Introduction: Private Investment Flows and Institutional Investors

Abstract

The nineteenth-century ideal of erecting a world based on the unencumbered operation of a free market has reemerged and has permeated the public policies and politics at the turn of the millennium. Akin to its role in the nineteenth century, international finance is playing a central role in the promulgation of the free market norm. The developing countries in Asia, Latin America and Africa are perhaps the most affected by this resurgence of liberalism and the demands of international finance. The conventional means of attracting capital into developing countries shifted rapidly from pledging allegiances to one of the cold war rivals to marketing the nation-state to the world’s financiers. Once a strategic geopolitical position could have ensured a consistent flow of assistance; now an economic policy, based on deregulation, privatization, and stabilization, is the path to equity. Instead of catering to the governments and international institutions of industrialized countries, leaders in developing countries realize that the power of the purse lies with private institutional investors. The political and social ramification of this change in finance sourcing for developing countries has yet to be explored fully. The goal of this book is to further the on-going debate about the relationship between liberalization and democratization, and to challenge some convenient assumptions about markets that do not hold in the current emerging financial markets.