.html?pagewanted=all (accessed May 30, 2014).
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Leafleting.” Monthly Review. http://monthlyreview.org/commentary/on-december-24-2004-maoistsin-china-get-three-year-prison-sentences-for-leafleting (accessed January 1, 2014).
“How Uninhabited Islands Soured China-Japan Ties.” BBC News. November 9, 2014. Accessed February
23, 2015. http://www.bbc.com/news/world-asia-pacific-11341139
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Latest-News-Wires/2014/0930/China-s-media-blackout-No-reports-or-images-of-Hong-Kongprotests.
Taylor, Adam. “Chinese State Media Points to Foreign Hand in Hong Kong Protests.” The Washington
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Zhao, Dingxin. “Nationalism and Authoritarianism: Student-Government Conflicts during the 1999
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Ideological Protest in Post-Reform China

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A Sustainable Model of
Authoritarian Capitalism?
Jeremy Lin

F

or a time, the Post-Cold War era appeared to be characterized by an “unabashed victory”
for Western values of economic and political liberalism.1 Though the declaration of liberal

triumph in hindsight seems to have been premature, the current world order is, nevertheless a far
cry from seeing rapid democratic reversal, or a surge of autocratic revival.2 Adherents of Francis
Fukuyama’s The End of History and the Last Man 1989 may subscribe to the notion that liberal-democracy is the final stage in the development of human governance, but a unique regime-type
is supplying a middle ground in which semi authoritarian rule is paired with economic freedom
and prosperity. Today, Singapore serves as the leading example. Since its expulsion from Malaysia
in 1965, Singapore has progressed from a third world country with few natural resources into a first
world Asian Tiger. Despite the resilience of single-party rule and the suppression of civil liberties,
Singapore boasts one of the world’s highest GDP per capita, consistently ranks first on the World
Bank’s ease of doing business index, and is able to maintain tremendous fiscal responsibility in
providing its citizens with impressive services in education, healthcare, and housing.

This paper seeks to examine precisely how the Singaporean state has embraced author-

itarian capitalist policies by promoting economic liberalization, while remaining largely autocratic and restricting important political and civil rights. First, I will examine the existing literature on state building and authoritarian capitalism, as well as survey how Singapore’s unique
state-building processes and institutional development allows for its successful governance. Second, I will evaluate Taiwan, one of Singapore’s Asian Tiger counterparts, as a point of comparison, and in addition assess recent social fissures that are forcing the Singaporean state to adapt
to a rapidly shifting social environment. Finally, I will argue that Singapore will remain highly
1
Fukuyama, Francis. “The End of History?” National Interest 16 (Summer 1989): p. 2.
2
Deudney, Daniel and Ikenberry, John. “The Myth of the Autocratic Revival.” Foreign Affairs. January/
February 2009. Retrieved: http://www.foreignaffairs.com/articles/63721/daniel-deudney-and-g-john-ikenberry/
the-myth-of-the-autocratic-revival

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A Sustainable Model for Authoritarian Capitalism

stable and prosperous in its future political development, and that political participation may be
seen, but not political pluralism.

The late political scientist, Samuel Huntington, famously stated that the “honesty and

efficiency that Senior Minister Lee [Kuan Yew] has brought to Singapore are likely to follow him
to his grave.”3 According to Huntington, authoritarian regimes – notwithstanding a marked lack
of corruption within the political system – cannot sustain successful governance over extended periods of time because they lack the necessary mechanisms for self-reform.4 In his seminal
work, Political Order in Changing Societies (1968), Huntington expounds on this theory, advancing that the strength of political communities within modernizing societies is contingent on
the viability and scope of political institutions, which he defines as “stable, valued, recurring patterns of behavior.”5 Such institutions are subject to decay if they are not able to adapt to changing
conditions, as they are often created to meet the demands of specific circumstances. Prominent
International Relations scholars, Daniel Deudney and John Ikenberry, argue that liberal-democracy will ultimately prevail, despite “today’s autocracies be[ing] more competent and more adept at
accommodating capitalism than their predecessors were.”6 Like Huntington, Deudney and Ikenberry also argue that autocratic capitalist societies are inviable in the long run because their rigid
institutions are incompatible with the network of capitalist interdependence that exists between
modern economies.7 Therefore they are less capable of adapting in the wake of social change.

Evaluating the effectiveness of institutions is an important mode of analysis for measur-

ing the success of political regimes, especially at various phases of state development. Given
the widespread political instability of newly independent states after World War II, Huntington’s
theories provide an effective means for understanding the need for strong political institutions
that can continuously adapt to new conditions. However, the literature has since been dominated by research that assesses the functionality of political institutions insofar as they operate in
accord with principles of liberal-democracy, which include the political participation of citizens,
protection of civil liberties, freedom of political expression, as well as the accountability of gov3
Huntington, Samuel. “Democracy for the Long Haul.” Journal of Democracy 7.2 (1996) p. 13.
4
Ibid.
5
Huntington, Samuel. “Political Order in Changing Societies.” New Haven and London: Yale University
Press (1968). p. 12.
6
Deudney and Ikenberry, (2009).
7
Ibid.

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ernments.8 Such an analysis may be useful for evaluating the surge of ‘third wave’ democratic
transitions in the late 20th century, particularly in the cases of Taiwan and South Korea.9 Singapore’s hybrid regime-type, however, does not conform to the notion of liberal democracy as the
superior form of governance.

This paper will take as its point of departure the analysis of how Singapore’s semi author-

itarian model does not fit into the democratic transition narrative, and will be able to continually
respond to social pressures accompanying rapid economic development without having to make
concessions to liberal democratic transformation. With these considerations in mind, we can
begin to examine how the mutually constitutive relationship within Singapore between illiberal
state institutions and economic prosperity stems from its unique historical processes.

The period between the end of World War II and the expulsion of Singapore from Malay-

sia was highly precarious. Since before the time Singapore was liberated from Japanese occupation, the Malayan Communist Party had engendered extensive support through well-organized
grassroots organizations, and exploited labor unrest, depressed economic conditions, and administrative dysfunction in order to incite resistance against British colonial rule.10 Concurrently, a
well-educated cohort of English-educated Singaporeans, including Lee Kuan Yew, had grown increasingly critical of what they had seen as British incompetence in the facilitation of political reforms. They realized collaboration with left-wing forces in Singapore that wielded a wide base of
power to be the most likely method for ensuring political success.11 Members from a pro-communist camp and Lee Kuan Yew’s faction joined together to form the People’s Action Party (PAP) in
1954, seemingly out of political convenience, and Lee served as its secretary-general. However,
because communist activity was perceived to be threatening social stability, government officials arrested many left-wing leaders, including those who were on the PAP’s central executive
committee or served as branch officials. This created a window of opportunity for Lee’s faction
of English-educated moderate leaders to reorganize the party structure which allowed PAP to
consolidate its newfound dominance in order to focus on securing electoral success.12
8
Rodan, Garry. “Singapore ‘Exceptionalism’? Authoritarian Rule and State Transformation.” Working Paper
No. 131, May 2006. Asia Research Centre, Murdoch University.
9
Ibid, p. 2.
10
Turnbull, C.M. “A History of Singapore 1819 – 1988.” Oxford and New York: Oxford University Press
(1989), p. 223.
11
Turnbull (1989), pp. 246 – 248.
12
Ibid, p. 260.

72

A Sustainable Model for Authoritarian Capitalism

A crucial point to be made in explaining the sustainability of Singapore’s semi-authori-

tarian model is that, from its inception, the PAP’s rule was legitimated through universal adult
suffrage. The party offered the electorate ‘honest and efficient government’ that would tackle
pressing issues of education, housing, social security, rural development, and healthcare, among
others.13 In 1959, the British government implemented a new constitution that allowed for internal self-government, and elections were held for the legislative assembly in which the PAP
secured 43 out of 51 seats. 14 Despite internal party tensions between the moderates who sought
a merger with the Federation of Malaya and the radicals who wanted to create an independent
socialist state, Lee Kuan Yew’s new regime had a strong mandate from the people to provide
effective governance. They set out to create authoritarian discipline to develop a planned economy and tackle pertinent social issues through the implementation of a four-year plan; this entailed the creation of public housing programs, universal free primary schooling, improved health
facilities, and favorable tax incentives for foreign and local investors.15 From the initial stages of
Singapore’s development, the PAP was able to rely on a record of tangible economic and social
improvements to win early elections, though it simultaneously utilized despotic means of power
to neutralize political opposition. The PAP government capitalized on legislation passed down by
British rule that allowed for the arrest of opposition leaders without trial, and imprisoned hundreds of communists, students, and trade union leaders.16 More importantly, the Lee Kuan Yew
regime created a state-society bargain in which the middle and working classes consented to PAP
rule because it provided the most likely guarantee of stability.17 The PAP may have made a political miscalculation in rushing into federal politics after Singapore’s merger with the Federation
of Malaysia, but the Federation’s decision to unilaterally impose independence upon Singapore
in 1965 only served to further strengthen the PAP’s control over the state apparatus and allow for
the PAP to build highly capable state institutions.

For the first few years of independence, Singapore was focused on the issue of surviv-

al. However, it became clear by 1969 that Singapore would be able to overcome its precarious
situation. The PAP sought to solidify the party-state structure through leading institutional and
13
14
15
16
17

Ibid, p. 263.
Ibid.
Turnbull (1989), p. 269
Ibid, p. 278.
Ibid.

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economic development to improve the material conditions of civil society and sought to create
sense of multiracial nationhood. Its approach to accomplishing this relied on disseminating party
ideology that advocated self-reliance, and forming linkages with civil society across political,
social and economic realms. Within the political realm, the PAP established community centers
with television sets that aired party propaganda and served as a means for strengthening a sense
of national identity.18 The party also preserved the guise of free and fair elections for the purpose
of political legitimacy, though in practice political pluralism did not exist. To increase political participation and secure electoral support, the PAP recruited members through its affiliated
grassroots networks to fill its ranks from the general population. Within the social realm, public
housing served a rapidly increasing proportion of the population within the first few years of independence, and the state devoted one-third of its budget to education in the first nine years of its
power.19 The working class became dependent on the state’s provision of such services, subordinating electoral choice to economic development. By raising health standards, the state enhanced
Singapore’s physical environment, while quality of life indicators such as infant mortality and
life expectancy rates also improved across the board.20

The initial state-led economy also played a decisive role in entrenching Singapore’s semi

autocratic system. Development-related institutions were either owned or supervised by the state,
and were a part of a larger technocratic bureaucracy that efficiently oversaw the state capitalist
market system. These institutions included the Economic Development Board, the Development Bank of Singapore, the government-created Temasek Holdings, and various other government-linked companies (GLCs).21 Although in recent years, the state has favored market-driven
policy measures. For example, Temasek Holdings, and the GLCs that it controls, constitutes 10
percent of Singapore’s total output as well as 25 percent of local stock-market capitalization.22
The economy saw surges in foreign direct investment as a result of the government’s policies in
favor of market competition and free capital flows. The state dominated virtually all sectors of
the economy, but its role leaned heavily towards market facilitation rather than intervention. In
18
Ibid.
19
Turnbull (1989), p. 299.
20
Ibid, p. 307
21
Haque, M. Shamsul. “Governance and Bureaucracy in Singapore: Contemporary Reforms and Implications.” International Political Science Review (2004), Vol. 25, No. 2, p. 229.
22
Ibid.

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A Sustainable Model for Authoritarian Capitalism

addition the PAP increased its appeal to the working class by bolstering national wages, increasing compulsory contributions to a social security savings plan, providing the state with capital
for infrastructure development, and leveraging to affect production and consumption patterns.23
The Singaporean state employed institutions such as the National Wage Council and the Central
Provident Fund for such purposes. From a theoretical standpoint, the Singaporean state’s exertion of power over society allowed for it to enact policies that formed linkages with civil society
across political, societal, and economic realms, legitimizing the government’s political power.24
Solidarity among state and societal actors relied upon a coordination of public-private resources,
as well as civil society support for state projects. However, society continued to operate within
the context of broader objectives that were set and monitored by the PAP’s despotically enforced
security apparatus under the Internal Security Act, which was enacted in 1963.25

Singapore’s state-building process safeguarded the PAP’s power and allowed for the

development of highly capable state institutions that improved social and economic conditions
at the expense of political liberalism. But beyond the negotiated relationship between state and
society that persists today, the PAP’s internal structure in itself contributes to the state’s successful governance. Samuel Huntington’s concern that absolute power has the potential to corrupt is
valid in many historical instances, despite the monopoly of power in Singapore’s regime, built
into the very fabric of the political system is a comprehensive anti-corruption strategy. Indeed,
the PAP enforces draconian laws and maintains an expansive security apparatus, but its policies
are unique in that the government is almost entirely free of corruption because it pays out extravagant salaries to public servants, effectively removing the temptation of succumbing to bribery or
committing fraud.26 Furthermore, Singapore’s Corrupt Practices Investigation Bureau is able to
detain suspects of fraudulent practices without legal proceedings, further mitigating the issue of
corruption.27 According to Transparency International, public perception levels remain highly in
favor of the government’s anti-corruption record, which ranks 5th on the index’s ranking of 177
countries.28 Such high levels of government accountability undoubtedly play an important func23
Rodan (2006), p. 7.
24
Haque (2004), p. 229.
25
Rodan (2006), p. 7.
26
Ott, Marvin. “Singapore.” Johns Hopkins University. Shriver Hall, Baltimore MD. 30 Sept. 2014. Lecture.
27
Ibid.
28
“Corruption by Country / Territory.” Transparency International, n.d. Web. 10 Oct. 2014. Retrieved: http://
www.transparency.org/country#SGP

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tion in helping the PAP maintain its efficient yet autocratic governance of Singapore. Huntington
writes that, “Singaporeans speak with justified pride about the lack of corruption in their political
system, an achievement made possible by the example and discipline of Lee Kuan Yew,” but
whereas Lee Kuan Yew’s leadership has a limited shelf life. The “freedom and creativity” introduced by former Taiwan president, Lee Teng-hui, will survive him.29 Taiwan’s somewhat similar historical narrative and pattern of political development ultimately yielded widely disparate
results from that of Singapore – attaining first world standards of living for civil society does not
necessarily indicate that democratization will follow.

Taiwan, which underwent a largely peaceful democratic transition process between the

late 1980s and 2000s is often cited as a counterpoint of analysis when examining Singapore’s
political trajectory. Taiwan similarly enjoyed successful institution building under an autocratic
regime, as well as a state-society bargain that provided higher standards of material welfare and
social stability for its population.30 However, Taiwan and Singapore’s historical narratives differ
in that Taiwan’s ruling party, the Kuomintang (KMT), brutally exercised its monopoly of violence over the populace (the infamous 228 Incident left an estimated 20,000 Taiwanese dead at
the hands of KMT troops) and was widely perceived to be corrupt. Taiwan’s historical experiences were also unique in that martial law was instituted for 38 years, shortly after the KMT exerted
its power without endeavoring to achieve democratic legitimation.31 This history of misgovernment in the early years of KMT rule set the stage for later demands for political reform. The
external forces, such as the dramatic decline of Taiwan’s position in global politics and the rising
power of the People’s Republic of China, helped precipitate the democratization process. By the
1980’s, many Taiwanese were highly outspoken against the KMT’s justification for authoritarian
rule, which it had maintained under the pretext that the state must be wary of Communist infiltration and prepare for the retaking of the Mainland.32

Though developing a comprehensive security strategy was a top priority for Singapore, it

does not face an existential security threat in the way that Taiwan does, and the status of Singapore’s sovereignty is not a contested issue. Furthermore, the PAP was staffed with competent
29
Huntington (1995), p. 12.
30
Ottervik, Mattias (2010). Democratic State-Building in Pakistan and Taiwan. Lund University. PDF, p 25.
31
Gold, Thomas B (1986). State and Society in the Taiwan Miracle, New York: East Gate Books, pp. 51-52.
32
Rigger, Shelley. Democratic Transition and Consolidation in Taiwan. Washington, D.C.: American Enterprise Institute, 10 Nov. 2011. PDF, p. 4.

76

A Sustainable Model for Authoritarian Capitalism

technocrats and was able to provide its population with effective governance from the inception
of the Singaporean state. To classify the remarkable economic growth of Taiwan and Singapore
under nondemocratic forms of government, within the same political narrative, perhaps misrepresents the facts of the matter. The Singaporean party-state did not experience such extreme
levels of despotic rule, as we encounter in the Taiwanese case. Taiwan’s history of repressive
dictatorship left indelible marks upon its population, and the dark history of authoritarian rule,
paired with external pressures, were decisive factors in producing social movements that called
for democratization. Because the KMT had developed a highly capable state, the party was able
to allow for a largely peaceful democratic transition. But this begs the question: without evident
widespread demands to reform the political system or liberal-democratic institutions, such as a
free press and freedom of assembly that facilitate self-reform, what trajectory will Singapore’s
future political development follow?

In the aftermath of the 2011 Singaporean general election, Lee Kuan Yew announced

that he would step down from the Cabinet. The general election had delivered the PAP its worst
electoral performance since the party’s founding, and the post-independence generation of
Singaporeans readily welcomed political debate and contestation.33 The PAP’s record of successful governance resonated less with younger voters, as worsening income inequality, inflation
concerns, and rising costs of living had produced social discontent among the populace. With
a better-prepared opposition, Singaporeans were able to witness the potential benefits of competitive politics, and how a credible opposition could provide an active check against the PAP’s
power.34 Prime Minister Lee Hsien Loong was mindful of this shift in the electoral precedent
and declared during the Cabinet’s swearing-in that the political system “will accommodate more
views, more debate and more participation.”35 This was immediately evident in his decision to
conduct a review of ministerial salaries, which had been a source of dissatisfaction for voters.
Noticeably absent from the list of issues fueling social discontent was the continued enforcement
of austere laws that inhibit certain political and human rights, and administer one of the highest
execution rates per capita in the world.36 While this may not signify the population’s support for
33
Tan, Eugene K. B., “Singapore: Transitioning to a “New Normal” in a Post-Lee Kuan Yew Era.” Southeast
Asian Affairs (2012), p. 267.
34
Ibid, p. 268.
35
Ibid, p. 271.
36
“Capital Punishment and Implementation of the Safeguards Guaranteeing Protection of the Rights of

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the government’s harsh stance on civil liberties, it does, however, indicate the importance that
Singaporean society places on a truly consultative political system, as well as the need to affirm
that its voice is well represented.

With Lee Kuan Yew effectively out of the picture, skeptics who subscribe to Huntington’s

notion that autocratic institutions will inevitably decay are closely observing political developments in Singapore. However, Singapore does not neatly fit into the category of authoritarian
capitalist states. As a “partly free” society, its citizens’ grievances are reflected at the ballot box,
political dissent is openly displayed in online blogs, and various institutions exist for the purpose
of engaging the public on policy issues.37 The PAP leaders are intimately aware of the issues
causing discontent, and constantly act to address them. For instance, issues such as anti-foreigner
sentiment and growing income inequalities have prompted the state to cut health-care subsidies for permanent residents and increase taxes on property purchases by foreigners.38 Political
participation has historically been encouraged through government bodies such as the Ministry
of Community Development, Government Parliamentary Committees, as well as the inclusion
of nominated members of Parliament, who typically represent middle class elements and a wide
range of backgrounds.39 One important caveat the PAP must consider is the effect which policies
that present a less welcoming environment for foreigners will have on economic competitiveness
and foreign investment. In response to this problem, the party created a Remaking Singapore
Committee in 2003 to manage the social and cultural tensions between economic restructuring
and overstrained social services, consulting with a wide array of Singaporean individuals and
organizations.40 So long as administrative indolence does not overtake the PAP government, and
Singaporean leaders can strike an adequate balance between placating domestic qualms and bolstering economic competitiveness, the current regime will likely persist well into the foreseeable
future. Overall, there appears to be adequate feedback mechanisms that allow the government to
co-opt social forces to anticipate and address pertinent social issues. Nominal democracy may
be sustainable, provided that the PAP administration continues to innovate its bureaucracy and
Those Facing the Death Penalty: Report of the Secretary-General.” United Nations Economic and Social Council
(2001), p. 18 Retrieved: http://www.unodc.org/pdf/crime/10_commission/10e.pdf
37
Holmes, Sam. “Singapore’s Newest Challenge: Social Discontent.” Wall Street Journal, April 19, 2012.
Retrieved: http://blogs.wsj.com/searealtime/2012/04/19/singapores-newest-challenge-social-discontent/
38
Holmes (2012).
39
Rodan (2006), p. 16.
40
Ibid, p. 23

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A Sustainable Model for Authoritarian Capitalism

deliver responsive governance.

This paper has shown that the People’s Action Party has precluded any other social or-

ganization from capturing the state in fundamental ways through tying critical aspects of society to the state apparatus and providing effective governance. Singapore’s sustainable political
development was in large part contingent on its unique historical situation, and the PAP’s cohort
of highly trained technocrats who systematically dismantled opposition through coopting social
forces and exerting despotic power over civil society. Perhaps liberal-democratic ideals are not
universally applicable. In a city that is accustomed to efficient and effective government, greater political choice and participation may suffice. Provided that there exists an arena of political
contestation, even one that exists within the boundaries of the PAP political machine, the state
can be highly cognizant of its population’s social grievances and can address those grievances
accordingly.

Rather than evaluate governance based on how well the state conforms to models of

liberal-democratic rule, or molding the trajectory of its political development to fit Taiwan’s, we
have examined the forces that shaped Singapore’s viable institutions and its political climate.
Singapore’s semi-autocratic system offers an exceptional case study for determining what constitutes good governance. Though its historical development allows for its model’s sustainability
in the foreseeable future, this is not to say that its success can be applied and duplicated in other
countries; further study of what conditions produced nondemocratic economic growth is warranted. The Singaporean state has certainly accomplished economic feats without being forced
to make major concessions towards democratic reform, but political change is inevitable. Singapore’s remarkable story forces us to rethink our assumptions on the “triumph” of Western models
of governance, yet the way the political system will evolve over the long term future is yet to be
seen.

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References
“Capital Punishment and Implementation of the Safeguards Guaranteeing Protection of the Rights of
Those Facing the Death Penalty: Report of the Secretary-General.” United Nations Economic and
Social Council (2001), p. 18 Retrieved: http://www.unodc.org/pdf/crime/10_commission/10e.pdf
“Corruption by Country / Territory.” Transparency International, n.d. Web. 10 Oct. 2014. Retrieved:
http://www.transparency.org/country#SGP
Deudney, Daniel and Ikenberry, John. “The Myth of the Autocratic Revival.” Foreign Affairs. January/
February 2009. Retrieved: http://www.foreignaffairs.com/articles/63721/daniel-deudney-and-g-johnikenberry/the-myth-of-the-autocratic-revival
Evans, Toby E. “Examine whether authoritarian capitalism is a viable alternative to its Western liberal
version, to promote long term economic growth and development.” Mont Pelerin Society. Retrieved:
https://www.montpelerin.org/montpelerin/documents/Toby%20Evans.pdf
Fukuyama, Francis. “The End of History?” National Interest 16 (Summer 1989).
Gold, Thomas B (1986). State and Society in the Taiwan Miracle, New York: East Gate Books.
Haque, M. Shamsul. “Governance and Bureaucracy in Singapore: Contemporary Reforms and
Implications.” International Political Science Review (2004), Vol. 25, No. 2.
Holmes, Sam. “Singapore’s Newest Challenge: Social Discontent.” Wall Street Journal, April 19, 2012.
Retrieved: http://blogs.wsj.com/searealtime/2012/04/19/singapores-newest-challenge-socialdiscontent/
Huntington, Samuel. “Democracy for the Long Haul.” Journal of Democracy 7.2 (1996).
Huntington, Samuel. “Political Order in Changing Societies.” New Haven and London: Yale University
Press (1968).
Ott, Marvin. “Singapore.” Johns Hopkins University. Shriver Hall, Baltimore MD. 30 Sept. 2014.
Lecture.
Ottervik, Mattias (2010). Democratic State-Building in Pakistan and Taiwan. Lund University. PDF.
Rigger, Shelley. Democratic Transition and Consolidation in Taiwan. Washington, D.C.: American
Enterprise Institute, 10 Nov. 2011. PDF.
Rodan, Garry. “Singapore ‘Exceptionalism’? Authoritarian Rule and State Transformation.” Working
Paper No. 131, May 2006. Asia Research Centre, Murdoch University.
Tan, Eugene K. B., “Singapore: Transitioning to a “New Normal” in a Post-Lee Kuan Yew Era.”
Southeast Asian Affairs (2012).
Turnbull, C.M. “A History of Singapore 1819 – 1988.” Oxford and New York: Oxford University Press
(1989).

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A Sustainable Model for Authoritarian Capitalism

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Remedy’s Rhetoric:
Differences in the Banking Crises of Ireland and Cyprus
Alison Dorsi

T

he Eurozone financial crisis has been taking place for many years, with emergencies spreading from one member state to the next. As each crisis has run its course, the European Com-

mission, the European Central Bank (ECB), and other political and economic actors in the area
have developed a strong discourse regarding the changes necessary to resolve the financial instability and place the euro on a trajectory of growth. The changes in fiscal policy have been shaky
at best, while not pushing the afflicted countries into another downward spiral, still failing to
address the unique concerns each of those country’s economies must deal with. In particular, as
time has gone on these actors have altered their reactions to crises based on the urgency of each,
shifting their ideas and preferences to reflect the perceived stability of the economy. The change
in rhetoric is most exemplified when comparing crises of similar origins. Both Ireland and Cyprus
experienced an intense banking crisis as a result of poor banking regulation that was exacerbated
by contagion from the Greek sovereign debt crisis. However, the three-year time difference in
bailout programs reveal the modification in attitudes at the European level of management and the
resulting differences in bailout programs with vastly different consequences for the national government and local economy. While many believe the Eurozone leaders have gained greater insight
into crisis management over time, these discrepancies represent a change in rhetoric that may be
destructive for European recovery and growth in the future.

Transportation to the Euro: Financial Responsibilities and Expectations
To understand how the European Commission developed programs for financially unstable
countries, it is necessary to understand the development of the Eurozone framework and the
conditions under which membership was achieved. Many member states in the European Union
committed to a great undertaking when they made the decision to discard their national currency
in favor of creating the European Monetary Union (EMU) with a single currency. The new Eu-

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Remedy’s Rhetoric

rozone was thought to be the next step in European integration, a necessary undertaking in order
to compete on the international market.1 The Commission reported that financial integration was
fundamental for a stronger Europe, developing a narrative that appealed to the various capitalist economies in a manner that neither consolidated nor publicized their divergent views on the
specifics of integration.
The Single Market was a flexible idea, able to be marketed to various member states in
ways that persuaded them of the benefits of adoption.2 To some, reformers were able to portray
the market as a “constraint” on economic activity, capitalizing on a prevailing sentiment that existing restrictions on finances had become obsolete and liberalization was inevitable. To that end,
it would be better to be a part of how new institutions would be created to support liberalization
and thus incorporate their existing values and goals into an integrated market framework. To others, the market became a “norm” of economic activity, expanding the scope of market liberalization to include protected industries through the notion that market liberalization could improve
upon their cost structures and reshape the expectations of the main actors.

This narrative was very persuasive, bringing together various political and economic ac-

tors to support the new currency union in the name of competition and growth. The EU attempted to create a common market in which there were no explicit trade restrictions, but the addition
of the single currency was thought to be a better mechanism for allowing a greater ease of trade
among the member states by reducing costs from currency exchange.3 In addition, many member
states that were inflation-prone were convinced of the benefits of adopting the single currency.
The overriding sentiment was that participation in the monetary union would provide an anchor
for modernization and growth as well as provide the external constraint needed to improve the
domestic institutions that engaged in unwise monetary policy.4

The original design of the euro sought to address issues of poor monetary policy in two

ways. The first was the Stability and Growth Pact, which set constraints on annual budget deficits
Jabko, Nicolas (2006) Playing the Market: A Political Strategy for Uniting Europe 19852005 Ithaca: Cornell University Press
2 Jabko (2006)
3
Alesina, Alberto; Barro, Robert J; and Tenreyro, Silvana. “Optimal Currency Areas.”
MIT Press, 2003. http://www.nber.org/chapters/c11077.pdf
4
Hopkin, Jonathan (2014) “The Southern Problem: The Euro Crisis in Italy and Spain”
in The Future of the Euro co-edited by Matthias Matthijs and Mark Blyth. New York: Oxford
University Press
1

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The Journal of Politics and International Affairs

at 3 percent of GDP. The second was a “no bailout” clause, implying that if a national government did not abide by these rules, default would not be prevented through a European bailout.5
These conditions were thought to be sufficient enough to allow for an easy transition into the
EMU, addressing the concerns of those who were afraid of a “free rider problem” from the seemingly fiscally irresponsible countries.

The benefits of the single currency were abundant and obvious, but the problem was that

the means by which to achieve them were not fully developed. The storyline of the euro did not
include the various institutional changes that were necessary for the benefits to materialize. The
abandonment of individual currencies in exchange for a single currency theoretically implies the
loss of independent monetary policy for the domestic governments. In practice, though, this did
not occur in the Eurozone. In part this is because the actors at both the European and domestic
levels did not understand how the divergences in capitalist structure would create an uneven
environment for development and growth.
Despite its position in the world economy, the Eurozone is effectively a semi-closed
economy, with only 10% of GDP leaving the Eurozone and the majority going to other EU
countries.6 This type of closed economy means that a gain in competitiveness for one member
state will come at the expense of a loss in competitiveness for another member state, resulting in
a zero-sum game among all those involved. Therefore, when imbalances occur due to asymmetrical shocks in the economy, as they have shown to do in the Eurozone, some form of redistribution mechanism is needed in order for national deficits to remain within treaty requirements.
However, the ECB has been reluctant to target the shocks of any particular country7, which then
perpetuates the imbalances even further.

This type of situation has created an incomplete economic and monetary union. The inter-

nal market that resulted from the EMU created the opportunities and need for coordinated action
to promote stability and growth. For monetary stability to occur the situation necessitates the
unification of monetary policy8 in order to avoid the inconsistency of free trade, capital mobility,
5
Lane, Philip R. 2012. “The European Sovereign Debt Crisis.” Journal of Economic Perspectives, 26(3): 49-68.
6
Regan, Aidan (2013) “Political Tensions and Euro-Varieties of Capitalism: The Crisis of
the Democratic State in Europe.” EUI Working Papers MWP 2013/24 Max Weber Programme
7
Alesina, Barro and Tenreyro (2003)
8
Padoa-Schioppa Report
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Remedy’s Rhetoric

fixed exchange rates, and domestically oriented monetary policy. However, the Eurozone is not
an optimal currency area, which some contend may have significant economic consequences, as
structural and cyclical divergences cannot be controlled. Throughout the 2000s member states
experienced growth and inflation rate divergences. The single interest rate set by the ECB contributed to those divergences9, allowing for banks to provide relatively cheap funds for those
member states that were deficit-prone and expensive funds for those that had stable investment
opportunities.

The elimination of national currencies did not eliminate national responsibility to control

their banks and their countries’ borrowing and spending patterns. During the period from 19902007 strong growth performance and a nonthreatening financial environment hid the accumulation of various fiscal and monetary vulnerabilities.10 The credit boom during this period was not
primarily a result of government borrowing but rather rising household expenditures. The failure
to tighten fiscal policy was due to the analytical frameworks used to assess the sustainability of
fiscal positions. Various regulators, such as the International Monetary Fund (IMF), the Organisation for Economic Co-operation and Development (OCED), the European Commission, and
domestic governments focused on budget balance without factoring in the distribution of risks
that could occur if/when the booms ended. These actors mostly examined individual countries as
opposed to the Eurozone members as a whole.

Monetary policy was not the only difficult task when completing the EMU. The European

Union was ill prepared to manage a banking crisis, especially in conjunction with the other financial matters that could occur in other member states as a result. Throughout the transition to the
euro there was skepticism regarding the implementation of the EU as lender-of-last-resort. There
was additional concern about the arrangements from cross-border banking crises, particularly
financial burden sharing.11 The creation of the single market and the single currency constructed
an environment in which there was greater consolidation and internationalization in EU banking.
There was an “inherent incompatibility between integration, financial stability, and independent
9
Enderlein, H. et al. (2012): Completing the Euro – A road map towards fiscal union in
Europe. Notre Europe Study No. 92
10
Lane (2012)
11
Buiter, Wilhem, and Rahbari, Ebrahim. “The European Central Bank as Lender of Last
Resort for Sovereigns in the Eurozone.” Journal of Common Market Studies, 22 Aug. 2012.
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national supervision.”12 Individual member states held a lot of responsibility in the supervision
of financial institutions and the stability of the financial system. The merging of cross-national
banks made supervision difficult, as there was little authority in supervising institutions from
other member states.

The cause of the financial crisis that began in 2008 lies in the inconsistency between a

single supranational currency and nation-state based economic policies.13 The ECB has had the
difficult challenge of transitioning diverse economies into a single currency area without the
institutional tools and legitimacy from the member states that is necessary to merge the economies successfully. However, in the aftermath of the financial chaos it was not able to prevent, the
ECB, along with the European Commission, have neglected to address the structural inconsistencies. Instead there is now an environment where neither the necessary changes can occur nor can
the euro survive with the current events.

In order to begin the process of figuring out what the Eurozone should do next, it is

interesting to examine the development of Commission responses to member states with banking crises. This paper will look at the banking crisis in Ireland that began in 2008 and the more
recent banking crisis in Cyprus in 2012 to assess the solutions each country took to resolve their
crisis and how each were handled on a European level.
The Crisis in Ireland
Ireland’s banking crisis was caused by several factors, some from the European and global markets but mainly originating from destructive financial structures at home. When Ireland joined
the European Economic Community (ECC) in 1973, it was the poorest country in that group.
Ireland experienced high inflation and high unemployment throughout the 1970s.14 By the 1980s,
the Irish economy slowly began to benefit from a series of successful government policies. The
government fostered “trilateral” wage agreements with unions and employers, creating an en12
Menil, G., & Portes, R. (2010). Banking crisis management in the EU: An early assessment. In Economic Policy 62 Financial Crisis Issue. Hoboken: John Wiley & Sons
13
Enderlein, H. et al. (2012): Completing the Euro – A road map towards fiscal union in
Europe.
14
Regling, Klause, and Max Watson. “A Preliminary Report on The Sources of Ireland’s
Banking Crisis.” (2010) http://www.betterregulation.com/external/A Preliminary Report on The
Sources of Irelands Banking Crisis.pdf.
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Remedy’s Rhetoric

vironment that was attractive for foreign investors. The launch of the European Single Market
increased access to other markets through deregulation and low corporate taxes. This competitive environment attracted a large amount of immigrants, a first in Irish history, creating positive
demand and supply effects. Most importantly, these changes and transitions were able to occur
while preserving macroeconomic stability.
After a long period of underperformance, beginning in 1994 Ireland experienced rapid
output, employment, and productivity growth as a result of convergence within the European
Single Market.15 The new emphasis on “high-value, low-weight” sectors, such as computers and
pharmaceuticals, allowed Ireland’s previous peripheral status to become less important to export-oriented production. High unemployment in the previous decades allowed economic expansion and increasing employment without pressure on wage rates. Throughout the 2000s, Ireland
became significantly more competitive in the Eurozone, with continued expansion into the
financial markets and increased development that helped Ireland surpass the average EU living
standards.16
The period from 1994-2000 is often known as the “Celtic Tiger,” representing a time
when the Irish economy expanded at an average rate of 9.4%. The term references Ireland’s similarity with the East Asian Tigers: Hong Kong, Singapore, South Korea, and Taiwan during their
massive growth periods in the 1980s through the 1990s.17 Extensive Irish growth was significantly financed through foreign direct investment, especially from American firms that saw Ireland
as a gateway into the European Single Market. Foreign assistance coupled with artificially low
interest rates in the Eurozone allowed many Irish banks to lend more money more cheaply. The
integration of financial markets allowed portfolio diversification, without as much worry over
higher-risk investments. These low interest rates, increased employment, and the low initial
property values in the early 1990s led to increased property purchases and a housing boom in the
2000s and the crash in 2008.18
It is interesting to examine the fall of what could have remained a highly competitive and
15
Lane, Philip R. “The Irish Crisis.” IIIS, Trinity College Dublin and CEPR
(2011)
16
Regling and Watson (2010)
17
Peadar Kirby, Luke Gibbons, Michael Cronin Reinventing Ireland: Culture, Society and
the Global Economy (2002), p. 17.
18
Lane (2011)
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prosperous European nation. Many see the crisis as a situation of too much of a good thing. For
a long time, Ireland’s fiscal policy was highly regarded, as the country achieved fiscal surpluses
for almost a decade until 2006.19 What was unknown at the time was the massive impact of asset
bubbles and the large positive output on tax revenue. In the years leading up to the recession,
Irish public expenditure-to-GDP ratio increased, although it remained low compared to a majority of EU countries. Expenditures grew faster than nominal GDP every year from 2001 to the
crisis, and the Irish public sector grew by 15.5% from 2001 to 2008.
In reality, the Irish crisis was a trifecta of crises occurring at once; massive losses in the
banking system, a sharp decline in economic activity, and corrosion of the fiscal position. An
initial cause for these crises was the “inadequate risk management practices of the Irish banks
and the failure of the financial regulator to supervise these practices effectively.”20 The initial
recession from 2008-2009 saw a sudden reversal in domestic consumption, which only exacerbated the structural problems that existed and began the negative feedback mechanisms. Banks
restricted lending, creating a starker downturn in the property sector.21 The sharp increase in
unemployment, rising from 4.6% in 2007 to 13.3% in 2010, led to a decrease in tax revenues,
with the fiscal deficit increasing in 2009 as a result of the collapse in tax revenue. Throughout the
1990s and 2000s, the composition of tax revenue had shifted gradually from stable sources, such
as personal income tax and VAT, to cyclical taxes, such as corporation tax and capital gains tax.22
This shift in the tax base made it more difficult to assess the structural situation of the budget and
made the budget more vulnerable to a recession.
The Irish government attempted to tackle the situation head on by announcing on September 30th 2008 that it was going to guarantee the liabilities of the Irish-controlled banks for
two years.23 The Credit Institutions (Financial Support) Act was signed into law shortly after and
came into force on October 2nd 2008. The Act provided financial support to credit institutions that
could maintain the stability of the financial system in Ireland. This included loans, guarantees,
19
Regling and Watson (2010)
20
K.P.V. O’Sullivan, Tom Kennedy, (2010) “What caused the Irish banking crisis?”, Journal of Financial Regulation and Compliance, Vol. 18 Iss: 3, pp. 224 - 242
21
Lane (2011)
22
Regling and Watson (2010)
23
“Post-Programme Surveillance for Ireland.” European Commission. http://ec.europa.eu/
economy_finance/assistance_eu_ms/ireland/index_en.htm.
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Remedy’s Rhetoric

and exchanges of assets in addition to the possibility for regulation of commercial conduct as
well as competitive behavior. The Credit Institutions (Financial Support) Scheme 2008 sought
to equip the Minister of Finance with an enabling framework that allowed whatever action was
considered necessary to achieve the goals of the Act. The immediate response to the banking
situation demonstrated the belief that unless the government was able to undertake guarantees for
their banks then irreversible damage would result in the domestic economy.

The efforts of the Irish government did little to foster stability for the banks. Initially, the

bank debt was thought to be an amount that the government would be able to repay. By December 2008, the share price of three of the four major banks was between 5 and 7 percent of peak
value reached in 2007 and the other was trading at less than 1 percent.24 Subsequently, the banks
tightened lending conditions and the Government recognized that banks needed recapitalization
in order to operate and rebuild banking confidence. This can have both positive and negative
international spillovers. The benefits are that risk is reduced for overseas creditors and the bank
has enhanced ability to lend. However, the costs tend to be that domestic banks are effectively
being subsidized, thereby putting foreign banks at a competitive disadvantage.25 During the two
years of its program, confidence in the Irish economy had declined significantly, not solely due
to its handling of the government-incurred debt but more significantly reflective of the situations in other European economies. The financial crisis in Greece led to low confidence in how
they could support their debt which then created contagion in the Irish banking sector. Without
any specific event in Ireland causing concerns over the government repaying debt, low confidence spread from Greece and caused many to withdraw from Irish banks and their economy
as a whole. This situation created even more government debt as the banks’ situation worsened.
While the onset of the crisis on the domestic level was truly the unsustainable rise in housing
prices, international pressures and poor perceptions of the Irish market contributed to the exacerbation of the problem. The market lost faith in the ability of the Irish government to pay back
the bank’s debt, which led to even more bank debt developing and thus higher levels of government debt that became unsustainable.
24
Honohan, Patrick. “Resolving Ireland’s Banking Crisis.” The Economic and Social
Review, 2009. http://www.tara.tcd.ie/bitstream/handle/2262/58797/Vol-40-2-Honohan.pdf?sequence=1&isAllowed=y.
25
Quaglia, L., Eastwood, R. And Holmes, P. (2009), The Financial Turmoil and EU Policy
Co-operation in 2008. JCMS: Journal of Common Market Studies, 47: 63–87.
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The Journal of Politics and International Affairs

After two years of financial support to the national banks the Credit Institutions Support

Act expired in September 2010 and the economy was still in shambles. Investor confidence was
creating a vicious cycle of deposit outflows from the banking sector and unsustainable levels
of government borrowing. The Deposit Guarantee Scheme (DGS) continued to cover up to
€100,000 per person, per institution, but this proved to be extremely costly for the Irish government. Investors were concerned about the government’s ability to support the large fiscal deficit
and their commitment to support the damaged banking sector. What followed was a sovereign
debt crisis and Ireland had to consult outside organizations to assist in recovery.
On November 28th 2010 the Irish government agreed to the Economic Adjustment Program for Ireland, negotiated with the Commission, the ECB, and the IMF worth €85 billion.26
The goal of the finances was to reorganize the banking sector while strengthening regulation
and supervision of the various institutions. The banking sector was set to become smaller and
credit institutions would have to increase standards in order to lower perceptions of risk. Ireland
was also hit with austerity measures, forced to reduce their government expenditures across the
board, which was not a contributor to the banking crisis that had initially put the Irish government in so much debt to begin with. However, the rhetoric throughout surplus countries within
the EU was that they would no longer pay for irresponsible spending. This essentially lumped the
crises of Greece, Spain, Italy, and Ireland together without regard for their unique sources and
contexts.
The Crisis in Cyprus
The banking system in Cyprus is unusually large compared to other EU and Eurozone member
states, with total assets at approximately 896% of GDP in 2010.27 Its banking system, like other
member states in the Eurozone, grew significantly over the past decade as a result of the desire
to compete in the European market by creating major international financial centers. Cyprus’
large banking system remains unique in two ways: the first is that domestically-owned credit
institutions accounted for 63% of total banking assets in 2009; the second is that even though big
26
Central Bank of Ireland. “Information for the General Public.” http://www.centralbank.
ie/publicinformation/Pages/PublicInformationUpdate.aspx#q4.
27
Stephanou, Constantinos. “The Banking System in Cyprus: Time to Rethink the
Business Model?” Cyprus Economic Policy Review (2011). http://www.ucy.ac.cy/erc/documents/
STEPHANOU_123-130.pdf.
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Remedy’s Rhetoric

domestically-owned banks are small in absolute terms, they continue to be a large proportion of
GDP. Three of the biggest domestic banks in Cyprus provide a broad range of services expanding
outside their borders (particularly in Greece) in the most recent years leading to the crisis.

As Cyprus’ banking crisis is unique in many respects, so is its prolonged history of

stability accompanied by growth. Since the late 1980s Cyprus has experienced an average GDP
growth of 4% and unemployment rate of 3.5%. Despite the asset bubble crisis in 1999, Cyprus’
economy was able to survive without significantly affecting growth, unemployment, or consumer
demand in the long run.28 The country has been a surprisingly positive outlier when compared to
other EU countries with excessive debt, as many thought the economy to be especially resilient
since its independence from Britain in 1960, the recovery after the 1974 war and the asset bubble in 1999. The large banking system has supported the services-driven economic model that
produced high output and employment for several decades. However, it is perhaps its past progressive performance that allowed Cyprus to be overlooked by politicians and banking elites in
regards to the performance of its financial sector.

The current size of the Cypriot banking system has raised concerns about growth policy

in the country, particularly the risks involved with financial services-based growth. As noted by
the IMF and the Financial Stability Board in October 2009, systemic risk is defined as a “risk
of disruption to financial services that is caused by an impairment of all or parts of the financial
system and has the potential to have serious negative consequences for the economy.”29 Assessing systemic risk can be quite difficult because it is contextual to the economic environment and
financial sector conditions. The purpose of the assessment also creates divergences, as risk can be
evaluated for crisis management or simply for the setting of a regulatory framework.30 The three
main overarching criteria for assessing a financial institution are its size of financial services relative to the economy at large; the substitutability of other financial institutions to provide the same
or similar services in the event of failure; and its interconnectedness with other financial system
28
The Cyprus Debt – Zenios
29
“Guidance to Assess the Systemic Importance of Financial Institutions, Markets and
Instruments: Initial Considerations.” (October 2009). http://www.imf.org/external/np/g20/
pdf/100109.pdf
30
Stephanou, Constantinos. “Big Banks In Small Countries: The Case Of Cyprus.” Cyprus
Economic Policy Review (2011). http://www.ucy.ac.cy/erc/documents/Big_Banks_In_Small_
Countries.pdf .
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participants, which measures the broader repercussions of failure.
The financial institutions in Cyprus can be considered as systemically important (SIFIs).
Impairment of the financial system that lead to the sharp rise in cost or temporary unavailability
of financial services caused intense systemic risk in Cyprus as well as in other member states
realized during the last recession. The ability of the governments to support this type of banking
system depends on the “fiscal space” available to address the problem, namely the amount of
public debt that can be incurred.31 The absence of policy measures to control these risks leads to
expectations that the government would support SIFIs in case of failure, creating a “too-big-tofail” problem. This unspoken support allowed Cypriot banks to borrow at preferential rates with
higher levels of coverage and overall engage in risky performances that have had adverse effects
on competition and financial stability.
The Cypriot banking crisis helped continue the growing inertia across Europe of financial
distress. A large contributor, if not the instigator, of the Cyprus banking crisis is the Greek sovereign debt crisis that occurred several years beforehand. After 2009 Cyprus began purchasing
Greek bonds due to their high interest rate returns on investment. The country’s two largest banks
– Bank of Cyprus and Laiki – relied heavily on Greek debt for trading profits, using the Greek
obligations as collateral for central bank borrowing.32 At the time the Cyprus banking sector had
total liabilities about 700% of GDP, with Greek loans and sovereign debt worth about 160% of
GDP.33 This type of portfolio structure left the two largest Cypriot banks exposed to high levels
of concentrated risk. In March 2012 the Greek government partially defaulted during their second bailout. This allowed Greek sovereign debt to lose its eligibility and Cypriot banks to lose on
sovereign debt portfolios and little collateral for routine central bank liquidity.34

After this time, the Bank of Cyprus and Laiki required emergency support from the Cen-

tral Bank of Cyprus. In March 2013 the ECB threatened to deny permission for the Central Bank
of Cyprus to continue liquidity support. This denial of support was within the ECB’s mandate
and even though they did not follow through it did force Cyprus to choose between restructuring the banks or exiting the single currency. Originally Cyprus had requested €17 billion in June
31
Stephanou (2011)
32
Jones, Erik (2014) “Forgotten Financial Union: How You Can Have a Euro Crisis without a Euro” in The Future of the Euro
33
Zenios (2013)
34
Jones (2014)
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Remedy’s Rhetoric

2012 but there were many disputes as to the conditions of such an allotment. The Troika’s(IMF,
OECD, ECB, European Union) eventual bailout of Cyprus in March 2013 was not large in
absolute terms but constituted a large amount relative to the size of the Cyprus economy. The
European Stability Mechanism (ESM) and the IMF agreed to provide a financial assistant facility
to Cyprus up to €10 billion, conditional upon implementation of numerous policy reforms.35 The
funding was designed to support Cyprus’s needs and burden-sharing measures were adopted by
the Cypriot government, which include budgetary financing, redemption of debt, and recapitalization of financial institutions other than the Bank of Cyprus and Laiki.36 While Cyprus chose to
remain in the Eurozone, recognizing that exiting would have made the economic situation worse,
restructuring the banks through controls of deposits and the movement of capital effectively took
Cyprus out of Europe’s integrated markets.37

Differences in Agreements
The banking crises in both Ireland and Cyprus occurred at different times during the economic
recession and were caused by distinctive problems within their banking institutions. Low interest
rates in Ireland led to a markup in housing prices that ended in a housing bubble and bust, and
eventual rises in debt for the Irish government. Cypriot banks, on the other hand, accumulated
excessive amounts of Greek bonds starting in 2010, which eventually defaulted after the second
Greek crisis 2012, resulting in a loss of collateral and liquidity in the two biggest Cypriot domestic banks. While these differences are notable in many respects, both represent the larger systemic problems of how monitoring banks and financial systems exist within the Eurozone. Scholars
on both banking crises recognize that both could have been preventable had the problems of
market integration on the European level been addressed.
Throughout 2009 and into 2010, doubts about the Greek economy and ability to sustain
their large sovereign debt created instability in the markets and contributed to the crises in other
European countries. By mid-2010, major German politicians along with other Northern European
35
European Stability Mechanism. “ESM Board of Governors grants stability support to
Cyprus.” 2013. http://www.esm.europa.eu./press/releases/20130424%20ESM%20Board%20
of%20Governors%20grants%20stability%20support%20to%20Cyprus%20.htm.
36
European Stability Mechanism. “ESM financial assistance for Cyprus.” http://www.esm.
europa.eu/assistance/cyprus/index.htm.
37
Jones (2014)
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countries joined together with the ECB to pave the way for austerity reforms. The early bailouts
of Greece and Ireland made conditional that the burden of adjustment was placed solely on these
debt-ridden countries, ignoring the role that surplus countries had in creating the divergences.
Debt-loaded countries that hadn’t appeared risky before, such as Italy’s debt-to-GDP ratio of 100
percent in 2001, suddenly appeared to be much riskier.
Since the Lisbon Treaty in 2009, the EU has looked to reorganize the decision making
process through new modes of governance, based on “open method of coordination, benchmarking, mainstreaming, peer review, and, more generally, intergovernmental coordination.”38 Since
the failure of the EU Constitution Treaty in 2005, the consensus became that intergovernmental
approach was the only feasible strategy for promoting integration. The creation of the ESM in
2010 was used as a new EU law instrument but, more importantly, the creation of the European
Financial Stability Facility (EFSF) was a framework for promoting crisis prevention. The creations of the Six Pack and Two Pack and the overall goals developed in the Europe 2010 Strategy
continued to add to the complexity and extraordinary policy magnitude of crisis management
procedures.
There has been extensive criticism towards the way the EU is dealing with the recent
recession. The financial crisis exposed the shortcomings in the original economic governance
designed in 1992 and the numerous new coordination frameworks are meant to align macroeconomic policy developments and structural reforms that will be monitored through the European
Semester.39 The main goal of the European Semester is to address the current account imbalances
between the Eurozone members. However, the rhetoric in new surveillance policy asserts that the
problem was a result of peripheral irresponsibility in the managing of the new single interest rate.
Other Eurozone countries, like Germany, had been able to control domestic demand and wage
growth, allowing their economy to remain competitive while peripheral countries became less
competitive.
Besides the crises of Ireland and Cyprus, there were other financial emergencies in
Greece, Spain, Portugal, and Italy, each with unique causes and circumstances. All of these
38 Fabbrini, Sergio. (2013). “Intergovernmentalism and its limits: Assessing the European
Union’s Answer to the Euro Crisis,”
39 A triumph of failed ideas: European models of capitalism in the crisis By Steffen
Lehndorff
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countries became lumped together with rhetoric that did not encapsulate each of their financial systems but assigned similar policy solutions to all. Ireland had a strong reputation for tax
payments and was seen as “best in class” in terms of debts and deficits going into the crisis.40 It
only ran into trouble when European banks provided the country with cheap money that created large asset footprints for Irish banks, and resulted in the Irish government guaranteeing the
entire system’s liabilities and thus re-accumulating large government debt. The situation was the
same as what occurred in the US, UK, and Iceland; the collapse of housing bubbles that turned
private-sector phenomena into public-sector problems. However, the EU did not recognize, or at
least did not admit, that Ireland was dissimilar to the other countries that had accumulated massive debt, and refused to address the banking sector inconsistencies on the European level.
One of the main differences between the Irish bailout and the Cypriot bailout was the
conditions under which they were made. The Cypriot bailout took months of negotiations to
create, with disagreements as to the amount of funds and the conditions under which they would
be provided. Included in the €10 billion bailout was an addition €5.8 billion to be generated by
a “haircut” in the form of a bank deposit tax.41 A first in modern banking times was that all bank
deposits over €100,000 would bear the burden of the haircut, and the re-negotiations occurring
now could show cuts to deposits of all levels. The rationale for this decision was that Cypriot
banks have few bondholders and someone needed to shoulder the losses. The final agreement
held that Laiki would have to shut down with all deposits of less than €100,000 being transferred
to the Bank of Cyprus.
The Cyprus bailout agreement can be seen as more harsh, when compared to Ireland,
for additional reasons. As the threat to the Euro from the various financial crises lessened, Germany and other northern European governments became very reluctant to send aid to Cyprus,
even when that aid package could seemingly be less than other packages due to the relatively
small size of the economy. On a philosophical level, they did not want their taxpayer’s money
to support private banks that had become too big to function on their own, which was thought to
create a free rider problem. More importantly, it was an election year for Germany, which meant
40 Blyth, Mark Austerity: The History of a Dangerous Idea New York: (2013) Oxford
University Press
41
Georgiou, George C. “Cyprus’s Financial Crisis and the Threat to the Euro.” Duke University Press (2013). http://mq.dukejournals.org/content/24/3/56.full.pdf .
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that politicians could not afford to appear as if they were bailing out irresponsible foreign banks
whose depositors were mainly “non-German, non-EU nationals, and primarily Russian.”42A
report to the German Bundestag in November 2012 placed the amount of Russian deposits in
Cypriot banks at €26 billion. Many German media outlets contended that these Russian deposits
were a product of money laundering or tax evasion, which made the negotiations for a Cyprus
bailout much more difficult.
Haircuts and shutdowns of this sort were nonexistent in the bailout agreement for Ireland.
The Irish bailout was created in effort to save the euro from market destruction, as many were
skeptical of the ability of Eurozone countries to pay off their debt and maintain stable economies.
At the time many of the mechanisms to support such funding had not even existed and were thus
created to stabilize the European economy and attempt to increase confidence. While there are
arguments as to whether the austerity measures were able to support the growth necessary to
restore confidence, it still remains that the main goal at the time was to save the euro as a world
currency. However, by 2013 these worries had begun to subside. The Cyprus bailout appears to
be contradictory to the ECB’s previous efforts to reassure financial markets and depositors of
the European banking system’s credibility and stability. After this bailout the market has become
completely unsupportive of any Cypriot economic measures to recover, with the economy severely contracting to a point that may surpass the fall of the Greek economy.
These differences in treatment of Ireland and Cyprus represent the differences in how the
Troika and other European political actors react during fast-burning and slow-burning crises.43
Ireland’s banking crisis is a part of the fast-burning crisis that fostered market attacks on the euro
between 2010 and 2012. During this period actors had little time for reflection and ended up taking swift action when the crisis was at its peak. The numerous new mechanisms at the EU level
were created to manage the crisis and properly regulate the banks, other financial institutions,
and government budgets. This represents the quick reaction to the crises at hand and a default
towards old ideas that created the problems in the first place. The goal during this crisis was to
stabilize the euro. Although harsh austerity measures were put into place for many countries in
42
Georgiou (2013)
43
Schmidt, Vivien. “The Eurozone’s Crisis of Democratic Legitimacy: Can the EU Rebuild
Public Trust and Support for European Economic Integration?” N.d. MS. Boston University. 17
Nov. 2014. Web.

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the Eurozone, Ireland did not experience the strict treatment towards their banks as they could
have if these other problems with the euro were not taking place.
The slow-burning crisis came afterwards, beginning in July 2012, and the European focus
turned toward creating a proper banking union.44 By this time the ECB was able to hamper market attacks on specific countries and members states no longer felt as if they had to rush to action
to protect the euro. Different political and economic actors had more time to think about the best
plans that would benefit their own interests, focusing on broader philosophies of future European
integration and financial support.45 This environment was not beneficial to the Cypriot banks that
found themselves in a situation where a bailout was not as crucial to European stability. The ECB
and other actors had time to weigh their options during negotiations and were able to fashion a
proposal that essentially made it necessary for the Cyprus government to agree, even if it was not
in the best interests of their financial sector or their depositors.
Conclusion
The overarching rhetoric that debt-fueled consumption in individual states caused the crisis
has created monetary and fiscal solutions that only continue to exacerbate those conditions and
hinder the growth necessary to pay back debt. While some of these procedures were able to calm
the market attacks, they were not enough to convince the “virtuous” Eurozone members (namely
Germany, Finland, Austria, and the Netherlands) that countries would and could cut their public
debt. The bailouts for Ireland and Cyprus mark a divergence in rhetoric and remedy from the
Troika. Disregarding the differences in money allotment (Cyprus has a much smaller economy
and thus would not require the same amount as Ireland would), the three-year time gap between
their bailouts show a shift in attitudes towards financial crises and changing preferences from
euro stabilization to dis-incentivizing banks from risky investments. Neither bailout has provided the tools for the countries to recover from their banking crises, and have only entrenched the
problems further into economic frameworks. Furthermore, without the adjustments to regulating
practices and overall understanding of how a single currency union must operate in terms of
44
Braun, Benjamin (2013) “Preparedness, Crisis Management and Policy Change: The
Euro Area at the Critical Juncture of 2008-2013,” British Journal of Political and International
Relations
45
Schmidt (2014)
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current account balances, the Eurozone may continue to have problems in the future. As of now,
confidence in the European banking system has significantly decreased as depositors worry about
the safety of their money. While other financial institutions remain stable for the time being, contagion can once again bring the Eurozone economy to a halt, and next time maybe for good.

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Nuclear Iran and the
International Community
Alex Kneib
Introduction

I

ran’s nuclear program began in the 1950s with the help of the United States through an initiative
called Atoms for Peace, which supplied Iran with highly enriched uranium. Iran’s nuclear pro-

gram continued to progress until 1979 when the Islamic Revolution shortly halted its development.
Finally, after over two decades of broken diplomatic ties with the U.S. and advances in the Iranian
nuclear program, U.S. president George W. Bush spoke out, accusing Iran of attempting to make
nuclear weapons. This accusation created panic among the international community and prompted
the International Atomic Energy Agency (IAEA) to scrutinize Iran’s nuclear program. In the wake
of much negotiation, Iran declared that it would never renounce its right to enrich uranium.

Over the past two years Iranian change in leadership has modulated the environment of

the nuclear negotiations. Current President Rouhani, who took power in August 2013, has already demonstrated his different approach to foreign negotiation. Just a month into his presidency Rouhani’s “conciliatory overtures led to…the first direct conversation between a U.S. and an
Iranian leader since 1979.” To further display his more moderate stance, Rouhani reached a Joint
Plan of Action Interim Agreement with the P5+1 in November 2013. Although it is ultimately the
Supreme Ruler’s decision on the development of nuclear weapons, Rouhani’s actions present a
new dialogue on nuclear development.

While groundbreaking progress has recently taken place on the halting of Iran’s nuclear

ambitions, the P5+1 and Iranian negotiations have reached a stalemate. Unable to complete a
permanent deal, both parties have allowed for two separate extensions of the temporary accords.
It is now unclear if either negotiating party will budge on the topics of breakout capability, sanction timeline, Iran’s past work on nuclear warheads or normalcy under the Nuclear Proliferation
Treaty (NPT). Moreover, mounting pressure from the U.S. Republican party and Israel risks
completely derailing negotiations with new sanctions on Iran.

With the prospect of a comprehensive solution unclear, it is vital to examine the possibil-

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ity of a nuclear Iran. How would Iranian obtainment of a nuclear weapon alter geopolitics? The
examination of the historical effects of nuclear weapons shows that Iran’s acquisition of nuclear
weapons will transform the greater geopolitical environment by inducing nuclear proliferation,
deterrence, and a large international response.
Treaty on the Non-Proliferation of Nuclear Weapons

Since 1949, when both the United States and the Soviet Union obtained and tested nuclear weapons, six additional states have become declared nuclear powers. Between the current
declared nuclear powers five out of eight have signed the Treaty on the Non-Proliferation of
Nuclear Weapons (NPT) – the U.S., Russia, China, France, and the U.K. The NPT, established
in 1968, was crucial in halting the escalation of the Cold War and stabilizing relations between
nuclear powers. Specifically, the NPT achieved these gains by obligating signatories to pursue a
nuclear disarmament policy, declare all nuclear material to the IAEA, and to not “transfer nuclear
weapons, other nuclear explosive devices, or their technology to any non-nuclear weapon states.”
Although this landmark treaty instilled confidence between signatories, it eventually created a
divide between states under the NPT and non-NPT nuclear powers.

Until 1974, when India obtained and tested a nuclear weapon, every existing nuclear

power had been a signatory of the NPT. Subsequently, each additional nuclear power not under
the NPT uniquely altered international relationships and spread anxiety. Three Non-NPT nuclear
powers, in particular, are crucial to examine when evaluating the effects of Iran’s potential obtainment of a nuclear power—India, Pakistan, and North Korea.
India’s Nuclear Weapons Program
India’s nuclear program traces back to three years before Indian independence in 1944 when Dr.
Homi Jehangir Bhabha submitted a proposal to Sir Dorab Tata Trust to found a nuclear research
institute. Soon after the establishment of a nuclear program, Prime Minister Pandit Jawaharlal
Nehru made India’s motives clear. The Prime Minister held that all nuclear power would be used
for peaceful purposes. Nehru’s straightforward proclamation concerning the motives of India set
the international community at ease.

For a decade, the Indian nuclear program focused exclusively on nuclear energy while

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founding the Non-Aligned Movement and advocating nuclear disarmament. In 1954, however,
India shifted towards creating a new reactor that would aid in production of a nuclear weapon.
With assistance from the British, Canadians, and Americans, India was able to create a nuclear
reactor capable of producing weapon-grade plutonium.

Efforts to construct a nuclear weapon in India began in direct response to actions of the

Chinese. In 1962, border disputes between the two countries, primarily in the Himalayan region,
erupted into the Sino-Indian war. The international community viewed this month-long war as an
unprovoked invasion of India. India used this war as evidence to confirm that the Chinese pursued a reckless foreign policy that threatened the security of their country. Two additional events
fueled India’s insecurity— China’s successful nuclear tests in 1964 and the Indian-Pakistani war
in 1965.

By May 18, 1974, India had tested its first nuclear weapon (code name Smiling Buddha).

As described by the Indian government, this “peaceful nuclear explosion” not only demonstrated
India’s nuclear capabilities but also served as a deterrent to both China and Pakistan. Reception
of India’s newfound nuclear status was varied. The French were ecstatic about India’s acquirement of a nuclear weapon and even sent the Indian Atomic Energy Commission a congratulatory
message. Although the Untied States and Canada greatly assisted in the creation of the Indian
nuclear program, they were caught by surprise and displeased by India’s nuclear test. China
deemed India’s acquirement of a nuclear weapon as not a “particularly important event,” however, they noted that it would delay and complicate relations among South Asian countries. Pakistan claimed they knew of India’s nuclear test, but were nonetheless extremely threatened by
India’s obtainment of a nuclear weapon.
Pakistan’s Nuclear Weapons Program
In 1956 Pakistan established the Pakistani Atomic Energy Commission in order to participate in
Atoms for Peace. During the next decade, Pakistan would receive substantial financial and informational aid from the United States in setting up a “5 MW light-water research reactor (PARR1).” In 1965, shortly after China became a nuclear power, Pakistan developed a closer relationship with China. Although it is unclear what early aid was provided by China to the Pakistani
nuclear program, both countries established a mutual interest against India obtaining a nuclear

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weapon. This mutual interest stems back to the creation of India and Pakistan. When the British
partitioned India and Pakistan in 1947, they attempted to divide along sectarian lines; however,
their actions were disastrous. From the botched partitioning, anger lingered concerning land
claims and displaced populations. Moreover, the remnants of the partition were in part responsible for war between Pakistan and India alone in 1947, 1965, and 1971.

Each of the aforementioned wars was a step in the process of motivating each country to

acquire nuclear weapons for the purpose of deterrence. For Pakistan, however, the Indo-Pakistani
War of 1971 in conjunction with intelligence reports on the advancements of India’s nuclear
weapons program was the breaking point. On January 24, 1972 President Zulfikar Ali Bhutto
“committed Pakistan to acquiring nuclear weapons at a secret meeting held in Multan.” Although Pakistan had nuclear research facilities in place, they still lacked the proper infrastructure
and technology to create a nuclear weapon. To acquire the infrastructure, Bhutto “reached out to
the rest of the Islamic world [mainly Libya and Saudi Arabia],” which resulted in billions of dollars in funding in the mid-1970s. Additionally, due to Pakistan’s strategic location in relation to
Southern Asia and the Middle East, Russia, the U.S., and China were vying for Pakistani support.
As a result, this competition “nullified the prospect of any sort of pressure on Pakistan to restrain its weapons program and opened floodgates of military and other aid.” Ultimately, a close
relationship with both the United States and China resulted in the successful operation of centrifuges in Pakistan by 1980. Pakistan’s nuclear weapon capabilities quickly progressed during the
1980s, producing an air-deliverable bomb and over 24 cold tests of nuclear devices. By October
1990, Pakistan was decertified as a non-possessor of nuclear weapons and eight years later, in
1998, they tested their first nuclear weapon.

Leading up to the nuclear tests many potentially disastrous international crises transpired.

In July 1986, India conducted Exercise Brasstacks, the largest military exercise in Indian history,
which deployed 400,000 troops within 100 miles of Pakistan. Pakistani military leaders viewed
this operation as a direct threat and responded with maneuvers of its own and heated rhetoric.
This cold conflict reached such tensions that Pakistani nuclear scientist Abdul Qadir Khan revealed in an interview that Pakistan had manufactured a nuclear bomb and was ‘reviewing their
options.’ Although the Agreement on the Prohibition of Attack Against Nuclear Installations and
Facilities was signed in late 1988, other crises transpired in the 1990s in connection with nuclear

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weapon rhetoric.

On May 11, 1998 India’s Prime Minister announced that India had conducted three nu-

clear tests. Startled by this sudden demonstration of power, Pakistan felt pressured to respond in
order to “deny India unilateral technical advantage it might have gained from conducting tests; to
restore a sense of a balance-of-power with India in the eyes of itself, India, and the world.” Just
seventeen days later, Pakistan conducted its first series of nuclear weapon tests. As the international community had feared, a nuclear arms race had emerged between India and Pakistan.

The international community swiftly reacted. Numerous countries, from Argentina to

Peru, publicly denounced both Indian and Pakistani nuclear tests and the United Nations Security Council (UNSC) unanimously adopted Resolution 1172. This resolution demanded that both
countries refrain from engaging in further tests and vowed to aid in the settlement of the Kashmir
conflict in return for their compliance. Furthermore, the United States, Japan, Australia, Sweden,
Canada, and the IMF levied sanctions against Pakistan. Although the U.S. also sanctioned India,
Pakistan’s economic sector bore a greater burden for its reactionary nuclear testing practices.
North Korea’s Nuclear Program
In the wake of WWII, the Korean peninsula was divided into Soviet-controlled North Korea and
U.S.-controlled South Korea. Under the Soviet umbrella, North Korea chartered a joint program
for nuclear research in February 1956, which began the exchange of nuclear intelligence. Over
the next fourteen years North Korea’s program expanded its “educational and research institution to support a nuclear program for both civilian and military application.” Progress steadily
continued through the next two decades resulting in an expanded research reactor, plutonium-reprocessing technology (acquired from the Soviet Union), a 5MW nuclear reactor, and construction of a 50MW nuclear reactor. Throughout North Korea’s nuclear advancements in the 1970’s
and 1980’s they fully abided by international nuclear regulatory guidelines. North Korea signed a
trilateral safeguards agreement with the IAEA that brought their reactors under IAEA safety, and
in 1985 signed the NPT.

It was not until 1993 that North Korea denied the IAEA access to North Korean waste

sites, withdrew from the NPT, and tested their Nodong-1 missile. An international crisis ensued
that almost resulted in war between North and South Korea. Through international involvement,

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however, the crisis was averted and the Agreed Framework was reached. In this agreement,
Pyongyang would freeze operations and construction of nuclear plants with nuclear weapon
capabilities, and the U.S. would supply North Korea with fuel oil pending construction of the
international consortium. This agreement settled tensions for the immediate future but left each
side dissatisfied and opened the possibility for future disputes.

Throughout the next decade, North Korea and the United States would maintain a turbu-

lent relationship, constantly leaving them on the brink of war. In 1998 the U.S. discovered North
Korea’s secret underground nuclear facility, which led to the stoppage of $35 million in heavy
oil aid to North Korea. Then in 2002, when the U.S. discovered North Korea’s Highly Enriched
Uranium Program and the North Koreans again expelled IAEA inspectors, a crisis, similar to that
of 1994, ensued. Although talks between North Korea and the international community resumed
intermittently between these international crises, they were to no avail.

On October 6, 2006 North Korea conducted its first nuclear test. This nuclear test show-

cased “more than two decades of [U.S.] diplomatic failure,” North Korean technological ingenuity, and the further proliferation of nuclear weapons. Although this test only yielded 1 kiloton
instead of the expected 4 kilotons, it was still revered as a success by the North Korean state,
launching them into the category of a nuclear power. The major international fears were not
only that North Korea could lash out, but also that they would spread weapons and technology to
other countries.

As expected, the nuclear tests resulted in significant international backlash, the United

States opened up the possibility of military action. Though a longtime North Korean ally, China
openly condemned North Korea for its irresponsible actions. Ultimately, the international community took action through the UNSC, which passed resolution 1718. This resolution heavily
sanctioned North Korea and demanded that negotiations continue. After more than a year, the
Six-Party process—between the Republic of Korea, Democratic People’s Republic of Korea, the
U.S., and People’s Republic of China, Japan, and the Russian Federation—continued. A negotiation was reached in 2007 and among other things North Korea agreed to abandon all of their
nuclear weapons and dismantle their nuclear program. This anti-proliferation victory, however,
was short-lived. Following suit with their past actions, in March 2009, North Korea once again
kicked out the IAEA and started up their nuclear program due to a minor dispute. The cycle of

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progress, preceded by major setbacks, has continued up to the present. In just the past year alone
(2013-2014) North Korea has confirmed its 3rd nuclear test and fired mid-range ballistic missiles
into South Korean Sea.
Patterns
A series of six patterns emerge from the examination of India, Pakistan, and North Korea’s nuclear weapon programs. First, each country had an almost identical motive for obtaining nuclear
weapons—deterrence and national prestige. India wanted to deter China and Pakistan; Pakistan
wanted to deter India and other industrialized states; North Korea wanted to deter the U.S., South
Korea, and all other imperialist powers.

Second, the obtainment of nuclear weapons subsequently proliferated nuclear weapons

elsewhere. When India successfully produced a nuclear weapon, it led Pakistan to pursue one
to restore ‘balance to the region’. After Pakistan produced a nuclear weapon they shared their
nuclear weapon information with North Korea. North Korea has then gone on to share nuclear
weapon information with Iran, Syria, and Burma.

Third, after every country obtained and tested a nuclear weapon there was a similar in-

ternational response—condemnation and sanctions. Preceding India’s nuclear tests in 1974 and
1998, Pakistan’s in 1998, and North Korea’s in 2006, each country was met with sanctions but
not military intervention. The dangers involved in international military action against the testing
and proliferation of nuclear weapons demonstrate the growing use of diplomacy of sanctions and
apprehension to engage a nuclear power in an offensive manner.

Fourth, none of these countries posed a considerable hegemonic threat to the regional

power structure. In Southern Asia, India did not have the potential to emerge as a hegemonic
power because a nuclear China in the north and Pakistan in the west served as checks to Indian
dominance. In a reciprocal manner, Pakistan’s neighbor India, who possessed nuclear weapons,
served as a hegemonic check on Pakistan as well. North Korea did not pose a hegemonic threat
because they are surrounded by China in the northwest, South Korea and Japan in the east.

Fifth, for each country, nuclear weapon capabilities earned them prestige but did not

fulfill the purpose of deterrence. For example, the possibility of a nuclear war did not discourage
either India or Pakistan from engaging in the Indo-Pakistani War of 1999. It should additionally

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be noted that already heated rhetoric was used in the Indo-Pakistani War; pragmatism won leaders over and nuclear options were not utilized. Furthermore, North Korea has not fully deterred
the U.S. and other imperialist powers. In particular, the international community has still been
able to implement sanctions against North Korea. So, although North Korea was able to fight off
military imperialism, some may view the sanctions by the international community as a form of
economic imperial intrusion.

Sixth, all of these countries’ nuclear weapons programs were fueled directly or indirect-

ly by the Cold War. Both India and Pakistan began their nuclear program through utilizing the
United States’ program Atoms for Peace during the Cold War. This program, mutually beneficial,
aided each countries nuclear ambition while serving the United States’ Cold War pursuits – containment. Moreover, North Korea’s nuclear program began with direct Soviet assistance.
How does Iran fit into this pattern?
The Iranian nuclear program predominantly fits into the previous pattern while still retaining
some crucial differentiating factors. First, their motivation for pursuit of a nuclear weapon is
also deterrence and national prestige. Iran’s “nationalistic hubris married to a sense of insecurity derived from persistent invasion by hostile forces...Iran became another victim of the “Great
Game,” played by the British and Russians…and later [in] the intense Cold War rivalry.” Although Iran’s political and security elite primarily “views nuclear capability as a deterrent to
neo-colonialism,” they are more specifically looking to deter Israel and the United States. Iran’s
feelings of insecurity were further intensified witnessing Western-assisted overthrow of regimes
in the region. In particular, the overthrow of Muammar Gaddafi, who at one point had pursued a
nuclear weapons program and then halted the program, stands as a message that nuclear weapons
are necessary to deter imperial powers. With the past Iranian president (Mahmoud Ahmadinejad),
in regard to national prestige, “he turned the [nuclear weapons] issue into one of national honor,
making it simply impossible for Iran to back down.” Thus, previously, obtainment of nuclear
weapons symbolized Iranian independence and the innovation of a non-Western power.

In the past year, however, national economic shortcomings have shifted public focus.

Now, the short-term economic benefit that can be obtained from halting their nuclear program
is overshadowing the want of national prestige through nuclear realization. This noticeable shift

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can be seen first in the election of Hassan Rouhani, who is viewed in Iran as a moderate. During
his campaign for president he ran on a platform of “saving the economy and reviving ethics and
interaction with the world.” Furthermore, his track record as the head of the Supreme National
Security Council under President Rafsanjani demonstrated his willingness to negotiate with the
international community. Most notably, as head of the Supreme National Security Council, Rouhani “presided over talks with Britain, France, and Germany that saw Iran agree to suspend uranium enrichment-related activities between 2003-2005.” Although a momentary shift in Iranian
nuclearization has taken place, the idea of national prestige through nuclearization still continues
to resonate within the Iranian ruling elite.

Much like India, Pakistan, and North Korea’s, Iran’s program was also directly fueled by

the Cold War. As mentioned, Iran received assistance from the United States’ Atoms for Peace
program in starting their nuclear program. However, due to the Iranian Revolution and Iran hostage crisis in 1979, American-Iranian relations were cut off and nuclear assistance ceased. The
1980-1988 Iran-Iraq war further stifled the progress of Iran’s nuclear program. These domestic
and foreign happenings delayed the progress of Iran’s nuclear program into the post-Cold War
era. This was particularly important to note because the international community approached
developments of the post-Cold War era in a different manner.

For example, during the development of India’s nuclear program, few, if any, attempts

were made by the international community to halt India’s nuclear proliferation. Additionally,
when India tested their first nuclear weapon it almost completely “caught the United States by
surprise… because the intelligence community had not been looking for signs that a test was in
the works.” Expectedly, nuclear developments in the post-Cold War world come under closer
scrutiny by the international community, especially after the War on Terror began in 2001.

Consequentially, the international responses to Iran’s nuclear weapon capabilities have

differed largely from those during the Cold War. As seen by North Korea and Iran’s experience
in the post-Cold War era, the international community is now using the diplomacy of sanctions
more aggressively to deal with evolving nuclear weapon programs. This is a better alternative
than military intrusion for the geopolitical community. In particular, with “petroleum, natural gas
and oil products accounting for …81.4 percent of the total merchandise exports of Iran,” international sanctions will undoubtedly continue to economically cripple Iran as they refuse interna-

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tional guidelines. Furthermore, the ability of the U.S. to obtain four sets of multilateral sanctions
– through UN legislation- on Iran over a sustained period appears to have been imperative to
reaching the 2013 Joint Plan of Action interim accords.

While Iran’s nuclear developments fit closely into this pattern, it also diverges in one cru-

cial section. Iran does pose a hegemonic threat. Historically, Iran has been an important power in
the Middle East. Aside from the perception of being the candidate for natural hegemonic force,
with “Iraq preoccupied with its internal squabbles and divided along sectarian lines,” and the
United States slowly pulling out of the region, it seems that most if not all barriers are removed
to allow Iran to assert its influence in the region. Iranian acquisition of a nuclear weapon would
further perpetuate Iranian power and influence in an unstable region. Although it is logical to
assume that Iran’s divergence from the pattern would render the application of such patterns
irrelevant, this is not the case. The hegemonic prong of the pattern is time-sensitive. While hemispheric hegemony is checked by both Russia and China, Iran has the chance to expand its regional sphere of power in the Middle East. With the acquisition of a nuclear weapon Iran would
be able to challenge the reigning hegemonic power in the Middle East–Israel. An expanded role
by Iran would rely on cooperation with all permanent members of the UNSC, in particular the
United States. Since U.S. cooperation and Iranian acquisition of a nuclear weapon are mutually
exclusive, the attainment of a nuclear weapon would in fact hinder Iranian regional hegemonic
pursuits.

Since Iran has not yet obtained or tested a nuclear weapon—to the knowledge of the

international community—it cannot be said whether Iran’s nuclear development will follow the
this pattern in the areas of nuclear proliferation, international response, or deterrence.
Prospects of future Iranian obtainment of Nuclear Weapons
If Iran obtains nuclear capabilities, the three major consequences to the international community
will revolve around proliferation, deterrence, and international response. It seems imminent that
the international proliferation of nuclear weapons will continue if Iran obtains nuclear capabilities. Thus far, every currently known nuclear power has distributed some sort of nuclear technology to their allies or prompted others in their region to pursue nuclear capabilities. It seems
likely that, once a nuclear power, Iran will share nuclear technology with their allies. In effect,

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Iran’s acquisition of a nuclear weapon could trigger a nuclear arms race while also serving the
function of deterrence. A likely candidate for such an arms race would be Israel. Although Israel
has never admitted that it has nuclear weapons, “nevertheless, Israel is universally believed to
possess nuclear weapons.”

The most likely countries to pursue nuclear weapons as a deterrent to Iran are Saudi

Arabia and Turkey. While in Dubai, at a Persian Gulf security forum, the Saudi intelligence
chief stated “[Saudi Arabia] might consider producing nuclear weapons if it found itself between
atomic arsenals in Iran and Israel.” In a similar remark, Turkey’s president Abdullah Gül said
in an interview with Foreign Affairs that “Turkey will not accept a neighboring country possessing weapons not possessed by Turkey herself.” Although some may dismiss these interviews as
political rhetoric, as seen in the past, once a country is threatened by a foreign nuclear power it
will go to extreme measures to maintain security. The idea of a nuclear arms race is questionable
at best, however, the increased prospect of confrontation in the region due to nuclear pursuit or
nuclear obtainment are a clear danger. Moreover, Iran’s achievement of nuclear capabilities will
only fulfill partial deterrence. With nuclear status they will be able to deter neo-colonialism, as
seen in North Korea, but will still maintain wider conflict (i.e. economic sanctions from the U.S.
or military intervention by Israel).

While past countries that acquired nuclear weapons against the will of the international

community have only received sanctions, Iran’s nuclear weapon obtainment could follow a different path. One of the foremost reasons is that they pose a threat to the United States. Not only
does Iran embrace vast ideological differences to the United States but also, as former Secretary
of Defense Chuck Hagel remarked, a nuclear-armed Iran is a “toxic combination of nuclear
ambition and support for terrorism.” With the progression of Iran’s nuclear program, the U.S.
has already entered into new territory, stopping just short of military intervention by providing
arms to both Iran’s neighboring countries and Israel. Furthermore, in previous instances, Israel
has conducted bombing raids on nuclear facilities in both Syria and Iraq, so the possibility of
Israeli military intervention always remains pertinent. It should also be noted that Iran acquiring
a nuclear weapon would destroy what is left of the already despondent U.S.-Iranian relations. For
the U.S. this would alienate public support for future diplomatic solution, further hurt U.S. credibility, strain the United States’ ability to control the flow of oil through the Strait of Hormuz, and

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hinder the U.S. ability to ensure the safety of its allies.
Conclusion
From the emergent historical patterns, it seems that Iranian obtainment of nuclear weapons
would trigger further nuclear proliferation, deterrence, and large international response. It should
be noted, however, that all of these events are all closely molded to Iran’s geopolitical situation
and will adapt accordingly. With tremendous upheaval over the past five years, predominantly
resulting from the Arab Spring, the War on Terror, ISIS, and sectarian violence, it is critical now,
more than ever, to analyze the past in order to anticipate the future. Through analysis of emerging patterns, particularly in the polarizing issue of nuclear weapons, cause-effect relationships
are easier to grasp. Although there is no telling what variables may change the future course of
events, educated analysis allows for a more thorough understanding of the possible course of
events.

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Cosponsorship in Congress:
How Many Cosponsors Does It Take to Pass a Bill?
Sharif Amlani1
This papers sets out to determine what effect cosponsorship has on passing legislation in the United States House of Representatives. I hypothesize that as the number
of cosponsors on a bill increases, so too does the probability that the bill will pass
in the House -. Using a logistic regression of all bills introduced between the 96th
and 112th Congresses, I find support for my hypothesis, with one electoral caveat.
Rare bills with the highest number of cosponsors do not have a high probability of
passing the chamber. This leads me to conclude that cosponsorship is a tool best
used for achieving reelection rather than passing bills.

Introduction

L

ike social media, Congress is an interpersonal institution created for social interaction. The
spread of news, ideas, and updates on the lives, positions, and goals of its members occurs

daily. One frequent aspect of social media is posting pictures and having friends demonstrate their
approval by “liking” it. Similarly, in Congress, when a member sponsors a bill their colleagues can
demonstrate their approval by cosponsoring it. The amount of “likes” a picture has, or the amount
of cosponsors signing on to a bill signals a bill’s quality and legitimacy to party leaders, committee
chairs and other members of the chamber (Koger 2003). Cosponsorship “provides informative signals to agenda setters about the number, quality and diversity of a bill’s supporters” (Koger 2003:
226). Also like social media, cosponsoring traces a pattern of interpersonal relationships between
members of Congress (Fowler 2006). It demonstrates a member voluntarily taking a position in
pursuit of the ultimate goal: reelection (Mayhew 1973; Rocca 2005). Finally, it is an important
component to passing legislation.

Yet, how many cosponsors does it take to pass a bill? The forthcoming discussion will

hinge on addressing this question. I hypothesize that as the number of cosponsors on a bill
1

I wish to thank Michael Rocca and Lisa Sanches for their helpful comments, guidance on research and
mentorship.

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increases so does the probability of a bill’s passage. I argue that those who cosponsor a bill will
vote for it upon final passage. In short, a bill has strength in numbers because it sends strong
signals to members with influence, members of the opposite party, and connected members who
influence others.

With limited time and resources within the beltway, knowing who to whip, lobby or call

and knowing when to fall back is valuable information in a town where information is power.
Outside the beltway, knowing which bills pass and which do not could aid in forwarding the
predictive potential of political science in future studies on Congress.

The model I have devised aids in assessing a bill’s legitimacy by counting the number of

cosponsors and determining the probability of its passage. Using data from the 96th to the 112th
Congresses, I find support for my hypothesis with one interesting caveat. The data demonstrates
that a positive correlation between cosponsorship and bill success exists. However, the probability of passage at the highest number of cosponsors is lower than expected. From this, I draw
several conclusions.
Why Does a Bill Pass?
Why does a bill pass in Congress? Three components contribute to a bill’s success. The first
component is procedural power, which is defined as any position of status or influence, such
as majority party, party or committee leader. Second, electoral considerations, which refers to
anything related to a member’s reelection goal. Finally, a member’s legislative strategy inside
Congress can contribute to a bill’s passage.

Procedural power in Congress matters because those with procedural influence maintain

the ability to set the legislative agenda, possess rule-making authority, and have the discretion to
select which bill succeeds and which fails. The majoritarian institution of Congress confers more
institutional benefits to the majority party than the minority party. Being a member of the majority party increases bill success, two fold (Frantzich 1979; Anderson 2003; Moore and Thomas
1991). This also explains why party leaders and committee chairs maintain great institutional
advantage: they control the agenda, which allows them higher institutional success than rankin-file majority members (Frantzich 1979; Anderson 2003). Additionally, seniority increases a
member’s legislative success (Anderson 2003; Frantzich 1979; Moore and Thomas, 1991). Being

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a senior member of Congress allows a member time to “develop skills, expertise and contacts
necessary to steer legislation successfully though the complex process” (Anderson 2003: 968).
Contrastingly, younger members of the minority party are more successful than their senior
counterparts (Moore and Thomas 1991). Moore and Thomas explain that their success may
reflect a “high level of ambition and vigor” in promoting their legislative agenda (Moore and
Thomas 1991: 969).

Procedural powers are best exemplified at the leadership level where their authority

affirms the ability to decide which bills are scheduled (Hasecke and Mycoff 2007). Party leaders grant rewards or sanctions to members who choose to be loyal or treasonous to the party;
therefore, “they use the bill schedule to encourage party loyalty” (Hasecke and Mycoff 2007).
As a result, if a member has low voting loyalty, they will have low scheduling success and vice
versa. Finally, “party leaders use their scheduling authority to strategically distribute legislative
success” (Hasecke and Mycoff 2007: 615). This is why procedural power is critical to legislative
success and power. Those who control the schedule control which bills come up for a vote. As a
result, party leaders can choose whether or not to schedule a bill for any reason, including party
loyalty or lack thereof.

As a result, legislative connectivity can be an important asset to members looking to pass

bills. In James Fowler’s (2006) exploration of cosponsorship and connectivity, he explains that
those who are more connected, such as party leaders and committee chairs, maintain greater
legislative influence than unconnected members (Fowler 2006). Fowler defines connectivity as
the shortest social distance between members of Congress (Fowler 2006). Fowler explains, “The
average distance from legislator to all others… gives us an idea of not only how much direct
support she receives, but how much support her supporters receive.” (Fowler 2006: 462). As a result, “A senator ranked at the 95th percentile for connectedness passes about seven times as many
amendments (the measure of influence) as a senator ranked at the fifth percentile” (Fowler 2006:
476). As a result, connected members have more opportunities to shape the legislative agenda
(Fowler 2006). Additionally, members of Congress enjoy mutual cosponsorship. Members with
more influence have more opportunities to hand out favors and thus can expect more returns on
their legislative investments. Finally, Fowler finds that “Legislators with high connectedness
scores tend to sponsor more legislation and acquire more cosponsors,” and, “Legislators are

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more likely to vote for final passage of bills sponsored by well-connected Senators and Representatives” (Fowler 2006: 484). Overall, a member’s social network influences their procedural
powers.

Most critically, members are concerned with being reelected (Mayhew 1974). Members

often take electoral considerations into account when deciding whether to sponsor or cosponsor a
bill. These considerations increase the probability of being reelected and the probability of their
bill’s passage. For example, local legislation has a higher probability of passage because of its
less controversial nature, which makes it “more prone to receive a logroll than legislation with
national implications. Further, local legislation benefits the district directly and provides electoral
benefits for the legislator” (Anderson 2003: 366). Most legislative activity is concentrated with
senior and electorally secure members because the longer a member has been in Congress and/
or the more secure the member’s district is, the less he or she has to worry about being reelected
and the more time he or she has to devote to “internal legislative activities” (Frantzich 1979).
As a result, the longer a member remains in Washington versus his or her home district the more
likely he or she is to have their bill pass committee (Moore and Thomas 1991). Alternatively,
insecure and marginal members that spend more time at home gathering support use bill introduction as a method to protect themselves from claims of “inaction or ineffectiveness” (Frantzich
1979).

However, members are not entirely beholden to institutional factors. There are certain ac-

tions members can take to increase the probability that their bill will pass the chamber. This I refer to as legislative strategy. First, introducing selective and focused bills, while not being overly
active, increases the probability of legislative success (Frantzich 1979; Moore and Thomas 1991;
Anderson 2003). This occurs because “other legislators are wary of a flood of bills from a single
member” (Anderson 2003: 364). While, “cosponsorship levels have little to do with whether or
not legislators get their bill passed” (Anderson 2003: 373). Anderson, citing Moore and Thomas, (1991) finds a relationship between speaking on the floor and a member’s legislative effectiveness (Anderson 2003). Anderson explains, “By speaking, a member has the opportunity to
make a rousing speech on behalf of a bill under consideration. Conversely, delivering too many
speeches might result in a member being perceived as difficult or obstructionist, thus putting off
other members. Not speaking at all, however, leaves the member no opportunity to provide cues

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for his bills or those of his colleagues” (Anderson 2003: 365).

With regard to legislative strategy, two strategic approaches exist. First, the rifle approach

explains, “A congressman should choose a limited number of legislative ideas, draft them carefully, express one’s deep interest to the leadership and focus all efforts on that limited objective”
(Frantzich 1979: 418). Second, the shotgun approach calls on members of Congress to “introduce more legislative with wider substantive focus hoping the law of averages will carry some
of the legislation through the process” (Frantzich 1979: 418). In this approach, “the member
exerts effort and may do it quite selectively, but loses the parsimony justification for passing the
‘crucial’ legislation” (Frantzich 1979: 419). Frantzich argues that the shotgun approach is the
best strategy in getting a member’s bill to final passage. He explains, “Congressmen with high
expectations of legislative success may be encouraged to introduce more legislation,” (Frantzich
1979: 419). Frantzich’s shotgun approach differs with Anderson’s 2003 and Moore and Thomas’s
1991 approach, which states that being selective and not overly active in sponsoring bills yields
the best legislative outcome (Anderson 2003). Anderson’s findings of bill success are more consistent with the rifle approach than the shotgun approach. Could this evolution in bill success be
consistent with changes in Congress between 1979 and 2003?

An additional component to legislative strategy is bandwagon signaling. Bandwagon

theory states, “The greater the number of cosponsors the more likely the legislation will succeed”
(Wilson and Young 1997: 28). Wilson and Young explain, gathering a great number of cosponsors early on in the life of a bill signals to gatekeepers that members with “intense preference”
support the bill’s passage (Wilson and Young 1997). On the other hand, the slower cosponsors
signs onto a bill the less intensity the member feels toward it (Wilson and Young 1997). In the
end, “the bandwagon model predicts that a bill with a large number of cosponsors who quickly
sign on will be more successful than a bill with fewer cosponsors who leisurely sign on” (Wilson
and Young 1997: 28).

Does the number of cosponsors on a bill matter? I argue it does. The literature does not

provide empirically conclusive evidence to support this claim, but this is where I plan to contribute. I will empirically analyze cosponsorship’s effect on bill passage to provide evidence concerning its institutional power.

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Theory
Majorities are required to take any official action in Congress, whether it be selecting party
leaders, changing official rules or passing a bill. This means that in the House of Representatives
a bill needs leadership support in order to reach the 218 votes needed to pass. Leadership support
is crucial to a bill’s passage because party leaders use their scheduling power to decide which
bills come up to the floor to for a vote or receive an opportunity to pass through a committee’s
gates (Hasecke and Mycoff 2007). Therefore, if a bill has rank-in-file support but not leadership
support, it will die. Gaining broad support is accomplished by attracting the attention of gatekeepers, who maintain the influence to place the bill on the schedule for a vote or open a committee’s gates.2

With limited time and resources, gatekeepers have an incentive to pass bills with a high

probability of passage (Koger 2003). These members use cosponsorship to measure the probability of a bill’s passage. As one senior leadership aide explains,
“We don’t want to waste time bringing bills onto the floor and having
them fail. We also do not want to waste leadership efforts – whipping,
persuading on issues that are not high priorities for the leadership”
(Koger 2003: 228).

This same staff member indicates that their office uses the number of cosponsors as an

indicator of bills with broad support, high probability of passage, that deserve of leadership’s
time and effort (Koger 2003). The staffer goes on to state, “I recommend that he go out and get
218 cosponsors and come back when he does” (Koger 2003: 228).
Cosponsorship is a mechanism used to demonstrate to party leaders that broad support
exists. Broad support sends bandwagon signals through the chamber. As a result, if a member
wants to claim credit for a successful bill they must jump on the bandwagon by signing as a
cosponsor. Rank-in-file members can employ this legislative strategy to legitimize a bill that
leadership has ignored or overlooked. This process is critical in gaining leadership support when
otherwise absent (Wilson and Young 1997). Broad support via cosponsorship is defined as the
2
Gatekeepers are defined as any member with institutional and procedural power. These
members include Party and Committee leaders on both the majority and minority side.
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support from minority members, seniors and freshmen, legislative specialist, extreme and moderate members, rank and file members, and committee and party leadership. Therefore, broad
support is the support of a diverse group of members, whether it is ideological, institutional, or
electoral.

Strong bandwagon signals may also include signals of ideological tenor or high exper-

tise, both of which are important to a bill’s passage. Ideological signals are sent when “members
with similar ideological predispositions join together on bills they introduce “(Wilson and Young
1997). Legislation introduced and cosponsored solely by extreme members tends to be less likely
to pass the chamber than legislation introduced and supported by moderate members (Wilson and
Young 1997). Therefore, bill sponsors are motivated to look for cosponsors from both parties,
preferably the majority party and members from all across the ideological divide. Additionally,
majority party members seek minority party cosponsors “to ease the passage of their legislation”
(Koger 2003: 229). For example, “a good bipartisan set of cosponsors says to leaders, ‘you won’t
face a party battle on this bill’” (Koger 2003: 230). If members possessing divergent ideologies
support the same legislation, it signals to gatekeepers that the bill is widely accepted as “uncontroversial” and “low cost” (Koger 2003: 237). Furthermore, legislative experts joining a bill
signals to gatekeepers that experts have vetted the bill and it is of a “high quality,” (Wilson and
Young 1997) indicating, “that a bill is likely to achieve its policy goal and that affected interest
groups will not oppose the bill” (Koger 2003: 228). Wilson and Young explain, “A bill cosponsored by members who are considered experts is more likely to succeed than a bill cosponsored
by legislators who are not regarded as experts” (Wilson and Young 1997: 29).

As broad support increases, a snowball effect occurs. The snowball effect occurs when

rank and file members see that a bill has substantial support and is likely to pass; therefore, they
sign on to the bill. This occurs because members are interested in being reelected and thus they
strive to maximize electoral credit (Mayhew 1974). Members will cosponsor a bill with a high
probability of success because “there’s more credit in cosponsoring a bill and then voting for it”
than only voting for it (Koger 2003: 231). “If you just vote yes, you had no role in bring the bill
to the floor” (Koger 2003: 231). Logically, those who cosponsor a bill are likely to vote for it as
well. I therefore hypothesize that as the number of cosponsors on a bill increases so too does the
probability of its success.

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Data and Methods
My empirical analysis examines cosponsorship between the 96th and 112th House of Representatives. The goal was to maximize the number of observations to assess most accurately cosponsorship’s effect on a bill’s passage. I derive the data for this analysis from the Congressional Bills
Project courtesy of E. Scott Adler and John Wilkerson at the University of Washington. I selected
this data because it contains every bill introduced between the 93rd and the 112th Congress. It also
includes the number of cosponsors on each bill, whether it was reported from committee, and if
it passed the chamber. Besides these factors, it also contains qualitative data such as members’
names, their position of significance within the chamber and ideological leanings. This information will be useful for further studies into congressional bill passage.

I chose to exclude data from the 93rd to the 95th Congresses because of a rule change that

lifted the cap on cosponsorship in Congress. Prior to the 96th Congress, the number of cosponsors
on a bill was limited to no more than 25 members. During the 96th Congress, this limit was removed and no cap on cosponsorship exists today. By excluding pre-96th congressional bill data, I
am able to maintain similar institutional conditions in examining cosponsorship over congressional bill history.

I use two models to tap into the various aspects of bill success. The first dependent vari-

able describes whether a bill was reported from committee. This variable is dichotomous with
one representing a bill successfully being reported to the floor and zero representing that it did
not make it to the floor. The second dependent variable reports whether a bill passes the chamber.
Since a bill either passes or does not, this variable is also dichotomous with one representing a
bill passing the chamber and zero representing its failure to pass. My focal independent variable
is cosponsorship. It is a continuous variable and represents the number of House members signing onto a bill as a cosponsor. It ranges from zero to 434.

I use a logistic regression to measure cosponsorship’s effect on bill passage. I chose this

method because my dependent variables are dichotomous and I cannot successfully apply them
to an OLS regression. To note, I did not control for any other factors such as the level of institutional influence of the members cosponsoring or sponsoring a bill or the bill’s subject. This analysis intertwines cosponsorship with endogenous institutional factors. Table 4 reports the logistic

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regression’s results, the magnitude of this relationship, and the rate of change, which shows
the relationship between the minimum number of cosponsors (0) and the maximum number of
cosponsors (434). Finally, to achieve a clearer picture of cosponsorship’s effect, I use predicted
values to produce the probability of a bill’s passage with different numbers of cosponsors. Table
5 and Figure 4 reports these results.

In examining cosponsorship, I found almost 40 percent of bills never received a cospon-

sor. Moreover, the mean number of cosponsors was approximately 14, and cosponsorship’s
median value was two. This means that 50 percent of bills had two or less cosponsors. In fact, the
first percentile to the 25th percentile included bills with zero cosponsors. As Figure 1 displays,
70 percent of bills had 20 or less cosponsors. Only .58 percent of bills had 218 (a majority of the
chamber) or more cosponsors and only .22 percent of bills had 300 or more cosponsors. With
only .2 percent of observations meeting these criteria, it was extremely rare for a bill to have 350
or more cosponsors. Although, this study predicted the statistical advantage of having more than
218 cosponsors on a bill, in reality, the likelihood a member achieving this goal is extremely low.

The percentage of bills reported and passing the chamber is extremely low. House com-

mittees reported only 9.06 percent of bills to the floor. Similarly, the House of Representatives
only passed 9.68 percent of bills. Figures 2 and 3 illustrate these percentages.

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Figure 1: Cosponsorship Frequency in Congress

Cosponsorship in Congress

0

20

Frequency (%)
40
60

80

96th to 112th Congress

0

100

200
300
Number of Cosponsors

Figure 2: Percentage of Bills Reported

Percent of Bills Reported From Committee
96th to 112th Congress

9.06%

90.94%

NOT Reported

Reported

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Figure 3: Percentage of Bills Passed

Percent of Bills Passing the House
96th to 112th House

9.68%

90.32%

NOT Passed

Passed

Results
In addressing the question of whether cosponsorship in Congress matters, the logistic regression
reports that it does. There is a positive correlation between increasing the number of cosponsors
and increasing the probability that a bill will be reported and/or pass. This correlation is statically
significant with a p-value of .000. Meaning, as the number of cosponsors on a bill increases so
does the likelihood that it will be reported and/or pass the chamber. This affirms my hypothesis.

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The change in probabilities (prchange) from the minimum number of cosponsors (0) to

the maximum number of cosponsors (434) for a bill reported from committee is 32.18 percent.
For a bill passing the House, the change in probability from the minimum value to the maximum
value is 40.73 percent.

As to this relationship’s degree of significance, Table 5 and Figure 4 illustrate that both

the report and pass variables have a positive trend positively. The Hastert Rule, an informal rule
used by the Speaker of the House who will not bring legislation to the floor unless a majority of
the majority supports it, - appears to have a significant impact on the probability. Before achieving a majority of the majority’s approval to bring a bill up to the floor for a vote, the probability
of passage is no more than 15 percent. As the trend continues toward 218 cosponsors, the probability of reporting and passing the bill is 20.23 percent and 23.91 percent respectively. After
the trend passes 218, the slope increases slightly. The probability of reporting and passing a bill
with 300 cosponsors is 27.06 percent and 32.75 percent; at 350 cosponsors the probabilities
increase to 31.87 percent and 38.88 percent. At 400 cosponsors, the probabilities keep increasing

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to 37.10 percent and 45.39 percent. At 434 cosponsors, the probability of reporting a bill from
committee and it passing the chamber is capped at 40.85 percent and 49.92 percent. A bill with
the maximum amount of cosponsors (for example, includes members who are committee chairs,
party leaders, rank and file and backbenchers) has the same probability of passing the chamber as
getting heads on a coin toss (1 in 2).

I have found that having a high number of cosponsors matters more on final passage than

on a vote to report a bill from committee. Not only does it have a higher change in probability
from the minimum value to the maximum value, but also the overall probability of success, at the
same number of cosponsors, is higher for a bill on final passage than on a vote to report it out of
committee. When it comes to reporting or passing a bill, cosponsorship alone cannot determine
a bills fate. Although increasing the number of cosponsors helps to increase the probability of
passing a bill, it does not make it certain – even with the maximum amount of cosponsors signed

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onto it.
Figure 4: Graph of Logistic Predictions for Cosponsorship

As a result of this study, two important observations about cosponsorship can be made.

First, the vast majority of bills have a low number of cosponsors and second, even rare bills with
a high number of cosponsors do not have an extremely high probability of passing the chamber.
It is extremely difficult to get to 218 cosponsors on a bill. Even if a member gets 218 cosponsors,
the probability of the bill passing is still incredibly low.

This leads me to three important postulations. First, members who cosponsor a bill do not

always intend on voting for it. Second, with the difficulty in obtaining cosponsors and its feeble
effect on bill passage, the number of cosponsors on a bill is a weak and unreliable indicator of a
bill’s future success. Finally, to answer the hypothesized question: there are never enough cosponsors on a bill to assure its passage.

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Discussion
Why is cosponsorship a weak measure of success? I would hypothesize that it is a weak measure
because a member’s primary concern is not to pass bills, but to be reelected (Mayhew 1974). My
analysis supports the theory that members do not need to cosponsor successful bills to achieve
reelection. Four reasons validate this idea. First, the act of cosponsoring a bill is enough to get
members reelected regardless of if it passes (Mayhew 1974). Second, members have become
experts at avoiding blame for low legislative output (Fenno 1978). Third, members are not policy
experts and are weary of policy outcomes. Thus, they seek to minimize blame over maximizing
credit (Weaver, 1987). Finally, members do not spend time legislating because more electorally
profitable activities exist (Fenno 1978).

Members of Congress do not need to pass bills to be reelected (Mayhew 1974). As David

Mayhew explains, the member, as a position taker, is a “speaker rather than a doer. The electoral
requirement is not that he makes pleasing things happen but that he make pleasing judgmental
statements. The position itself is the political commodity” (Mayhew 1974: 62). With approximately 70 percent of bills receiving less than 20 cosponsors, my model predicts these bills have,
at most, have a 22 percent probability of passing. This means that constituents do not reelect
members based upon the number of bills their representative passes. The data supports the claim
that the position itself (sponsoring or cosponsoring a bill) is enough to get members reelected.
Less than 10 percent of all bills pass the House of Representatives and yet 90 percent of members are reelected (Open Secrets).

Additionally, Mayhew’s idea of Congress as an electoral machine holds true, especially in

regard to cosponsorship. Mayhew states, “The organization of Congress meets remarkably well
the electoral needs of its members” (Mayhew 1974: 81). Unsuccessful bills, in and of do not
decide the outcome of elections, but positions of cosponsorship can aid members’ reelection pursuits. Thus, cosponsorship is an endogenous institutional rule created by members to take electorally pleasing positions. Whether or not these positions materialize into legislative outcomes is
irrelevant because “the position is the political commodity” and cosponsorship is the mechanism
of that position (Mayhew 1974: 62). It is a mechanism of reelection.

Members use cosponsorship to signal their policy preferences to attentive parties be-

cause positions help to bring in campaign donations (Rocca and Gordon, 2010). As Rocca and

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Gordon (2010) find, there is a “direct and robust relationship between member of Congress’s
position-taking behavior and interest group contributions” (Rocca and Gordon 2010: 393). In
an examination of labor groups and bill sponsorship, Rocca and Gordon find that a “member of
Congress receives about $67,216 if he or she sponsors a labor bill” (Rocca and Gordon 2010:
392). They report that non-roll call position taking yields monetary and electoral benefits for
members of Congress (Rocca and Gordon 2010). Thus, I would extend Rocca and Gordon’s
analysis to include cosponsorship. Members’ cosponsorship behavior sends signals to and evokes
similar reactions from interest groups. As a result, members take positions, not only appeal to
constituents, but also to attract the attention of attentive parties who pay a “considerable wage”
for positions and thus, help members of Congress run for reelection (Rocca and Gordon 2010).
Further research into cosponsorship can explore this relationship.

Second, as Richard Fenno (1978) explains, members have become experts at avoiding

scrutiny for their lack of legislative output. He explains, “Members of Congress run for Congress
by running against Congress” (Fenno 1978: 168). This is true especially in regard to Congress’s
lack of legislative productivity. People are already critical of Congress, as a result, “the congressman stands only to increase constituent identification and trust when he joins – and leads
– the chorus” (Fenno 1978: 167). In that, “The performance of Congress is collective; but the
responsibility for congressional performance is not. It is easy for each congressman to explain
to his own supporters why he cannot be blamed for the performance of the collectivity” (Fenno
1978: 167). Members simply deflect blame off themselves and on to “collegial villains” who
bear the responsibility for Congress’ lackluster performance (Fenno 1978: 167). In summation,
low passage rates do not determine election outcomes because members simply allocate blame
onto their colleagues. For example, one campaign strategist in Fenno’s Home Style explains their
campaign’s message, “‘they are awful, but our guy is wonderful’” because he is fighting the good
fight against those ‘bandits down there in Congress’” (Fenno 1978: 166).

Third, if a rare bill, with 434 cosponsors, comes up for a vote this bill will only have a 50

percent probability of passing. This confirms the idea proposed by Kent Weaver, “Politicians are
motivated primarily by the desire to avoid blame for unpopular actions rather than by seeking
to claim credit for popular ones” (Weaver 1987: 371). This idea stems from the observation that
members of Congress are not policy experts and thus may not know the political ramifications of

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policies they pass (Weaver 1987). As a result, members are cautious about passing policy, even if
it has every members support (Weaver 1987).

Fourth, time and resource allocation is a member’s primary concern. As Fenno puts it,

“Time is a House member’s scarcest and most precious political resource” (Fenno 1978: 34). Do
members spend time at home or in Washington? Do they attend a policy briefing or a caucus luncheon? Do members meet with colleagues about a bill or do they meet with campaign donors?
Members must carefully select how they manage their time (Fenno 1978). Additionally, members
must decide where to focus their resources, “staff, office space, office expense allowances, free
mailing privileges (and) personal expense accounts” (Fenno 1978: 34). If members seek reelection, they must maximize their time and limited resources in the most electorally efficient manner
available. Thus, if a position on a bill is all that is required to achieve reelection, it is unsurprising that members allocate their time and resources away from passing legislation through obtaining cosponsors, and toward more profitable reelection goals. For example, members can use
most of their time and resources to obtain 300 or 400 cosponsors on one bill. In which case, their
bill will have between a 32.75% and 45.39% probability of passing the chamber. Alternatively,
for less time and resources, a member can take multiple positions by sponsoring multiple bills.
With a mean of 14 cosponsors and no hope of passing, members can still brag to constituents
about trying to fix multiple problems that their colleagues did not want to solve. This satisfies the
electoral requirement and saves time and resources for other electorally profitable endeavors. The
latter, as political science teaches us, gets members reelected most efficiently.

Finally, in the eyes of the member, failing to pass policy is not necessarily a bad because

it is not needed to achieve reelection. Members know how to deflect blame for this strategy, and
not passing legislation prevents unwanted policy fallouts. Finally, it allows members to use their
time and resources in the most electorally efficient manner.
Conclusion
I set out to determine how many cosponsors it takes for a bill to have a fifty percent chance of
passing the chamber. Understanding how cosponsorship affects legislative outcomes is important
for determining which bills pass and which do not. Additionally, examining cosponsorship helps
political scientists to understand how this institutional rule affects legislative and electoral behav-

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ior. I hypothesized that as the number of cosponsors on a bill increased, so too does the probability that the bill would pass. This hypothesis was based on the theory that if members cosponsor
a bill they will vote for it as well. Although my hypothesis is supported and there is a positive
correlation between the numbers of cosponsors on a bill and its probability of passing, the results
report that even bills with the highest number of cosponsors have a low probability of passing.

These results provide insight into cosponsorship’s influence in the legislative process.

It affirm the idea that, in seeking reelection, the “position is the political commodity” not the
positions successful transformation into law (Mayhew 1974: 62). Of the few bills that pass, other
institutional factors have a stronger influence in moving bills though the process than cosponsorship. Finally, these findings support the idea that cosponsorship is a tool best used for achieving reelection rather than passing bills. Future research may explore which institutional factors
contribute most to the successful passage of a bill, how many bills members ought to cosponsor,
or how many positions a member ought to take to achieve reelection.

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abridged forms of an undergraduate research thesis. Manuscripts for consideration should
include an abstract of approximately 150 words. Citations and references should follow the
American Political Science Association Style Manual for Political Science. All references must be
complete, accurate, and up-to-date for submissions to be considered. References in manuscripts
should be in-text citations in the author-date format with a complete bibliography.
Those who submit papers may be asked to revise their manuscript before and after it is accepted
for publication. Papers can be submitted digitally on the journal’s website at u.osu.edu/jpia where
you can also find submission guidelines including a digital copy of our style manual. You will be
asked to provide your full name, university, class rank, a short biography, and contact information
(mailing address, e-mail address, and phone number). Although papers are encouraged and
accepted on a rolling basis, they will only be considered for publication during each publication
cycle.

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