towards the securitization of retail financial
products, whereby lenders aggregate the loans
made to low-risk customers and sell them to
investors in international securities markets
(Dymski, 2005). Sub-prime customers, mean-
while, have low to moderate incomes and/or
financial assets, and are either excluded from
mainstream financial marketing campaigns for
new products or are denied access to services if
they apply.
The geography of prime and sub-prime
financial markets follows established geog-
raphies of income and wealth. Thus, for the
most part, prime retail financial customers
may be found in affluent urban and suburban
areas, whereas sub-prime markets are concen-
trated in areas of low and moderate income,
typically in inner-city areas (and, in the UK, at
least, on public-sector housing estates). In the
absence of mainstream financial services,
which continue to close branches in such
areas, a host of specialist sub-prime or ‘fringe’
retail financial institutions ply their trade.
They provide similar services to the main-
stream, but at a much higher cost. It is now
possible to identify pronounced financial ecol-
ogies, made up of distinctive combinations of
markets, customers and institutions (Leyshon,
Burton, Knights, Alferoff and Signoretta,
2004). Public policies to counter the problems
of financial exclusion were initiated
with increased vigour in the late 1990s
(Marshall, 2004), and the explosive growth
of ‘predatory lending’ in sub-prime markets
was a key factor in the global financialcrisis
that detonated in 2008. al
fiscal crisis A fiscal crisis occurs when the
revenue raised by thestateis insufficient to
cover the cost of its activities. All governments
experience short-term financial problems as a
result of routine fluctuations in tax revenues
and public expenditure. The term ‘fiscal crisis’
is usually reserved for a more serious shortfall
in the state’s financial position arising from
structural or systematic imbalances between
the cost of providing public services and social
security payments and the ability of the state
to finance them through taxation.
According to O’Connor (1973), a tendency
towards fiscal crisis is a logical outcome of
the contradictory character of the state under
capitalism. O’Connor argues that the state
has two main functions within capitalism: to
promoteaccumulationby privatecapital,
and to ensure the legitimacy of this process
among the population. To do the former, the
state needs to make investments in economic
infrastructure (e.g. roads, energy supply
networks, the central bank), systems of regu-
lation (e.g. to ensure the orderly functioning of
market exchange; cf.regulation theory) and
the maintenance of a productive labour force
(e.g. by providing education). To do the latter,
the state seeks to promote social integration
through expenditure on the welfare state
and the maintenance oflawand order.
O’Connor’s analysis suggests that with the
emergence of the monopoly form of capitalism
in whichmarketsare dominated by a small
number of large corporations, an increasing
proportion of the costs of investment must be
met by the state, while expenditure on social
problems also grows. This requires the state to
seek to raise extra revenue from taxation,
which has the effect of discouraging private
investment, thereby reducing the tax base
and exacerbating the problem. This can result
in a fiscalcrisisas the state’s revenue-raising
capacity is reduced at the same time as
demands for increased state expenditure grow.
The state may seek to resolve the crisis by
trying to reduce public expenditure as a pro-
portion of the economy. However, this may
result in a crisis of legitimation as welfare
expenditure is cut. In some cases, however,
powerful states (notably the USA) have been
able to sustain very large budget deficits for
extended periods and to stave off fiscal crises
by borrowing from overseas. In 2006, approxi-
mately one-quarter of the total US public debt
of $8,500 billion was held by foreign govern-
ments and international investors.
A tendency to fiscal crisis may be spatially
differentiated, particularly where local govern-
ments have autonomous revenue-raising
capacities. In the 1970s and 1980s, many US
cities faced serious fiscal problems as manu-
facturing industry declined and higher-income
residents moved out to the suburbs (see
fiscal migration). In 1975, New York City
avoided bankruptcy only after the federal gov-
ernment intervened. Subsequently, many local
governments have faced budgetary constraints
as a result of restrictions imposed by the
central state or because of poor credit ratings
imposed by increasingly influential private
rating agencies (Hackworth, 2006). jpaSuggested reading
Jessop (2002, ch. 2); O’Connor (1973).fiscal migration A process by which individ-
uals,householdsand firms relocate to secure
fiscal benefits. The concept is derived from
thetiebout model, which argues that landGregory / The Dictionary of Human Geography 9781405132879_4_F Final Proof page 255 31.3.2009 1:20pmFISCAL MIGRATION