The Anatomy of the State Under Neo-liberalism

Prabhat Patnaik


THE change in the nature of the State under neo-liberalism has been much
discussed. From standing apparently above society and mediating between
different classes, as under dirigisme (even though it too was a
big-bourgeois-led State), the State under neo-liberalism promotes primarily the
interests of the corporate-financial oligarchy (which is integrated to
international finance capital), on the plea that what is good for this oligarchy
is ipso facto good for the nation. The complete unanimity between Arun Jaitley
and P Chidambaram, at a recent function in Delhi where both were present, on the
issue of “retrospective taxation”, which both opposed because it dampened
capitalists’ “incentives”, only illustrates the point.
Likewise the change in the complexion of the State under neo-liberalism has
been much discussed. The enormous increase in election expenses that ensures
that Parties of the working poor have greater difficulty in getting represented
in the legislatures, which therefore are filled increasingly by billionaires or
by corporate nominees, is an obvious change. Narendra Modi, who reportedly spent
more on his prime ministerial campaign in the recent election than Obama had
spent on his presidential campaign, could not have made much headway without
massive corporate backing, which not surprisingly he is now having to
reciprocate when in power: the complexion of the elected segment of the
government in short undergoes a change under neo-liberalism, with corporate
favourites being better represented.
And even the bureaucracy undergoes a change, not just for reasons discussed by
Hilferding and Lenin, viz. its “personal union” with the financial oligarchy,
owing inter alia to lucrative post- (or even pre-) retirement employment offers
by the corporate sector, but for an additional reason: it increasingly gets
“trained” either directly by agencies like the World Bank, or through
arrangements worked out by agencies like the World Bank in “prestigious”
metropolitan universities like Harvard and Yale where it imbibes the neo-liberal
ideology in toto.
In addition however to this change in the nature and complexion of the State,
there also occurs a change in the anatomy of the State, ie, in its internal
organisation and distribution of powers. There are at least five different
aspects involved here which we shall discuss seriatim.
The first change is the introduction of autonomy of the central bank. This
still has not happened formally in India, but the fact that the same person who
had been appointed governor by the previous government continues to hold office
even now, doing pretty much what he was doing earlier and pretty much what his
own preference dictates, is suggestive of his de facto autonomy, and that of the
institution he heads. In other countries such autonomy has been more formally
institutionalised, which means that a whole range of policies that the central
bank has the prerogative to fix, are decided independently of the wishes of the
legislature, and hence of the representatives of the people. The people may
elect a new government, but it will have no say on the exchange rate policy,
monetary policy, and credit policy, which have a vital impact upon the people’s
lives. And what is more, since a neo-liberal economy is exposed to more or less
free capital flows, these policies are fixed by the autonomous central bank to
meet the demands of globalised finance.
Policies of the central bank in other words are insulated from the wishes of
the people and fixed in accordance with the demands of finance capital. This, to
be sure, would be the case, irrespective of whether or not the central bank
enjoyed autonomy, as long as the economy remained open to global financial
flows; why then, it may be asked, should central bank autonomy make a
difference? The reason is that such autonomy makes even the imposition of
capital controls that much more difficult, by placing an additional hurdle, in
the form of an autonomous central bank, to be overcome before such controls can
be put in place.
The second change is a complete transformation in the relative powers of the
government departments, with the finance ministry emerging as a super ministry,
which acquires a power of veto on the proposals of other ministries and whose
representatives even sit on every significant decision-making committee of every
other ministry. In India, the Planning Commission had enjoyed a pre-eminent
status from the days of Nehruvian planning, and its continuation was a challenge
to the emergence of a neo-liberal State structure. This challenge was overcome
under the Manmohan Singh government by getting a neo-liberal World Bank employee
who had earlier been with the Indian finance ministry to head the Planning
Commission; under the present government it is overcome by abolishing the
Planning Commission altogether. This abolition has little to do with Modi’s
quirks; it is part of the formation of a neo-liberal State structure.
The third, and the most significant, feature of the neo-liberal State structure
is that both the central bank which becomes autonomous and the finance ministry
which emerges as a super ministry, are headed and manned by employees from the
World Bank, the IMF or multinational banks. What this entails in short is that
within the State as a whole, there comes into being a core entity, a State
within a State, which is concerned especially with economic matters, but not
only with such matters (since “security” and relations with imperialism and
international finance capital also fall within its purview).
This entity is all powerful; it is not answerable to the people; it is not
removable by popular electoral verdict; and it is closely linked with
imperialism. (It is not surprising that the deputy chairman of the Planning
Commission under the Manmohan Singh government, whose official responsibilities
had little to do with the matter, was nonetheless reported to have been
involved, presumably as a member of this “Core State”, in the negotiations with
the US on the Indo-US nuclear deal).
Many have written in the context of the US of a “Deep State”, which is
dangerously all powerful, answerable to no one, invisible from outside, and
linked to powerful business interests, being embedded within the State. No
matter what view one takes on the specific concept of a so-called “Deep State”
within the US, a tendency for a core entity to crystallise, which is all
powerful, outside any democratic control, and linked to big business and
financial interests, exists within every neo-liberal State.
The fourth change relates to the tendency to enter into external treaties on
crucial economic issues linked to trade, capital flows and intellectual property
rights, which, it is claimed, do not have to be ratified by the legislature. The
country is in other words, whenever such treaties are entered into, presented
with a fait accompli about which the elected representatives of the people can
do very little but which has an important bearing on the people’s lives.
This is what happened with regard to the Indian Patents Act of 1970 which had
to be made TRIPS-compatible, even though numerous Parliamentary committees had
specifically recommended that the patent regime set up under the Act, which had
been lauded internationally by independent progressive thinkers as a model one,
should not be changed. But it had to be changed because the country had entered
into the TRIPS agreement by a unilateral decision of the executive, which did
not at any stage get parliamentary approval for it because it was claimed that
it did not need to.

UNFETTERED HEGEMONY OF THE CORPORATE-FINANCIAL OLIGARCHY
The Indo-US Nuclear Deal was another instance of a treaty being signed
unilaterally by the executive with the matter not coming up before the
parliament at all, and the country being presented with a fait accompli worked
out by the core entity within the neo-liberal State.
The fifth change is currently in the offing in the form of such international
agreements as the Trans Pacific Partnership (TPP) and Transatlantic Trade and
Investment Pact (TTIP). These specific treaties do not of course concern India
directly, but they represent a new aspect of the neo-liberal State which we
would do well to be aware of since similar agreements are likely to confront us
in the coming days. They take a whole range of subjects completely outside the
purview of the nation-State and entrust them to specifically formed
supra-national bodies. A signatory nation to such an agreement for instance will
have to forego all national jurisdiction in the matter of how to deal with
foreign investment, and will have to be bound by the decisions of supra-national
judicial bodies set up under the agreement.
If the entry into such an agreement itself is not supposed to need
parliamentary ratification in the country, then we would have a perfect example
of the core entity within a neo-liberal State staging a coup de etat against
“popular sovereignty” as enshrined in the Constitution. It would have handed
over sovereign powers to a supra-national body without the consent of the
people’s representatives, even though such handing over impinges strongly on the
people’s lives.
But even if parliamentary ratification is deemed necessary, it would not be
difficult to obtain such ratification on the basis of a little bit of
“wheeling-dealing”, since it would involve a mere one-time vote: in such a case
the Constitution of the country would have been abridged through a mere one-time
vote in parliament obtained through “wheeling-dealing”.
The neo-liberal State, or the State in the era of hegemony of international
finance capital, is increasingly fashioned in a manner that restricts “popular
sovereignty” in every conceivable way. Its essential tendency is to abridge
democracy and establish, even if perforce within an apparently democratic shell,
the unfettered hegemony of the corporate-financial oligarchy. Towards this end
it changes the internal structure, the anatomy, of the State as well. A
resuscitation of democracy itself requires a transformation of the
State-structure created by neo-liberalism.

In
Peoples Democracy
http://peoplesdemocracy.in/2014/1116_pd/anatomy-state-under-neo-liberalism
November, 16, 2014