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).

Philpott: Revolutions in Sovereignty: How Ideas Shaped Modern International Relations

Philpott, D., 2001. Revolutions in Sovereignty: How Ideas Shaped Modern International Relations, Princeton University Press.

“My central claim: Revolutions in sovereignty result from prior revolutions in ideas about justice and political authority…My claim…is about what revolutions in sovereignty are not. That is, they are not merely the aftereffects of the rise and fall of great powers, or of slow shifts in class structure or political structure, in technology, commerce or industrial production, or in the division of labor, methods of warfare, or population size…It takes a revolution in ideas to bring a revolution in sovereignty” (4).

“A polity’s practice of its authority on the inside requires the recognition of this authority from the outside” (13).

“We need to see, I propose, that international authority appears in three faces. All constitutions contain all three faces; every constitution’s depiction of them is its unique signature. Each face answers a different question about authority. The first face answers, What are the polities in a given international society? The second face answers, Which polities may belong to the society? And who may become one of these legitimate polities? The third face answers, What are the essential prerogatives of these polities? Together these faces define constitutional authority for any international society. They allow us to distinguish constitutions, and provide a criterion for change. A revolution in the constitution of international relations, I will argue, involves a change in at least one of these three faces” (15).

Epstein: The Social Context in Conditionality

Epstein, Rachel. (2008). "The Social Context in Conditionality: Internationalizing Finance in Postcommunist Europe". Journal of European Public Policy.

Eastern European countries have been more effective than their Western European counter-parts in building the framework for the united European financial markets system. This paper asks why this is the case. It builds a framework of international institutional influence that requires a certain societal milieu in order to be effective.

“…I argue that CEE (Central and Eastern European) susceptibility to international institutions’ pressure, including conditionality, hinged on a particular social context. Where domestic actors viewed international institutions as authoritative sources of information and potential imprimaturs of their political platforms, post communist countries were likely to heed their advice and fulfill the terms of their conditionality…By contrast, where international institutions were unable to displace domestic sources of authority, namely nationalist striving and the desire for autonomy, international institutions’ recommendations and conditionality wielded much less power, resulting in lower levels of foreign ownership in CEE banks” (2).

The dependent variable being explained is why there is such high levels of foreign ownership of banks and other moves that are in line with the financial standardization promoted by the EU. The independent variables are the forces applied by the international institutions that are mediated by the specific social milieu that the author puts forth. This social context is claimed to be a “new mechanism” of understanding the influence of international organizations and institutions.

The social context in that the IV is mediated are described. Three features are highlighted: “the discontinuity of sectors and regimes, domestic actors’ perceived subordinated status vis-à-vis international institutions and the normative consistency underpinning the policies in question” (6). These three variables are all operationalized (6), and, where they are congruently high, it is expected that a country’s openness to advice from international institutions will also be great.

Four rival approaches for explaining the variation in the adoption of influence from international institutions are then explored. The first is domestic preferences (8). The second is economic constraints or opportunities (9). The third is external demand for foreign owned banks (10). The fourth is conditionality (10-1). The main drivers are then examined for various transitioning CEE countries with an eye to social context.

Elkins et. al.: On Waves, Clusters and Diffusion

Elkins, Zachary, & Simmons, Beth. (2005). "On Waves, Clusters, and Diffusion: A Conceptual Framework". Annals of the American Academy of Political and Social Science, 598, 33-51.

This article begins by making a distinction between diffusion in general, and specific instances where the term may not be applicable. For example if reform, “…lacks an exchange of some sort between actors, it is not diffusion as scholars have come to use the term” (32).

Clustering of idea diffusion is a characteristic of policy reform. One reason that it happens at a similar, yet independent streak, is because countries have similar domestic constraints and structures to that they are responding. Another reason is coordination: this can occur through epistemic communities, or through more explicitly vertical or horizontal arrangements. Another reason may combine aspects of the first two: “…governments are independent in the sense that they make their own decisions without cooperation or coercion but interdependent in the sense that they factor in the choices of other governments. In other words, uncoordinated interdependence” (35).

The next section of the articles wonders whether or not the concept of diffusion should be thought of as an independent or a dependent variable.

The drivers of diffusion are then examined, with three conditions of/for diffusion explored: cultural norms, support groups and competition (39). Then, different forms of learning are identified. The goal of this article was to present a set of terms and a framework for further empirical research.

Meseguer: Poilcy Learning, Policy Diffusion and the Making of a New Order

Meseguer, Covadonga. (2005). "Policy Learning, Policy Diffusion, and the Making of a New Order". Annals of the American Academy of Political and Social Science, 598, 67-82.

"This article surveys the role of learning as mechanism of policy diffusion in the context of the creation of a new political order” (67).

Mexeguer examines how learning from the examples of others may have contributed to policy diffusion and liberalization in the later decades of the 20th century. Specifically, the author examines whether or not countries and polities learned from failed collectivization and interventionism policies. This article attempts to more broadly contextualize the idea of learning as a tool of policy diffusion, examine alternative perspectives and explain the difficulties of testing this empirically.

“I argue that although learning is suggested as a fundamental mechanism of diffusion of the previous wave of deregulation and privatization and of the current wave of regulatory reforms, we still lack the empirical tests to evaluate the impact that learning may have had on these two trends” (68).

Learning is a voluntary act (71). It also implies an adaptation of beliefs (72). “Rational learning, in short, would imply convergence i9n policy choices. This is a model of learning that seems to match the sort of trend this chapter seeks to explain” (72).

Bounded learning is placed in contrast to rational learning. “Rather than scanning all information, governments look at relevant information” (72).

“Empirically, there is a strong evidence for the hypothesis that emulation has driven the adoption of a wide range of economic and social policy reforms. There is also strong evidence that emulation is behind the very recent ascendance of the regulatory state…The truth is that the empirical evidence we can rely on is still limited and partial (79).

Brooks: Interdependent and Domestic Foundations of Policy Change

Brooks, Sarah M. (2005). "Interdependent and Domestic Foundations of Policy Change: The Diffusion of Pension Privatization Around the World". International Studies Quarterly, 49(2), 273-294. http://search.ebscohost.com/login.aspx?direct=true&db=aph&AN=16719702&site=ehost-live

This article examines the diffusion of pension privatization programs globally. It initially explains why there was such a need for pension reform: increased life expectancy and decreased birth rates have produced a strain on the funding mechanisms that worked historically. Brooks claims that the long-term effects of pension privatization were not known and wonders why policy measures were taken to liberalize pensions in the face of this insecurity (274).

She deploys a statistical method of 59 countries to examine how policy diffusion took place.

Brooks explores some explanations of policy diffusion: globalization requires that countries become more attractive to capital. Also, some argue that IOs have a unique, independent influence on this situation. This can take place either through hard power or soft power. These “downward” pressures on countries may not go very far in explaining why they make neoliberal reforms. The answer may lie in horizontal pressures.

An empirical model is then deployed to examine where the greater driver lies. Her dependent variable is the, “…adoption of some degree of private structural reform to a mandatory national old age pension system,” and is measured as a binary (284).

Her results, “…reveals a significant interdependent logic shaping the decision to privatize national pension systems, while also confirming the importance of domestic political and economic correlates of this deep institutional change” (285). “Peer dynamics thus powerfully shape the risk of privatization among nations in EECA and Latin America, increasing dramatically the risk of adoption as more peers turn to market-orientated pension reforms” (286). Demographics and domestic political institutions are significant while IFI influence is not. “Overall, the empirical model provides evidence of a forceful interdependent logic of domestic policy-making decisions” (289).

Weyland: Theories of Political Diffusion

Weyland, Kurt. (2005). "Theories of Policy Diffusion: Lessons from Latin American Pension Reform". World Politics, 57, 262-285.

“In sum, the present article asks what drives waves of diffusion most—foreign pressures, symbolic and normative imitation, rational learning, or cognitive heuristics” (263).

The questions asked by this article have broader theoretical implications, specifically on questions surrounding bounded rationality. The article wonders whether or not pension policies in Latin America can be examined to determine whether or not politicians made decisions that were because of the influence of international organizations, bounded rationality or through a process of cognitive heuristics. “The present analysis suggests that the cognitive-psychological approach, which emphasizes decision heuristics, offers a particularly good explanation for the spread of innovations in the pension area” (264).

The article examines idea diffusion as a s-curve. It also claims that idea diffusion has a geographical feature: clustering. Finally, it argues that diffusion proceeds in distinct waves.

An interesting figure (Figure 2) on 269 highlights the different levels of analysis that this issue encompasses. At the top, there is external pressure (IOs). In the middle, there is a “quest for legitimacy”, which is seen a a mid-level approach. At the bottom, there is rational learning and cognitive heuristics.

External Pressure: Has difficulty explaining geographic clustering. It also has problems explaining initial diffusion of ideas. Also, empirical data shows that compliance with IFIs is quite weak.

Normative Imitation: Here, countries adapt because they have internalized international norms. They adopt new policies because their preferences have changed. Weyland argues that this approach posits a large initial diffusion of ideas, which is not in line with the s-curve approach. “In sum, the general validity of the normative imitation approach is questionable, especially for the analysis of redistributive policies” (278).

Rational Learning: “…this framework confronts great difficulties in accounting for the three characteristics of diffusion. Above all, commonality in diversity poses a serious puzzle for rational choice” (279). Why would ideas cluster if actors are looking globally for policy inspiration?

Cognitive Heuristics: “…cognitive heuristics framework sees diffusion result from goal-orientated activities driven largely by actor interests” (281). However, this approach differs from rational learning in they methods that actors use to pursue their goals. “…cognitive0-psychological theories start from the robust empirical finding that human rationality is inherently bounded by innate, insuperable limitations on information processing and memory capacity” (282). Three heuristics are examined: availability, representativeness and anchoring. Availability: people witness a car crash and slow down. Representativeness: overestimation of trends from limited data. Anchoring: how do you adapt a model for your needs? These three heuristic approaches, “…provide a good explanation for the basic features of diffusion, namely, its geographical clustering, its s-shaped temporal unfolding, and its substantive characteristic of creating commonality in diversity” (285).

Swank: Tax Policy in an Era of Internationalization

Swank, Duane. (2006). "Tax Policy in an Era of Internationalization: Explaining the Spread of Neoliberalism". International Organization, 60(04), 847-882.

This article examines the spread of neo-liberal tax policies throughout the world. “My central argument is that the highly visible 1980s market-conforming tax reform in the United States should be especially important in shaping subsequent tax policies in other polities” (847). “Specifically, I argue that (asymmetric) competition for mobile assets associated with US reforms significantly influences national policy choices in other polities” (848). However, this is mitigated by domestic constraints (cost of implementation verses benefit).

Swank then examines other possible causes of the diffusion of tax policy in many countries. He looks at coercion, emulation, learning, competition and the domestic constraints that mitigate these decisions. He argues that there are different kinds of competition that can take place, and that the diffusion of tax policy can be attributed to asymmetrical competition: the US decreased the tax burden on capital and placed it on labor and other countries had to follow suit in order to remain attractive to the needs of capital.

He also identifies an ideational shift that may help the spread of tax policies. “…a shift to the right at the mass and elite level should significantly increase3 the weight assigned potential benefits and diminish the costs associated with adoption of the US model” (857).

“On the question of diffusion, substantial theory, an abundance of qualitative evidence about the perceptions of national policymakers, and the results presented above indicate that competitive pressures under girded the diffusion of US reforms” (873).

Of interest: "While there is little question that tax poilcy has experienced structural change...the substantial capacity of governments to fund social protection and public goods provision in the capitalist democracies has not been diminished appraciably by the US-driven diffusion of neoliberalism" (876).

Simmons, et. al.: The International Diffusion of Liberalism

Simmons, Beth A., Dobbin, Frank, & Garrett, Geoffrey. (2006). "Introduction: The International Diffusion of Liberalism". International Organization, 60(04), 781-810.

Here we examine the rise and spread of both economic and political liberalism. To understand the causes of this spread, our authors put fourth four distinct drivers and examine them qualitatively. These are the drivers of coercion, competition, learning and emulation. There are symposium articles that follow this article which explore these empirically. This abstract focuses solely on this article.

“Our principal objective is to shed light on the causal mechanisms that explain the timing and geographic reach of liberal innovations. What has caused these new policies to diffuse across time and space?”

They define economic liberalism as: “…policies that reduce government constraints on economic behavior and thereby promote economic exchange”. Political liberalism is also defined: “…policies that reduce government constraints on political behavior, promote free political exchange, and establish rights to political participation” (783).

The diffusion of ideas follows an s-curve. At first, there are a few people who are early adopters. Then, there is a rapid increase in adoption. Finally, there is a peaking out of the curve as all who could adopt have adopted.

Coercion: “Powerful countries can explicitly or implicitly influence the probability that weaker nations adopt the policy they prefer by manipulating the opportunities and constraints encountered by target countries, either directly or through the international and nongovernmental organizations…they influence” (790).

Competition: “…a more decentralized mechanism for policy diffusion than coercion” (792). In order to make claims about competition, theorists must be able to show that policies are being diffused by methods that are not just reducible to arguments about efficiency. This approach involves an information rich environment where actors mutually constitute the decisions of others, that relationships are horizontal and that policy interventions are mostly evaluated by short-medium-term effects.

Learning: “…refers to a change in beliefs or change in one’s confidence in existing beliefs, which can result from exposure to new evidence, theories, or behavioral repertoires” (795). Learning can be theorized as happening with individual rational actors or in broader communities.

Emulation: This approach is highly correlated to social constructivist approaches. “The distinguishing feature of social constructivism is its focus on the inter-subjectivity of meaning—both legitimate ends and appropriate means are considered social constructs” (799). This approach wonders how certain political policies and approaches became more broadly accepted as begin legitimate. Emulation can be seen as being caused by either epistemic communities (top-down) or through the emulation of peers through social psychology (horizontal).

The article then goes on to identify four different types of liberalism, which I will not elaborate on here. The article concludes by saying that these concepts are important and distinct (though the footnote points to a reference where they are unified). They then explain why each article is important in the symposium.

Benavot et. al.: Knowledge for the Masses

Benavot, Aaron, Cha, Yun-Kyung, Kamens, David, Meyer, John W., & Wong, Suk-Ying. (1991). "Knowledge for the Masses: World Models and National Curricula, 1920-1986". American Sociological Review, 56(1), 85-100. http://links.jstor.org/sici?sici=0003-1224%28199102%2956%3A1%3C85%3AKFTMWM%3E2.0.CO%3B2-I

This article examines how much of the primary school curriculum has become standardized from a sociological perspective. Old perspectives on this issue constructed the formation of school curriculum as the result of either the, “…functional requirements of society”, or, “…as a reflection of existing power relations in society” (86). This would skew the result more heavily towards a nationally patterned set of distinct curricula.

However, these authors posit that the rise of the standardization of national curricula can be seen a corollary of the rise of, “standardized models of society” (86). This can be seen as an emerging world cultural set of values and structures. “…the same world-wide processes that were involved in the spread of primary education may also have generated similarity in its content” (86).

The authors put forth a number of hypotheses. Increased social development would relate to increased standardization in curriculum as well as more focus on math, natural science and social science. Increasing development would also be seen through an increasing focus on “modern values”.

They deploy a statistical method for exploring these hypotheses. They find that there is a “world-wide trend” that moves countries towards standardization of curriculum. “This striking worldwide trend toward a more integrated notion of society could have a functionalist interpretation, e.g., greater public involvement in and control over social life produced a stronger conception of society as a ‘social system’” (92). Other statistical finding support the view that the standardization process was formed mostly not by national processes but by global processes.

Conclusion: “Functionalist theory suggests that national curricula vary by level of socioeconomic development, increasingly incorporate modern subject matter, and are slow to change” (96). What are the deeper drivers of this standardization? “We have no information on the processes by which this curricular standardization is achieved” (97). “The real surprise of our findings lies not in the unimportance of local influences, but in the relative unimportance of national influences on curricular structure” (98).