Economic crisis, global financial cycles, and state control of finance: public development banking in Brazil and South Africa

In the aftermath of recent crisis, national governments across the global south increasingly see state ownership and control of finance as a vital public policy tool. What explains variation in state control of finance in the wake of crisis? Interventionist policies can elicit disinvestment or exit threats from private financial actors if they limit profitability. When disinvestment threats are credible, policymakers may rule out reform for fear of devastating economic consequences. I argue that the credibility of disinvestment threats is conditioned by two key variables, the resilience of the national economy to capital flight, which affects the level of damage capital flight will inflict, and global financial liquidity, which can be used to undercut domestic disinvestment threats. These arguments are developed through comparative case studies of cross-national and over-time variation in the scale and scope of public development banking in Brazil and South Africa in the wake of the 2008 crisis.