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 EconomicsEmory 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