From powerholders to stakeholders: State-building with elite compensation in early medieval China

The forthcoming article “From powerholders to stakeholders: State-building with elite compensation in early medieval China” by Joy Chen, Erik H. Wang, and Xiaoming Zhang is summarized by the author(s) below.

Our article investigates a central question in the political economy of development: how do rulers resolve resistance to state-building from local powerholders who stand to lose from such efforts? This question is particularly important in settings where a central government maintains fragile political order and local powerholders retain considerable economic prowess, social prestige, and some coercive means to undermine the building of the state in their turfs. 

We theorize an important yet often overlooked strategy: compensating the local powerholders via a nascent bureaucracy. Besides offsetting the loss of economic rents, offices in the bureaucracy also serve the purposes of 1) mitigating the credible commitment problem for the ruler and 2) aligning the interests of the local powerholders and the ruler. 

Empirically, we exploit a major state-building Reform in the Northern Wei Dynasty of China (386 – 534 CE), which challenged the interests of aristocrats who exercised local autonomy. We built a unique dataset from textual and archaeological sources, such as dynastic archival records and excavated epitaphs and monuments. At its core are geocoded career histories of around 2,600 elites alongside the geographic distribution of fortified castles across northern China. Aristocrats in regions with (without) fortified castles serve as the treatment (control) group in our research.  

The state-building Reform of 485-486 CE sought to increase state penetration in the society and control local population directly. Both historical evidence and our own analyses suggest that the Reform succeeded in expanding central authority at the expense of the aristocrats in regions with fortified castles, who we operationalize as local powerholders with vested interest in the status quo.  

The puzzle becomes: why didn’t these powerful reform “losers” resist or undermine the Reform? Our difference-in-differences (DiD) estimates reveal that following the Reform, there is a sustained spike in the number of aristocrats from regions with such castles recruited into the bureaucracy as compensation in exchange for their acceptance of state penetration. Various auxiliary analyses all point to the strategic nature of this deal. 

We further unpack the mechanisms of bureaucratic compensation: credible commitment and interest realignment. Individual-level analyses of career histories indicate that those local powerholders, compensated with higher-ranked and more prestigious offices post-Reform, were also more likely to take the kind of positions in the bureaucracy that could help them expand networks of allies. This arrangement effectively made them too powerful for the ruler to renege on the deal. The bureaucracy, therefore, enabled the ruler to deliberately tie her own hands when compensating these powerholders.  

Equally important, the data suggests that the ruler compensated the aristocrats from castle areas with senior offices in the national government rather than in regional governments. When these aristocrats did serve in regional governments, they were positioned away from their hometowns. These arrangements, among others, reflect a conscious effort to transform the erstwhile local powerholders into national stakeholders of the political regime.  

Our findings contribute to the literature on state capacity, by demonstrating a non-violent pathway to state-building, and to the literature on political economy of reform, by highlighting bureaucracy as a compensation device. The strategy documented here also differs from typical “cooptation,” where local elites would remain localized after receiving nominal titles from the government. Bureaucratic compensation fully uproots and integrates the erstwhile powerholders into the upper echelon of political power, turning them into national stakeholders who support broader policies or reform that increase the regime’s rents. Our article also sheds light on a major puzzle of historical political economy, the so-called “First Great Divergence,” where similar “barbarian” invasions at similar times led to fragmentation in Europe but further state consolidation in China.

About the Author(s): Joy Chen is an assistant professor at the School of Economics, Renmin University of China, Erik H. Wang is an Assistant Professor in the Wilf Family Department of Politics at New York University (NYU), and Xiaoming Zhang is an assistant professor of Sociology at Zhejiang University. Their research “From powerholders to stakeholders: State-building with elite compensation in early medieval China” is now available in Early View and will appear in a forthcoming issue of the American Journal of Political Science.