The Financier State as an Alternative to The Developmental State: A Case Study of Infrastructure Asset Recycling in New South Wales, Australia

Abstract

As public debt rises, governments struggle to fund and finance new infrastructure. The past two decades have seen an increase in privatization of infrastructure assets and public private partnerships. However, alignment of interests between governments and private owners can be challenging. In addition, private investors’ appetite has so far been skewed toward existing assets, while development requires new infrastructure. The literature about the role of the state in development also warns about a failure of the private sector to fulfill governments’ development goals, and the need for a strong State to regulate the market in order to achieve development. A case study of the creation of a new coordination agency in New South Wales (NSW), Australia, offers a new perspective on how governments can lead development. Contrary to Evans’ model of Developmental Bureaucracy, NSW created an agency staffed by employees from the private sector. They also focused on making the best use of private interests to indirectly serve developmental goals, instead silencing private interests by means of a strong bureaucratic culture. The connections between public and private sectors are reminiscent of O’Riain’s Flexible State. However, this case transposes this theory to the strategic fields of private versus public sectors instead of local versus global. Finally, the power given to the coordinating agency is also crucial in this case, but we argue that government is an institution in Scott’s sense, and that normative and cultural-cognitive elements are also crucial in explaining the success of NSW in addition to regulative aspects identified in previous studies. This case study supports a new theory of developmental state which we call the “financier state”, in which Government uses the tools of global financial markets to achieve developmental goals. We describe “asset recycling” as one of such tools, successfully used by NSW to develop infrastructure.