Financial substantive tools are not synonymous with all government spending, since much of this goes to fund direct service delivery and also support regulatory agencies (as well as to provide information, which will be discussed in Chapter 8 below). Rather, such tools are specific techniques of governance involved in transferring treasure resources to other actors in order to encourage them to undertake some activity desired by governments through the provision of financial incentives, or to discourage them through the imposition of financial costs.
Like organizational and authoritative tools, there are many different permutations of these instruments and mechanisms. In fact, they can be calibrated down to the decimal point, since they involve the transfer of money, or goods and services with a calculable dollar value, between governments and between governments and non-governmental actors and organizations. And, as such, their exact configuration is virtually infinite in variety. Nevertheless, like organizational and authority-based tools, their basic types are few and categorizable according to what kind of treasure resource they rely upon to extract expected behaviour from targeted organizations, groups and individuals. Transfers can be either in cash or tax based but also can be made through a wide range of ‘cash equivalents’, for example procurement, loans guarantees, insurance, or vouchers among others. Both principal types and some of the many alternate means are discussed below.
The use of these treasure resources in policy designs to allow states to obtain their substantive goals is very common and is compatible with several modes of governance, but especially market-based ones. Modern liberal democratic states spend billions annually on many different programmes involving the use of these tools. However, in some areas, such as industrial activity, some efforts have been made in recent years – through provisions of free trade treaties and the like – to restrict their use. These efforts have been only partially successful, though, often resulting in the transformation of cash based incentives and disincentives to other forms of financial tools rather than their complete abandonment.