The Austerity Paradox: How Municipalities (Can) Innovatively Cope with Fiscal Stress

Abstract

This book studies how municipalities (can) deal with fiscal stress. It applies an institutional perspective, arguing that municipalities can move beyond a fiscal focus and performance optimization, towards building institutional capacities to innovatively deal with fiscal crises. The book shows that many municipalities mainly opt for safe financial measures with quick results. It also shows, however, that some municipalities do invest in seeking new measures, and that they deal differently with the current crisis and create leeway to deal differently with future crises. They bend and stretch constraining rules, norms, and beliefs. More innovative responses are established when municipalities move beyond dominant doctrines (deviate), when they identify and translate potential innovations into concise decisions (decipher), and when they perform dynamic acts of implementation that fit the context of austerity (deliver). The book concludes with an emphasis on the ‘austerity paradox’: opting for financially driven austerity actions does not enable municipalities to deal with fiscal crises. Municipalities can bounce forward by opting for alternative solutions that pay attention to the non-financial aspects of dealing with financial crises, most specifically knowledge, routines, cultures and mentalities.