The financialization of the state: Government debt management reforms in New Zealand and Ireland

Abstract

The financialization of sovereign debt management has received attention in comparative political economy studies. While previous studies have highlighted the cross-national commonality of this process and the congruence of interests between finance and governments, the analysis of the role of finance and state agency in domestic reform processes is still under-exposed. By analysing the financialization of government debt management in the two early adopter countries, New Zealand and Ireland, this study seeks to close this gap. The study shows that differences in the structure of financial markets and the civil service systems resulted in different policymaking processes through which Treasury civil servants brought financial economics into the reforms. In New Zealand, economists had an in-house position within the Treasury and were able to frame the decision-making process (ideational explanation), while in Ireland, finance successfully lobbied senior civil servants who sponsored these efforts (interest explanation). With this finding, this article reveals the multiple channels that lead to sovereign debt management financialization.

The political economy of local government financialization and the role of policy diffusion

“…Given the fact that it was foreign banks that started selling Lobo loans to English municipalities in the late 1990s, the demand for new Lobo loans might actually have been substantially decreased in those smaller councils when domestic banks started to participate in the market. Third and finally, recent research by Trampusch (2019) suggests that finance uses different channels to drive the process of financialization: next to the means of structural and instrumental power, state financialization can also be increased by financial industry experts who are already part of the state apparatus. If this interpretation was correct, the interaction term (power*size) would actually be less a proxy for the interaction between finance power and government size but rather a proxy for local governments' capacity to poach financial experts from local financial services firms – it is more difficult to attract professional financial experts from a well‐developed local financial sector in small‐ and medium‐sized local governments compared to larger ones, which can offer higher salaries and better career opportunities in their treasury departments.…”

“…Only very recently have scholars started to conceptualize and describe the process on the national (Lagna 2016; Fastenrath et al . 2017; Trampusch 2019) and the subnational levels (Pacewicz 2013; Hendrikse & Sidaway 2014; Hendrikse 2015; Lagna 2015; Kirkpatrick 2016; Fastenrath et al . 2018).…”

Foreign bond investors and market discipline

“…Alongside broader institutional and managerial changes in public debt management (e.g. Dutta, 2018; Fastenrath et al., 2017; Trampusch, 2019), debt management in advanced economies has actively courted foreign investors, notably via changes in debt products (what is sold) and changes in the marketing thereof (how they were sold). To give an example of the first channel, according to Tetsuya Miura, chief bond strategist of Mizuho Securities in Tokyo, ‘foreign investors, especially those in the UK, love inflation-linked bonds’ (cited in Hayes, 2013).…”

Marketizing Sovereign Prerogatives: How to Sell Citizenship

“…In the process, the state begins to react as homo economicus, pursuing its own financial benefit even as it serves as the key market regulator. The result of the conflicting roles is a "Janus-faced" agency-that of sovereign and market actor-as the state balances conflicting interests [Livne and Yonay 2016: 340, 359; see also Trampusch 2019]. The authors let the observation stand as symptomatic of neoliberalization in order to explore other questions; they do not highlight how it challenges market-making itself or probe how it is resolved to the satisfaction of other market actors, enabling business to continue.…”