The Institutional Construction of Neoliberal Economic Globalization by variablepitch339

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									The Institutional Construction of Neoliberal Economic Globalization: The Case of Capital Market Liberalization in Latin America
Jeffrey M. Chwieroth Alexander M. Hicks
Diogo Pinheiro

London School of Economics

Emory University

Introduction
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What are the causes of neoliberal economic globalization?
One component : capital market liberalization  One region: Latin America (an early liberalizer and seminal case)




Some Key Forces: NGOs, IMF, Economic Professionals
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Carriers of and mechanisms for policy diffusion, homogenization, and isomorphism

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We also explore the role of domestic political interests and economic vulnerability

Insights from Sociology
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New Institutionalism (Dimaggio and Powell)


Homogenization (isomorphism) driven by:
– external dependence  Normative – professional norms of personnel  Mimetic – imitation due to uncertainty
 Coercive



World Polity Theory (Meyer, Boli, and Thomas)


Homogenization (isomorphism) driven by:
 International

legitimacy of a particular practice and connections to “world polity” (a form of mimetic isomorphism).

NGOs – Mimetic Isomorphism


Connection to World Polity = Ties to International NGOs
Authoritative and Legitimate Actors  “Receptor Sites” – transmit cues from World Polity to local actors and governments


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Critical of Capital Market Liberalization (Example: Association for the Taxation of Financial Transactions for the Aid of Citizens – ATTAC) Hypothesis: Insofar as INGOs are inclined to dissent from neoliberalism, countries with close ties to INGOs are more likely to restrict international capital flows.

IMF – Coercive Isomorphism




Proponent of capital market liberalization, though not uniformly or indiscriminately (Adbelal; Chwieroth) IMF Programs – vehicle for advocacy
Not formal conditionality, but…  An incentive-altering vehicle to provide financial support to domestic reformers (lower adjustment costs, raise non-compliance costs)  A persuasive vehicle to provide technical support to domestic reformers (policy dialogue)


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Hypothesis: Countries participating in IMF programs are more likely to liberalize international capital flows.





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Economic Professionals – Normative Isomorphism Increasing incumbency of neoliberal economists in positions of policymaking clout has contributed to spread of capital market liberalization (Chwieroth) Content of Beliefs + Coherence of Policymaking Team Hypothesis: Countries with a greater number of neoliberal economists in key economic policymaking positions are more likely to liberalize international capital flows.

Summary


Theoretical Hypotheses. Mimetic Isomorphism Ties to INGOs  -  Coercive Isomorphism IMF Program  +  Normative isomorphism Neoliberal Team  + 

liberalization liberalization liberalization



Possibility of dissident INGOs challenges World Polity Theory
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Isomorphic forces are not truly universal and uniform, but rather potentially conflictual and partitioned

Methods
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TSCS data on 17 Latin American countries from 1983 2001 Two stage analysis
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First Stage: Selection equations for cabinet appointments and IMF program participation Second Stage: Outcome equation with selection instruments

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Selection Equation: Event History Model (conditional elapsed time variant) Outcome Equation: Three Specifications
  

LDV, PCSEs, Fixed Effects LDV, Robust SEs, Fixed Effects FGLS, PCSEs, Fixed Effects

Data I




Dependent Variable: Chinn-Ito Index of capital market openness Independent Variables:
Number of INGOs with country nationals as members  IMF Program Participation  Professional Characteristics of Finance Minister and Head of the Central Bank


Data II


Control Variables
           




Mean Regional Capital Market Regulations for each country – “competitive deregulation” and “social learning” Left Chief of Government Left Legislature Legislative Fragmentation (Herfindahl index) Domestic Money Bank Assets / GDP Trade / GDP GDP Growth Public and Publicly Guaranteed Debt / GDP Current Account / GDP Real Investment / GDP GDP Per Capita Currency Crisis Global Foreign Borrowing Time Trend

Data III


Selection Variables – Neoliberal Cabinet Appointments  Political Model
   



Left Chief of Government Left Legislature Neoliberal Chief of Government Turnover of Central Bank Governors (low turnover = free market norms?) Veto Players – Checks Average Private Interest Rate – Eurodollar/LIBOR Debt Service / Exports Reserves / Imports IMF Program Turnover of Central Bank Governors (high turnover = low credibility?)



Credibility Model
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
  

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Economics
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Inflation Currency Crisis

Data IV


Selection Variables – IMF Programs  Macroeconomic Conditions
     

Current Account Balance / GDP GDP Per Capita Real Investment / GDP Debt Service / Exports Reserves / Imports Short-term Debt / Total External Debt Cumulative Number of Years of IMF Program Participation Total Number of Countries Participating in IMF Program Election U.S. U.N. Affinity Score U.S. Commercial Bank Exposure



“Sovereignty Costs” (Vreeland)
 



Politics





Results – Cabinet Appointment Selection Equations


Political Model


Neoliberal Chiefs of Government = more likely FM and CB Official and Private Creditors = Divergent Outcomes

  



Credibility Model


IMF Program: more likely FM Private Interest Rate & Debt Service Burden: less likely FM Neoliberal appointments stronger impact on official sentiment Governments more sensitive to official sentiment
A substitute for CBI



High Central Bank Turnover = FM




Economics
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Reserves / Imports = more likely FM


Neoliberalism in “good times” or during “overheating” Appeal of “structuralism” and “heterodox” approaches



Inflation = less likely




Results – IMF Program Participation Selection Equations Macroeconomic Conditions
Current Account Deficits = more likely  GDP Per Capita = more likely


Results – Policy Outcome Equation


Isomorphic Variables
  

Neoliberal Policy Teams IMF Program Participation INGOs Leftist Chief of Government Domestic Money Bank Assets /GDP Trade / GDP Public and Publicly Guaranteed Debt / GDP GDP Per Capita Global Foreign Borrowing LDV Time Trend Finance Minister Selection Instrument Central Banker Selection Instrument

+ + - (strongest) - (one spec) + (one spec) - (two specs) + (one spec) + + + -



Control Variables
       




Conclusion


Principal Findings


Neoliberal Policy Teams = normative isomorphism
 



FM and CB Appointments: Neoliberal COG and Inflation FM Appointment: Divergent influence of official and market sentiment FM Appointment: Substitute for CBI Current Account Deficits and GDP Per Capita



IMF Program Participation = coercive isomorphism




INGOs = mimetic isomorphism

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Are these salient forces for/against globalization worldwide? Isomorphic forces can operate in a conflictual manner and partitioned sense Neoliberalism may have been only partially institutionalized in global economic culture


								
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