Books and Manuscripts in Progress

The Rise of Patient Capital: The Political Economy of Chinese Finance in Latin America” (Under contract with Cambridge University Press; work 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.    

– The book project is supported by external grants and fellowships from the Woodrow Wilson International Center for Scholars, the Strategy and Policy Program at the Smith Richardson Foundation, and the Minerva Initiative. It is part of a consortium project led by Charles Glaser, entitled Spheres of Influence and Regional Orders: Assessing Approaches for Responding to China's Rise

Globalization and Austerity Politics in Latin America.” (Cambridge University Press, 2013, Cambridge Studies in Comparative Politics)

In an age of financial globalization, are markets and democracy compatible?  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. 

"A thoroughly analytical work with the potential to transform thinking about globalization and austerity measures worldwide. Choice

– A Choice 2013 Outstanding Academic Titles in Social and Behavioral Sciences. 

Research Articles 

Fighting Past Economic Wars: Crisis and Austerity in Latin America.”                        Latin American Research Review 53(1), 2018.

Political economy theory expects that changes in macroeconomic governance are often catalyzed by institutional factors, such as partisanship, elections, or IMF conditionality. I challenge and contextualize this view by incorporating the role of technocratic advisors into a domestic policymaking framework. I contend that presidents from countries with crisis legacies are more likely to appoint mainstream economists that pursue budget discipline. Employing an originally constructed dataset, the Index of Economic Advisors, I conduct an econometric test of 16 Latin American countries from 1961 to 2011. I find that politicians are most likely to appoint mainstream economists who embrace fiscal rectitude in countries with inflation-crisis legacies. Furthermore, these crisis legacies are sticky given the severity of inflationary trauma relative to other types of domestic economic volatility in Latin America. In fact, these effects hold when controlling for both historical and contemporaneous shocks to unemployment. 

Online Appendix

The Latin American Research Review’s (LARR) Panoramas blog featured my commentary about Venezeula’s elections and economic reform prospects, which also highlighted the article’s main themes.

“The Political Economy of Sovereign Debt: Global Finance and Electoral Cycles.” The Journal of Politics, 79(2): 2017. With Kaj Thommson, Maastricht University. 

Political economy theory expects politicians to use budget deficits to engineer an election-timed boom, known as the political business cycle. We challenge and contextualize this view by incorporating the financial constraints faced by governments into an electoral framework. We argue that the extent of ownership dispersion among creditors has important effects for governments' policy autonomy. Specifically, we contend that when highly indebted governments become more reliant on international bond markets -- as opposed to traditional bank lending -- politicians alter the way they respond to domestic constituents. In an econometric test of 16 Latin American countries from 1961 to 2011, we show that financial decentralization breeds austerity. More specifically, we find that politicians exhibit more fiscal discipline when they fund a greater share of their spending through decentralized bond markets. Furthermore, we find this disciplining effect to be particularly strong during election periods.

Online Appendix

Partisan Technocratic Cycles in Latin America.” Electoral Studies 45(2): 2017. Special issue, Fat Politics, Lean Politics: Political Survival in Good and Bad Times.

Given their powerful position in presidential cabinets, technocrats are an important transmission mechanism for explaining policy choices in Latin America, but have received less attention compared to some other well-established channels in the comparative political economy literature such as elections or the tenure of democracy. In this paper, I incorporate the role of technocratic advisors into a domestic policymaking framework. I contend that left governments are more likely to appoint technocrats, or ministers with mainstream economics training, to signal their commitment to sound governance to the electorate, the business community, and international investors. This partisan technocratic pattern, however, is conditioned by a country's place in its business cycle. During periods of high economic growth, left governments are more likely to appoint heterodox advisors that drift from fiscal discipline. Employing an originally constructed data index, the Index of Economic Advisors, I conduct a statistical test of 16 Latin American countries from 1960 to 2011, finding partisan shifts in technocratic appointments and fiscal governance that are conditioned by national business cycles.

Online Appendix

GW's Institute for International Economic Policy (IIEP) featured a commentary, summarizing some of the main themes of the article. 

Banking Unconditionally: The Political Economy of Chinese Finance in Latin America.” Review of International Political Economy, 23(4), 2016.      

Globalization scholars have long-debated to what extent economic integration, and specifically, mobile private capital constrains national policymaking. With Western capital reeling from the 2008 financial crisis, state-owned capital made inroads globally. China, as the world’s largest saver, expanded its cross-border lending, funneling almost US$300 billion to developing countries since the crisis. What are the implications for debtor governments’ room to maneuver? I argue that the rapid global expansion of China’s state-led capitalism, an important form of patient capital, has transformed the traditional relationship between economic interdependence and national policy autonomy. Without the market’s threat of short-term capital withdrawal, national governments have considerably more room to maneuver. Given the recent emergence of Chinese financing, I employ a comparative case study analysis of two of China’s largest debtors, Brazil and Venezuela, before and after the introduction of Chinese credit. I find that government budget deficits increase as Chinese state-to-state financing accounts for a larger share of total external public financing. These findings offer important new insights for the study of globalization, Latin American development, and China-Latin American relations, by helping explain the conditions under which nations veer from Western governance models.


The Political Obstacles to Greater Exchange Rate Flexibility in China.”                   World Development, 34(7), 2006.

Building on the politics of exchange rate literature, I claim that interest group pressures on exchange rate policy are often conditional on theover/under valuation of national currencies. Employing the case of China, I confirm previous finding that the larger a country’s tradable sector (as measured by the size of the manufacturing sector), the greater its political influence over exchange rate choices. However, I find that an undervalued currency increases the likelihood that the tradable sector advocates for sustaining a fixed exchange rate, while an overvalued currency prompts it to instead support exiting the currency peg. Finally, I find that the extent of interest groups’ clout with the government ultimately depends on the government’s own political priorities, such as employment and social stability in the case of China.

Working Papers

The Rise of Patient Capital: The Political Economy of Chinese Global Finance.” Institute for International Economic Policy (IIEP) Working Paper, no. 2018-2. Presented at the 2016 annual meetings of the American Political Science Association (APSA), the 2017 annual conference of the Latin American Political Economy Network (REPAL), and the 2018 Annual Congress of the Latin American Studies Association.  

– Top 10% most downloaded papers on the Social Science Research Network. 

I contend that China’s state-led capitalism is an important form of patient capital, characterized by a longer-term horizon. While technically classified as mobile capital, its higher risk tolerance and geopolitical shrewdness make state-owned capital less likely to swiftly exit debtor countries. Compared to traditional mobile capital, debtor governments thus gain more policy freedom, particularly during hard times when Western creditors might otherwise impose austerity and other onerous policy conditions. Employing an originally constructed data index, the Chinese Global Financial Index, I conduct an econometric test across 15 Latin American countries from 1990-2015. I find that Chinese state-to-state lending reduces governments’ reliance on conditionality-linked Western financing, giving them more autonomy to use budget deficits to intervene in their economies. This effect is also contingent on partisanship, with extreme, or populist left governments being most likely to enhance their budgetary discretion. These results suggest that Chinese financing could be a development opportunity, but only if governments invest wisely. Otherwise, by lending without policy conditions, China may be encouraging developing country governments to spend without bounds, sowing the seeds for future debt problems.

“The Political Economy of IMF Lending in the 21st Century: Global Banker or Economic Reformer?” With Sujeong Shim. Funded by GW-CIBER Doctoral Summer Institute.

Confronted with considerable market turmoil, Argentina is negotiating its first IMF agreement in more than a decade since its historic 2001-02 debt crisis. Given the IMF’s controversial legacy in Argentina, President Mauricio Macri had hoped to access IMF credit without its traditionally onerous conditions. Why wouldn’t the IMF simply support Macri’s reformist government without conditions, given that the IMF is an ardent promoter of economic reform? In this paper, we argue that the IMF has dual roles: an economic reformer promoting international financial stability and a global banker safeguarding the resources of its major shareholders and financial soundness of its balance sheet. We thus expect that the Fund balances these two roles, varying the intensity of its policy conditions based on both a borrower country’s reform prospects and its likelihood of debt repayment. To test our theoretical priors, we conduct a comparative cases study analysis of three IMF debtor countries: Argentina, Brazil, and Greece. We find that the IMF tends to impose stronger conditionality when debtor governments have low credit worthiness, but high reform prospects. These findings offer important new insights for the study of globalization, international organization, the IMF, and the politics of domestic reform.

Other Academic Work

Do Elections Hurt Developing Economies? Available at SSRN’s Political Institutions: Bureaucracies & Public Administration, 2(14) 2008.

“The Revised Bank of Japan Law: A Framework for Enhanced Autonomy?”            Federal Reserve Bank of New York, 1998.

On Political Equality.” Conducted research and data analysis for book.                    With Professor Emeritus Robert Dahl. 

The Future of Globalization: Explorations in Light of Recent Turbulence.”                   Co-authored introductory chapter for book. With President Ernesto Zedillo of Mexico.

© Stephen B. Kaplan 2018