Political Economy: State-centred Approaches
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How does the state relate to the economy?
The economy is directed by the market in the spheres of production,
consumption and distribution.
The state has a limited area of intervention:
- national defence;
- law and order; and
- enforcement of contracts and protection of private
property.
The state is neutral, and has no interests to defend.
This approach separates the political from the economic, the authority
from the market.
Yet, laissez-faire faced
several problems:
- economic stability was
insecure, and the economy was riddled with booms and recessions;
- the development of big business and labour movements, no perfect competition existed; and
- a sizeable group in poverty, no sign of economic
fairness and equity.
The economy is not always in full equilibrium. The economy at under full employment is unable to recover.
The state is required to ensure stability and capital accumulation
through fiscal and monetary policies.
The capitalist state is the servant of the dominant interest in the
society:
- in the class struggle, the state supports the
bourgeois interests; and
- the state is ultimately determined by economic
considerations.
Neo-Marxists suggest that the state has ‘relative autonomy’:
- the state has a crucial
role in maintaining stability and cohesion between the antagonistic social
classes;
- the state is a site of political struggle rather
than an instrument of the capitalist.
The welfare state manages capitalism:
- provides a system of
social insurance against the risks of unemployment, old age, illness and
disability;
- nationalised industries to
control the economy along public-interested lines;
- reflects issues of social justice and a good
society; and
- social rights of citizens are combined with formal
rights.
Neo-liberalism criticises the welfare state:
- the increasing cost of bureaucracy;
- over-taxing the people;
- a lack of economic competition in many parts of the economy (i.e., nationalised monopolies);
- a culture of dependency;
many people become too dependent on
the welfare state rather than being self-responsible; and
- stifling and prohibiting initiative, independence
and choice.
The neo-liberals suggest that the welfare state must be reduced:
- cut-backs in social expenditure such as welfare payments, education and medical services;
- privatisation of nationalised companies; and
- re-definition of the relationship between the
state and the citizen:
- a reduction of social
rights; and
- the person as an
entrepreneur, a consumer and a self-responsible citizen.