The Politics of Losing the 'AAA' Rating: A Critical Perspective on the Sovereign Downgrades of the United States, France, and Austria

This article promotes the utility of critical theory to examine instances of private authority in international affairs with a particular focus on the political consequences of a sovereign credit rating downgrade. After historicizing the American roots of credit rating agencies and linking their global expansion to the growth of transnational finance in the neo-liberal era, this article argues that credit rating agencies' authority is socially constructed and inextricably tied to the United States' hegemonic position in the current world order. This argument is qualified through case analyses of the politics surrounding the sovereign downgrades of the US, France, and Austria. The results of these case studies shows that following the global financial crisis of 2008 credit rating agencies' judgments on sovereign debt are much more political than technical, their power to affect the cost of capital is diminished, and their authority is increasingly challenged by bondholders, political leaders, and regulators.