UCLA

Facing unsustainable economies, why are some regimes successful in recovering by instituting drastic reform of the economic system, while others fail? If a country's leaders implement some reforms, why do they later reverse them? Why do some governments that come to power on mandates to reverse reform not fulfill their promises? Some scholars argue that government leaders' ideologies strongly influence their economic policy decisions. Others argue that ideology does not matter in developing countries because ideologically defined parties do not follow their ideologically framed preference after they come to power. For example, the first group of scholars would consider President Menem's drastic economic reform a major deviation from his party but identify as an outlier. On the contrary, the latter group would identify the occasion as an example of how ideology does not matter in developing democracies.

This dissertation asks an empirical question: does ideology really influence economic policies in developing countries? My view is that during economic crisis, partisanship does not impact governments' efforts to correct the failing economic situations. This in turn leads to another empirical question: what systematic factors make ideology irrelevant in economically dismal times? When testing the impact of partisanship on economic policy, the literature usually treats government as one entity and scholars use the percentage of left or right in legislature as a proxy for ideological orientation of government. However, I suggest disaggregating government into at least two entities: executive and legislative and looking at agenda setting executives' and government parties' ideologies separately. History has shown that in some presidential systems executives often times deviate from their own party agenda. I argue that it is not because ideology does not matter in developing democracies that governments tighten their budget and adopt structural adjustments, but rather it is because the calculation of costs and benefits change due to external pressure and failing economy. Economic crisis renders the status quo unsustainable and beneficial to nobody so that coalitions of interests and veto players, which blocked or wished for reversal, will no longer exert their oppositions, and we see less of ideological influence on economic policies.

To test the validity of my arguments, I conduct statistical analyses on the panel data of developing countries. I use several measures of ideology: executive party's ideology regarding economic policy, the usual percentage of left in legislature, the existence of left-wing veto player in legislature, and the categorized percentage of left in legislature. I use the measures of inflation, external debt as % GDP, and official development aid as % GDP to define economic unsustainability. I test how ideology and economic unsustainability affect the executives' efforts to reform, which I indexed by investigating the executives' proposals and statements and Economist Intelligence Unit's reports. Then, I test how ideology, economic unsustainability, and the executives' reform efforts affect the level of budget balance. Lastly, I disaggregate budgets to study whether partisanship affects social spending as government's way to compensate the group that lose most from reform. I find that at the end, both left-wing and right-wing increase social security and welfare spending when government initiate reform during economically difficult times.