The governmentality of sovereign credit ratings: exploring the political economy of creditworthiness in South Africa

Abstract

The sovereign credit ratings issued by the ‘Big Three’ credit rating agencies (CRAs) –Standard & Poor’s (S&P), Moody’s, and Fitch – significantly influence how emerging market governments structure their economies. This is despite several rating failures that have cast doubt on the accuracy and transparency of ratings and revealed problems such as conflict of interest in the business model of CRAs. Existing critiques about the political economy of sovereign credit ratings, however, fail to explain how their authority remains intact amidst these contestations. This thesis shows how the authoritative agency of CRAs and sovereign credit ratings are produced by an epistemic culture that places a high value on numerical data as a transparent reflection of reality and therefore the most rational basis for decision making. While acknowledging that ratings can be improved, the assumption is that under certain conditions, CRAs can unearth the objective ‘truth’ about a government’s fiscal profligacy. This thesis reveals the historical, discursive, and geopolitical framework that informs this assumption and how it fits into global power relationships. As such, the thesis shows how modern credit arrangements are embedded in long-term colonial histories and the continued relevance of these histories in the reproduction of the global political economy. The goal is to re-politicise the discourse of sovereign credit ratings by exposing the historical ambiguities, ideological contestations, and methodological compromises that underpin their production. This analysis is divided into two themes. The first two chapters of this project examine the historical processes through which financial markets and the economy became de-politicised, and conceived as a natural, self-regulatory mechanism that can be scientifically ‘known’ and the macro-economic policies this assumption made possible. The two chapters after that reveal the myriad subjective assessments, political considerations, and methodological compromises that go into the production of ratings. These include deciding what type of data to collect, model specifications, as well as how to interpret flawed or missing data. The final two chapters of this thesis consider how sovereign credit ratings are entangled in the political economy of South Africa. These chapters reveal the post-colonial nature of modern financial markets by showing how South Africa’s political economy has profoundly been shaped by colonial regimes of power and knowledge. Sovereign credit ratings are entangled in the reproduction of these power structures in two ways. First, the assessment of creditworthiness necessitates a forgetting of not only these violent histories and how they have come to shape asymmetrical power relations around the globe, but also their own complicity in the reproduction of these hierarchies. Secondly, their authoritative position in financial markets contributes significantly to the normalisation and sedimentation of macroeconomic policies which similarly require a ‘forgetting’ of these histories by disciplining unorthodox fiscal and monetary measures to address them. By exposing the political processes inherent in ratings, this thesis emphasises the necessity of broadening their content to enable modalities of economic policy making that aligns with the social welfare and democratic needs of society