States Within Markets: Elites, Institutions and the Politics of Privatization-Nationalization Waves
Ganga, Paula Daniela
Howard, Marc M
Why do many countries vacillate between periods of greater state ownership in the economy and periods of increased market laissez-faire, between policies of privatization and policies of nationalization? Why do these waves occur in so many countries at once? And what are the processes behind regional or world waves of privatization and nationalization? This research examines the processes of privatization and nationalization as two sides of the same political process which so far have rarely been studied together. Large-scale reform programs reshaping the political economy of entire regions--such as the privatization wave of the 1990s--have occurred and been reversed periodically, although much research hailed the trends as irreversible. I argue that reversals in economic policy are much more frequent and states often shift between privatization and nationalization policies depending on the interaction of two sets of factors. Domestically, the way governments modify the extent of their ownership in the market in turn modifies power relationships within society creating new winners and losers, new winning coalitions in the political process. International factors intervene through forces that integrate a country within regional economic contexts as well as the international financial system, creating ties to international institutions and actors with policy agendas that push states toward privatization or nationalization.I test my theory using an original data set of privatizations and nationalizations since 1950 and find evidence for the presence of these extensive waves and their reversals at the nexus of domestic politics and international pressures. Measures of a country's affinity to the Western order predict greater propensity for privatization when interacted with FDI, WTO membership, IMF loans and the presence of financial crises. I find that the probability of privatization is markedly larger in a country that supports the international liberal order and receives support from that community, for example through IMF funding. Privatizations are also more likely to happen during a financial crisis if the country has high levels of affinity, whereas nationalizations are likely to happen in times of crisis but only in countries that break with the liberal order.
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