Public Actors in Private Markets: Toward a Developmental Finance State

73 Pages Posted: 4 Mar 2015 Last revised: 24 Feb 2016

Robert C. Hockett

Cornell University - Law School

Saule T. Omarova

Cornell University - Law School

Date Written: June 1, 2015

Abstract

The nation's recent financial crisis brought into sharp relief fundamental questions concerning the social function and purpose of the financial system, including its relation to the "real" economy. This Article argues that, to answer these questions, we must recapture a distinctively American view of the proper relations among state, financial market, and development. This programmatic vision – captured in what we call a "developmental finance state" – is based on three key propositions: (1) that economic and social development is not an "end-state" but a continuing national policy priority; (2) that the modalities of finance are the most potent means of fueling development; and (3) that the state, as the most potent financial actor, both must and often does pursue its developmental goals by acting endogenously – i.e., as a direct participant in private financial markets. In addition to articulating and elaborating the concept of the developmental finance state, this Article identifies and analyzes the principal modalities through which the modern American developmental finance state operates today. Finally, the Article proposes three broad strategic extensions of the existing modalities, with a view to enabling the emergence of a more ambitiously proactive and effective developmental finance state – and thus rediscovering a truly public-minded finance.

Keywords: Assets, Banks, Crisis, Development, Development Finance, Employer of Last Resort, Fed, Federal Reserve, Finance, Financial Development, Financial Regulation, Golden Shares, Infrastructure, Infrastructure Banks, Infrastructure Finance, Labor Markets, Money, Open Market Operations, Regulation

Suggested Citation

Hockett, Robert C. and Omarova, Saule T., Public Actors in Private Markets: Toward a Developmental Finance State (June 1, 2015). 93 Washington University Law Review, 2015 . Available at SSRN: https://ssrn.com/abstract=2572635 or http://dx.doi.org/10.2139/ssrn.2572635

Robert C. Hockett (Contact Author)

Cornell University - Law School ( email )

Myron Taylor Hall
Cornell University
Ithaca, NY 14853-4901
United States

Saule T. Omarova

Cornell University - Law School ( email )

Myron Taylor Hall
Cornell University
Ithaca, NY 14853-4901
United States

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