Financial activism against the neoliberal backdrop : tracing institutional variation in development finance in East-Central Europe

Abstract

The last decade bears witness to increasing financial activism: various governments react to the shortcomings of de-regulated financial markets by becoming active as market participants themselves. This is no less true in East-Central Europe (ECE), where responses to the pitfalls of the status quo include increasing domestic and/or public shares of bank ownership, and the expanded activity of development banks. Research on these measures highlights their most prominent representations – notably the measures enacted by the right-wing governments in Hungary and Poland – and explains them in the context of changing economic policymaking paradigms by emphasising ideological shifts, discontent among the electorate, and the interests of domestic businesses. This dissertation aims to fill two blind spots in these accounts. First, the focus on Hungary and Poland cannot account for the full range of measures that diverge from the neoliberal status quo: a variety of governments engage in similar measures, while others follow such paths less successfully, and yet others refrain from any reform efforts altogether. This constellation is highlighted by a comprehensive overview of measures related to financial activism in the region. Second, the advanced explanations underemphasise the importance of the state as an actor tasked with implementing such policy in an increasingly complex environment. This emphasis is adopted by comparing Poland as a case of successful financial activism to Romania as a case of an attempted imitation of the Polish case with only limited success. Substantively, the analysis considers the management of financial instruments included in the European Structural and Investment Funds (ESIF) and the underlying institutional structures as suitable examples of financial activism more generally. The comparison highlights the importance of capacity in explaining the observed variation and stresses the pitfalls of the institutional approaches in both countries in terms of the autonomy of the bureaucracy.