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Political and Social Consequences of Financial Crises in Developing Countries: Role of Ideas, Interests and Institutions

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This paper examines the social and political consequences of financial crises in developing countries, and how these countries cope with the aftermath of the crises. Success or failure of crisis management depends on several factors, but especially economic factors (inflation, total debt, economic openness)and political institutions (parliamentary vs. presidential systems, decentralization, partisanship). In this paper, I argue that despite their explanatory power, interest and institution-based perspectives may not totally account for the variance in the political and social responses given in developing countries, in particular Argentina and Turkey. As a concomitant factor, ideas or state ideologies also do play an important role. This paper shows that nationalist framing of the financial crises might intensify the problems and result in negative regime change, decrease in durability, and increase in social unrest. Empirical results in this direction are also supported by the illustration of crises in Turkey and Argentina. In Turkey, existence of pro-Westernization ideology that regards the IMF as a part of the larger scheme has constrained attempts to breach the Fund's conditions and to use the 2001 speculative attack as a political asset. In addition, Turkish party politics that operates on a dimension (i.e. secularism) different from the traditional right-left dimension decreases expected electoral benefits of adopting an anti-IMF rhetoric, and hence the level of politicization of the whole issue. In contrast, absence of such institutions or such an ideology in Argentina enables politicians to use the stand-by agreement for electoral reasons. This kind of politicization fuels social instability as the Argentine example demonstrated. This paper concludes that financial crises -though difficult to predict and prevent- are manageable with particular institutional arrangement and depoliticized ideational framing.

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polit (93), variabl (75), specul (72), countri (69), attack (69), econom (65), govern (65), crisi (63), 1 (60), crise (59), might (52), financi (49), elect (44), use (44), chang (41), develop (41), 2005 (37), parti (37), 26 (37), februari (36), burcu (35),
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Ucaray, Burcu. "Political and Social Consequences of Financial Crises in Developing Countries: Role of Ideas, Interests and Institutions" Paper presented at the annual meeting of the International Studies Association, Hilton Hawaiian Village, Honolulu, Hawaii, Mar 05, 2005 <Not Available>. 2008-10-10 <http://www.allacademic.com/meta/p71108_index.html>

APA Citation:

Ucaray, B. , 2005-03-05 "Political and Social Consequences of Financial Crises in Developing Countries: Role of Ideas, Interests and Institutions" Paper presented at the annual meeting of the International Studies Association, Hilton Hawaiian Village, Honolulu, Hawaii Online <.PDF>. 2008-10-10 from http://www.allacademic.com/meta/p71108_index.html

Publication Type: Conference Paper/Unpublished Manuscript
Review Method: Peer Reviewed
Abstract: This paper examines the social and political consequences of financial crises in developing countries, and how these countries cope with the aftermath of the crises. Success or failure of crisis management depends on several factors, but especially economic factors (inflation, total debt, economic openness)and political institutions (parliamentary vs. presidential systems, decentralization, partisanship). In this paper, I argue that despite their explanatory power, interest and institution-based perspectives may not totally account for the variance in the political and social responses given in developing countries, in particular Argentina and Turkey. As a concomitant factor, ideas or state ideologies also do play an important role. This paper shows that nationalist framing of the financial crises might intensify the problems and result in negative regime change, decrease in durability, and increase in social unrest. Empirical results in this direction are also supported by the illustration of crises in Turkey and Argentina. In Turkey, existence of pro-Westernization ideology that regards the IMF as a part of the larger scheme has constrained attempts to breach the Fund's conditions and to use the 2001 speculative attack as a political asset. In addition, Turkish party politics that operates on a dimension (i.e. secularism) different from the traditional right-left dimension decreases expected electoral benefits of adopting an anti-IMF rhetoric, and hence the level of politicization of the whole issue. In contrast, absence of such institutions or such an ideology in Argentina enables politicians to use the stand-by agreement for electoral reasons. This kind of politicization fuels social instability as the Argentine example demonstrated. This paper concludes that financial crises -though difficult to predict and prevent- are manageable with particular institutional arrangement and depoliticized ideational framing.

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Document Type: .pdf
Page count: 35
Word count: 10667
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Political and Social Consequences of Financial Crises in Developing Countries: Role of Ideas Interests and Institutions Burcu Ucaray University of Illinois Urbana-Champaign ucaray@uiuc.edu Work in Progress1 Comments Welcomed. February 20 2005 1 Prepared for the Annual Meeting of the International Studies Association Hawaii March 1- 5 2005. I would like to thank the graduate students and faculty members of the Department of Political Science at University of Illinois who participated the 2005 Departmental Graduate Student Practice Seminars for their
February 26 2005 [46] Weingast Barry. 1995 "The Economic Role of Political institutions: Federalism Mar- kets and Economic Development " Journal of Law Economics and Organization 11 (1): 1-31. [47] Weyland Kurt. 2002. The Politics of Market Reform in Fragile Democracies: Argentina Brazil Peru and Venezuela. New Jersey: Princeton University Press. [48] Wyplosz Charles. 2004. "Financial Instability in Emerging Market Countries: Causes and Remedies " Paper presented at the "Conference Stability Growth and the Search for a New Development


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