Reversing financialization

The state may seek to reverse financialization in the corporate economy by awarding more public contracts to private providers in sustainable ownership. In this way, it may address an important secondary purpose of nurturing a less financialized corporate governance model and more sustainable design of corporate ownership in the wider economy while, at the same time, improving the outsourcing of public services – aspiring to create win-win. Initially at least, providers in sustainable ownership may rely on the largesse of the state by receiving payment for public service delivery as a form of nurturing, so that by delivering public contracts, they expand their capacity to operate as economically independent firms. This may, in the case of small firms or startups, act as a form of incubation to help them grow initial capacity to become established and eventually able to deliver not just more public contracts but also private contracts. In the case of larger and already established firms in sustainable ownership, it may nurture their continued capitalization and growth. We see the potential for a positive feedback loop between improving public service outsourcing and diversifying the wider economy by introducing more sustainable corporate ownership designs. The government's current procurement policies addressing VCSE organizations and SMEs already recognize some of these win-win opportunities (see Chapter One), highlighting that governance in these organizations can help deliver ‘smarter, more thoughtful and effective public services [while also rendering] the economy more innovative, resilient and productive’. A reframing of the existing policies could further strengthen and expand this by encouraging contracting authorities to favour a wider range of sustainable corporate forms (see Chapter Five) to deliver a wider range of public services.

Financialized corporate governance creates problems in the wider economy and for society that reach far beyond the delivery of public services. Unlike in past economic crises, the economic issue since the global financial crisis in 2008 is less about mass unemployment and more to do with the fact that many in employment remain poor, their wages stagnating as those who own capital extract an increasing share of the economy.