Financialization and local statecraft: Truth and consequences

Introduction

The mid-20th century American game show Truth or Consequences asked contestants for the right answers to trivia questions; failure forced participants into zany stunts for audience amusement. In an entrepreneurial flourish fit for a forlorn county seat of a few thousand people, Hot Springs, New Mexico adopted the show’s name to generate local income and broader interest. The desert outpost remains a destination for travellers today seeking out its well-photographed town sign (this author included), long after the game show’s run. As a local development strategy, the gimmick may have failed to produce secular growth, but it did nudge a short-lived population bump and augurated an annual Fiesta, so at least it was a lighthearted scheme.

Local officials taking up new strategies in their zest for success can engender far more dire consequences for people and their towns. Topping the list of concerns just might be the UK local councils’ roughly £100 billion owed to lenders in 2024 for failed development gambits (Thomas and Lynch, 2024). Debt obligations totalling nearly £1400 per person have led to various technical bankruptcies (England’s section 114 notices) and promise deep austerity in the future. Credit rating agency Moody’s centrally blames poor governance and reliance on faulty assumptions that are no longer tenable in the face of inflation, property value erosion, cuts at the national level, and higher interest rates (Bentley, 2024; Partington, 2023; Thomas and Lynch, 2024).

Pike’s (2023a) Financialization and Local Statecraft enters the debate to challenge the popular account of local officials as ‘councillors at the casino’, as if public fortunes are being recklessly and haplessly gambled by inept local authorities stumbling into the sophisticated world of high finance. Pike builds an alternative argument around differentiated local sector strategies (arranged in intensity from vanguard to intermediate to long-tail), acknowledging both local governments’ agency and constraints. In the face of decades’ long changes in England’s local public sector and forms of statecraft amid financialization, commercialization, and austerity, Pike’s book aims to develop a theory of local statecraft and to account for how local states have engaged in these late modern capitalist dynamics since at least 2010 (Pike, 2023a: 13).

Responding to the call for historicization, reading Pike’s new book led me to dust off two harbinger texts of the early neoliberal period: Susan Strange’s Casino Capitalism published in the mid-1980s, and David Osborne and Ted Gaebler’s Reinventing Government from the early 1990s. History not only matters for empirical issues, so too does the legacy of received ideas and imparted wisdom. In this review essay, I will situate Pike’s findings on contemporary financialized local statecraft within these early tales of neoliberalism and their implications. In so doing, I hope to show that perceived truths have wrought long-run consequences. Given that truth is a slippery concept, rather than offering ‘the’ truth, I focus on narratives of what to do and what went wrong, an aspect connecting Pike’s book to work on ideational economic geographies (Phillips et al., 2025).

Games of chance structure the theme of this review essay. Most directly, the subject matter here concerns high stakes games of global financialized capitalism and the chances taken on neoliberal governance strategies by local officials. Similie and metaphor are also on offer: mantras of local statecraft reinvented by appeal to crisp rational market efficiencies meet their match in the smoky haze of bells and buzzers, a whizzing rattling capitalist casino where the house never wins, and bankruptcy is an unloved daylight twin. Upending these unhappy dynamics, a fate worse than debt might await.

The house never wins?

The term ‘casino’ is mentioned more than a few dozen times in Pike’s (2023a) book; ‘throw of the dice’ (Pike, 2023b) and ‘local public service gamble’ (Pike, 2023c) are similar games of chance-style evocations mentioned in related writing. Unlike popular discourse, Pike’s (2023a) findings point to history and heterogeneity, a ‘Differentiated landscape of local statecraft engagements with financialization since 2010’, pushing back on the convenient castigation of ‘councillors at the casino’ (p. 17).

The early days of deregulated global finance were dubbed Casino Capitalism (Strange, 2016 [1986]) as well, in that instance used to describe the instability associated with the shift away from the national capital controls that were a feature of the Bretton Woods era. Pike cites Strange once on page 3 but, perhaps owing to the challenge posed to the councillors at the casino depiction underpinning Financialization and Local Statecraft, his book does not engage the casino metaphor. Here Pike is closer to Strange than one might anticipate; Strange does not explore the ‘casino’ concept either, focusing instead on consequence (crisis) rather than process (casino). Even Matthew Watson’s Introduction to the book’s 30th anniversary (Strange, 2016 [1986]) cautions that Casino Capitalism has limited direct applicability to the inner workings of financial markets, technological change, and participants’ motivations.

Whatever the intellectual limitations of casino as metaphor, the Strange times continued unabated over the 1990s as global financial market innovation and expansion pushed volatility and crisis to new heights with higher stakes. In 1998, US Federal Reserve Board Chairman Alan Greenspan argued, presumably with a straight face, ‘This burgeoning global system has been demonstrated to be a highly efficient structure that has significantly facilitated cross-border trade in goods and services and, accordingly, has made a substantial contribution to standards of living worldwide. Its efficiency exposes and punishes underlying economic weakness swiftly and decisively’. Greenspan’s testimony, called upon in the context of the disastrous 1997 Asian Financial Crisis, would also force the concession, ‘Regrettably, [financialization] also appears to have facilitated the transmission of financial disturbances far more effectively than ever before’ (Greenspan, 1998).

ASEAN countries like South Korea lost a third of their GDP in 1997–1998, upping the ante for proponents of globalized finance. Blame was cast alternately on weak international financial market oversight (global governance) or domestic ‘crony capitalism’ (national governance) like give-aways to political allies and relatives, corrupt behaviour, moral hazard, misallocation of investment, lack of transparency, and dirigiste policies. Either way, the house (if the state and its statecraft), not the game (if global markets and financial flows), was marked for bust.

A dozen years later, the crony capitalist concept and its sentiment were echoed in a 2010 piece by The Economist where ‘Local [English] governments were depicted as being bamboozled and fleeced by financiers and the houses of finance capital . . . financial innovations and their risk have ended up with those “least able to understand it” rather than those “best qualified to hold it”’ (quoted in Pike, 2023a: 3). Twas ever thus? Just as in 1997–1998, poor public governance and debt mismanagement by local English councils aggravates the whirl of market conditions (Partington, 2023) and ‘. . . the UK government continues to explain financially failing local councils as the result of locally particular bad decisions, poor culture, and weak governance and leadership’ (Pike, 2023c). To know more about the local governance play that encouraged new types of risky statecraft, we next turn to the ideas underpinning these losing strategies.

The bankruptcy of bureaucracy?

Whether financialized governance failures are conceived of as an aberration (conniving cronies) or inherent (a feature not a bug) to late modern capitalism, events today equally unfold through the long run consequences of neoliberal-style public administration reforms known as New Public Management. Reinventing Government (1992) is cited but twice in Pike’s book, although its shadow looms large. Offering a vision and a road map, private sector consultants David Osborne and Ted Gaebler catapulted to international influence in public administration circles by promoting an ‘entrepreneurial spirit’ in local statecraft through buzzy mantras like ‘catalytic government’, ‘competitive government’, ‘customer-driven government’, ‘enterprising government’, and ‘market-oriented government’. With its catch phrases still repeated today through easy slogans like ‘steering not rowing’, Reinventing Government has been described as the bible for some local managers (cited in Whiteside, 2019: 10), bringing the macroeconomic spirit of Smith, Hayek, and Friedman to the heart of the public sector.

Osborne and Gaebler’s (1992: 31) ‘many arrows in the quiver’ groups public sector fiscal activity into three parts: traditional, innovative, and avant-garde. Traditional captured the staid realm of taxes, grants, subsidies, loans, and licensing; innovative included public-private partnerships, vouchers, and technical assistance; avant-garde featured seed money, equity investments, and property sales. In a sense, all three categories now ought to be considered largely ‘traditional’ given their decades-long normalization. Pike’s (2023a) three categories of long-tail, intermediate, and vanguard financialized statecraft could be usefully mapped onto Osborne and Gaebler’s traditional, innovative, and avant-garde fiscal activities, if not directly then at least in principle. The intention of Reinventing Government was to shape statecraft as much as it was to indicate sources of revenue. Channelling frustrations with the traditional bureaucracy, a 1980s’ report by the once deputy prime minister of Canada Erik Nielsen made the rather suggestive claim that, ‘design [consultants] in the government are like eunuchs in a harem, they get to see all the action but cannot participate’ (Nielsen, 1986: 59).

If there is one foreboding parable in the bible of New Public Management most relevant to Financialization and Local Statecraft, it must certainly be the idea that an ‘enterprising government’ should be ‘earning rather than spending’ by ‘searching for nontax revenues’ (Osborne and Gaebler, 1992: 196). The possibilities for nontax revenues in the early 1990s took many forms but essentially boiled down to selling government services to collect user fees from the public (Osborne and Gaebler, 1992: 197). Updated some decades later, in 2012, then Communities secretary Eric Pickles encouraged [England’s] council leaders to ‘make creative use of reserves’ including ‘invest-to-save projects’ (Thomas and Lynch, 2024). By 2025, ‘creative use’ had reached the dead end of debt for the vanguard.

Even today, local governments are hampered by their limited range of fiscal options (Whiteside, 2023), are price takers in terms of monetary policy, and, for small jurisdictions, the opportunity for substantive state capitalism is abrogated (Whiteside et al., 2023). What the local state can do, especially when dealing with austerity from above (Bentley, 2024), is commercialize and financialize its activities. Pike (2023a) makes the useful distinction between financialization and commercialization and provides readers with a breakdown of the measures taken by local English states in their search for nontax revenues. Thirty years of government reconfigured as a catalyzed helmsman, a mission-driven enterpriser seeking preventions rather than cures, or forming teams not hierarchies, have fizzled into a bankrupt bureaucracy in more ways than one. If the early 1990s bureaucracy was said to be figuratively bankrupt for its distinct ethos of ‘slow, inefficient, impersonal’ (Osborne and Gaebler, 1992: 14), the 2020s bureaucracy is bankrupt quite literally for its embrace of both the unsettled and unsettling. The dirge-hummed dance of high finance and low-level bureaucrats (The Economist, 2010: 78) fills the casino air.

A fate worse than debt?

‘The question is, how much further can you go?’ asks Mr. Carr-West, chief executive of the Local Government Information Unit, ‘we trimmed the fat a decade ago. And then we trimmed the flesh. And now we are just right down to the bone’ (quoted in Bentley, 2024). A playbook exhausted, rehearsed neoliberal bromides ring hollow and fraudulent given massive corporate bailouts and a lack of tangible benefits over decades of restructuring. Where sober minds like Australian Prime Minister Hawke (1989) once spoke confidently of the ‘inefficiencies of excessive regulation’, ‘expensive spiral of government assistance’, and ‘the drain and danger caused by excessive federal budget deficits’, Pike (2023c) warns of ‘local councils appear[ing] to be running out of road as they struggle to manage growing funding gaps and greater risks amidst rising service demands and inflation’. For those familiar with Harvey’s (2006) temporal fix, a stretched out time horizon for fictious capital can stave off crisis by pushing it into the future, but value at some point does have to be realized for a fix to not become a drag. Debt weighs like a nightmare.

And yet, for all its complexities, the simple truth of financialization is that for every debtor there is a creditor. Just as Max Weber pointed to double entry bookkeeping as an enabling condition of capitalism, so does the fact remain that one side of the ledger benefits enormously from volatility and bankruptcy. Susan Strange well knew that bankers were profiting from the casino just as plainly as Las Vegas experiences every bust as a boon. For Pike (2023a: 16), using Jessop’s (2016) strategic relational approach, the local state ought to be understood theoretically ‘as a social relation constantly remade through the agency of state personnel’. The relations at play with debtor-creditor arrangements are quite a bit more tangled today than ever – especially when we consider that pension funds are often the creditors for local state financialization schemes.

Itself inaugurated through the crisis-riddled decade of the 1970s, early neoliberal discourse still allowed for John Maynard Keynes’s observation that countries in surplus were the other side of the deficit coin. As William E. Brock, US Trade Representative and Chairman of the Cabinet-level Trade Policy Committee in the early 1980s, put it, ‘[indebted] countries must be able to sell their goods abroad to service their debts. If their access to industrial countries’ markets is impaired through protectionism, the developed world will be condemning indebted nations to perpetual financial crisis’ (quoted in George, 1990: 58). The bankruptcy of neoliberal ideas and policies today has made room for an exit from the casino of an even more unsavoury kind. US President Donald Trump too understands that a trade deficit for one equals a surplus for another, and his vision of fused imperialist-mercantilist beggar-thy-neighbour aggression may know no bounds. Applying the insights of Financialization and Local Statecraft, where governance is shaped by both public and private actors, with an emphasis on differentiated strategies, local statecrafters may soon face a fate worse than debt if the relations of penury imposed by their national states become generalized at the global-national scale. What truth and which consequences are in store for struggling local states in an era shaped more by Thomas Hobbes than John Locke remain to be seen, but the odds of winning aren’t great.