The repurposing of utility companies in Flanders: Institutional bricolage by the local state under budgetary restraint and financialized capitalism

In many welfare states, municipalities are struggling to provide essential services such as energy and water to their citizens. While some local states have resorted to the outsourcing of utility companies to private operators, others have increasingly turned to financial actors to plug the investment gap. Political economists and geographers alike consider the latter process of financialization as structurally changing the contemporary provision of utilities by local states. Yet, state policies are not simply overruled by financial market logics. Rather, multiple logics are informing state action, ranging from generating growth and balancing the budget to confronting socio-ecological needs. To grasp these variegated and contradictory logics, a re-engagementwith the state as a financial actor is needed, centred on its agency and that of state-related entities, and the interactions between country-specific histories of state restructuring and macro-economic structural conditions that constitute financialized capitalism at local and global scales.

In the region of Flanders, Belgium, the local state has remained firmly present as provider of utilities through intermunicipal companies (IMCs): century-old public utility companies owned by several municipalities acting as shareholders. While the budgets of Flemish municipalities appear fairly sheltered from financial market logics, IMCs have adopted new roles with respect to the municipal budget. Over the last two decades, IMCs have scaled-up and diversified their activities and begun to issue bonds aiming to attract institutional investors. Municipalities also use IMCs in novel ways, for example to recuperate corporate tax. Mobilizing the debate on state restructuring, financialization and variegated neoliberalization, this thesis examines what logics of state restructuring amid financialized capitalism are steering the repurposing of intermunicipal companies.

From a theoretical point of view, the thesis seeks to contribute to the ongoing debate about local state policies and utility provision in a context of budgetary restraint and financialized capitalism. I thereby approach the local state as a financial agent, yet one that is neither politically neutral nor organisationally coherent. By broadening the lens to encompass the municipal core and state-owned entities, together forming ‘the extended local state’, I seek to grasp the financial dynamics within municipal budgets that fundamentally shape local state’s engagement with finance. Added to that, through the concept of institutional bricolage, I seek to develop a more dynamic understanding of how state agents re-purpose century-old institutional arrangements to find conjunctural solutions to structural constraints. The concept of institutional bricolage allows me to grasp how institutional arrangements can be the result of political compromises and the layering of several state logics, including managerial,entrepreneurial and financial ones. By questioning the importance of concerted neoliberal state strategies, this approach opens avenues for constructive dialogue between Anglo-Saxon and continental European countries on (local) state policies. Taken together, this theoretically-informed empirical study seeks to broaden the debate from studying financialization of the state as a typological exercise in finding difference/similarity, towards grasping how state agents deal with structural conditions shaped by decade-long processes of state restructuring. This allows to shift our lens towards conceptualizing the causes and consequences of the logics that currently steer utility provision.

To provide an empirical answer, the thesis is structured in four substantive chapters. A first historical chapter describes how, from the 1920s until the late 1990s, compromises between state layers and political forces have institutionalized IMCs as essential services providers within the Belgian state pparatus. While this historical arrangement granted municipalities the constitutional right to provide utilities, it also made the municipal budget dependent on dividends from these activities. This arrangement led to new contradictions when processes of marketization and state rescaling started to structurally impact municipalities’ financial position, shaping utility provision to thisday. Building on these observations, the second chapter seeks to grasp how, since the 2000s, municipalities have mobilised IMCs for new purposes, revolving around municipal debt relief, tax optimisation and the tapping into liquid financial markets. Speaking back to the historical chapter, intermunicipal companies are primarily repurposed to deal with the budgetary pressure resulting from several rounds of state restructuring, while the extent to which financial market logics become drivers of local state policy appears relatively limited overall and differs amongst IMCs.