State institutions, risk, and lending in global capital markets

This paper examines one component of the expansion of global capitalism, the lending of capital across national borders and the affect of national political institutions and arrangements upon that lending. Global capital markets expanded rapidly during the latter part of the twentieth century, prompting discussions about the role of mobile capital. This contribution makes three key points to the understanding of globalization, its impacts, its causes, and its relationship to the nation-state, business and development. First, globalization is an uneven, bifurcated, phenomenon. Only a select group access these global capital markets, while many watch from the sidelines. Second, national political arrangements help us understand systematic disparities in access to global capital. National and local public policies, national political institutions, and other local activities prove instrumental in affecting access to global capital. Democracy and regulatory stability matter as they provide information to international investors about the risk to investments from local arenas. Third, the data presents a methodological obstacle in understanding how politics affects access to global capital. The structure of the data’s distribution can hide real relationships and pervert substantive interpretations if not managed. Without addressing the statistical concerns presented by the data the results would at worst be little more than garbage in, garbage out, and at best misleading.