Financial Market Governance in Developing Countries

Abstract

This article presents a critique of the prevailing IMF/World Bank paradigm for financial market governance in developing countries that converges on the restrained role for the state, the neoliberal emphasis on self-governance, and the pursuit of market efficiency. It argues that the largely positive terms in which the governance discourse is couched have obfuscated the political dimensions that underlie the limitations of current efforts to improve the functioning of national financial systems in developing countries. It seeks to explore the political underpinnings of market governance that manifest themselves in the primary role of the state in market destruction and creation, the politically sustainable balance of power between private interests and public authorities, and the distributive justice of institutional reforms. Drawing upon recent national experiences with financial reforms and crises in developing countries, the article highlights these three dimensions as the essential normative constructs of effective financial policy management and market governance in developing countries.