Summary of Financial Actor’s Logic of ‘Flexible Financialism’

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Financial actors were able to maintain their relevance for the water sector because they possess a certain conceptual flexibility. Those actors who are in the business of pure intangibles – such as the financial consultants – are in the business of knowledge and especially knowledge about finance. As I pointed out in the analysis of municipal logics, finance becomes even more important for municipalities that have budgetary problems.

They are trying to solve their financial problems by exploring their options and the financial actors with their intangible services have an advantage compared to companies who provide a tangible services offering, as industrial companies mostly do. If a company is in the business of operating wastewater treatment plants, it becomes difficult to stay in the game as long as municipalities are unwilling to outsource the operation of their wastewater treatment plants. However, if a company is in the business of providing management and financial consulting, it can stay in the game regardless of whether the municipalities are selling their assets to the private sector or whether they just shift assets internally. It is the nature of their service offering, combined with strategies of how to access the networks of decision-making and to build constituencies for their goals that allows financial actors to be involved in a large variety of contexts.

The institutional logics of financial actors can be summarized as flexible and financial.

Their logics contain rather strong belief in the possibility to maximize individual benefits by calculating and thus convincing decision-makers through the ‘rational facts’ of the numbers. The financial actors inherently prefer and advocate market liberalization and privatization, but they equally have the ability to change their views according to their clients’ needs and promote concepts that may even contradict their inherent ‘free market’

principles. Thus, although these actors’ belief in the effectiveness of ‘the market’ and private firms, which is a neoliberal mindset, they are flexible, perceptive, and adaptive in what they do and propose to their clients. Besides the free-market agenda financial actors may have, their primary goal still is to make money and that is achieved by serving their clients.

Financial actors also possess vision that is more according to their own inherent ideas and beliefs about how water services and the economy in general should be managed. The vision of financial actors is to increase the private sector share in the economy because they believe in its managerial supremacy. But while they regard the private sector as managerially superior compared to the public sector, they acknowledge its ‘moral inferiority’ when it comes to taking advantage of monopoly positions. Therefore, financial actors acknowledge the necessity of having regulation in place and would not accept a non-supervised private monopoly. But there is another reason why these actors call for regulation, which is the fact that they regard it is a prerequisite to privatization.

Here, the demand that the state should take action and lay out the ground rules for private sector activity is clearly visible. Financial actors regard it as a problem that the state has no plans at the moment to establish these rules of the game, most likely, also because state actors are aware that they would establish the very conditions which would promote private players in the market. But once more, financial actors’ views on why a water

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sector reform and more participation of private sector companies (either as owners and operators or merely as operators) is important does not exclusively relate to their individual self-interests. Instead, these actors are also convinced that the Finnish water sector’s sustainability is threatened and a large-scale reform with more private sector participation serves the long-term interests of the economy, citizens, and the water sector.

The financial actors’ involvement in the restructuring process of municipal water works and municipal reform provides more solid knowledge about finance and asset restructuring to their municipal clients but it also has negative consequences on the development of the water services themselves. Regionalization projects that have the goal to merge smaller water utilities together are hampered by the involvement of financial actors because their emphasis on rationally calculating the risks and benefits of municipal reform and restructuring somewhat ignores the ambiguity that arises from such projects.

These projects are of long-term nature and contain a number of different known and unknown factors that come into play along the process, and a number of different parties need to agree by negotiating. Especially, the financial actors’ notion that making compromises is like distributing ‘free lunches’ in a world where no such thing exists, ignores what can be gained by giving something up. Financial actors try to convince of their solutions through the rationality of numbers and the financial benefits of a project in order to justify structural changes in municipalities. Hence, financial actors assume that decisions on local government level, although perceiving them as being ‘not rational’, are based on numbers and that financial aspects are the most important aspects. This is a logic that makes negotiations in regionalization processes difficult as every party wants to calculate and maximize its benefits.

However, in the cases where this logic is applied to the intra-municipal change such as when the local water utility is merged with the local energy utility, it is more successful because financial benefits are redistributed within one municipality. In such cases, whenever one side is losing, another is gaining and since the municipality thinks of itself as managing a portfolio of activities that requires overall balance, it matters less in which areas something is gained, and where something is lost, as long as the organization is balanced overall. Therefore, although a merger between the local municipally-owned water and energy utility may face resistance from the utility side, the municipal council may still agree on the restructuring because it delivers capital that is used to balance other activities of the municipality that may operate on a loss, such as health and cultural services.

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