Major Themes in Industrialised Societies: Advanced Capitalist States
We shall examine some key perspectives on the nature of the state, and its relationship to the economy.
- Adam Smith and John Stuart Mill
The economy is directed by the market in the spheres of production, consumption and distribution. Nevertheless, the state has some limited area of intervention:
- national defence;
- law and order; and
- enforcement of contracts and protection of private property.
The state is depicted as being neutral, and has no interests to defend. This approach separates the political from the economic, the authority from the market.
Yet, the laissez-faire approach faces several problems:
- economic stability is insecure, and the economy is riddled with booms and recessions;
- the development of big business and labour movements, there is no perfect competition;
- a sizeable group in poverty, there is no sign of economic fairness and equality; and
- the state is not neutral (e.g., civil servants and politicians desire to increase their influence over society).
- Nico Poulantzas and Antonio Gramsci
The capitalist state is the servant of the dominant class in the society (the ruling class):
- in the class struggle, the state supports the bourgeois interests; and
- the state is ultimately determined by economic considerations – base and superstructure.
Neo-Marxists suggest that the state, in fact, has a degree of freedom from the ruling class – i.e. ‘relative autonomy’:
- the state has a crucial role in maintaining social cohesion and stability between the antagonistic social classes;
- the state is a site of political struggle, rather than an instrument of the capitalist.
In many respects, both the liberal and Marxist perspectives share the ‘society-centred’ approach to the state, meaning that the state has little power and autonomy. The nature of the state depends on the nature of the society. In the liberal approach, the plural nature of the society means that the state does not defend any particular interest, and is open to various claims and lobbying from social groups. In the Marxist version, since the modern society is capitalistic, in which the capitalists have greater power, the state is largely in the hands of the business class.
- Maynard Keynes and John Galbraith
The economy is not always in full equilibrium, and there are no automatic corrective mechanisms (e.g., markets) to drive the economy towards a stable, full employment position. In fact, if the economy experiences unemployment, hyper-inflation, a huge trade deficit, then there is no guarantee of an economic recovery.
The state is required to ensure full employment, stability and capital accumulation through active fiscal and monetary policies (i.e., demand-management of the economy):
- a high public expenditure programme;
- low interest rates to stimulate consumption and investment; and
- trade and industrial policies (subsidies, tariffs and protectionism) to encourage output.
The state is managed by highly professional and educated bureaucrats, who aim to regulate for a high growth and stable economy. In this account, the state is an actor, with its own agenda. Another ‘state-centred’ approach can be found in Weber’s account of the state, where the state aims to maintain its monopoly over forced coercion and physical violence, nurture its political legitimacy, and control societal resources.
- Gosta Esping-Andersen and Peter Taylor-Gooby
The social democratic welfare state manages capitalism:
- provides a system of social insurance against the risks of unemployment, old age, illness and disability;
- nationalised or public-funded industries to control the economy in accordance with the public-interest;
- reflects issues of social justice and a good society; and
- social rights of citizens are combined with their formal rights.
- Fredrick von Hayek and Peter Saunders
Neo-liberalism criticises the welfare state:
- the increasing cost of bureaucracy – the public sector as unproductive labour, and the government rules and regulations obstruct commercial enterprise and initiative;
- over-taxing the people in order to pay for a large public staff and public programmes;
- a lack of economic competition in many parts of the economy (e.g., nationalised monopolies);
- a culture of welfare dependency; many people become too dependent on the welfare state, rather than being self-responsible;
- the state stifles and prohibits initiative, independence and choice; and
- in a global era, the state is ineffective and powerless to act unilaterally, in isolation and in contradiction to policies in other countries.
The neo-liberals suggest that the welfare state must be reduced:
- cut-backs in social expenditure, such as welfare payments, education and medical services;
- supply-side economic management, such as incentives to work and to reward innovations;
- privatisation of nationalised companies and de-regulation of the public sector;
- re-definition of the relationship between the state and the citizen, so less social rights, more self-responsibilities, and the use of consumer and enterprise discourses (concepts and ideas) in the public sphere; this means:
- a reduction of social rights; and
- the person as an entrepreneur, a consumer and a self-responsible citizen.