Motivation and Summary

Modern states depend upon bureaucracies effectively delivering services and enforcing regulations, from public health to environmental protection and postal services. When bureaucracies are plagued by inefficiency and incapacity and are unable to “deliver the goods,” elected representatives suffer. This can open the door for citizens to throw their support behind authoritarian leaders who promise to deliver more effectively.

A central question of bureaucratic design concerns the degree of autonomy that ‘principals’ — political actors like legislators — should delegate to bureaucratic ‘agents.’ Calibrating autonomy is crucial because principals cannot perfectly monitor or control agents, whose preferences often diverge from their own. On the one hand, highly autonomous bureaucrats may become unaccountable to their principals. Think of national security agencies that create secretive dissident watchlists or even authorize assassinations. On the other hand, bureaucracies with little autonomy will find their decision-making hamstrung by “red tape.” If public health agencies required extensive legislative approval for every aspect of vaccine delivery, infection rates would skyrocket. How, then, can bureaucracies be designed to achieve their goals, creatively respond to new problems, and minimize corruption, all while being perceived as legitimate?

In “Calibrating autonomy,” Katherine Bersch and Francis Fukuyama disaggregate the concept of autonomy into two facets (independence and discretion), present hypotheses concerning how each facet relates to capacity and quality, and then test these hypotheses, primarily using survey data from Brazilian bureaucrats. Their findings caution against overly blunt efforts to calibrate autonomy across multiple bureaucracies, suggesting instead that policymakers should understand a given agency’s capacity to perform.

Argument and Hypotheses

The article builds on earlier research by co-author Francis Fukuyama, who in 2013 hypothesized a key moderating role for bureaucratic capacity in the relationship between autonomy and quality. Briefly, low-capacity agencies — lacking expertise and resources — will likely struggle to utilize their autonomy and deliver, whereas high-capacity bureaucracies will deliver effectively for opposite reasons. However, autonomy is itself a complex concept that ought to be disentangled before one can begin to spell out how it is linked to delivery.

Independence, the first “face” of autonomy, concerns the degree to which bureaucrats are constrained by actors who are close to politics, such as elected leaders or politically-appointed agency heads. More independent bureaucrats might allocate waste management contracts on the basis of cost-effectiveness or service quality records. Less independent bureaucrats might allocate according to the whims of politicians who wish to reward their allies. The degree of independence is oftentimes a function of the number and extent of political appointees in a given agency. 

The second face of autonomy is discretion, or rather, the extent to which agencies are constrained by laws, rules, or protocols. Waste management agencies with limited discretion may struggle to respond to sporadic garbage pile-ups, whereas those with high discretion may set unpredictable collection schedules. 

These two faces of autonomy lead to different expectations about how they are connected to quality. The authors hypothesize that independence and quality stand in a linear and positive relationship: agencies that are more unconstrained by political actors will deliver more effectively. By contrast, discretion and quality stand in a non-linear or “Goldilocks” relationship: too few and too many constraining rules will reduce quality. Following Fukuyama’s earlier research, capacity moderates these relationships; for example, less independence in specifically low-capacity agencies may strengthen quality, perhaps in cases where legislative actors are able to appoint highly qualified experts.

Methods and Findings

The authors select Brazil as their case, in part because it exhibits considerable internal variation in bureaucratic quality: some agencies are professional while others are incompetent. By focusing on one country, they avoid comparing fundamentally different national bureaucratic contexts. Further, selecting Brazil — with both strong and weak bureaucracies — reduces ‘selection biases,’ i.e., mistaking characteristics of only high- or low-quality agencies as causes of overall performance. From a global standpoint, Brazilian bureaucracies are solidly middle-ranged, neither outstanding nor abysmal. 

The main empirical part of the paper involves a 2018 survey of over 3200 Brazilian federal bureaucrats. About 60% of the respondents are political appointees and 40% are civil servants, which enables looking at bureaucrats who stand in different relationships to political actors. The authors exclude military personnel, teachers, nurses, and local police officers.

As hypothesized, respondents’ perceptions of agency independence increase their perceptions of quality in a linear way. This finding likely reflects Brazil’s coalitional style of government: politicians benefit electorally from strong government performance; without bureaucratic independence, political pressure and influence from the many coalition partners would likely hinder bureaucrats and weaken performance. Meanwhile, perceptions of discretion align with the authors’ non-linear expectations.
 

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Figure 3: (a) Impact of independence on quality at varying levels of capacity. (b) Impact of discretion on quality at varying levels of capacity.
 

These findings are mediated by capacity, which the authors measure in terms of resources, career length, salaries, and the proportion of agents in core or expert careers. The findings hold even when controlling for political factors like party membership or appointment type (political vs. civil servant), individual characteristics such as gender or years of service, and agency differences, including budget or size. These controls are based on administrative data from over 326,000 bureaucrats across Brazil’s 95 most important federal agencies.
 

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Figure 4: Quality at varying levels of capacity.
 

Contributions and Implications

“Calibrating autonomy” makes important conceptual and empirical contributions to our understanding of bureaucratic performance. By disaggregating the concept of autonomy into independence and discretion, it helps make sense of seemingly contradictory empirical findings, namely that both minimally and highly autonomous bureaucracies perform well. And by evaluating their hypotheses about the two faces of autonomy using Brazilian data, the authors guard against selection biases or problems from comparing countries with quite different bureaucratic landscapes.

The paper serves as a caution against overly simplistic or blunt “solutions” to poor bureaucratic performance. Merely limiting discretion or increasing legislative oversight can make matters worse if the relevant bureaucratic culture is not properly understood, especially when it comes to capacity.

*Research-in-Brief prepared by Adam Fefer.

CDDRL Mosbacher Director Kathryn Stoner noted that: “This award is a powerful testament to the incredible quality of Erin and Brett’s pathbreaking research. Their work significantly advances our understanding of how modern authoritarian regimes function in the 21st century, and I am so pleased that our CDDRL community helped to support some of their scholarship. But this honor is all theirs!”

The William H. Riker Book Award adds to the growing recognition of the Carters’ research: Propaganda in Autocracies has also received the Hazel Gaudet-Erskine Best Book Award from the International Journal of Press/Politics, along with honorable mentions for both the APSA Luebbert Award for Best Book in Comparative Politics and the APSA Democracy and Autocracy Best Book Award.

With this honor, Erin Baggott Carter and Brett Carter join the distinguished ranks of scholars whose work carries forward William Riker’s legacy of combining theory and empirics to deepen our understanding of political life.

Introduction and Contribution

Recep Tayyip Erdoğan and his Justice and Development Party (AKP) continue to deepen their decades-long authoritarian control over Turkish politics, economy, and society. Indeed, repressive tactics once reserved for Turkey’s marginalized Kurdish community have increasingly been applied to AKP’s opponents more generally, including journalists, business elites, and mayors. Key among these opponents is Istanbul mayor Ekrem İmamoğlu, viewed as the face of the opposition Republican People’s Party (CHP). İmamoğlu, seen as the frontrunner to challenge Erdoğan’s presidency in 2028, was arrested in March 2025 on spurious charges of terrorism and corruption.

At the same time, Turkey’s opposition is finding ways to resist Erdoğan’s autocratization. CHP — which traces its roots to Mustafa Kemal Atatürk and his vision for a secular Turkish nation — learned from its disappointing loss in Turkey’s 2023 national elections. By transforming its electoral strategy for the 2024 local elections, the CHP not only bested AKP’s vote share but also won in many areas that are historically AKP strongholds, which are often populated by conservative voters. What explains the CHP’s significant local turnaround under the constraints of Turkey’s ‘electoral authoritarian’ regime? 

In “Turkey's Hard Road to Democratic Renewal,” Ayça Alemdaroğlu, Toygar Sinan Baykan, Ladin Bayurgil, and Aytuğ Şaşmaz caution against the received wisdom that broad, national-level coalitions offer the best hope of undermining authoritarian power. Such coalitions are difficult to sustain in countries like Turkey or Hungary, where authoritarian leaders control major political institutions and the public purse while muzzling their opponents and the media. Instead, the authors point to the surprising benefits of building alternatives to authoritarianism at the local level.

Argument

At first glance, the control of local governments in authoritarian political systems does not seem especially advantageous in terms of autonomy and influence. However, Turkish mayors control many of the policy domains that directly affect ordinary citizens, including transportation, sanitation, and housing. When local services and infrastructure are poor, voters may be willing to switch their partisan allegiance, even in places where the incumbent party works to distribute patronage and to propagandize them. Local governance enables opposition politicians to gain visibility and public support, as well as to demonstrate their administrative competence. 

How exactly did the CHP pull off its impressive local showing in 2024? As noted above, the opposition built a national-level coalition in 2023, fractured by ideological divisions and disputes over its presidential candidate against Erdoğan, ultimately collapsing after the election. It was no match for Erdoğan’s unified messaging around threats to Turkey’s national security — portraying Kurds at home and in Syria as threats — and on nationalist pride in Turkey’s indigenous defense industry.

In 2024, by contrast, the CHP’s campaign strategy emerged from the bottom up: it employed electoral strategists and pollsters across Turkish municipalities, conducted fieldwork in competitive areas, selected mayoral candidates who could win, created local coalitions across ideological lines, and fine-tuned its messaging around service provision. Its flexible and pragmatic strategy appealed to both Turkey’s Sunni majority as well as its minority Alevis and Kurds. Meanwhile, the AKP was highly centralized in its reliance on Erdoğan’s popularity, failing to adapt to the demands of local residents whose support it believed was guaranteed.
 

Unpacking the CHP’s Victory

To understand how the CHP won and how it consolidated its electoral gains, the authors conducted interviews with newly elected mayors and vice mayors, CHP party officials, activists, journalists, and political observers. Interviewees were selected from six municipal districts where no opposition-controlled mayor had won an election for at least two decades and where the CHP improved its vote share by five or more points between 2019 and 2024. In these traditional AKP strongholds, voters complained a great deal about the high cost of living in Erdoğan’s Turkey. At the same time, they were becoming less religiously conservative and less supportive of a “majoritarian” style of politics.
 

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Table 1: Six Turkish districts in brief
 

During the campaign, the CHP worked to reverse its image as a party committed to Atatürk’s “aggressive” secularism, sometimes nominating conservative Sunni candidates in otherwise divided districts. It focused not on ideology but on service delivery and other issues that appealed across ethnic and sectarian lines. Incumbent CHP mayors advised prospective mayors, creating intra-party relationships that were complemented by the work of CHP grassroots organizations. 

The authors introduce a number of the CHP’s successful mayoral candidates. Some of them were well-known national-level politicians who realized the benefits they could accrue by leaving Turkey’s toothless parliament and applying their skills to local government. Multiple mayors were of Kurdish and/or Alevi background, but they used these identities to appeal both inside and outside of their in-groups, for example, by attending Friday prayers with their Sunni constituents. One Alevi candidate gave municipal assembly list spots to conservative Sunnis and Kurds. By contrast, the AKP’s mayoral candidates — mainly nominated on the basis of their loyalty to Erdoğan — were perceived by their constituents as corrupt, aloof, and inefficient.

Challenges

Erdoğan’s opponents will likely struggle to reap the benefits of local governance, let alone to mount an effective challenge to AKP rule at the national level. These challenges will be heightened by AKP’s efforts to repress and arrest those whom it finds threatening. What’s more, CHP constituents expect not only the delivery of effective public services, but also patronage, especially public sector jobs, in exchange for their continued support. The AKP recognizes the challenge posed by its mayoral opponents and has responded by slashing municipal budgets. But the CHP is becoming more unified in the face of these common hardships posed by the AKP.

Ultimately, the growth of local-level CHP power opens up possibilities for democratic alternatives to AKP. The authors offer a novel perspective on how pragmatic local election campaigns, centered on service delivery, can serve as a means of undermining the influence of authoritarian leaders.

*Research-in-Brief prepared by Adam Fefer.

This post, first published by the Harvard Law School Forum on Corporate Governance, is based on the co-authors' recent European Corporate Governance Institute - Law Working Paper No. 872/2025.

Introduction

Conventional accounts of the rivalry among global stock exchanges emphasize regulatory competition to attract initial public offerings (IPOs). This framing – often cast as a “race to the bottom” – suggests that exchanges compete primarily by lowering governance and disclosure standards to secure marquee listings. In a new paper, we argue that this view is both incomplete and outdated. By examining stock exchanges through the broader lens of political economy, we demonstrate that IPO competition represents only a fraction of the forces shaping today’s capital markets. Exchanges have become strategic assets at the intersection of commercial imperatives, national economic goals, and geopolitical rivalry.

Our analysis makes two central contributions. First, we show that the importance of IPO competition to exchanges, and the regulatory arbitrage thought to propel it, is often overstated. While competition, particularly between New York and non-US exchanges, can be fierce, IPOs generate only marginal revenues for exchanges in comparison to revenues from data and analytics, and private capital is an increasingly important alternative source of finance. Second, we bring nation states into the picture. Governments are active participants in global stock exchange competition, with strong economic, policy, and geopolitical stakes in the health of their domestic or regional exchanges. We highlight how exchanges increasingly function as mechanisms of policy transmission, instruments of financial sovereignty, and geopolitical screening devices – sometimes at the expense of their economic functions.
 

The Shein Listing Saga as a Microcosm

The recent saga of fast-fashion retailer Shein illustrates the new dynamics. After confidentially filing for a New York listing in 2023, Shein encountered pushback from U.S. lawmakers over alleged use of forced labor in its supply chain. It then turned to the London Stock Exchange, which was eager to obtain a high-profile listing despite the allegations, only to face heightened scrutiny from U.K. advocacy groups. Ultimately, Beijing itself blocked the company’s foreign listing, possibly fearing the enhanced scrutiny it would entail, forcing Shein to pursue a Hong Kong listing instead.

This episode highlights several themes we explore in the paper: the enduring prestige of high-profile IPOs and the willingness of regulators to adjust standards to obtain them; and, crucially, the role of governments in shaping access to capital markets in light of geopolitical tensions and policies unrelated to investor protection.
 

Limits of IPO Competition

Stock exchanges have long competed for listings, including by lowering listing or governance standards, but this rivalry is subject to important limitations and caveats:

1. Demutualization and Profit Motives: Most exchanges have demutualized and now operate as profit-oriented shareholder-owned corporations. Listing fees today account for only a small fraction of exchange revenues. For example, listing fees on the London Stock Exchange account for just 3% of its parent company’s income; for the NYSE, the figure is around 10%.
    
2. Regulatory Competition and Governance Standards: Exchanges have historically relaxed rules to secure listings. The London Stock Exchange diluted its rules on related-party transactions in an unsuccessful attempt to attract Saudi Aramco. London, Hong Kong, and Singapore revised their listing rules to allow multiple-voting shares to compete with U.S. exchanges. While these episodes raise familiar race to the top/bottom questions, the importance of regulatory arbitrage in the global capital markets today can be overstated, in part for reasons explained in points 3 and 4 below.
    
3. Economic Motivations Beyond Regulation: Many firms choose the NYSE or Nasdaq not principally for regulatory reasons but for liquidity, visibility, and greater opportunities in areas such as M&A in the huge U.S. market. To name a few recent examples, Flutter Entertainment, CRH, Wise, Spotify, and Arm all explained that they listed in New York for these reasons.
    
4. Competition from Private Capital: Perhaps the most important caveat is that exchanges increasingly compete less with one another than with private markets. Assets under management in private equity, venture capital, and private credit have ballooned from $9.7 trillion in 2012 to over $24 trillion by 2023. Firms avoid public markets to sidestep disclosure burdens, compliance costs, and shareholder activism. Since 2022, take-private deals have outpaced IPOs more than threefold.
    

Taken together, these trends suggest that the long-running narrative on regulatory competition for IPOs misses major contemporary market dynamics.
 

States as Stakeholders

If capital is global, why should governments be deeply invested in the fate of their domestic exchanges? We identify three reasons.

1. Direct and Indirect Economic Benefits: Domestic exchanges generate tax revenues, create jobs, and facilitate capital formation. They provide a platform for small and medium-sized enterprises less likely to seek foreign listings, thereby stimulating domestic firm growth and innovation.
    
2. Preventing Corporate Exodus: Policymakers fear that firms listing abroad may eventually relocate headquarters, talent, and tax bases overseas. European reports, for example, have warned of a “technology drain” as innovative firms list on U.S. markets. Domestic exchanges thus serve as anchors against corporate flight.
    
3. Home Bias: Evidence shows that investors retain a preference for domestically listed companies. Governments reinforce this tendency by encouraging pension funds and other institutional investors to allocate assets domestically.
    

Exchanges as Geopolitical Instruments

Perhaps the most profound shift lies in the politicization of public capital markets. Exchanges now function not simply as neutral financing infrastructure but as levers of economic statecraft and policy transmission. Some examples:

1. United States–China Rivalry: The Holding Foreign Companies Accountable Act, Ant Group’s aborted IPO, Didi’s delisting from the NYSE, and heightened scrutiny of Chinese firms on U.S. markets illustrate how capital markets are enmeshed in national security, data security, and geopolitical concerns.
    
2. Europe: The EU’s Capital Markets Union, recently reframed as the “Savings and Investment Union,” is now explicitly tied to European economic sovereignty and geopolitical positioning. Separately, ESG regulations such as the CSRD and the Supply Chain Directive extend Europe’s normative agenda globally by imposing climate and human rights obligations on listed firms.
    
3. Other Jurisdictions increasingly view exchanges as state assets. For example, Singapore has called relisting on the SGX a “national duty.” India frames domestic listings under the banner of self-reliance. Israel highlights its stock exchange as a force for resilience in wartime. Japan has used the TSE as a tool to implement corporate governance reforms.
    

In short, capital market policies and listing decisions now intersect with areas of government interest well beyond economics, including national security, human rights, financial sovereignty, and industrial policy. But efforts to harness exchanges for strategic ends risks fragmenting global markets and undermining their economic role.
 

Conclusion

Global stock exchanges today operate in a transformed environment. They remain commercial enterprises competing for listings, but they are also strategic assets deeply embedded in state policy and geopolitical rivalry. High-profile IPO competition, though still active, is only part of the story. As private capital expands and governments assert new forms of control, exchanges have been repurposed as instruments of financial sovereignty and normative policy enforcement.

About the Authors

Curtis J. Milhaupt is the William F. Baxter – Visa International Professor of Law at Stanford Law School, Senior Fellow, by courtesy, at the Freeman Spogli Institute for International Studies at Stanford University, and Fellow at the European Corporate Governance Institute. Wolf-Georg Ringe is Professor of Law and Finance at the University of Hamburg, Visiting Professor at the University of Oxford, and Research Member at the European Corporate Governance Institute.