Universität zu Köln

Fastenrath, Florian ORCID: 0000-0002-1939-9141 (2019). The Political Economy of the State-Finance Nexus: Public Debt, Crisis and Bank Business Models. PhD thesis, Universität zu Köln.

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Abstract

This dissertation aims at advancing our understanding of the state-finance nexus in times of globalized financial market capitalism. It sheds light on the profound changes that have occurred on both sides of this relationship since OECD countries have transitioned into debt states since the 1970s. This is done in a first part by examining the financialization of the state in the area of government debt management. Based on the development of a concept that makes it possible to measure this phenomenon, a discernible trend is shown according to which states have aligned their handling of debt with financial markets along two dimensions. First, the sense-making frameworks that guide action in debt management, nowadays, originate from financial economics, so that a portfolio view on indebtedness has found its way into the public realm. Second, the financial market has become the predominant governance mechanism in which economic coordination takes place in this area. Thus, states have increasingly adopted financial market logics and practices in public finance, one of the core areas of modern democracies. At the same time, governments have made a decisive contribution to the development of modern financial markets by the increasing orientation towards international investors and marketability of public debt. These interpenetrations of politics and finance are not limited to the national, but also extend to the subnational level. Local governments in Germany, the US and UK have introduced financial derivatives since the 1980s and continue to use them in some cases, even though they suffered major losses from these instruments during the financial crisis. By combining political economy with an economic sociological perspective, the causes that led to the local manifestation of this phenomenon are scrutinized. It is shown that the chronically underfinanced municipalities hoped to regain financial and political leeway through the use of financial innovations, which were strongly promoted and lobbied by financial institutions. The second part of the thesis analyzes the state-finance nexus from the perspective of the financial industry and the business with public debt, which is embodied in the emergence of pure public sector lending banks in the German mortgage banking sector. Unpacking the manifold state-banks relations demonstrates that the historical emergence of this crisis-ridden business model focusing on public finance closely interacts with the different roles played by the state in financial markets as economic policy maker, borrower, regulator and supervisor. The state is deeply involved in the process of coping with competition between banks by enabling change and stabilization of the social structures in which banks’ activities play out. Overall, this dissertation reiterates that the relationship between the state and finance is by no means one-sided, but rather characterized by mutual conditionality. It further highlights that the state-finance nexus is a complex configuration that also arises from the multilayered nature of the two entities themselves. Neither the financial sector nor the state are monolithic, but highly differentiated social arenas in which different actors and interests coexist. It is therefore of great importance that intra-state politics and dynamic relations within both entities are taken into account when studying relations between state and finance.

Item Type:	Thesis (PhD thesis)
Creators:	Creators Email ORCID ORCID Put Code Fastenrath, Florian fastenrath@wiso.uni-koeln.de orcid.org/0000-0002-1939-9141 UNSPECIFIED
Contributors:	Contribution Name Email Author in quotations or text extracts Trampusch, Christine UNSPECIFIED Author in quotations or text extracts Janssen, Agnes UNSPECIFIED Author in quotations or text extracts Schwan, Michael UNSPECIFIED
URN:	urn:nbn:de:hbz:38-98173
Date:	2019
Language:	English
Faculty:	Faculty of Management, Economy and Social Sciences
Divisions:	Faculty of Management, Economics and Social Sciences > Social Sciences > Political Science > Cologne Center for Comparative Politics
Subjects:	Social sciences Political science
Uncontrolled Keywords:	Keywords Language Finanzialisierung German Politische Ökonomie German Wirtschaftssoziologie German Staatsverschuldung German Kommunalfinanzierung German Öffentliches Schuldenmanagement German Deutsche Hypothekenbanken German Financialization English Political Economy English Economic Sociology English Public Debt English Municipal Finance English Sovereign Debt Management English German Mortgage Banks English UNSPECIFIED English
Date of oral exam:	24 April 2019
Referee:	Name Academic Title Trampusch, Christine Prof. Dr. Höpner, Martin apl. Prof. Dr.
Funders:	Deutsche Forschungsgemeinschaft (DFG)
Projects:	Municipalities and their Expectations on Pay-Offs of Swap Deals (Prof. Dr. Christine Trampusch)
Refereed:	Yes
URI:	http://kups.ub.uni-koeln.de/id/eprint/9817