Social Scientist. v 20, no. 234 (Nov 1992) p. 44.


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PRABHAT PATNAIIC

A Note on the Political Economy of the 'Retreat of the State'

1. Policies such as privatisation of State-owned production units, reduction of State expenditure especially on subsidies and transfer payments, and removal of State controls in various spheres, which have been so much in vogue in recent years all over the world, are commonly perceived as constituting a 'retreat of the State*, a movement towards laissez-faire from State interventionism. This perception, shared alike by both the protagonists as well as the critics of such a shift, is however an erroneous one. The US State for instance, notwithstanding all the Reaganite rhetoric, has (apart from running huge fiscal deficits) continuously shored up the American financial system, made increasingly vulnerable by debt-explosion.1 And the exchange rate at which Tory Britain plans 'to join the European Monetary System has nothing to do with a 'free market equilibrium'; it is a choice on the part of the State dictated by the interests of the City. Even in the fiscal sphere, where tax-cuts have accompanied welfare expenditure cuts everywhere, there is obviously a specific redistributive design at work, a specific kind of intervention embedded within the so-called 'retreat* by the State. In short, the blanket term 'retreat* by the State, is a gross misnomer. What we are witnessing is a transition from one paradigm of State intervention to another. This transition is not merely a shift from one technique of State intervention to another; still less is it a shift in abstracto towards laissez-faire. It has an exceedingly important class-content.

This shift, in general, is designed to bring about three important consequences: first, a weakening of the working class vis-a-vis the capitalists (so much so that many American economists see Reaganomics essentially as a strategy for raising the rate of surplus value2); secondly, a considerable centralisation of capital, i.e. driving out or absorption of small capitalists by the large; and thirdly, a strengthening of financial interests relative to manufacturing interests within the capitalists themselves. I use the term 'in general' while

^Centre for Economic Studies and'Planning, Jawaharlal Nehru University, New Delhi.

Social Scientist, Vol. 20, No. 11, November 1992



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