State, No State, or the Missing State | Ajay Mishra & Shraddha Rishi

Abstract

Key Words: Rationalism, Missing State, Delegating State, Neocapitalism

Introduction

"Finance Secretary T.V. Somanathan stated in a post-Budget interview that the industry is being encouraged to favour labour over automation [1].†This comment was about the government’s recent Budget declaration of a new employment-linked incentive (ELI) scheme for corporations. This scheme offers financial rewards to companies for each additional employee they recruit. Previously, in 2020, the government introduced a production-linked incentive (PLI) scheme, allocating financial incentives for companies that meet specific production milestones. The goal was to financially motivate companies to increase production, creating more employment opportunities. However, it has become apparent that these measures did not generate the anticipated number of jobs. Companies either retained the tax reductions without making further investments, or they allocated more funds to machinery than to workforce expansion. In essence, neither production incentives nor corporate tax reductions have sufficiently translated into job creation and income for the populace.

In the context of the PLI and ELI Schemes, the government often resorts to taxation or borrowing, or a combination of both. However, the concept of Ricardian equivalence is overlooked. This economic theory posits that whether government spending is financed through taxation or borrowing, the total demand for goods and services in the economy remains unaffected. Taxation places the burden on the present generation, whereas borrowing shifts it to future generations. In both scenarios, it disincentivises public expenditure, leading to suppressed demand. For a developing nation like India, any limitation on demand can harm economic growth and the standard of living of its people. Furthermore, the implementation of both schemes indicates the government’s willingness to incentivise the private sector, even at the expense of the general populace.

Both the PLI and ELI schemes indicate the government’s shift toward entrusting the private sector with roles in a neoliberal state, even for essential services for which the government is elected. In its move to delegate responsibilities, the government overlooks the need to expand its role in increasing employment, as suggested by the Keynesian multiplier. It adheres to the rigid framework of the Fiscal Responsibility & Budget Management Act, which sets impractical fiscal deficit targets for India, a developing nation. These schemes and their implementation raise questions about the adequacy and necessity of the state’s scale in India.

The concept of the state, its absence, or its perceived absence, elucidates its existence, necessity, and legitimacy. An individual’s behaviour is shaped by both the prevailing circumstances and the ideology that the state embodies. Over time, a division has developed between the state and the individual, leading to the emergence of the ’deep state,’ which further reinforces the subjugation of the individual. The ’deep state’ denotes a scenario where state power is commandeered by the vested interests of powerful elite. Furthermore, the question arises: if the state persists, how has its form transformed? Additionally, does this new manifestation within a neocapitalist state precipitate a crisis of legitimacy? The study will also explore whether a rising neoliberal state fosters a state-induced anarchy.

The Atomised Individual

Neoliberal economics were vigorously adopted in the 1980s when the environment began to be seen as a finite resource. Lionel Robbins defined economics as the science of maximising utility amidst scarcity and competing uses of resources. Robbins was referring to the tendency of self-interested individuals to maximise utility in the face of scarcity. The rational and informed maximisation of returns, viewed as unilinear development, overlooks that social systems are specific to historically developed modes of production. This perspective suggests that natural selection favours positivism and rationalism in logical discourses, trusting only in the truth of objects observable by the senses. Consequently, unobserved objects, as well as subjective and inter-subjective societal discourses, remain unrecognised.

Positivism has been criticized for two main oversights: firstly, for disregarding the subjectivity of objects, and secondly, for neglecting subalterns who are overlooked due to the absence of observable qualities. Nonetheless, both subjectivity and subalternity have voices that influence logical discourses [2]. Positivism, in its pursuit of factual knowledge, tends to overlook the significance of values. However, it is crucial to recognise that facts are inherently intertwined with values. Values are subjective and specific, as articulated in Marx’s inductive logic, where he postulates that specificity is contingent upon universal principles but is preconditioned by historical contexts. This emphasizes that specific facts are inextricably linked to collective and inter-subjective values. Furthermore, the development of universal values over time influences specific facts and courses of action, thereby advocating for the constructive role of the state in endorsing representative values and rejecting the dichotomy between facts and values.

While capitalism assumes a division between facts and values, neo-capitalism espouses its value system while taking cognisance of factual observations. For instance, capitalism posits class relations as the source of surplus generation rather than a medium of exploitation. Government endorsement of schemes such as PLI and ELI validates the capitalist’s surplus generation. Moreover, economic theory is perceived as a manifestation of blind adherence to the neoclassical model in textbooks, wherein profit-seeking individuals are detached from societal interests.

Economics textbooks have often idealised the rational and informed maximisation of returns for individuals in a socially constrained economy. The determining factor of business behaviour could be anything - habitual reaction, random chance, or something else entirely. When this factor leads to behaviour that aligns with rational and informed maximisation of returns, the business will thrive and accumulate resources for expansion. When it doesn’t, the business will tend to lose resources and can only continue to exist by acquiring resources from outside or manipulating exchange relations [3]. However, "Habitual reaction" may lead to profit-maximization, but "random chance" certainly will not result in any consistent tendency for profitable firms to grow relative to those that are not profitable [4]. Habitual reaction to profit-maximization, and not random chance, characterizes the primitive accumulation in neocapitalism supported by the liberal welfare state, which ensures that winners take all and geometric accumulation. This state tends to ease but does not delegitimise class relations.

Furthermore, it has portrayed individuals as atomised entities to maximise profit and utility. This approach has been mistakenly presented as the definition of Economics. Consequently, Economics has been narrowed down to the analysis of supply and demand forces operating through price mechanisms to achieve equilibrium. Production has been relegated to exchange relations. Economics, as a subjective field similar to the social sciences, has been relegated to alienation, governed by the forces of demand and supply. This has led to recognition of the industrial proletariat’s potential power and an advocacy for the democratisation of political, but not economic, life. The liberal-democratic approach, which gained widespread acceptance, called for government intervention to improve the proletariat’s conditions, to prevent a revolution that could completely dismantle the capitalist system. This approach evolved into welfare-state liberalism, where the core tenets of capitalist production remain unchanged: the government employs its tax authority to redistribute a minor portion of societal wealth to the poor, while the realms of production, exchange, and distribution grow increasingly centralised under the dominion of large-scale corporations that dominate their specific sectors of industry or commerce, a phenomenon known as “neocapitalism.â€

The Social Individual

However, the classical political economic theory is involved inextricably with the problems confronted by the society and the manner of their resolution in the conflicting interests of the classes [5]. As Smith puts it, ‘man, according to the Stoics, ought to regard himself, not as something separated and detached, but as a citizen of the world, a member of the vast commonwealth of nature’, and ‘to the interest of this great community, he ought at all times to be willing that his little interest should be sacrificed [6].’ Self-respect and egoism serve as motivators and drivers of an individual’s actions. Individuals with self-egoism may unintentionally and indirectly promote social welfare. Additionally, Smith has argued that it is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest…. The greater part of his occasional wants is supplied in the same manner as those of other people, by treaty, by barter, and by purchase [7]. The analysis portrays individuals as altruistic social entities. The biological mechanism for growing a conscience seems to operate through our emotional equipment [8]. The emotional aspect is influenced by biological morality in social contexts, but it still demonstrates a strong inclination toward social individualism, particularly prevalent in subaltern communities in rural India. For instance, in an unmodernised Indian village: the village specialists have a right to a certain percentage share in the harvest and must do as much or as little work as happen to be required [9]. Neoliberal individuals are contrasted with Smith’s social individuals; the former are incentivised to pursue societal good, while the latter naturally contribute to social goals.

Ideology Matters

The development and dissemination of ideas demand resources, and while opinions are not tangible goods that can be purchased or sold, their generation often mirrors the production of typical commodities. The proletariat’s acquiescence to their exploitation has to be “manufactured†by influential entities in society by creating “false consciousness† of the supremacy of capitalism, encompassing both the state and corporate media. Chomsky notes, “A privilege of power is the capacity to craft history with the assurance of facing minimal opposition†[10]. This perspective asserts that individuals perceive the present allocation of rewards just, believe that opportunities are accessible to everyone, and think that success is attainable through hard work. This paradoxical admiration for the wealthy among the poor and middle class can be seen as a psychological dominance of the less affluent by the affluent, facilitated by the relentless promotion of the meritocracy myth that controls the thought process of the underprivileged.

Thomas Piketty [11] astutely notes in "Capital and Ideology" that inequality is rooted not in economics or technology, but in ideology and politics. State-endorsed neocapitalism advocates for increasing returns to scale in production, among other technologically driven cost benefits. For instance, if a non-maximizing firm secures an early advantage over a maximizing competitor by entering the industry sooner, this scale benefit could enable the non-maximiser to grow more rapidly than the maximiser, potentially in an irreversible manner. This results in a compounding growth rate for ’winner-takes-all’ scenarios. The ideology of the liberal welfare state underpins this, sacrificing broader market competition and leading to an oligarchy that controls the state. Economics is thus portrayed as both a scientific examination of society and a means of disseminating ideology. The inherent difficulties in social science of producing clinching evidence for theories are given as the reason that ideology so frequently creeps into the argument: "economics limps along with one foot in untested hypotheses and the other in untestable slogans†[12]. Ideology often prevails over socio-economic reasoning. For instance, socialist-inspired Five Year plans contributed to reducing the share of the top 10 per cent who had 50 per cent of the income under colonial rule, to 35 per cent-40 per cent in the early decades after Independence since the mid-1980s, deregulation and liberalization policies have led to “one of the most extreme increases in income and wealth inequality observed in the world†[13].

Conspicuous Consumption Mentality

The persistent inequality corrupts the ideology of the ruling class, leading them to assume that inequality is the inevitable outcome of production and exchange relations. This mindset encourages them to preserve and further justify the skewed distribution of resources and living standard. In the Theory of the Leisure Class Veblen wrote, “conspicuous consumption of valuable goods is a means of reputability to the gentleman of leisure†, who, to “put his opulence in evidence†seeks “the aid of friends and competitors†by giving them “valuable presents and expensive feasts and entertainments†[14]. The scale of this extravaganza is deliberately kept so large that it renders “pecuniary emulation†impossible by others. It is the "invidious pecuniary comparison" driven by wasteful spending that incites wealthy narcissists to surpass those with whom they customarily associate themselves. [15]

If Veblen’s analysis sheds light on the ostentation of billionaires, Michael Sandel scrutinises the mentality that justifies the right to extravagant spending. In his 2020 work "The Tyranny of Merit," Michael Sandel [16] criticises the perception held by affluent individuals that they possess an inherent entitlement to unrestricted use of their wealth. Sandel references John Rawls’s "negative argument," asserting that an individual cannot lay exclusive claim to their success owing to circumstances beyond their control, and invokes Friedrich Hayek’s "affirmative argument," positing that those who have achieved success are obliged to contribute to the common good that facilitates their prosperity. These two arguments have convinced the wealthy that their skills justify the wealth the market grants them, and conversely, that the poor merit their plight due to a lack of talent. Both arguments acknowledge and endorse the fortunate circumstances of a few for their success. Such statements perpetuate the trickle-down effect of a corporate-driven welfare state where individuals are merely passive beneficiaries. The belief that "I succeeded through merit" is a perilous rationalisation for extensive inequalities. Once accepted, the concept of merit only solidifies the division between winners and losers, suggesting that the former owes no concern to the latter. Winning is attributed to personal talent and effort; losing is to individual shortcomings.

The Missing State

The debate surrounding the ideology governing the state acknowledges the capitalist state’s perceived invincibility. It raises the question of whether the capitalist state is equally willing to address societal concerns with the same sensitivity and promptness as it pursues profit. Marcuse argues that late capitalist society, which he views as the wealthiest and most technologically advanced in history, has the potential to provide the greatest opportunities for a peaceful and liberated human existence. However, he contends that instead of realising these potential opportunities, society efficiently represses them. On the other hand, Popper acknowledges that all social orders we know of have elements of injustice, repression, poverty, and destitution. Nonetheless, he believes that Western democracies address these issues through representative democracy, political liberties, and state actions. Popper views these societies as flawed and in need of improvement, but ultimately deems them the best choice. Marcuse compares late capitalist society with his ideals of social existence and humanity, which he believes can and should be achieved with the currently available resources. Conversely, Popper contrasts contemporary capitalist society with other present-day societies and ultimately favours the relative merits of the former. [17]

Francis Fukuyama contends that the belief in the corruptibility of all institutions culminates in a dead end of universal distrust. He asserts that American democracy, and indeed any democracy, cannot endure without faith in the potential for impartial institutions. Without this, partisan political combat will infiltrate every facet of life. Fukuyama maintains that the survival of democracies hinges on unbiased platforms for justice and governance administration [18]. Fukuyama argues that democracies can’t survive without at least a belief in the possibility of impartial platforms for the administration of justice and governance. However, neocapitalism currently controls the state, leading to the corruption of its secular institutions. It’s crucial to protect these democratic institutions to serve the people’s interests. Philosopher Popper has argued for safeguarding and enhancing democratic institutions to benefit everyone. However, he also views the state as a necessary evil. It’s important to prevent the excessive influence of the corporate state in social decision-making. Despite this, the state is indispensable for maintaining and preserving democratic institutions. Empowering people through legislation based on their rights is essential to ensure their active participation. Professor Prabhat Patnaik has discussed how inequality can be exacerbated by economic growth due to a mismatch between technological advances and employment growth. He has proposed five fundamental rights for all individuals - the right to health, education, food, employment, and old-age and disability pensions - to empower the modern nation-state and move away from a purely welfare-based system. Additionally, he has suggested implementing wealth and inheritance taxes to generate the necessary financial resources to uphold these rights. [19]

The question of the state’s vitality and legitimacy is raised. Unilinear development, guided by natural selection and the rational maximisation of returns, fosters homogeneity in societal values and ethics. Yet, the state is not merely another imperative element; it stands apart from kings, military heads, or nations. The state’s role involves a balance between authority and adaptation. Parliamentary compromises, reducing differences, reflect the complex internal activities necessary for achieving homogeneity. However, when faced with unassimilable forces, the state enforces strict authority. The dominant inclination of a state, whether towards adaptation or authority, hinges on its democratic or despotic nature [20]. The state, therefore, neither acknowledges nor accommodates differences. Within a majoritarian democracy governed by meritocracy, the state is prone to becoming amenable to the vested interests of a select and privileged minority.

People can be both altruistic and self-centred. It is the responsibility of the state to promote preferred values within society. This involves the state adhering to the societal norms established through the constitution. Any effort to transform society, regardless of its stated intentions, is seen as an attempt to change the status of a specific group of people within existing power structures [21]. For example, when corporate interests lead to social change, it can create a society where individuals feel disconnected and isolated, always prioritising making as much money as possible. These results in people making decisions based solely on maximising economic gains, creating an "economic man". However, changing these societal values towards a more collective mindset is not an easy task. To achieve this, those who prioritise rational decision-making and maximising profits would need to have political power or control. As an old anarchist dictum reminds us that in giving birth to a new world our success will depend on keeping our chosen means commensurate with the desired ends [22]. During this process, individuals not only adhere to the anarchist ideology but also contribute to state-led anarchy. State-led anarchy encompasses two implications. In the first scenario, within a capitalist society, the state diminishes in significance while the fundamental concept of the state remains unchanged. In the second scenario, the state fails to meet its obligations. This deficiency is rectifiable through regular democratic elections. However, the first scenario is irreparable [23]. Moreover, according to Michael Sandel, the meritocratic state prioritises distributive justice (rights without obligation) over contributive justice (rights with obligation), which ensures embedded social constructivism and participatory development.

Conclusion

In considering the state, whether present, absent, or missing, state-led anarchy has emerged as the logical outcome, recognising the state’s role as merely an observer of capital functions in complex Indian society, with remedial welfarist measures when needed. However, this welfarism negates people’s agency and renders them mere recipients. It also argues that although the state exists, it does not function as desired. Moreover, it delegates its authority to private entities, even for people’s basic needs, in situations where the state is absent. when required. However, this welfarism negates agency in people and makes them recipients at the receiving end. It also argues that although the state exists but not function in a desired way. Furthermore, it delegates essential responsibilities to private entities, including the provision of basic needs for people. It is where the state is missing. Thorstein Veblen 1899, Theory of Leisure Class, Macmillan: US.

(Authors: Ajay Mishra teaches Economics at Lalit Narayan Mithila University, Darbhanga, Bihar. He has earned a PhD from the Centre for South Asian Studies, JNU, New Delhi, India: Shraddha Rishi teaches Political Science at Magadh University, Bodhgaya, Bihar. She has earned a PhD from the Centre for South Asian Studies, JNU, New Delhi, India)