Beyond Market Failures: The Market Creating and Shaping Roles of State Investment Banks

Recent decades witnessed a trend whereby private markets retreated from financing the real economy, while, simultaneously, the real economy itself became increasingly financialized. This trend resulted in public finance becoming more important for investments in capital development, technical change, and innovation. Within this context, this paper focuses on the roles played by a particular source of public finance: state investment banks (SIBs). It develops a conceptual typology of the different roles that SIBs play in the economy, which together show the market creation/shaping process of SIBs rather than their mere "market fixing" roles. This paper discusses four types of investments, both theoretically and empirically: countercyclical, developmental, venture capitalist, and challenge led. To develop the typology, we first discuss how standard market failure theory justifies the roles of SIBs, the diagnostics and evaluation toolbox associated with it, and resulting criticisms centered on notions of "government failures." We then show the limitations of this approach based on insights from Keynes, Schumpeter, Minsky, and Polanyi, as well as other authors from the evolutionary economics tradition, which help us move toward a framework for public investments that is more about market creating/shaping than market fixing. As frameworks lead to evaluation tools, we use this new lens to discuss the increasingly targeted investments that SIBs are making, and to shed new light on the usual criticisms that are made about such directed activity (e.g., crowding out and picking winners). The paper ends with a proposal of directions for future research

Government intervention and financial sector development

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Environmental Policies in the Lula Era: Accomplishments and Contradictions

In the last few decades, environment has become a contentious theme in Brazil’s national politics. The country’s environmental challenges are directly linked to its vibrant economic growth, which relies on primary industry with significant and growing energy demands. The increasing share of commodities in export value, from 23 percent in 2000 to 46.7 percent in 2012, has driven the so- called ‘ re- primarization’ of the economy (Figure 10.1). The national development program (Growth Acceleration Program), based on the expansion of agricultural land, energy production and infrastructure, has sparked harsh criticisms from civil society organizations and environmentalists regarding negative impacts such as biodiversity loss, erosion of ecosystem services and social disruptions (Fearnside, 2006; Zhouri and Laschefski, 2010). At the same time, the country hosts approximately 65 percent of a mega-biodiversity biome and important carbon sink, which makes land cover change a key environmental concern at the global scale. Pressured by its uncomfortable position as one of the top greenhouse gas (GHG) emitters, mostly from deforestation and land use (La Rovere et al., 2013), the government faces major conflict between carbon mitigation policies and the national development agenda, based on expansion of extractive industries

On Agon and Ecosophical Endurance: Finding Your Own Pace

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