Renationalizing finance for development: policy space and public economic control in Bolivia

Abstract

After years of placing faith in the markets, we are seeing a revival of interest in statist economic policy across the world, particularly with regards to finance. How much policy space do previously liberalized developing countries still have to renationalize their financial sectors by exerting direct control over the process of credit allocation, despite the constraints posed by economic globalization? Under what conditions do they actually use this policy space? Bolivia is an especially important case because it is one of the few peripheral countries that implemented strongly interventionist financial reform in the 2010s. Using Bolivia as a least likely case, I argue that two factors, increased availability of external financing sources, and domestic popular mobilization, create favorable conditions for developmentalist financial reform because these make it possible to reduce external conditionalities and overcome opposition by the domestic financial sector. Popular mobilizations paved the way for reform by bringing developmentalist policymakers to power and exerting pressure on them to 1. Maximize policy space by diversifying into newly available alternative sources of foreign borrowing to reduce external conditionalities, and 2. Mitigate the importance of disinvestment threats by domestic economic elites by incrementally increasing public ownership and control of the economy.

Taking back control: comprador bankers and managerial developmentalism in Poland

“…Polish organized business representing other segments of business than indigenous bankers (e.g. Chibber, 2003), or by; 3.2. trade unions (Naqvi, 2019).…”

“…lobbying or the revolving door)is highly unlikely (Doner & Schneider, 2016. Large firms with greater instrumental power resources are typically assumed to have a first-order preference for an arm's-length relationship with the state due to their reluctance to accept the 'sticks' that could be imposed upon them and because of their having good access to commercial banks and capital markets (Bril-Mascarenhas & Madariaga, 2019;Naqvi, 2019;Schneider, 2015). By contrast, credit-constrained small and mediumsized enterprises (SMEs) may only develop a latent preference for state intervention and, even if they explicitly start advocating it, they are typically less well represented in employers' associations and less endowed with instrumental power (Doner & Schneider, 2016).…”

The political economy of moving up in global value chains: how Malaysia added value to its natural resources through industrial policy

“…The concept of the developmental state has been championed by several scholars (including Amsden, 1989;Chang, 1994;Evans, 1995;Johnson, 1982;Nem Singh and Ovadia, 2018;and Wade, 1990), who have essentially offered a heterodox theoretical approach to growth by emphasizing the role of government intervention as well as the significance of strong states (and particular social coalitions) featuring some degrees of autonomy of the state from rent-seeking private interests (Haggard, 2018). The notion of the development states is in line with the literature on business politics according to which the ability of governments to impose their policies against business preferences depends on the power and influence of business elites vis-à-vis the state (See Culpepper, 2015;Fairfield, 2015;Hope, 2019;Naqvi, 2019;Schulz, 2020).…”

The reregulation of capital flows in Latin America: assessing the impact of post-neoliberal governments

“…This finding may reflect the fact that successive electoral victories strengthen the pursuit of a post-neoliberal policy reorientation. In line with this interpretation, the administrations led by FSP members in Argentina, Brazil, Bolivia, and Venezuela deployed stricter capital controls after the first term (Campello, 2015;Fritz & Prates, 2018;Naqvi, 2019;Wylde, 2016).…”

“…However, in countries like Argentina and Ecuador, the deployment of capital controls used to follow confrontational rhetoric against financial interests and international organizations (Muños & Retamozo, 2008;Riggirozzi, 2009;Wolff, 2016). Even though refraining from heated rhetoric, the motivations for capital controls in Bolivia also included the need for addressing the anti-finance sentiment of core constituencies (Naqvi, 2019). Similarly, in the case of Brazil, Gallagher (2015aGallagher ( , 2015b mentioned that capital controls had some relevance in the electoral debate, resonating with the anti-imperialist sentiment of trade unionists and progressives.…”