During the past two decades, governments across the developing world have implemented many liberal economic reforms, including microeconomic policies that reduce direct state intervention in different industries. Capital account liberalization, stringent rules for the protection of intellectual property rights, and liberal investment rules have overhauled the economies of dozens of developing countries. Yet liberal reforms have also provoked intense political controversy. Their detractors mobilize against the implementation of reforms and campaign to depose national leaders who promote these r ... More

During the past two decades, governments across the developing world have implemented many liberal economic reforms, including microeconomic policies that reduce direct state intervention in different industries. Capital account liberalization, stringent rules for the protection of intellectual property rights, and liberal investment rules have overhauled the economies of dozens of developing countries. Yet liberal reforms have also provoked intense political controversy. Their detractors mobilize against the implementation of reforms and campaign to depose national leaders who promote these reforms. Why do some leaders implement economic reforms, while others continue to rely on state intervention? These choices have immense consequences for the livelihoods of billions of people around the world, but the drivers of economic reform remain poorly understood. This book shows that international institutions—formal agreements that govern policy formation in member states—made possible some of the most important reforms in developing countries. These institutions enable economic reform by allowing leaders to credibly commit to liberal policies and by creating domestic political support for reform. Specifically, the book shows that leaders have used preferential trading agreements with the European Union and the United States to promote liberal economic policies. Among international institutions, EU and US trade agreements prescribe unusually deep economic reforms. At the same time, their bilateral nature allows leaders in developing countries to engage in negotiations when they are needed the most.