November 16, 2014

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.