Close entanglements: aligning the construction and finance industries

Abstract

The construction industry has two major institutional supporters in (1) the sovereign state, whose political entities render affordable housing and the supply of credit a core component in modern statecraft, and (2) the finance industry, which rely on the construction industry for high-quality collateral in forms of real estate, and which also expand the stock of credit in the economy. In this finance capital creation role, the finance industry makes many construction industry projects realizable and attractive investment objects. Construction management scholarship has neither ignored nor understated governance issues, but closer attention should be given to the intimate relationships and co-dependencies across formal industry boundaries. The article stresses how the expansion of the securities industry has been a key mechanism for integrating construction and finance industries more closely, offering various joint benefits that materialize as both desirable and more cumbersome and unanticipated economic consequences. The article argues, however, that while securitization increased the stock of finance capital and the liquidity, the Global Financial Crisis of 2008 indicated that this new integration of construction finance and the state resulted in an unstable and risky nexus. That nexus has since been consolidated, but the open question is whether it has been stabilized.