The Structural Power of Finance
The Structural Power of Finance
It has been established that power lies at the heart of the sovereign debt puzzle. This chapter asks: What are the precise mechanisms through which finance exerts its power? Under what conditions are these mechanisms likely to be effective, and under what conditions are they likely to break down? How have these dynamics been impacted by the globalization and financialization of the capitalist economy in recent decades? And what, if anything, can still be done to counteract the power of finance from below? It is argued that a distressed sovereign borrower will only choose to renege on its financial obligations if the social costs of repayment have become unbearable and citizens threaten to withdraw their loyalty to the state. Only in the context of a destabilizing legitimation crisis and a citizens' revolt from below will the administrators of a contemporary “debt state” ever contemplate defying their private creditors by defaulting on their financial obligations.
Keywords: sovereign debt, finance, power, globalization, capitalist economy, social costs
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