Way: Political Insecurity and the Diffusion of Financial Market Regulation

Way, Christopher R. 2005. Political Insecurity and the Diffusion of Financial Market Regulation. Annals of the American Academy of Political and Social Science 598: 125-144.

"Domestic financial market liberalization--the process of designing a regulatory framework for markets that determine who gets and grants credit and at what prices--has swept the world as part of the spread of neoliberalism over the past three decades. Combining the acute political needs of insecure leaders with the specific dynamics of domestic financial market reform suggests that politically insecure governments will provide surprisingly likely to initiate reforms, proving to be potent agents of diffusion in the right circumstances. My results indicate that the combination of political insecurity, regional trends toward reform and the prominence of IFI policy advice in policy discourse together make a powerful combination encouraging the diffusion of domestic financial market reform" (1).

Standard descriptions for this diffusion have been mostly top down or bottom up.

"I argue that the economic boom associated with financial market liberalization can provide an important source of political strength for insecure governments, meaning that they can have a surprisingly strong attraction to liberalization. Combining the acute political needs of insecure leaders with the specific dynamics of domestic financial market reform suggests that politically insecure governments will prove surprisingly likely to initiate reforms, proving to be potent agents of diffusion in the right circumstances" (2).