"To Break The Bank: "Enlightened" Authoritarianism And The Banking Sector Reform In Kazakhstan"

Abstract

Why do market-oriented economic reforms in developing countries succeed or fail? Of the three sets of factors that affect the outcome of the reforms - economic policies, formal and informal institutions, and leadership - the role of political leaders and reform teams in initiating and implementing reforms, has received the least attention. However, the prevailing conceptualization of this leadership dynamic has not moved further than the assumption that the success with reforms depends on the presence of a committed and visionary chief executive (the politician), a cohesive technocratic reform team, which he selects and empowers to implement reforms, and synergy between the two.

Through an in-depth study of the banking sector reform in Kazakhstan this dissertation seeks to enhance our understanding of the role of leadership by focusing on factors that create or undermine synergy. By comparing two periods of the reform this dissertation demonstrates why and how the market-oriented reform and the creation of a privately owned banking sector in the first were reversed and state control over the banks was reinstated in the second. Building on the "politician's dilemma" concept, the dissertation argues that in countries with authoritarian regimes the technocratic reformers' decision to become independent political actors, i.e., technopols, is treated by the politician as a threat to his regime and makes him choose his own survival over the pursuit of market-oriented economic reforms, which create economic and political sources of power independent of him, leading to the reform reversal and re-imposition of state control over the economy. Based on a comparative analysis of Kazakhstan and Chile, the dissertation contributes to building a theory of economic reforms in developing countries by advancing two arguments. First, it suggests that synergy between the politician and the reform team, and by extension, a successful outcome of economic reforms depend on the division of functions whereby the politician manages the politics of economic reforms while the reform team performs a technocratic function, i.e., designs and implements the reforms. Second, it argues that a successful outcome of economic reforms depends on ideological cohesion of the economic reform and political teams that work for the chief executive.