Revisiting conventional wisdom: does financialization have to leave sovereigns subordinated?

The financialization process is considered to leave debtor states critically dependent on international financial capital, which may then exercise indirect power over government policy, to the point where the state becomes a hostage to financial markets’ ‘state of confidence’. Such relations between the state and internationalized capital are perceived to come with two strings attached, as the state listens to financial markets because it is in debt and must settle accounts while still requiring external financing; and as financial deepening or credit is considered a vehicle of economic growth. It is the contention of this paper that conventional wisdom as to the correctness of debtor-state behavior in the above circumstances is open to challenge.