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

Natalya Naqvi

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

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.

Keywords: business power; development; finance; Globalization; industrial policy; policy space (search for similar items in EconPapers)
JEL-codes: F3 G3 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2019-12-17
New Economics Papers: this item is included in nep-fdg and nep-hme
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Published in Review of International Political Economy, 17, December, 2019. ISSN: 0969-2290

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