Abstract:
Local governments have increasingly embraced financial engineering in times of austerity. The characteristics and causes of this process have been examined under the concept of state financialization in a recently growing multidisciplinary literature. It remains puzzling, however, why a dramatically failed financialized approach to public finance in some cases leads to definancialization, while in others it proves to be resilient. Drawing on two comparative case studies of policy responses to crisis situations arising from the use of opaque financial instruments (swaps) at the local level in Germany and the US, this chapter examines the conditions leading to these different patterns of policy change. By bridging approaches to policy change after crisis with current research on fictional expectation formation, the chapter points to the centrality of the “politics of expectations.” Policy outcomes are the result of fierce struggles between financial experts and civil society actors to influence decision-makers’ expectations in times of fundamental uncertainty.
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Fastenrath, F., Trampusch, C. & Janssen, A. (2025). “The Politics of Expectations in Local Government. (De-) Financialization Processes in the US and Germany”. In The Routledge Handbook of Economic Expectations in Historical Perspective. New York: Routledge. 578-598. DOI: 10.4324/9781003379010-36