Financial Globalization and the Partisan Preferences of Capital

• In Event: Political Economy of Sovereign Debt and International Finance

Abstract

Do international capital flows favor right-wing governments and parties? While there is scholarly consensus that financial integration empowers corporate actors and owners of mobile assets, existing research has yet to unpack the causal mechanisms that link global financial flows to heightened corporate influence over national election outcomes. This paper examines how international capital flows affect the electoral chances of right-wing parties. I argue that favorable external liquidity conditions increase the resources available to firms with access to international capital markets. This excess supply of capital translates into increased campaign contributions to market-friendly candidates from the right. Using firm-level data on political contributions in the context of Brazilian federal elections for the period 1994-2018, I show that capital inflows increase contributions to right-of-center parties from firms with greater exposure to external financial conditions, as captured by credit ratings, foreign indebtedness, and export revenues. The findings document a specific channel through which financial globalization affects the political influence of firms and highlight some of the challenges of democratic accountability in a financially-integrated world.

Author

• Raphael Cunha, Florida State University