Dissertations submitted to the Hertie School
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04/2022
Authoritarian Regimes and Financial Crises: Explaining Autocratic Regime Survival and Collapse
(2022)
The common notion that financial crises pose serious threats to autocratic regime stability has been challenged over the last decades both on theoretical and empirical grounds by the extensive number of authoritarian regimes that seem to be absolutely impervious to financial and economic shocks. So, why do financial crises only sometimes lead to autocratic regime collapse? What mechanisms do (de)stabilize authoritarian regimes during financial crises? And under what conditions is autocratic regime breakdown likely to happen?
This dissertation addresses these questions by bringing together insights from the democratization, comparative autocracy, and political economy strands of research. It argues that the relationship between financial crises and autocratic regime breakdown is highly conditional, and depends on a complex interplay of economic and political factors. In three standalone papers, this dissertation scrutinizes the entire process of crises induced autocratic regime instability and regime collapse, and examines the effects of different economic and political factors on the probability of autocratic regime survival and collapse during specific types of financial crises.
The key findings of this dissertation demonstrate that the destabilizing effects of financial crises may vary by crisis type, that in response to financial crises, policymakers in autocracies can implement crisis policies that prolong authoritarian rule, and that institutions by which autocracies govern may immunize them from political risks during financial crises, or, by contrast, may precipitate elite defection and regime collapse.
Overall, this dissertation provides many new theoretical and empirical insights into the sources of autocratic regime survival and breakdown during financial crises. It also provides one more evidence that economic and political problems do not exist in isolation from one another, rather they are linked together in complex networks of weirdly tangled cause-effects relationships, which we do not yet fully understand.
03/2022
The rise of automated decision-making systems has been extraordinary in the last few years, both in terms of scale and scope of operation. This is especially true in the field of fintech, where robo financial advisors have gained prominence with their claim to “democratise” finance, with their low operating costs, multi-tasking abilities and potential for mass adoption. This series of three research papers is focused on demystifying algorithmic explainability in the field of fintech, by diving deep into both theoretical and practical aspects of the phenomenon, and contextualising the discussion to India.
The first paper explores the trade-off that emerges between performance and explainability for robo financial advisors, through a detailed review of available literature that allowed comparisons between relevant processes adopted around the world, and interviews with various stakeholders within India to understand the evolving domestic situation. The paper finds that it is not quite a question of if ADS will play a significant role in India’s financial services sector but more a question of when that will happen. The second paper operationalises algorithmic explainability in the particular context of risk profiling done by robo financial advisory applications. Here, an approach towards developing a ‘RegTech’ tool is outlined, which can explain the robo advisor’s decision-making, using machine learning models to recognise and reconstruct different levels of explanations. Finally, the third paper evaluates the effectiveness of user-centric explanations in conveying the decision-making logic of complex algorithmic systems in fintech. The paper demonstrates the usefulness of such explanations from the perspectives of both novice and seasoned investors, and goes on to differentiate between white- and black-box explanations.
In sum, this three-paper series, using a range of tools and approaches, examines in detail the under-appreciated regulatory and operational challenges that emerge during the use of algorithms in the field of fintech, and explores ways to resolve them. While the first paper looks at the present and future of AI in Indian fintech, the second paper develops a tool to explain a robo advisor’s decisionmaking, and the third finds factors that determine users’ comprehension and confidence in such systems. The results of these three approaches in the three papers become vital when seen in the context of the rapid rise of artificial intelligence across products, services and industries globally. If humans are to work alongside machines in this changing world, explainability becomes an important aspect to consider for companies, regulators and users alike, in order for humans to trust the algorithmic systems in place and improve outcomes — in this case, financial outcomes — for all.
02/2022
In 1999, a group of member states of the European Union launched a common currency, the euro. The political weight and institutional set-up of this group have prompted fears that eurozone members might dominate non-members. This thesis studies political dynamics between members and non-members of the eurozone. Specifically, it explores to what extent eurozone membership explains negotiation performance in the Council of the European Union – the core arena for negotiations among member states. To this end, the thesis uses an original dataset of 303 negotiations conducted under the co-decision procedure between 1999 and 2016.
The thesis makes a two-fold theoretical argument. First, it is argued that eurozone members have an incentive to build “minimum winning coalitions” under exclusion of non-members, as this increases their gains in Council negotiations. Secondly, this process is enabled by the institutional setup of exclusive eurozone-only bodies, most importantly the Eurogroup. On this basis, it is hypothesized that eurozone members should have a higher probability of inclusion in a winning coalition in the Council (H1), especially in the Economic and Financial Affairs (ECOFIN) Council (H2), but perhaps also in other Council configurations (H3). It is furthermore hypothesized that inclusion of eurozone members in winning coalitions increased during the euro crisis (H4).
Contrary to theoretical expectations, the analysis yields four null findings. Eurozone members were not more likely to be included in winning coalitions, independently if a proposal was negotiated in the ECOFIN Council or other Council configurations, and regardless if negotiations took place during the euro crisis.
The thesis provides a possible explanation for this puzzling finding. An analysis of coalition patterns reveals that eurozone members were too divided to exercise their collective influence in the Council. Rather than acting as a cohesive bloc, eurozone states were split internally along traditional cleavages structuring conflict in the Council.
01/2022
In the early days of the internet, it was often assumed that the internet would develop into a free and open technology. However, governments have proven to be able to govern the internet, control its content, and develop international content control norms. This dissertation looks at content control from an international norms perspective and asks: How and why do international content control norms emerge and develop?
I adopt an analytical eclecticist approach that combines elements from comparative politics and international relations. There are three aspects to this eclectic theory of content control. First, states subscribe to content control norms, which can range from liberal to illiberal norms. States cooperate in the area of content control and promote content control norms. Second, states support content control norms to a different extent because of the democratic or authoritarian values they subscribe to and their internal decision-making procedures, which can lead to conflict. Third, regional and international organizations affect the norm promotion strategies of states.
I use both qualitative methods (case studies, content analysis) and quantitative methods (negative binomial hurdle model) to answer the research question. In order to answer the how part of the research question, I analyze two aspects of content control norm development. First, I assess the broader conflicts over norms and institutions in internet governance. I show that these conflicts are dependent on the identities of the actors involved. Second, I analyze the strategies that autocratic states use to push for specific content control norms. I show that institutional structures create opportunities and constraints to their norm promotion strategies. In order to answer the why part of the research question, I zoom in even further by comparing content control practices between democratic and authoritarian regimes. I show that democracies also control content, but mainly security-related content. Hence, content control practices are dependent on the regime type identity of actors and the type of content targeted.
This dissertation shows that existing global internet governance models are contested and countermodels are emerging. These developments point towards the beginning of the end of the open and liberal internet order as we know it.
18/2021
This thesis examines the causal process that led to policy change in the field of impact assessment (IA) in France, Germany and Italy since the mid-2000s. I seek to understand whether changes to the goals and/or ends of IA may be explained by symbolic politics or by a domestic learning process. Additionally, I aim to find out how and under which conditions policy learning results in policy change, and how the policy process affects the type of policy change that is adopted. Based on the policy diffusion literature, the policy learning framework and the Multiple Streams Framework, I operationalise three different causal mechanisms: symbolic politics, problem-oriented learning and power-oriented learning. Using document analysis and expert interviews, I trace the causal process that resulted in nine selected cases of policy change.
I find that in most cases policy changes resulted from a domestic learning process, whereby domestic entities defined policy problems and/or goals, acquired and diffused knowledge, and adopted measures to implement and enforce the policy change. This shows that France, Germany and Italy have gone beyond the symbolic phase in the implementation of IA. In Germany and Italy, recent policy changes may be explained by problem-oriented learning. Domestic entrepreneurs identified problems in the implementation of IA and aimed at improving the performance of the instrument. In these two countries stable organisations with a mandate to evaluate IA were the main policy entrepreneurs. They facilitated the acquisition of knowledge on IA, acted as learning fora, and largely contributed to disseminating knowledge and setting the policy agenda.
With respect to how and under which conditions policy lessons may be translated into policy change, findings show that this depends on the ability of policy entrepreneurs to use windows of opportunities such as changes of government to translate the acquired knowledge into policy change. I find that because the type of causal mechanism affects who learns and what is learnt, problem-oriented learning tends to result in incremental change of the means of IA, while power-oriented learning is more conducive to redefining the ends of IA.
17/2021
Urban Governance Processes in the Making: The Unfolding of Cycling Policies in London and Berlin
(2021)
With the growing variety of stakeholders involved and different interests that need to be reconciled, policymaking in the city can be sometimes slow or even run into deadlock. This dissertation addresses this complexity of urban governance with a process view. It strives to investigate how complex urban governance processes unfold and what might enable or impede joint action throughout. Accordingly, it surveys the field of urban transport, which provides a prime example of the struggle of cities to move complex policies forward. This becomes particularly apparent in the redesign of urban streets, which requires careful retrofitting of existing infrastructures and an alignment of previous plans with new political priorities. This struggle has recently been reignited by the renaissance of the bicycle in cities and the related rollout of new cycling infrastructure. The promotion of cycling has moved up the urban political agenda almost universally and become a cross-sectoral priority of transport, public health, and environmental policies. Yet, the creation of space for the safety of cyclists, for instance in the form of separate cycle lanes, has initiated fierce debates with strong supporters and opponents in nearly all major cities. This dissertation explores how, in spite of this controversy, urban stakeholders move ambitious cycling programs forward based on the comparative analysis of cycling policies in London (2012-2016) and Berlin (2016-2021). With a methodological and theoretical approach rooted in network research, this dissertation explores the evolution of the actor-networks and the policy debate of these case studies over time. The analysis draws on a qualitative database that was created for this dissertation and consists of interview data and documents. The findings suggest that next to structural and cultural properties, stylistic features should be taken into account to fully comprehend how complex urban governance processes unfold and, thus, deserve a more prominent position in the urban governance field.
16/2021
The European Union (EU), though a treaty between states, is different from previous international organisations in the depth and breadth of its aims. Termed a supranational organisation, it seeks not only to work in the common interest of its 27 member states, but in the general interest of the Union. Scholars of EU studies have long debated the construction of this emergent political community, asking whether it would come to exist the manner needed to legitimise these newfound powers. A subset of these researchers has been particularly interested in European socialisation, a field that studies how time spent working in European institutions leads to effective cooperation and the creation of a common, imagined collective. Reviewing literature dating back to the 1970s, this dissertation finds consistent results showing that inductees’ ages and countries of origin seem to matter consistently for their likelihood of undergoing European socialisation; however, few other results appear consistently and across studies. The theoretical contribution of this work is to argue that beliefs, rather than demographics should be studied. By looking at how novel organisational roles and norms cohere to those learned over time in national communities, the socialisation process can be better understood. Setting the study at the Lesvos migration hotspot, this study uses ethnographic research methods to understand the microprocesses of the socialisation process among Seconded National Experts (SNEs) deployed by the European Asylum Support Office (EASO) and the European Border and Coast Guard (Frontex) in support of Greek authorities. On the basis of intensive fieldwork, including formal interviews with 24 SNEs and participant observations, this research finds that beliefs regarding legitimate authority and what constitutes high-quality work, formed during their tenures in national professional communities, help explain the efficaciousness of the socialisation process on Lesvos. Moreover, the work finds that the European professional community built on the Greek island undergirds the formation of an inchoate political one. These results contribute to those early questions asked by scholars of European integration and contain practical lessons for mangers and trainers overseeing diverse European workforces, as well as for policymakers and civil society looking to instil best practices.
15/2021
Economic inequality, i.e. income and wealth inequality, varies across time and space. Preferences for and concerns about economic inequality in particular and political preferences in general are remarkably independent of such variation in economic inequality. Empirically, the mechanisms linking economic inequality and political preferences are difficult to study since economic inequality as a macro-level phenomenon can influence individual political preferences in many ways. A typical assumption in theoretically and empirically studying the effects of economic inequality on the formation of political preferences is that individuals have full information about economic inequality. This assumption, while analytically helpful, is conceptually and empirically contested. I study the formation of political preferences under incomplete, potentially biased, information about inequality by considering perceived economic inequality as linking mechanism between economic inequality and political preferences.
Chapter 2 studies the relevance of inequality perceptions for the formation of preferences for redistribution and finds that inequality perceptions are strong predictors for preferences for redistribution. I further find that inequality perceptions are independent of actual levels of income inequality but dependent on individual socio-economic and ideological positions. Chapter 3 builds upon this argument but looks at perceptions of tax inequality rather than income inequality and its effects on preferences for taxation. It shows that individuals perceive tax rates for different income groups differently depending on their own income position. Preferred tax rates for different income groups, however, are rather similar across individual income positions. Chapters 2 and 3 indicate that there is heterogeneity in perceived inequalities and that these perceptions are relevant to the formation of political preferences. While these chapters use individual level observational data to study potential mechanisms correlationally, I apply a quasi-experimental design to test whether perceived inequality—modelled as experience of inequality—causally influences political preferences in chapter 4: Studying populist voting in Germany, I find that experiencing regional inequality can affect populist voting.
This dissertation presents empirical evidence that considering perceived inequalities can help us to better understand why individual political preferences do not necessarily reflect levels and changes in economic inequality.
14/2021
This dissertation is about how democracies can respond to economic crises. At its centre is the dilemma that political elites, and societies as a whole, face after such an event –whether to focus exclusively on forward-looking policies that secure a recovery or whether to also address the underlying causes of the crisis, learning the lessons of the past but also weathering the divisiveness and recrimination this exercise is likely to elicit.
To engage with this dilemma, this research takes inspiration from the field of transitional justice on how societies can deal with the past, and learn from it. Of special interest are the mechanisms of transitional justice. Truth commissions most prominently, but also prosecutions, reparations, and constitutional reforms. The analysis moves from a cross-country comparison of truth commissions deployed in Iceland, Ireland, and Greece after the Great Recession, to a case study of a comprehensive range of mechanisms deployed in Iceland, to an impact assessment of the most effective of the three truth commission.
I will argue that the transitional justice framework brings helpful and practical insights when applied to the study of economic crises in established democracies. It challenges the conventional wisdom that ‘business as usual’ will prevail after an economic crisis; it also yields principles for designing mechanisms that promote learning from the past and building-in better practices in the future.
13/2021
The Court of Justice of the European Union is one of the most contested European Union institutions. It is a non-majoritarian body that wields power beyond the state and imposes its rule to citizens and directly legitimate national governments. Despite numerous bold rulings that went beyond the expectations of member states, added to the alleged global legitimacy crisis suffered by the EU, the CJEU was the most likely candidate to face total disempowerment. Yet the Court’s mandate has been extended as a result of the economic and financial crisis, and its involvement in the control of the new economic recovery fund in the context of the COVID 19 crisis led 2 member states to lift their veto to the most important recovery plan of the century. How is the Court seemingly not suffering a legitimacy crisis in the 21st century?
Answers to this paradox require a comprehensive exercise of theory building of the Court’s legitimacy. The latter is a concept traditionally employed to assess the justified right to rule of powerholders within nation-states and was used to describe the whole polity rather than some of its parts. Existing legitimacy concepts must be refined in order to characterize the transnational non-majoritarian body. The thesis thus provides the first comprehensive and multidisciplinary account of the legitimacy of the CJEU, drawing insights from law, political science and sociology. It recalibrates the use of concepts such as the “input-throughput-output” trichotomy to the specificities of the judiciary and combines theories of judicial review developed in legal scholarship with actor-based accounts found in empirical social sciences.
The thesis rejects the division between normative and sociological legitimacy and advocates for a recoupling of both sides in order to have a complete picture of the CJEU’s right to rule. The question of the Court’s audience is crucial. Standards of judicial legitimacy are forged according to the social characteristics of the Court’s attentive public. Since the CJEU is a non-majoritarian institution evolving on the transnational scene and exercises an expert activity discriminating legal specialists from other citizens, the Court’s attentive public is (as determined by the analysis of judicial external visits and the properties of the Court’s followers on Twitter) composed by the EU legal profession.
Normative standards of judicial legitimacy in the EU must be forged according to the expectations of the Court’s attentive public while respecting broader social dynamics found in all member states. In terms of the Court’s sources of legitimacy, the Court must respect its
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mandate enshrined in the treaties and judges must be outstanding legal professionals and reflect the population of the member states. It must respect due process and associate its attentive public to the interpretation and enforcement of EU law as much as possible. It must also deliver sound results that correspond to its status as the supreme court of the Union.
The thesis concludes by claiming that the CJEU is not suffering a legitimacy crisis in the 21st century. The legitimacy deficits that characterize its activities are progressively or remain minor, and do not outweigh the support that judges built with the legal profession over decades. The thesis nonetheless identified several institutional and behavioral shortcomings and includes a series of recommendations to address the mere legitimacy problems faced the Court today.