State-owned banks and development: Dispelling mainstream myths

Thirty years of neoliberal restructuring have side-lined alternative financing practices, and propagated mainstream myths about state-owned banks. This paper examines these neoliberal claims, arguing instead that public financing remains a crucial part of progressive, sustainable and democratic strategies for investments in long-term development and infrastructure. Drawing on past and present case studies, as well as theoretical literature on finance, the paper points to the potential to revive and improve state-owned banking as a viable option for financing public services

Banking on Alternatives to Neoliberal Development

It is a far from widely shared proposition that banks should have anything to do with any alternative to neoliberalism in the developing world, let alone facili- tate any substantive break with capitalism’s social relations of power, production and oppression. This is despite 25 per cent of all financial institutions globally remaining state-owned (and hence potentially more open to democratic control) and despite banks continuing to play a central role in developing and emerging capitalist societies. There has been a near systemic neglect of banking and financial alternatives in the field of development, most strikingly among radicals. Many scholars, activists, unions and social forces that take the question of alternative development seriously focus on workers’ control of the productive apparatus. Yet neither in historical practice nor in theory is there much basis for this financial blind spot. From the experiences and experiments of ‘less-than- liberal-capitalist’ banking systems in societies as diverse as China, Cuba, Vietnam and Venezuela to the analytical works of Marxists like Rudolf Hilferding, V. I. Lenin, Makoto Itoh and Costas Lapavitsas, banking systems not fully subordi- nated to profit and competitive imperatives have been understood as integral to potentially socialist projects

State-Owned Banks and Development: Dispelling Mainstream Myths

Thirty years of neoliberal restructuring have side-lined alternative financing practices, and propagated mainstream myths about state-owned banks. This paper examines these neoliberal claims, arguing instead that state-owned banks can remain a crucial part of progressive, sustainable and democratic strategies for investments in long-term development and infrastructure. Drawing on past and present case studies, as well as theoretical literature on finance, the paper points to the potential to revive – and improve – state-owned banking as a viable option for financing public services. To this end the chapter dispels nine popular neoliberal claims about state-owned banks while discussing how state-owned banks have undergone neoliberal restructuring processes such as marketization and corporatization in ways that nonetheless challenge their status as ‘public’ banks. To illustrate, the chapter looks at imperfect, but telling or inspiring examples from Brazil, China, Costa Rica, India, South Africa, Turkey and Venezuela, among others