The experience of the 1980s and 1990s, in developing regions from East Asia to Latin America, suggests that it is fruitless to search for some overall master theory of economic development that either the IMF or the economic policy managers of individual countries can follow as a universal rule. In a capital-rich world, it is both logical and inevitable for countries to open thir economies to foreign capital, but doing so will always involve risk and uncertainty, whatever ideological assumptions are made and whatever specific policies are followed. Neither establishing government-directed "repressed" financial systems nor embracing full liberalization have thus proven to be foolproof strategies for making the most effective use of foreign capital in national development. The former is subject to distortion by "favored sectors" or by leaders' associates, the latter to powerful local interests or to sudden abrogation by governments ignoring their own ideology. Hastings, L. A. (1993). Regulatory revenge: the politics of free-market financial reforms in Chile. In Haggard, S, Lee, C. H, and Maxfield, S., eds., The Politics of Finance in Developing Countries. Ithaca, NY: Cornell University, pp. 201-29. The experience of the Southern Cone countries (Argentina, Chile, and Uruguay) with financial liberalization and internationalization played an important role in demonstrating that reduced government intervention does not in itself guarantee an efficient financial market (Haggard and Lee, 1993, p. 13). Such disruptions of steady growth can be produced by changes in the global economy, by internal political developments, or by both. The latter was the case in Mexico in 1994: "Mexico received an unusual dose of bad luck in 1994, in the form of both a turn in the international interest rate cycle and unfortunate domestic political developments" (Goldstein and Calvo, 1996, p. 235). The triggering domestic political factor was the leftist peasant revolt i |
