Jeffrey M. Chwieroth Alexander M. Hicks Diogo Pinheiro

1. 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

2. Introduction • 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 • Carriers of and mechanisms for policy diffusion, homogenization, and isomorphism • We also explore the role of domestic political interests and economic vulnerability

3. Insights from Sociology • New Institutionalism (Dimaggio and Powell) • Homogenization (isomorphism) driven by: • Coercive – external dependence • Normative – professional norms of personnel • Mimetic – imitation due to uncertainty • 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).

4. 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 • 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.

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

6. 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.

7. Summary • Theoretical Hypotheses. Mimetic Isomorphism Ties to INGOs  -  liberalization Coercive Isomorphism IMF Program  +  liberalization Normative isomorphism Neoliberal Team  +  liberalization • Possibility of dissident INGOs challenges World Polity Theory • Isomorphic forces are not truly universal and uniform, but rather potentially conflictual and partitioned

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

9. 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

10. 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

11. 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 • Credibility Model • Average Private Interest Rate – Eurodollar/LIBOR • Debt Service / Exports • Reserves / Imports • IMF Program • Turnover of Central Bank Governors (high turnover = low credibility?) • Economics • Inflation • Currency Crisis

12. 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 • “Sovereignty Costs” (Vreeland) • Cumulative Number of Years of IMF Program Participation • Total Number of Countries Participating in IMF Program • Politics • Election • U.S. U.N. Affinity Score • U.S. Commercial Bank Exposure

13. Results – Cabinet Appointment Selection Equations • Political Model • Neoliberal Chiefs of Government = more likely FM and CB • Credibility Model • Official and Private Creditors = Divergent Outcomes • 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 • High Central Bank Turnover = FM • A substitute for CBI • Economics • Reserves / Imports = more likely FM • Neoliberalism in “good times” or during “overheating” • Inflation = less likely • Appeal of “structuralism” and “heterodox” approaches

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

15. Results – Policy Outcome Equation • Isomorphic Variables • Neoliberal Policy Teams + • IMF Program Participation + • INGOs - (strongest) • Control Variables • Leftist Chief of Government - (one spec) • Domestic Money Bank Assets /GDP - • Trade / GDP + (one spec) • Public and Publicly Guaranteed Debt / GDP - • GDP Per Capita - (two specs) • Global Foreign Borrowing + (one spec) • LDV + • Time Trend + • Finance Minister Selection Instrument + • Central Banker Selection Instrument -

16. 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 • IMF Program Participation = coercive isomorphism • Current Account Deficits and GDP Per Capita • INGOs = mimetic isomorphism • 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