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Financialising the State: Recent developments in fiscal and monetary policy

– Ewa Karwowski, Marcos Centurion-Vicencio –

The financialisation of the state is widely assumed but rarely analysed in detail. After all it is rather difficult to imagine that “the role of financial motives, financial markets, financial actors and financial institutions” (Epstein 2005: 3) can increase in importance without at least some support from public policy and institutions in this process. The recent collapse of the UK construction company Carillion, a major beneficiary of public service provision contracts, is a painful illustration that financialisation can have a profound impact on society through the state: thousands of private-sector jobs have been lost.

However, much of the research on financialisation either leaves out the state entirely or simplistically assumes that the ‘rentier’, representing global financial elites, undermines production, dominates distribution and captures the state. To tackle this simplistic view, which omits state institutions’ (heterogeneous) interests and agency, this paper provides a structured overview of the nascent research area of financialisation and the state. We focus on the macroeconomic functions carried out by state entities: fiscal and monetary policy. We define financialisation of the state broadly as the changing relationship between the state, understood as sovereign with duties and accountable towards its citizens, and financial markets and practices, in ways that can diminish those duties and reduce accountability.

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