Political Economy of Macroeconomic Policymaking: Economic Crises and Technocratic Governance

How do economic crisis affect national-level policy choices? Are technocratic advisors more likely to enter government during periods of severe economic volatility? If so, how does such governance affect economic policymaking and social responsiveness? In this paper, I evaluate the role of technocratic advisors on Latin American reforms. Building on the political psychology literature, I argue that collective crisis memories in technocratic communities have a disproportionate influence on elite-level policymaking. Employing an originally constructed data index, the Index of Economic Advisors, I conduct a large-N cross-national test from 1960-2011 to examine whether economic crisis lead to more technocrats serving in presidential cabinets, and find that crises often professionalize presidential teams. The statistical results also show that technocrats' governance approaches are conditioned by the nature of past shocks. An inflationary crisis history makes budget austerity more likely. Deflationary spirals have been far less common in Latin America, but comparative case study evidence of Argentina in the early 2000s shows that these shocks often catalyze sustained fiscal expansion. This investigation has significant implications for the study of democrazy and development. Technocratic governance might help provide economic stability following crises, but an enduring political focus on past crises can limit policy flexibility and social responsiveness.