Summary: Globalization and Austerity Politics in Latin America (Cambridge University Press, Cambridge Studies in Comparative Politics Series, 2013)

In Globalization and Austerity Politics, I examine the question of whether or not markets and democracy are compatible in an age of financial globalization. For developing countries, the dramatic internationalization of financial markets over the last two decades deepens tensions between politics and markets. Notwithstanding the rise of left-leaning governments in regions like Latin America, macroeconomic policies often have a neoliberal appearance. When is austerity imposed externally and when is it a domestic political choice? By combining statistical tests with extensive field research across Latin America, this book examines the effect of financial globalization on economic policy making. I argue that a country’s structural composition of international borrowing and its individual technocratic understanding of past economic crises combine to produce dramatically different outcomes in national policy choices. Incorporating these factors into an electoral politics framework, the book then challenges the conventional wisdom that political business cycles are prevalent in newly democratizing regions. This book is accessible to a broad audience and scholars with an interest in the political economy of finance, development and democracy, and Latin American politics. 

For sample book chapters, see Chapter 1: Introduction, and Chapter 2: Globalization and Austerity Politics.


"Stephen Kaplan beautifully captures how, on the heels of the 1989 Brady Plan for debt restructuring, the quick and simultaneous liberalization of trade and finance in the early 1990s prompted the flow of capital into regional stock and bond markets. This securitization of capital inflows, exciting as it was, also set the stage for massive capital outflows when political and/or economic trends signaled instability. This particularly scenario was one of several causes of the massive exchange rate and banking crises that erupted in Mexico (1994), Brazil (1999), and Argentina (2002). Once the currency hits the proverbial fan and inflation inevitably flares, the menu of options usually boils down to some form of austerity.” 

– Carol Wise, University of Southern California, book review essay, entitled Slippery Slopes: Globalization, Market Reforms, and Austerity PoliticsLatin American Research Review, 52(5):2017.

“Today’s integrated capital markets provide great opportunities for, and impose tight constraints on, governments in the developing world. Just how great are the opportunities, and how tight the constraints, is the topic of much scholarly and popular debate. In Globalization and Austerity Politics in Latin America, Stephen Kaplan provides a careful analysis of how and why Latin American governments have responded to the contemporary international economic environment. He shows, with both cross-national statistical analysis and careful case studies, that governments respond to both international financial and domestic political pressures. Globalization can constrain national policies, but it does so within a domestic political context. This is a careful, thoughtful study that will be of great interest to scholars and students of Latin America, and of the political economy of development more generally.”

– Jeffry Frieden, Harvard University

"Why have governments on the left in Latin American adopted surprisingly conservative macroeconomic policies? Kaplan offers a sophisticated explanation of when and why we have seen this shift.  By focusing on the internal political dynamics of financial market actors, he makes a convincing--yet nuanced--argument about the power of bond markets to shape government policies in a globalized world." 

– Kathleen McNamara, Georgetown University

“In an era of financial openness, some developing countries enjoy more autonomy vis-à-vis capital markets than others. Why? Stephen Kaplan convincingly suggests that the ways in which governments finance their debt and the ways in which political elites view their country’s economic history both play a role. In nations that have experienced inflationary crises and that borrow via bonds (rather than from banks), conditions are ripe for a ‘political austerity cycle.’ Kaplan’s analysis points to the importance of both ideational and material factors, and of both domestic and international forces, on elites’ behavior in contemporary Latin America.”

– Layna Mosley, University of North Carolina at Chapel Hill

“In this deeply insightful and original book, Stephen Kaplan not only offers a fresh interpretation of how global financial markets constrain domestic policymakers in developing countries, but he explains the conditions under which these constraints are more or less confining. Through cross-national statistical tests and comparative case studies from Latin America, Kaplan demonstrates how inflationary experiences and the shift from bank lending to bond market financing shape democratic business cycles, producing austerity measures or stimulus policies. This is a first-rate contribution to the study of the political economy of democracy and development, and it breaks new ground in understanding how domestic policy choices are conditioned by international financial dependence.”

– Kenneth M. Roberts, Cornell University

“Kaplan's book represents a pathbreaking study in international political economy. His work challenges the conventional wisdom about how governments use economic policy before elections. For many decades, scholars have debated whether governments engage in inflationary policies to spur economic growth as they head toward elections, in the hope of retaining power. Kaplan turns this debate on its head, showing that some governments actually apply the financial "brakes" before an election, implementing policies that are anti-inflationary. He grounds his explanation in international and domestic factors. At the international level, some governments that operate in a financially globalized world cannot obtain sufficient access to capital. At the domestic level, some governments face inflation-averse electorates, who seek protection from income shocks and take unsustainable stimulus policies before an election as a bad sign. The book is a must-read for students and scholars of political economy.”

– James Vreeland, Georgetown University


The book has been featured in several blogs, including the Washington Post’s Monkey Cage, Economic Sociology and Political Economy (ES/PE) Community, Presidential Power, and the Getulio Vargas Foundation’s Center for Politics and Economics in the Public Sector (CEPES). 

Summary: The Rise of Patient Capital: The Political Economy of Chinese Finance in Latin America (Under contract with Cambridge University Press; book manuscript in progress).

As the United States has retreated from its lead role in globalization — first because of the 2008 financial crisis, and now under President Donald Trump’s leadership — China has become a major global economic player in the Western Hemisphere. But, what are the implications of this growing interdepedence? This book explores how China’s regional expansion of investment and trade affects the economic policy choices of invidual Latin American nations. To advance this book project, I have received external grants from the Smith Richardson Foundation, the Wilson Center, and the Minerva Initiative

© Stephen B. Kaplan 2018