Michael Loriaux
Capital Ungoverned: Liberalizing Finance in Interventionist States
Ch. 4 "Capital Mobility and Mexican Financial Liberalization"
Sylvia Maxfield
In _Capital Ungoverned: Liberalizing Finance in Interventionist
States_ (Ithaca: Cornell University Press, 1997), principal author Michael
Loriaux pays homage to his mentor, noted international relations scholar
Robert Gilpin, building a cross-national empirical case for the explanatory
power of an analytical framework derived from Gilpin's well-known works,
_U.S. Power and the Multinational Corporation_ (New York: Basic Books,
1975) and _The Political Economy of International Relations_ (Princeton:
Princeton University Press, 1987). Loriaux posits two possible
explanations for the nearly concurrent dismantling of activist credit
policies by five dissimilar "interventionist" states (Japan, South Korea,
Mexico, France and Spain) during the 1980s: (1) an economistic
interpretation focusing on market and technological factors, and (2) a
political interpretation, which ascribes the emergence of market pressures
to policies adopted by financially powerfully states--especially the United
States. Loriaux's purpose is to demonstrate the superiority of the latter,
following Gilpin in focusing on the role of uneven growth rates across
countries as a catalyst for the changing policy preferences of the U.S.,
the "predatory" hegemon in the global capitalist system. This book thus
represents a critique of liberalizing reforms orchestrated by a scholar
sympathetic to fiscal interventionism.
The fundamental structure of this volume, which focuses principally
on the Cold War period (especially the change in financial policy in the
five states between the 1970s and 1980s), stands in contrast to that of
Barbara Stallings' edited volume _Global Change, Regional Response: The
New International Context of Development_ (Cambridge University Press,
1995). Whereas Stallings, being primarily concerned with the post-Cold War
international environment, makes distinctions in types of capitalist
systems based on geography--world regions and (putatively) consequent
spheres of interest (e.g., Latin America vis-ŕ-vis the United States,
Southeast Asia vis-ŕ-vis Japan, Africa vis-ŕ-vis Europe), Loriaux is
principally concerned with explaining policy shifts which took place within
the bipolar geopolitical framework of the Cold War. Hence Loriaux et al.
conceive of only one macro sphere of influence within the capitalist world
of the Cold War era, that dominated by the U.S. They draw links between
the U.S.'s leading role in the world economy and the policy responses of
all five countries; differences between countries are explained primarily
by their varying positions in the international system in the country cases
assigned (Japan, South Korea [on the "front lines" of the Cold War] and
Mexico [the U.S.'s "back door"]).
The authors explicitly refer to John Zysman's three-fold framework
of varieties of capitalism in elaborating their respective cases (Zysman,
_Governments, Markets, and Growth: Financial Systems and the Politics of
Industrial Change_ [Ithaca: Cornell University Press, 1983]). Loriaux
argues that at one time or another all the countries studied have resembled
Zysman's "French" model (unsurprisingly, in the case of France!) (pp. 3-4).
In Mexico, the period from the late 1930s to the 1980s, marked by
state-led development featuring controlled prices and publicly-administered
credit, culminating in the nationalization of the banking sector in 1982,
demonstrates the principal hallmarks of this variety of capitalism.
However, more recent liberalizing reforms have been more along the lines of
the credit-based, institution-dominated "German" model, with the government
encouraging reprivatized but highly concentrated banks to increase their
involvement in industrial financing and to take on some of the
responsibilities previously assumed by the state (p. 13). Hence the
present structure of the financial system gives the lie to the appearance
of Mexico's neoliberal reforms as conforming to or even approximating the
"Anglo-American" model, at least with regard to this sector.
In Chapter 4, Sylvia Maxfield analyzes liberalization in Mexico,
describing how international factors played a very large role in that
process. The financial reform of the late 1980s and 1990s represented a
dramatic turnabout in credit policy, given that during the 1970s and early
1980s Mexico's government had pursued aggressively interventionist
policies, such as the nationalization of the banks and the creation of
«fideicomisos». Maxfield argues that a balance of payment deficit and a
general financial crisis (beginning in 1982) made Mexican leaders sensitive
to the need to adopt policies that would induce foreign creditors and
investors to commit resources to the country. Also, policy shifts in the
United States imposed and continue to impose major indirect structural
constraints.
Maxfield's chapter reiterates the previous Maxfield and Schneider
readings (Sylvia Maxfield and Ben Ross Schneider, eds., _Business and the
State in Developing Countries_ [Ithaca: Cornell University Press, 1997]),
which highlighted the importance of business-government relations in the
Mexican liberalization process. Maxfield primarily makes the
state-centered argument that business pressure is internalized by
government actors who then initiate changes. For instance, in the case of
the privatization of the banks, the private sector pressure was indirect,
reflecting the "structural power of capital" (the ability of private actors
to invest or lend capital, shape public economic well-being, and thereby
affect the political fortunes of government leaders), but the push was
primarily motivated by government. In the case of allowing foreign entry
into Mexican financial markets, it was investors and creditors who exerted
indirect "structural" influence on the government. The Mexican banks
viewed foreign entry as a threat since they had long been protected by the
government from foreign competition. However, Maxfield also recognizes
that in a few aspects of the process evidence of direct impact of the
interests of those regulated--commercial banks--is also clear.
Schneider, in _Business and the State in Developing Countries_,
referred to Mexico's radical liberalization reform as the result of the
policymakers' efforts to restore business confidence and investment. He
argues that once reforms were enacted, concertation, or organized
cooperation between business and government, sped up the implementation of
reforms. Maxfield's chapter in Loriaux et al. confirms this view as she
describes the importance and strength of the Mexican banks vis-ŕ-vis U.S.
industrial and business coalitions and U.S. banking groups who were
interested in Mexico's financial services liberalization. As a result,
Mexican banks were able to shape directly the policy that was finally
adopted on the issue of foreign ownership of banks.
While Loriaux's analysis has utility in explaining the relationship
between the relative positions of the U.S. and Mexico (as well as those of
the U.S. vis-ŕ-vis the other countries examined) in the international
political and economic order and their respective policy preferences, and
though Maxfield's empirical work systematically explains the business-state
relations involved in the Mexican liberation process, there is little novel
to this volume. Loriaux makes demonstrating his theory too easy by
counterposing a caricatured neoliberal hypothesis, i.e., that purely market
and technological forces, absent any determinant international political
influences, are sufficient to explain the events observed. Meanwhile,
though Maxfield endeavors to bring her analysis of Mexican financial
liberalization up to date, she seems to have written in mid-1994, some two
and a half years before the volume was published. Consequently she does
not incorporate the peso devaluation crisis which broke out in December of
that year into her analysis, making the same out of date before it ever
appeared in print.