Neoliberal Economists and Capital Account Liberalization in Emerging Markets

One of the most important developments in the world economy during the past three decades has been the willingness of governments in emerging markets to liberalize controls over international capital movements—a process known as capital account liberalization. What accounts for this trend? While existing research highlights a number of important factors, it neglects the role played by the rise and spread of neoliberal ideas that prioritized liberalization as a policy choice. Extending the literature on epistemic communities, I argue one critical mechanism shaping policy decisions is the formation of a coherent team of neoliberal economists. Using a new data set that codes the professional training of more than 1500 policymakers in emerging markets, I assess the relative importance of this argument quantitatively on a sample of twenty-nine emerging markets from 1977 to 1999. In order to assess the independent effect of neoliberal economists, I also take into account the endogeneity of the appointment process, assessing whether appointments are driven by credibility concerns, political interests, or economic conditions. I also stress that a fuller understanding of the appointment process necessitates a focus on the social environment in which appointments are situated.Earlier versions of this article were presented at the Program on International Politics, Economics and Security (PIPES), University of Chicago, 28 April 2005; the 99th Annual Meeting of the American Political Science Association, Philadelphia, 28–31 August 2003; and the Meeting of the Working Group on Political Economy, European University Institute (EUI), San Domenico di Fiesole, Italy, 29 October 2003. The author is grateful for helpful comments on earlier drafts provided by David Andrews, Benjamin J. Cohen, Scott Cooper, Garrett Glasgow, Lloyd Gruber, Emilie Hafner-Burton, Bob Hancke, Joseph Jupille, Ralf Leiteritz, Charles Lipson, Layna Mosley, Lou Pauly, Andy Sobel, Duncan Snidal, Lora Viola, and participants in the PIPES workshop. The author would also like to thank Lisa Martin and the anonymous reviewers for their many suggestions and insightful comments on previous versions of this manuscript. Research support provided by the Department of Political Science at Syracuse University and a Jean Monnet Fellowship from the Robert Schuman Centre for Advanced Studies at the EUI is also gratefully acknowledged.