What is local government financialisation? Four empirical channels to clarify the roles of local government

Abstract

Recent literature at the nexus of geography and political economy notes that local governments are becoming financialised. But it is not always clear what this means. Specifically, what is being financialised? And what is the role of local governments in this process? Building on Whiteside’s (2023) definition of local state-led financialisation as enabled and internal, this paper combines a systematic literature review with the comparative analysis of country-level statistics to clarify this process further. It identifies four channels through which local government financialisation unfolds empirically. First, local governments enable the financialisation of public assets and services through privatisation, outsourcing, and by applying financial principles to land use planning. Second, they borrow against their own assets. Third, local governments use bonds and derivatives to manage risks and costs of their borrowing. Fourth, they invest to generate financial income. Focussing on high-income countries in Western Europe, the paper extends the geographical remit of the US- and UK-centric literature. Building on its findings, the paper highlights two avenues for further research. First, internationally comparative research can explore how the structural context in which local governments operate shapes their financialisation. Second, critical research into the tension between objectives and risks of local government financialisation adds nuance to current debates.