Political insecurity and the diffusion of financial market regulation
By: WAY, Christopher R
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ArticlePublisher: Thousand Oaks : SAGE, March 2005The Annals of The American Academy of Political and Social Science 598, p. 125-144Abstract: Explanations for the international apread of financial market liberalization have emphasized either "topdown" mechanisms (globalization, pressure from international organizations and the United States) or "botm-up" mechanisms focusing on domestic coalitions (derived from configurations of economic interests). In contrast to these broadly structural approaches that deemphasize the coices of individuals, this article focuses on the incentives facing office-mechanisms of diffusion by emphasizing the incentives facing office-seeeking leaders. It argues that politically insecure leaders are potent agents of diffusion because they are particulary likely to "learn" the lessons of financial market reform an emulate the liberalizing practices of others for two reasons. First, the hefty economic boom often associated with financial liberalization provides a tempting way to buttress their near-term grip on power. As they observe other nations in their region experiencing a boom, leaders fearful of losing office will jump on the liberalization bandwagon, accelerating regional reform cascades. Second, insecure governments may be particularly susceptible to pressure from international organizations: They have motivated biases to bellieve the efficiency claims of liberalizers and strong reasons to seek approval for their policies.
Explanations for the international apread of financial market liberalization have emphasized either "topdown" mechanisms (globalization, pressure from international organizations and the United States) or "botm-up" mechanisms focusing on domestic coalitions (derived from configurations of economic interests). In contrast to these broadly structural approaches that deemphasize the coices of individuals, this article focuses on the incentives facing office-mechanisms of diffusion by emphasizing the incentives facing office-seeeking leaders. It argues that politically insecure leaders are potent agents of diffusion because they are particulary likely to "learn" the lessons of financial market reform an emulate the liberalizing practices of others for two reasons. First, the hefty economic boom often associated with financial liberalization provides a tempting way to buttress their near-term grip on power. As they observe other nations in their region experiencing a boom, leaders fearful of losing office will jump on the liberalization bandwagon, accelerating regional reform cascades. Second, insecure governments may be particularly susceptible to pressure from international organizations: They have motivated biases to bellieve the efficiency claims of liberalizers and strong reasons to seek approval for their policies.
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