The Dilemma of Financial Liberalization: State Autonomy and Societal Demands Academic Article uri icon

abstract

  • Under what conditions do governments shift their capital control policies toward liberalization? Under what conditions do societal supporters influence that liberalization? We postulate the following: (1) The desire to maintain state autonomy leads all governments to prefer capital controls to their liberalization, but strong governments, regardless of partisanship, are more able to act on that preference and more likely to maintain controls longer than weak governments. (2) Strong partisan governments are influenced toward liberalization if their core societal constituency increasingly supports it-skilled labor for the left government, multinational corporations (MNCs) and commercial banks for the right government. (3) Skilled labor, MNCs, and banks may also influence capital decontrol, regardless of whether its political party is in power, if the group has broad national significance and captures government policy making. Our theory extends beyond existing pluralist and statist explanations. In an empirical test of 17 OECD countries over 22 years, the evidence largely supports our theoretical expectations.

published proceedings

  • The Journal of Politics

author list (cited authors)

  • Li, Q., & Smith, D. L

citation count

  • 20

complete list of authors

  • Li, Quan||Smith, Dale L

publication date

  • August 2002