The Rise and Fall of State Banking in OECD Countries

Abstract

State banking is the intervention of the state in the allocation of credit. State banking became important during the course of this century in some Organization for Economic Cooperation and Development (OECD) countries but not in others and then declined in the 1980s. Why? State banking was demanded by sectors that were pressed to invest but that could not find access to long-term credit because of the marginal importance of small and local banks in countries with centralized market and state institutions. The class cleavage enabled these groups to extract state banking from central governments thanks to their pivotal role in the Right-Left rivalry. The current demise of state banking reflects the shift from class to territorial modes of interest articulation in capital markets.

Market-based but state-led: The role of public development banks in shaping market-based finance in the European Union

“…Development banks have not figured greatly in studies of financialization and financial systems, mainly because they seemed to belong to a Gerschenkronian past of economic backwardness -at least in the core economies (see Verdier, 2000). With the recent crisis, development banks have been pushed by policy makers and academics alike as countervailing forces against the poor investment score and severe crises associated with financialization (cf.…”

Building a hidden investment state? The European Investment Bank, national development banks and European economic governance

“…3 However, this functional explanation misses important points about the institutional evolution of European economic governance and the historical trajectory of development banking in the European political economy. The fact that, before the crisis, state banking was severely under pressure of European liberalization policies and even declared near death (Seikel 2014;Verdier 2000) begs for historical and political placement of recent events. The outlined growth of the EIB and its national counterparts, this article therefore contends, is significantly rooted in two parallel processes of European integration.…”

Kicking away the financial ladder? German development banking under economic globalisation

“…Public development banks have historically been a key tool of industrial policy in both developing and advanced economies, including Korea, Japan, China, India, Brazil, the US, and France to name a few. Development banks acted as the state's agent for allocating long-term (often subsidised) credit to targeted industries considered vital for growth, but which the private sector was too risk-averse to finance (Amsden 2001;Kindleberger 2015;Mazzucato and Penna 2016;Mertens and Thiemann 2017;Verdier 2000). These banks do not necessarily need to have a large financing volume to be effective in influencing the sectorial allocation of resources 6 ; their finance is often concentrated in very large, economically important projects that have spill-over effects for the rest of the economy (Hopewell 2017), and they often play a catalytic role in attracting private sector finance to otherwise unattractive projects (Griffith-Jones 2016).…”

“…This is done through a focus on the activities of its largest national development bank, the Kreditantstalt für Wiederaufbau (KfW) 5 , from the post-war era to the present. Against the backdrop of IMF sponsored bank privatisation that has swept the developing world since the 1980s (Andrews 2005), and the sharp decline of state-owned banking across OECD economies under liberalisation pressures (Verdier 2000), Germany still retains the most nationally important state-owned development bank in the world when measured by total assets as a percentage of GDP. With total assets of nearly 500bn Euro, the KfW is even more important to its national economy than the BNDES or China Development Bank are to Brazil and China respectively (Humphrey 2015, 3), and is unique in terms of size compared to other advanced economy investment banks (EAPB 2016, 9-11).…”