The Potential of Pro-Market Activism for Finance in Africa: A Political Economy Perspective
211
competitive private (banking) sector. A prime example is seen in the case of Chile, where the banking sector has become more diverse and competitive in recent years and there is evidence that private commercial banks, forced to reach out to new customers, tend to support activist policies that help them to serve SMEs and that promarket activism has become relatively effective (De la Torre, Gozzi, and Schmukler 2007; De la Torre, Martínez Pería, and Schmukler 2010). However, in the extreme case of a fragmented private sector, activist policies are less likely to work. Fragmentation constitutes an obstacle to collective action, so governments would have difficulties engaging with the private sector in policy making. 2. The revenue base of the state. When governments have access to sources of revenue other than domestic bank finance or taxes from domestic private sector activity through international links—such as credit from international capital markets or, as is more often the case in African countries, aid and exports of natural resources—governments are less structurally dependent on the domestic private sector (Boone 2005; Gordon and Li 2009; Maxfield 1990; Moore and Schmitz 2008; Winters 1996, 41). Thus, in a situation where the degree of reliance on the domestic private sector as a source of government income and economic prosperity is low, incentives to cooperate with the domestic private (banking) sector to promote business-friendly and activist financial policies are also likely to be low. However, the effects of government income from sources other than the domestic private sector are not adverse in all circumstances because these alternative revenue sources can give governments a degree of autonomy from the domestic private (banking) sector that can also be used wisely. This could particularly be the case if conditions are attached to the use of the external revenues, as in the case of aid or in the context of a strong private sector (Maxfield 1990, 1994; Winters 1994). Future research on the potential of activism as a development strategy could also provide a high added value by considering the role of state capacity. Technical capacity (including adequate organizational and managerial resources) emerges as an important intervening variable in assessing the potential of pro-market activism as a tool to increase access to finance, especially because pro-market activist strategies often require a commitment to sustainable financial inclusion from multiple actors and effective coordination between them. Technical capacity seems to be a