The Balancing Act of Indirect and Direct Rule: Evidence from the Qing Empire

Abstract

Prevailing theories suggest that state rulers opt for indirect rule when they want to mitigate administrative costs. But when the benefits of direct rule outweigh those of indirect rule, they shift to direct rule. We offer a revised interpretation of this dynamic based on a case study of dynastic China at a time of rapid territorial expansion: central leaders employ direct rule to achieve economic gains while controlling for carefully calculated military costs. Premised on Qing China’s bimetallic monetary system of using both silver and copper as media of exchange, we leverage on a natural experiment that saw a surge in international copper prices as potential trigger. By analyzing a panel dataset uniquely constructed for this period (c. 1661-1735), we find that rulers favored direct rule over locales favorably endowed with copper at a time when the exogenous price shocks increased the potential benefits of extracting this metal enormously. Our heterogeneous analysis further finds that the conquest was carried out discriminately. To reduce the costs of military conflict, the central rulers targeted especially the militarily weak native chiefdoms, leaving the militarily stronger ones unscathed. Our results are robust to a test of using silver (a placebo) and lead (a complement) in place of copper, and confirm that, while the former is insignificantly related to the transition to direct rule, the latter is marginally significant.