Assessing the ‘Return’ of the State: Bringing Class Back In

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There are decades where nothing happens; and there are weeks where decades happen’, words famously attributed to Lenin. In the last few weeks the Covid-19 pandemic has led to an extraordinary series of events throughout the world. Our everyday lives, the way our economies are organised, and the ways that we exercise our basic rights and freedoms are being transformed. These changes were unimaginable only a few weeks ago.

A significant aspect of these ‘extraordinary times’ is governments’ extraordinary responses to the economic meltdown triggered by the coronavirus crisis. Within the space of just a few weeks, one taboo after another in Western capitalism has been broken, as The Economist puts it. As monetary policy measures (i.e. unlimited QE, record low interest rates) proved to be insufficient, unprecedented fiscal stimulus packages including wage and income guarantees came to the fore. In the EU, the so-called ordoliberal principles of competition, free market and a commitment to a balanced budget (that were harshly imposed upon Greek and other peripheral European economies during the Eurozone crisis) appear to have been all but forgotten by the core capitalist countries. ‘We will protect our strategic companies from foreign takeovers’ declared the president of the European Comission. The infamousschwarze Null’ budget policy of Germany, for example, was abandoned as the German government foresees an extra 156 billion in new government debt this year, and an extra €600 billion to bail out big companies if necessary. In the UK, the traditionally austerity-loving Conservative Party’s Chancellor of the Exchequer announced an enormous coronavirus package of £350 billion. The Trump administration has signed the largest ever US financial stimulus package, amounting to $2 trillion, which includes ‘helicopter money’ for the citizens. Whatever it takes’ became the motto of G20 leaders and finance ministers. All of a sudden, austerity ended as the reproduction of the capitalist system became impossible without the protective measures that were introduced. This reflects the fact that austerity was a political choice all along; despite being framed as ‘TINA’ for years.

Against the backdrop of these developments, the idea of bringing back the state’ or the return of the state came to the fore once again. It is argued that the return of government to centre stage marks the close of an era in which power and responsibility migrated from states to markets’. This reading reflects a dichotomous understanding of the state and market as two opposed forms of social organisation; and it is a recurrent theme in economic journalism and conventional academic analysis on (global) political economy. It is striking that we saw very similar analyses from the same circles in the aftermath of the 2008 global financial crisis. However, the years following the brief ‘interventionist’ moment after the 2008 crisis proved that states and markets are forms of the same antagonistic social relations between capital and labour. Indeed, the response was further neoliberalism with an increasingly authoritarian character, against the background of social discontent.

This extraordinary state activism, deficit financing, big government and abandonment of rule-based economic management is argued to be a deviation from ‘ordoliberal’ and/or neoliberal political economy. This reflects an understanding of (neo)liberalism as being to do with ‘laissez-faire’ and a ‘weak’ state; and when the state intervenes it is against these principles. However, as Andrew Gamble reminded us long ago, ‘nobody in the tradition of liberal political economy seriously suggested that capitalism could do without a strong and active state’. This is even more forcefully put by the ordoliberals, arguing that the ‘economic system requires a market police with strong state authority for its protection and maintenanceance’. Furthermore, in a time of need, like the one we are experiencing, that state does not hesitate to become a ‘state of emergency’.

I do not argue that the crisis triggered by the Covid-19 pandemic would not lead to any change in state-market and/or state-society relations. It is still early days. The reasons behind the crisis, and the unfolding of it, are different from those of the global financial crisis of 2008. Unlike the 2008 crisis, this crisis hit at a time when neoliberalism was already unravelling; and the debt-ridden global capitalism was fragile as it still had not fully recovered from 2008. Furthermore, there has been a backlash against ‘globalisation’ which has been exploited by nationalist-populist leaders. However, this new nationalist turn mainly represented a ‘national liberalism’ as it is against liberal norms, rights, and legality, as well as immigration; but not necessarily against the liberal economy. Similarly, we might see more permanent state economic activism as well; as it has already been evident in recent years not only in emerging capitalisms or rising powers but also in the West, as demonstrated by the burgeoning ‘state capitalism’ literature. This would not be a welcome shift, however. This new state activism prioritises profitability, capitalist accumulation and expansion, and commodification by ‘national capital’; and does not necessarily reflect a progressive shift from the earlier so-called ‘market-led’ political economy. It is also complemented with a highly authoritarian management of labour power, economy and the wider society, with a stricter imposition of border controls. It also implements new methods of surveillance of its populations, which also came to the fore and strengthened as part of Covid-19 measures.

This should not lead us to defeatism, however. Politicisation of the crisis is important; demanding more of what is ours is important. Radical demands and interventions are necessary if we are to avoid the same austerity cycle that followed the bail-outs of post-2008. The state, after all, is also an arena of class struggle. But as long as it remains a ‘capitalist state’, its purpose is ‘to govern over the labour force’. Paraphrasing Simon Clarke from a different context, a socialist response to the crisis triggered by Covid-19 could not be reduced to a defence of statism and welfarism; however ‘progressive’ that might be. As Clarke further argues: “It is about making qualitative changes, about transforming social relations, about replacing the alienated forms of capitalist political and economic regulation by new forms of collective self-organisation and democratic control; and it is only on the latter basis that the state, and the power of capital, can be effectively confronted.

Mehmet Erman Erol is a Postdoctoral Researcher at the University of Cambridge. Photo by Patrice CALATAYU.

One thought on “Assessing the ‘Return’ of the State: Bringing Class Back In

  1. […] Assessing the ‘Return’ of the State: Against the backdrop of these developments, the idea of ‘bringing back the state’ or the ‘return of the state’ came to the fore once again. It is argued that ‘the return of government to centre stage marks the close of an era in which power and responsibility migrated from states to markets’. This reading reflects a dichotomous understanding of the state and market as two opposed forms of social organisation, and it is a recurrent theme in economic journalism and conventional academic analysis on (global) political economy. It is striking that we saw very similar analyses from the same circles in the aftermath of the 2008 global financial crisis. However, the years following the brief ‘interventionist’ moment after the 2008 crisis proved that states and markets are forms of the same antagonistic social relations between capital and labour. Indeed, the response was further neoliberalism with an increasingly authoritarian character, against the background of social discontent. […]

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