Creating crony capitalism: neoliberal globalization and the fueling of corruption

Abstract

Abstract This article examines how neoliberal policies mandated by the International Monetary Fund (IMF) impact on corruption in developing countries. Combining domestic political analysis with world systems and dependency theories, we hypothesize that these reforms concentrate losses on influential social groups such as businesses and civil servants, who then engage in corrupt practices to maintain their privileged positions. Using an original dataset of IMF policy reforms from 1980 to 2014, we find robust empirical support for our argument. Results of regression-based analysis demonstrate an effect of IMF policy reforms that hold across multiple samples and measure of corruption: 141 countries using a corruption control measure from the International Country Risk Guide; 70 countries on the Business Environment and Enterprise Performance Survey; and 19 countries from the International Crime Victims Survey. Our findings elucidate the link between neoliberal globalization and political capitalism, while offering important policy lessons regarding the design of IMF policy reforms.