Further insights can be gained from other branches of the literature. The ‘fiscal
sociology’ of the 1970s and 1980s remains relevant. Maxfield (1991, p422) argues
that:
the ability of financiers to influence public policy results from the strategic
interaction between revenue-raising states and private holders of relatively
liquid assets . . . To the extent that capital is mobile, and government
depends on financial contributions from holders of mobile assets, we will
always find financiers shaping government policy.
25
Given the huge growth of financial sectors and the removal of restrictions on
international capital mobility, it seems highly likely that the ‘structural power’ of
finance (Winters, 1994) has increased.
As well as explaining how national regulations became increasingly liberalized,
particularly in jurisdictions with major financial centres, it is important to understand
how these norms are transmitted to other countries, particularly poorer countries
with immature financial sectors.
On this question, a rich and varied literature on the international diffusion of
ideas has developed. Simmons et al. (2008) identify four strands of this literature
that may have encouraged liberalization: coercion, competition, learning and
emulation. On the first of these, Simmons et al. (2008, p11) suggests:
The diffusion of economic liberalization is thought by many to be the
outcome largely of coercive pressures . . . The logic is straightforward.
Developing countries need financial assistance from the strong either to ward
off crises or to make infrastructural investments that are hard to fund through
private markets. Lenders, however, then condition their financial support on
domestic economic reforms they deem desirable – macroeconomic
stabilization, free trade and cross-border capital movements, privatization and
deregulation.
‘Coercion’ need not be overt, but may result from the spread of ‘hegemonic ideas’.
Here, the idea of liberalization is increasingly accepted, not least because of the
powerful actors promoting these views.
26 As well as more formal channels, an
important transmission mechanism may be the ‘epistemic community’ (Haas,
1980) of economists. Chwieroth (2007), for example, shows how US-trained
economists played a prominent role in capital account liberalization in developing
countries.
Other strands of the diffusion literature stress the role of choice, albeit heavily
constrained ‘choice’. The mobility of international capital, for example, encourages
competition between countries to implement ‘market-friendly’ policies, particularly
financial liberalization, and the reduction of tax rates (Jenson, 2003, cited in Simmons
et al., 2008). A third mechanism is where governments learn from the experience
of other countries which policies are likely to work (Simmons et al., 2008).
Financing green transformations 165
sociology’ of the 1970s and 1980s remains relevant. Maxfield (1991, p422) argues
that:
the ability of financiers to influence public policy results from the strategic
interaction between revenue-raising states and private holders of relatively
liquid assets . . . To the extent that capital is mobile, and government
depends on financial contributions from holders of mobile assets, we will
always find financiers shaping government policy.
25
Given the huge growth of financial sectors and the removal of restrictions on
international capital mobility, it seems highly likely that the ‘structural power’ of
finance (Winters, 1994) has increased.
As well as explaining how national regulations became increasingly liberalized,
particularly in jurisdictions with major financial centres, it is important to understand
how these norms are transmitted to other countries, particularly poorer countries
with immature financial sectors.
On this question, a rich and varied literature on the international diffusion of
ideas has developed. Simmons et al. (2008) identify four strands of this literature
that may have encouraged liberalization: coercion, competition, learning and
emulation. On the first of these, Simmons et al. (2008, p11) suggests:
The diffusion of economic liberalization is thought by many to be the
outcome largely of coercive pressures . . . The logic is straightforward.
Developing countries need financial assistance from the strong either to ward
off crises or to make infrastructural investments that are hard to fund through
private markets. Lenders, however, then condition their financial support on
domestic economic reforms they deem desirable – macroeconomic
stabilization, free trade and cross-border capital movements, privatization and
deregulation.
‘Coercion’ need not be overt, but may result from the spread of ‘hegemonic ideas’.
Here, the idea of liberalization is increasingly accepted, not least because of the
powerful actors promoting these views.
26 As well as more formal channels, an
important transmission mechanism may be the ‘epistemic community’ (Haas,
1980) of economists. Chwieroth (2007), for example, shows how US-trained
economists played a prominent role in capital account liberalization in developing
countries.
Other strands of the diffusion literature stress the role of choice, albeit heavily
constrained ‘choice’. The mobility of international capital, for example, encourages
competition between countries to implement ‘market-friendly’ policies, particularly
financial liberalization, and the reduction of tax rates (Jenson, 2003, cited in Simmons
et al., 2008). A third mechanism is where governments learn from the experience
of other countries which policies are likely to work (Simmons et al., 2008).
Financing green transformations 165