State theory - Marxism v Weberianism

This thesis represents an analysis of the Marxist-Weberian debate in a contemporary context. It examines changes in and convergence between these two contrasting traditions and investigates and evaluates the remaining points in dispute between two seminal contributions to the literature, Bob Jessop’s The Future of the Capitalist State (2002) and Linda Wiess’s The Myth of the Powerless State (1998).

Recent changes in contemporary capitalist economies, including the growth of corporatism, and growing levels of international divergence in economic performance have required the reconsideration of two of the main anti-liberal traditions of economic thought, Marxist and Weberian theories of the state. There is a recognition amongst theorists of the growing importance of the state, governance and coordinating economic institutions. Some countries seem to have developed their capacity for managing the process of industrial and economic transformation better than others. However, there are serious political and other constraints upon the ability of the state in all contexts.

Marxism, while acknowledging the increased salience of the state, persists with a deterministic, functionalist analysis of its role in capitalist economies; Marxism still argues that the state is controlled by capital and its role is to provide the political and legal conditions for private profit-making. Weberianism is more optimistic: though Weberian analyses are mostly empirical they are usually only descriptive and lack a sophisticated theoretical understanding of the broader economic context.

Politics in Contemporary Capitalism:

Marxism and Weberianism Compared

Jade Connor

Jade Connor October 2005

ABSTRACT

Jade Connor October 2005

ACKNOWLEDGEMENTS

Thanks sincerely to my supervisor, Geoff Dow, for allowing me my many indulgences; for his patience; and his ideas. Thanks especially to Lindsay Pahn and Barbara Sullivan for their advice and encouragement.

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INTRODUCTION

Weberian writers have for a long time been optimistic about the possibilities of politics. Many works in this tradition have increasingly been concerned to analyse the constraints upon the state. especially ‘globalisation’ constraints and how to overcome them. Weberian analyses typically focus upon the state’s ‘infrastructural power’. Marxism has traditionally been sceptical of the possibilities of politics, though over time it has reluctantly become slightly more optimistic. Marxist analyses typically focus upon the political and sociological constraints imposed by the capitalist logic of accumulation.

For this thesis the definition of the state includes the government, bureaucracy and other public institutions, as opposed to countries or economies. The growing importance of the state in the economy has been well established in the literature of comparative political economy (Kitschelt et al 1999, Weiss 2003, Weiss & Hobson 1995, Evans et al 1985, Boreham et al 1999). The growing politicisation of the economy has led to a high level of divergence of economic outcomes in the OECD. Countries such as Japan or Austria, that have developed their capacity to coordinate industrial change, have been most economically successful and had high levels of economic equality. Liberal or market-based preferences are increasingly being usurped, even in the liberal countries.

On the other hand, it is a common enough argument that ‘globalisation’ has brought with it new competitive pressures for both individual capitals and the overall economy. It is argued that the state is more constrained than in the past, limiting its abilities and options (Giddens 1995, Jessop 2002, Latham 1998). However, references to the term ‘globalisation’ should be viewed suspiciously. In practice the concept of globalisation is vague and frequently polemical. For this thesis, globalisation refers to the tendency of capital to attempt to expand production into foreign countries, which in practice usually means in foreign countries in the surrounding region.

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The original Marxian theories of state impotence, represented by Marx and Engels, now seem less than convincing, especially when one considers the growing size and role of government (see Figure 1), and the growing body of comparative political economy literature. Weberian conceptions of national bureaucratic state competence also need re-evaluation to incorporate a more sophisticated understanding of, firstly, the distinctive economic influences on state policy which have become prominent since 1974; and secondly, the political difficulties involved in responding to economic problems.

Two theorists who have contributed most to current discussions about changing modes of governance are Bob Jessop (2002) and Linda Weiss (1998). These works reflect the growing convergence between Marxian and Weberian theories of the state. Jessop has noted the increasing importance of the state, but argues that the state’s involvement in the economy is structurally constrained and it encounters political difficulties in attempting to overcome economic problems. On the other hand, Weiss has modernised the Weberian approach by better understanding the economic pressures brought about by globalisation.

Figure 1: The growth of government in selected countries, 1870-1996.

Source: Tanzi & Schukencht (2000: 6-7).

010203040506070186018801900192019401960198020002020Total Government Outlays /

GDP (%)AustraliaAustriaSwedenJapanUS

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The specific purpose of this thesis is to evaluate Jessop’s recent work on governance and the possibilities of nationally-based politics and Weiss’s recent work on state capacity and globalisation. The comparison and contrasting of a neo-Marxist view and a neo-Weberian view will provide a survey of respective divergent views and concepts deployed in Marxian and Weberian analyses. In doing so we can see the increasing convergence between Marxian and Weberian theories of the state, and this will help to develop a better theoretical understanding of both the possibilities and difficulties of macro-political economic coordination. I envisage that a discussion of the respective strengths and weaknesses of Jessop and Weiss will allow a more wholesome account of the role of politics in the capitalist accumulation process. The thesis examines the historical debate between Marxism and Weberianism in a contemporary context.

Both Jessop’s scepticism and Wiess’s optimism are based upon respective analyses of globalisation, and more general analyses of contemporary capitalism. Jessop’s analysis of globalisation tendencies seems glib and uncritical. He argues that globalisation means that Keynesian policies are obsolete; thus the national state is less relevant and capable. In mature capitalism, businesses must expand production beyond domestic horizons; thus he argues that capital is increasingly beyond the reach of domestic regulators. He argues that new globalisation-induced ‘competitive pressures’ force countries to compete against each other in an ‘international deregulatory race to the bottom’. He concludes that this has resulted in the general disembedding of markets.

Despite this, he argues that the ‘increased complexity’ of economic problems and new economic problems, like stagflation, mean that the state needs to develop governance relationships with business and labour, as confirmed by the comparative literature. Unilateral statism has become limited in its abilities to solve economic problems, however Jessop argues the need for disembedding markets and the growing mobility of capital mean that we should not underestimate the serious economic and political difficulties involved in developing corporatist capacities.

Jessop’s analysis is important, but flawed in several key respects. Firstly, Wiess shows that the state can, at least in theory, develop its capacity through the assertion

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of its ‘infrastructural power’ (see p8). Secondly, Weiss shows that the implications of globalisation for state capability and autonomy are overstated. Thirdly, Keynesianism is not obsolete. Fourthly, the ‘new competitive pressures’ in contemporary capitalism are not caused by globalisation, and are not new. Fifthly, Jessop relies upon the Schumpeterian concept of innovation, but ignores Schumpeter’s analysis of the cyclical nature of capitalism and the process of creative destruction. Sixthly, and most importantly, his assertion that markets have been disembedded is wrong. These errors contribute to an over-exaggeration of the difficulties associated with developing state capacity.

Weiss seems to presume that the political environment is independent of the economic process. Thus she misjudges the political-sociological effects and limitations imposed by the capitalist accumulation process. The nature and logic of capitalism has a direct impact upon the political environment, even though it is certainly not determining and politics is always contingent and changeable. Weiss also overestimates the rational coherence of politics, which may be linked to her focus on countries without long democratic traditions. She ignores the general conflicts over economic policy that occur in all political systems at a time when neoliberalism is on the horizon everywhere. In Japan, for example, state policy-makers are frequently divided between neoliberal and anti-liberal policy responses and policy is increasingly contradictory (Johnston 1999).

The underlying questions which are explored in this thesis are, firstly, what are the reasons for the general changes in politics and the economy from the post-war boom period to the post-1974 period? Secondly, what are the political constraints and possibilities created by globalisation and the existence of competitive pressures? The thesis is not primarily a discussion of the growing importance of governance and networks in contemporary capitalism: this is done elsewhere. Instead I choose to focus on the differences between Jessop and Weiss, since this provides a preliminary analysis of the issues that remain unresolved and need debating.

I begin with a section discussing the important methodological aspects of the thesis and the methodological differences between Marxism and Weberianism. I then discuss the classical Marxist and Weberian works in order to develop an

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understanding of the traditions of analysis from which Jessop and Wiess come. This is followed by a discussion of the concept of state capacity as developed by Weiss. In the fourth section I outline Jessop’s work on contemporary capitalism and governance. I then follow with my own synthesis and critique of the two. To focus the thesis I restrict it to a discussion of a few specific topics, including globalisation, the political environment, Schumpeterian innovation and the capitalist cycle of boom and bust (structural change).

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METHODOLOGY

The thesis is a synthesis of two different methodological approaches to the analysis of politics and the state. Marxism is usually abstract and focuses on theoretical elements of the capitalist mode of production; it tends to preclude a role for autonomous politics and usually searches for deterministic explanations for changes in modes of governance. Marxist analyses are often theories without empirical testing. Neo-Weberianism tends to be empirical, historical and focused on institutions; however, it is often descriptive rather than seeking theoretical explanations for understanding how and why different economic regimes have developed.

Weiss primarily examines Japan, South Korea and Taiwan. Since these countries seem to have defied the neoliberal Anglo ideal, Weiss implies that it is also possible for the liberal countries to develop their capacity, if only politicians and bureaucrats were politically and technically sophisticated enough. Jessop focuses on Europe and the Anglo countries. His theoretical understanding of the logic of the accumulation process in capitalist economies could contribute towards an understanding of the political differences between Asian and Western countries. He argues that globalisation pressures emerge in tandem with the maturing of capitalist economies. Weiss disputes the prominence of actual globalisation constraints. However, South Korea and Taiwan are ‘catch-up’ countries. As for Japan, it has a well-established industrial sector now, but it is also an unusually big economy, enhancing the possibilities for domestic profit-making. Thus Weiss is too optimistic in presuming that governance attempts can be replicated in the Western economies.

Jessop’s abstract analysis encourages him to generalise too much about economic systems that are very different. It leads him to investigate deterministic reasons for changes in modes of governance. However, politics is always contingent and the strategies and competence of political parties and other political forces makes substantial differences to outcomes. Thus one should be wary of primarily deterministic analyses such as Jessop’s.

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The thesis is a small, early contribution located within a bigger project to understand the political, economic and historical differences between countries which have and have not been able to develop sophisticated corporatist-governance capacities. The Weberian tradition has not been concerned to analyse why some countries have not developed their capacity. The Marxist tradition pursues deterministic explanations and thus is less helpful than it could be in understanding the possibilities of politics.

The present project contributes to this goal in several ways. Firstly, it examines theoretical flaws in Jessop’s argument. Secondly, it questions his claim that the market has been disembedded, which helps interrogate his claim that the state is the captive of business interests and thus not autonomous. Thirdly, it challenges his assumptions on the basis of arguments from Weiss, and challenges Weiss’s arguments on the basis of Jessop’s work. Fourthly, it questions whether Weiss has overlooked important political and economic constraints upon the state in her own analysis of the East Asian (and other) countries.

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CLASSICAL THEORY

Marxism has typically argued that the state provides the legal and political basis for capitalist profit making:

The executive of the modern state is but a committee for managing the common affairs of the whole bourgeoisie (Marx & Engels 1983 [1848]: 206).

Weber recognised that politics was a difficult process, but was more optimistic:

Certainly all historical experience confirms the truth – that man would not have attained the possible unless time and again he had reached out for the impossible (Weber 1948 [1918]: 128).

The classical Weberian approach emphasises the ability of the state to achieve its objectives. Weber argued that it was important and realistic for the state to play a role in the economy. The state and politics are taken to exist prior to, and mostly independent of, the economic system.

Politics / The State The Economy

Figure 2: Weberian political economy’s emphasis on the primacy of ‘the state’.

More recent Weberian accounts have concentrated on the ‘infrastructural power’ of the state, a concept initially associated with Mann (1988). Infrastructural power comes from the need for the state to organise the general conditions of the economy and the important role it has in developing infrastructure, public goods and the general need

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for the state to establish a functioning market system. This essential state role is said to give it scope to implement its policies.

Infrastructural power is the opposite of despotic power. On the one hand, despotic power is where the state asserts its authority over citizens or business to compel conformity to state initiatives. Alternatively, infrastructural power is where the state uses its resources and unique abilities to assist business and the economic process generally. This gives the state huge power to elicit cooperation from business, to discipline business to improve productivity and product quality, to facilitate investment and to shape the direction of that investment. Whereas despotic power implies opposition and conflict, infrastructural power implies negotiation and cooperation.

Weberian scholarship has often analysed the development of policy tools that enhance the state’s ability. Weberianism has also usually accepted the argument that the level of integration into the international economy constrains state autonomy, though remaining optimistic that the state can use its infrastructural power to overcome such constraints.

Marx tended to be sceptical of the ability of the state to pursue economic goals. This was founded in his belief that the state was the captive of capital. Marx’s historical materialism argued that the economic system ‘determined’ the nature of politics. For Marxists, the capitalist system functions according to the capitalist ‘logic of accumulation’, where capital is motivated to invest on the expectation of profits. Thus a capitalist economy depends upon the ongoing ability of capital to make a sufficient level of profits. This substantially requires the state to establish various legal and political conditions, including enforcing rights to private property. Business interests are very powerful and resist attempts for the state to ‘intervene’ in the production process. The state is seen as little more than an agent to establish the socio-political and legal conditions necessary in society for business to make profits.

The theory of the profit-making logic of accumulation has tended to emphasise the tendency of capital to continually look to expand markets:

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The need of a constantly expanding market for its products chases the bourgeoisie over the whole surface of the globe. It must nestle everywhere, settle everywhere, establish connections everywhere (Marx & Engels 1983 [1848]: 207).

The theory of the logic of accumulations also stresses the centrality of private capital to the accumulation process. The ability of business to be able to make satisfactory profits is fundamental to the success of the economy as a whole. This places capital in a dominant political position. Since the state relies on good economic performance it becomes dependent upon capital; also, continued good economic performance thus depends upon the state supporting capital and the profit-making process.

The Economy Politics / The State

Figure 3: Marxism’s emphasis on the ‘the economy’: the state provides the conditions for capitalism.

Thus the debate within both the Marxist and Weberian literature focused for a long time on the question of the ‘autonomy’ of the state from capital. The ultimate question has been whether the state can implement ‘its policies’. These classical approaches reflect traditional understandings of power, defined as the ability of the state to implement its policies despite opposition.

Gradually Marxist scholarship has come to acknowledge more and more the prominent role of the state in responding to the capitalist crisis tendencies. However, Jessop’s acknowledgement of the role of the state is mostly superficial. He retains the major flaw in Marxist theorising by resorting almost entirely to determinist explanations for the growing role of the state. On the other hand, Weberianism focuses more on ‘agency’ explanations.

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WEISS ON STATE CAPACITY

Weiss’s definition of state capacity is more specific than typical definitions. The usual definition, focused as it is on the question of autonomy, defines state capacity as the ability of the state to achieve its objectives (1998: 38). Weiss argues that capacity is judged according to the state’s competency in governing the process of industrial change:

[State capacity is] the ability to coordinate industrial change to meet the changing context of international competition (1998: 7).

‘[State capacity] is thus the capacity to devise and implement policies that augment a society’s investible surplus, as opposed to merely redistributing existing resources...’ (1998: 5).

State capacity, she argues, is not only a function of the level of autonomy from capital (1998: 26-29). State capacity must also address the ability of the state to pursue economic goals effectively (1998: 32). Increasing overall wealth and redistributing wealth are seen as complementary rather than competing objectives. State capacity depends upon the state’s ability to anticipate and respond to economic change (1998: 4). It is the capacity for mobilising a ‘collective investment effort’ and is judged by the state’s ability to raise the level of manufactured exports and for coordinating technological upgrading (1998: 7).

In contrast to the typical Weberian approach, Weiss argues that transformative state capacity is not a product of private-sector weakness. Private sector weakness actually limits state capacity and pure unilateralism in state policy-making is likely to be a minus rather than a plus, although statist forms of governance still play a very important role. Weiss’s theory of ‘governed independence’ acknowledges the importance of state autonomy, but she argues that ‘Of central importance is the state’s ability to use its autonomy to consult and to elicit consensus and cooperation from the private sector.’ (1998: 39). She argues that the state can use its ‘infrastructural power’

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to, firstly, extract vital information from capital and particular businesses; secondly, to stimulate private sector participation in policy formulation, rather than lobbying; and thirdly, to mobilise industry collaboration around a national economic strategy.

Weiss is critical of traditional approaches that focus on conventional ‘policy tools’. This is because the tasks required for industrial upgrading change over time, and more specifically depend on the particular context and the types of problems that need to be managed:

Of course MITI [the Ministry of International Trade and Industry] no longer needs to promote exports, or preside over industry creation. It may have ‘lost’ many of its former policy instruments... [but] MITI continues to create new tools, ones more suited to the new environment and to the new tasks that this engenders... (1998: 197).

Strong state capacity is determined by, firstly, the sophistication of the bureaucracy; and secondly, the relationship between the state and industry groups. It is important for the bureaucracy to have a sophisticated information-gathering function. The state should insist upon regular reporting by industry and particular firms of the latest production information. It should have a sophisticated analytical ability to predict changes in overall trends and locate problems within specific industries and possibilities for new investment. The ideal types of state-industry linkages and how the state can use various ‘disciplinary’ modes of governance are captured in Weiss’s theory of ‘governed interdependence’ (see below).

Weiss argues that there are two main types of state capacity. The first is transformative or developmental capacity and the second is distributive capacity. Transformative and distributive state capacities represent divergent strategies for managing economic and industrial change. They are both divergences from liberal modes of economic management.

The primary focus of a state pursuing a transformative strategy to managing the economy is production (supply-side economics). The state aims to manage problems of production and directly facilitates the development of industry in a variety of ways.

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Firstly, it can encourage complementary investment decisions. Secondly, it can help organise the specialisation and cooperation of smaller firms. Thirdly, it can promote the sharing of information and technological acquisition, especially within individual industries. Fourthly, it can help socialise investment risk (and facilitating priority access to finance for industry). Fifthly, the state can facilitate long-term investment and very large investments and coordinate investment that needs to be made concurrently. Finally, it can encourage cooperation between primary, secondary and tertiary producers and across the general economy, for example by encouraging national ‘specialisations’.

In contrast, the state that pursues a distributive strategy to managing the economy tends to focus more on socializing the costs of change to the citizenry. According to Weiss, the distributive strategy is a ‘less direct’ form of managing industrial change: it represents what Weberianism calls ‘putting the cart before the horse’, since the state focuses on citizenship rights without enough focus on governing industrial development. Weiss broadly associates this with Sweden. The distributive model tends to focus more on demand management and demand-side policies to encourage or indirectly pressure business to engage in industrial transformation. She also argues that there is a rare, ‘dualistic’ type of state which combines transformative and distributive capacities (Japan, Germany and Austria).

According to Weiss, the state with the strongest state capacity will be the one with the best relationship with industry. State autonomy is important, but only if it is ‘embedded’ in a cooperative process with business. ‘Embedded autonomy’ means the state’s ability to elicit cooperation from capital in both policy formulation and implementation. This is a sharp contrast from any unilateralist approach to state policy formulation and implementation. Of course, the state still needs to be well insulated from specific business and lobbying interests.

The nature of the interdependence between the government and business is important. The state needs to encourage a robust negotiating relationship, with a focus on strong state negotiating skills, which Weiss calls ‘governed interdependence’. Incentives should not be offered unless there is a commitment from business that they will also contribute to cost-saving and productivity, rather than simply becoming rent-seekers

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(1998: 38). Weiss argues that there is a significant basis for interdependency. The state needs business to generate jobs and growth, to take initiative to improve productivity and to continually innovate. Business relies on government to establish and nurture general economic conditions and for assistance in overcoming the various production obstacles noted above. There are various measures available to the state that should be used to create a disciplined industry environment which can foster technological growth; these disciplinary infrastructural powers can be used through either market, statist or network forms of governance. In return for any form of state support or coordination, the state should always make demands on business, including getting results and setting quotas, but also by demanding compliance with any number of other politically-determined initiatives.

Of central importance is that this cooperative relationship is extensive, regularized and institutionalised (1998: 39). Highly-skilled state agencies need to be well-informed of the latest production and investment data. Weiss argues that the institutionalisation of cooperation allows conflict to be managed rather than becoming an obstacle to national economic development.

According to Weiss, the state should consciously foster the development of united, strong, competent industry associations, and if such associations do not exist, the state should develop them. This will facilitate better communication with the state, but also better cooperation, especially within individual industries and between producers at different stages in the production cycle. Also, if the associations are strong they will have the ability to better ensure the compliance of individual businesses and develop a type of ‘forced’ cooperation and consultation between the state and all relevant businesses. The state should also encourage cooperation between producer groups on their own (private-sector governance).

Weiss next argues that the development of state capacity depends on the political environment and support from the political leadership (1998: 54): political leaders need to support a growth agenda in order to facilitate the development of bureaucratic capacity. Note here that Weiss’s favourite objects of empirical analysis are Japan, South Korea and Taiwan, countries that have (to say the least) distinctly different political systems to Western examples of democracy. Weiss argues that:

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One may conjecture that this elite cohesion [in Japan] over core national goals has to do with factors that go well beyond the LDP’s lengthy rule. Arguably, it is bound up with a shared national experience which gave rise to the drive for technological pendence. ...one should not overlook the character of the political system or the factors which make for elite cohesion.... (1998: 54).

Wiess argues that state ‘helplessness’ is a political construct (Weiss 1998: 193). Against the orthodoxy, she further argues that globalisation means that the state is now more important to economic development and politics is still the main determinate of state capacity (1998: 170). She argues that globalisation has not forced convergence upon a liberal model of accumulation regime (1998: 178). The cost of finance in different countries hasn’t converged, large differences in national savings and investment rates remain, and most domestic investment still comes from domestic savings.

Weiss presents evidence to suggest that the expansion of markets, not cost-reduction, is the main reason behind the internationalisation of investment. Multinational corporations do not invest where wages and taxes are lowest (1998: 186). Most economic integration is based on a growing ‘regionalisation’ rather than ‘globalisation’ as such (1998: 187). Finally, multinational corporations still maintain a ‘home base’ in one particular country or within one specific region (1998: 186). This obviously has important implications for the governability of capital; since, for example, a Japanese company is most likely to expand in countries that are close by, the growth of regional governance organizations, deliberately developed by particular governments, means that these international capitals are not really ‘footloose’.

Globalisation does not contribute to the diminishing of state capacity. Firstly, Weiss argues that this is only a polemical, rhetorical argument deployed by political leaders in already weak liberal countries in order to better sell unpopular neoliberal economic policies to voters (1998: 193). Also, other political forces pressing for neoliberal policies for the usual reasons contribute to the ideology of state helplessness ‘because of’ globalisation. Weiss argues that ideological factors, and the current world

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‘fashion’ in economic policy-making have alarming effects (1998: 193), though she does not attempt to explore this further.

This does not mean that Weiss argues that the constraints imposed by globalisation are not real, but she argues that the state can still evolve to adapt to the changed environment. Instead of losing capacity, the state finds different ways of managing change (1998: 189). She argues that liberal countries, which never had a state capacity to begin with, continue to find it difficult to develop their capacity for the usual reasons, not because of any new globalised world order. There have been various different varieties of state responses to contemporary economic pressures (1998: 194). Governments have changed and industry policy has become much more complicated in general as old tools of economic coordination and management become less effective. (1998: 197, 209). Liberal macroeconomic tools especially become less effective and require a more sophisticated state response.

Secondly, Weiss argues that there are good reasons why the state might want to encourage the internationalization of domestic investment. Domestic markets are only so big and therefore have limits to the amount of profit that can be earned from them. This tendency means that as big companies expand they increasingly need to look to international markets to expand profits. This is not necessarily an easy task, and thus the state has a very prominent role in facilitating the process, both in foreign or trade policy terms, but also in assisting with investment and relocation costs (1998: 204, 207). Weiss argues that ‘state capacity is a condition of successful internationalization.’ (1998: 206). This has important implications for divergence in the international economy, because if capital cannot easily relocate and participate in new markets in order to pursue profits, it is encouraged to pursue cost-cutting strategies.

Thirdly, Weiss argues that the ‘catalytic state’ has emerged (1998: 209-211). This is a type of state which is proactive in developing its increasingly complex capacities. It seeks to adapt to new economic challenges by strengthening its cooperative relationships with industry. This type of state is on the ‘front foot’ in managing technological upgrading and encouraging microeconomic cooperation.

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Weiss argues that the existence of ‘global’ capital is a myth. Capital still maintains a ‘national base’ and at best mostly only expands throughout its given local region (1998: 184-187). This obviously has important implications for the question of the governability of capital. Weiss maintains that there are several advantages of a national or regional base. Firstly, new technologies become important fixed costs that cannot be shifted easily. Secondly, new production methods support the growth of local producer networks within close physical proximity (especially with non-assembly operations). Finally, the support relationships between national governments and labour groups are an important source of competitiveness, especially in ‘strong’ states. Thus the advantages of capital mobility are overstated (1998: 187).

To summarise, Weiss argues that the pressure to globalise arises from a real need for business to expand its opportunities beyond domestic markets. This does not necessarily mean that levels of domestic investment will be lower (1998: 174-178). The state has an important function to play in this process, and even a liberal state which concentrates on foreign or trade policy has some important capabilities. Globalisation pressures are just another form of challenge like so many others that the state has had to respond to, such as stagflation.

Weiss argues that the state can respond to the challenges posed by the globalising world economy and the limits of uncoordinated economies. The type of response is based on how well-developed state capacity is. She argues that the state certainly is an important element in the determination of overall economic conditions and national economic success. This is increasingly the case as economies become more complex and as economic actors look to transcend the limits of atomized, uncoordinated, uncontrolled economic anarchy.

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JESSOP ON GOVERNANCE AND DISEMBEDDING MARKETS

Jessop’s theoretical work compares post-World War 2 capitalism with modern capitalism. He focuses specifically upon a ‘stylized model of Atlantic Fordism’, a type of capitalist economy that he argues existed in the English-speaking countries and North-Western Europe after the war (2002: 55). He acknowledges the differences between countries as highlighted in the comparative political economy literature but argues that it is possible to establish a general understanding of the trends in contemporary capitalism. Important concepts in Jessop’s work are the logic of accumulation, the labour theory of value, the contradictions of capitalism and Schumpeterian competitive innovation.

Jessop applies the concept of ‘autopoiesis’, which is the study of self-organising, self-functioning systems (1990: 307-337). According to Jessop, capitalism is largely self-organising, even if it is prone to crisis, and the capitalist (market) system lives alongside ‘civil society’. This theory is developed from biology and its understanding of ecological dominance. One system becomes dominant in a complex, co-evolving situation and sociological relations are always contingent (2002: 26). The subordinated system (civil society) will try to ‘guide’ the system in a favourable direction:

Dismissing the ultimately determining role of the forces of production and / or the technical and social relations of production for an entire society does not, however, exclude their importance within the economy. (2002: 23).

Jessop argues that the Atlantic-Fordist accumulation regime was based upon the presumption of a closed economy. New investment and profits were based primarily upon increasing economies of scale and manufacturing productivity based on assembly-line and other techniques (2002: 56). Wages were viewed primarily as a

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source of demand rather than a cost of production. He argues that this system came to crisis because of the limits of solely domestic sources of demand.

In the Atlantic-Fordist regime, the ‘Keynesian Welfare National State’ confirmed the sociological aspects of the economy, with a specific type of wage relations. The state was responsible for the prosperity of all citizens (2002: 60). It aimed to secure effective demand by policies of demand management and management of other national economic aggregates to ensure full employment.

Jessop argues that when there is a crisis ‘of’ an accumulation regime, society and the economy together respond with a new ‘spatio-temporal’ fix, which becomes the new set of production relations. Importantly, this will involve the ‘rearticulation’ of the various balances between the structural contradictions of capitalism: the first being the tendency towards the socialization of investment versus the tendency for continuing private control over the production process; the second is conflicts between logics of individual action and the overall needs of the system in general (atomism versus cooperation); and the third contradiction involves the inherent conflictual nature of capitalism, involving the structuring of various conflicts, especially between capital and labour over wages. These contradictions provide an ongoing basis for conflict between liberal and anti-liberal policy preferences.

According to Jessop, when the ‘limits’ of the Atlantic-Fordist regime were reached, new competitive pressures developed and capital began to look for new ways to expand profits (2002: 81). Jessop outlines several key ways, based on ideas from Schumpeter, in which capital can ‘innovate’ in order to continue to expand profits:

Innovation 1: New or improved products;

Innovation 2: New economies of production;

Innovation 3: New markets beyond the domestic market or new niches;

Innovation 4: New (better or cheaper) sources of supply;

Innovation 5: Better organisation of the overall industry.

Both business and the state react to these possibilities for new profits by attempting to improve the organisation of the industry. Jessop argues that this will happen partly

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spontaneously as in any autopoietic system, but extra-economic conditions, including the state, are also increasingly important to securing these sociological and legal conditions and particularly to embedding them in society.

Jessop argues that many countries, including Japan, Germany, Belgium and Sweden, have followed strategies based on product innovation rather than cost-cutting. Nonetheless he maintains that there are limits to the innovation strategy. Firstly, with the growing pace of technological developments and innovations the complexity and risks of new investments based on innovations is escalating (2002: 123). Secondly, benefits to innovation are limited because innovations tend to be copied and profits and increased market share tend to get competed away. Therefore, the focus inevitably shifts beyond product innovations and towards other measures to increase (maintain) profits. These include new economies such as a more skilled workforce, searches for new (global) markets and cheaper or more exploitable labour.

As noted previously, Weiss has argued that a competent state will be able to organise economic conditions so that industry is in a state of perpetual innovation. She argues that the state can continually engage in a process of governed-interdependence to continually improve industry structure and cooperation within industries. She is also optimistic about the state’s ability to predict industry trends and opportunities for new investment and emerging niche possibilities for capital. Finally, Weiss argues that the state can assist in the diffusion and sharing of new production technologies and processes, particularly by socialising risk. Therefore, the ability of the state and business to compete based on a strategy of product or process innovation is a prominent site of disagreement between Jessop and Weiss.

For Jessop, the inevitability of the logic of accumulation means that the state loses control over national autonomy and gets involved in guiding the globalisation process, which (ironically) further undermines national autonomy (2002: 126). This further leads him to be sceptical of the ability of the state to facilitate investment and to pursue the ‘high road’ innovation strategy. However, he maintains that there are still persistent attempts to keep capital within the reach of state regulators and also supra-national attempts to establish regional inter-governmental organisations capable of

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regulating international capital (2002: 172-213). However Jessop insists that each country is forced to compete in order to secure the best conditions for capital.

Thus contemporary capitalism can be understood insofar as it has involved the rearticulation of the structural contradictions noted above. Jessop argues that, firstly, competitive globalisation pressures have forced a downward pressure on wages and moves to improve labour flexibility. Secondly, globalisation has meant that capital is less governable and thus individual anarchy has become more common than cooperation. Finally, he insists that the state has less autonomy than in the past and this corresponds to the reassertion of private control over capital.

Jessop next argues that ‘Keynesian’ tools of national economic management have become redundant because there is less emphasis on increasing domestic demand as a strategy to increasing profits. He argues that this is a logical response to the long-term tendency for the rate of profit to fall. Capital searches for new international markets to increase sales. The past effectiveness of Keynesian policy tools, he says, was based upon the presumption of a closed national economy which no longer exists. Thus he concludes that the relative decrease in the potential of nationally-based economic management inevitably means less autonomy for the state.

Jessop dismisses arguments that the process of globalisation means that the state is less relevant, but does argue that the state has less autonomy. The state is important since ‘extra-economic’ conditions are increasingly necessary for providing the conditions for private profit-making. The state has an important role in ‘re-articulating’ the respective balances of the three main contradictions of capitalism by changing the political and legal environment. Jessop is sceptical about the possibilities of innovations 1, 2 and 5. He explains that capital therefore shifted its focus and began to cut costs including wage costs and taxes. He argues that the state continues to be especially important in promoting labour force flexibility.

This pessimistic view argues that the state has a prominent role in disembedding capital (markets) from society. This involves making neoliberal ‘reforms’ politically and socially feasible. He argues that the state reproduces the conditions for private profit-making in two ways: firstly, in political-polemical, rhetorical comments about

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globalisation (or otherwise) aimed at reshaping the discursive political environment behind a more neoliberal hegemony; and secondly, by secretly undermining social entitlements. For example, the rhetoric of the ‘new challenges of an aging population’ is often combined with secretive, technical changes such as shifting the indexation of the old-age pension to prices rather than wages. Thus Jessop argues that the state’s most important role in creating national wealth is in establishing the conditions for a reasonable level of surplus-extraction in order to provide reasonable levels of profit. Where Jessop is more optimistic is when governments across specific regions develop cooperative forms of regional economic management.

Both Jessop and Weiss argue that the development of state capacity depends upon broad political support behind an ideology of growth, and a sense of ‘solidarity’ between government and business. However, only Jessop investigates the political implications of governance failure. Jessop argues that the state needs to be able to constantly adapt the political foundations of the economic system: he argues that ‘[Governance] suggests the need for almost permanent institutional and organisational innovation to maintain the very possibility (however remote) of sustained economic growth.’ (2002: 243) However, he warns that there are inherent technical difficulties in promoting continual and flexible change in governance structures.

According to Jessop’s definition, governance failure occurs when there is an inability of the state, business, labour and others to achieve the goals that they jointly determine (2002: 236). Failure also occurs when governance does not result in more substantively efficient or successful outcomes than the market or statism would deliver. For Jessop, the key measure of failure is the ‘talking shop’ which does not actually achieve any significant outcome.

Jessop argues that the state continuously rearticulates the structural contradictions of capital, which is necessarily a political task. For example, the state may need to create the legal conditions for extra flexibility in the labour force. This is necessarily a difficult task for a popularly elected government, and is likely to be continually resisted by progressively-minded politicians and bureaucrats. The state is constantly torn between short-to-medium-term political-party competition and other economic imperatives (2002: 243). In particular, this means that capital is in a generally very

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powerful position. Thus it is not always politically or economically possible for the state to achieve politically-determined objectives. In fact, each of the contradictions of capitalism provide a potential source of instability and ongoing conflict.

Both Jessop and Weiss agree that governance is increasingly important, though they arrive at this conclusion differently. Jessop argues that governance represents the need for the state to ensure the needs of business are met. Thus the role of the state and governance fluctuates according to the requirements of the economic system. In contrast, Weiss argues that the state has always been capable of assisting the accumulation process, but that the increased competitive pressures brought about by globalisation mean that the success of a given economy now depends even more on the state’s competence.

For Jessop, ‘solidarity’ between the state and business is important. Rather than merely using its infrastructural power to create interdependencies to force cooperation with political prerogatives, he argues that the state should also be involved in promoting an environment where parties have a shared (negotiated) commitment to a common set of goals. He concludes that the state needs to also negotiate and be willing to depart from its own stated objectives. Jessop further argues that despite attempts to encourage solidarity, gaps will inevitably appear where these commitments conflict with the logics of individual organisations, creating ongoing problems and disagreements (2002: 238).

Besides the inherently conflictual nature of governance, which Weiss overlooks, another potential source of failure is the insufficient knowledge of the involved parties. According to Jessop, a third source is general problems arising in the overall coordination of various partnerships (2002: 238). There is always potential for contradictory state policy and thus the ‘governance of governance’ or ‘metagovernance’ becomes crucial. An important fourth source of governance failure are the inherent difficulties associated with governing international capital. Jessop claims that the relativisation of scale (increasing globalisation and sub-national governance) has lead to a declining role for national-level policy responses (2002: 238). He further claims that capital is simply harder to govern: growing internationalisation has led to ‘regime shopping’ and deregulatory ‘races to the

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bottom’ (2002: 241), strengthening resistance to governance (and statism). This contrasts with Weiss’s assertion of interdependency between business and the state.

Jessop argues that governance is a process of ‘negotiated decision-making’, but that business ultimately has control over this process (2002: 243). The state is dependent upon business to maintain levels of investment, for current knowledge and information and for its technical and business expertise. As such he pertinaciously declares that the state becomes merely a first among equals, most often no more than the agent of capital which helps to provide the conditions for private profit-making (2002: 243). The competing interests of various parties means that capital will often be unwilling to cooperate and governance also raises the potential for lobbying and other obstacles which undermine state autonomy. This is before considering pure ideological resistance to state ‘interference’.

For Jessop, governance failure need not mean total failure, but most cases are examples of ‘incomplete success’. Once it is taken for granted that attempts at governance, as he argues, will ‘inevitably fail’ (at least partially), ongoing attempts at institutionalised governance are dependent upon reflexive orientation, requisite variety and self-reflexive irony (2002: 244-245). Reflexive orientation requires, firstly, that the state can competently evaluate governance outcomes; and secondly, a sophisticated collective understanding of the goals of governance, based on negotiated agreement. The state also needs to competently decide between conflicting goals, such as democratic goals and the need for ongoing economic growth, be able to reassess this regularly, ensure consistency across all areas of state policy and be able to maintain capital’s support. The parties to governance also need to be able to choose the best options rather than compromise options.

Requisite variety means that the state needs to build its repertoire of policy ‘tools’ and be able to choose effectively from a range of different options, although this is difficult because neoliberal resistance often interferes. Governance arrangements themselves also need to be flexible and continually innovative. However, the political environment is not only important in the development of state capacities, but also in defending them against ideological attacks. Self-reflexive irony means that all social forces must recognise from the outset that some measure of failure is likely. Often

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governance or state failure is interpreted by neoliberals as ‘evidence’ that the market is the superior governance mechanism. A commitment to governance needs to be maintained, and capacities improved, rather than abandoning governance in favour of the market or statism. This is a political task which is usually very difficult.

To summarise, Jessop argues that the complexity and political difficulties involved in governance means that some measure of failure is inevitable. This has socio-political consequences, especially where levels of state capacity are low and failure is high. He argues that the state has an important role in disembedding markets from society where necessary and this constrains attempts at developing capacity. He further argues that old Keynesian tools of national economic management have become obsolete because of internationalisation. The state is said to have less autonomy than it has had previously, but it is nonetheless important that state actors persist with governance attempts and try to institutionalise cooperation, despite strident opposition.

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CRITIQUE

The state must develop its capacity in order to ensure economic success. However, failure to do so has potentially disastrous political and sociological consequences. The recent resurgence of neoliberalism makes the development of state capacity politically difficult, and this is the case in all mature capitalist economies. Weiss’s arguments are valuable, however the nature of political conflict, incoherence in state policy and sociological aspects of the economy need to be taken far more seriously.

Jessop’s work is also valuable. However, he makes some errors about both the Fordist and post-1974 epochs. His argument that the state has been less capable since 1974 seems to defy the reality of continued growth in state expenditure and the divergence in different economic systems in the OECD. Secondly, he fails to account for the cyclical nature of capitalism and the implications of this: the period of Atlantic-Fordism corresponds to a long period of economic fortunes, while post-Fordism represents a long post-1974 recession. Jessop also neglects the Asian economies in his analysis, which may encourage him to be over-pessimistic.

Jessop argues that full employment during the boom years was largely the result of ‘Keynesian’ policies focused upon maximising domestic demand. However, the post-Fordist era from 1974 onwards has been a long recession according to Keynesian economic principles and the regular capitalist cycle allows a far more convincing explanation for changes in contemporary capitalism. In a single reference to business cycles he argues that post-war expansion involved a ‘political business cycle’:

....after Keynesian-induced full employment strengthened the bargaining power of organised labour, employers and the state would provoke a recession in order to reduce wage pressures; but as a national election neared, the government would reflate to garner votes from economic recovery (2002: 145).

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Jessop is wrong here, since the essence of Keynesianism was never demand management. Despite the popular view, Keynesian policies were never seriously implemented in most countries (Robinson 1973). The essence of Keynesianism is the call for a ‘comprehensive socialization of investment’ (Keynes 1936; see also Stewart 1986). What is crucial is supply or investment management, an argument strongly endorsed by Weiss. The Keynesian economic cycle, as in Schumpeter’s work, refers to longer periods of boom and structural change (see Figure 4).

Weiss is highly critical of analyses that assess state autonomy by measuring conventional policy tools. As I have noted, changing economic circumstances mean that the state needs to constantly ‘adapt’ and develop new, unusual tools. Jessop is wrong to argue that the state will lose its autonomy because old Keynesian tools of economic management are not suitable for the changed economic environment.

Jessop has also mis-stated the sociological changes that have occurred in modern capitalist economies. He is partly right to call the post-1974 state Schumpeterian, since it exists during a period of competitive structural change. However, this is

Figure 4: The capitalist cycle of boom and structural change. Source: Boreham et al (1999: 109).

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part of the normal cycle of capitalism; a long period of relatively easy growth is followed by crisis because of the long-term tendency for the rate of profit to fall. Jessop is wrong to give so much credit for the long post-war boom to national demand and aggregate management.

On the other hand, the main thrust of Jessop’s argument is that the Schumpeterian competition state has the economically-determined role of disembedding the market. However, to insist that post-1974 society has been neoliberalised is potentially problematic. Certainly it seems hard to ignore the increased neoliberal rhetoric, and Jessop’s argument could be true in the case of extra flexibility in the labour market. However, attempts to improve labour flexibility have not been uniform over the OECD countries (Kitschelt et al 1999; Boreham et al 1999; Weiss & Hobson 1995). There are also marked disparities in the levels of corporate taxes and wages (Hobson 2003). Distinctly different types of capitalism have emerged (see Figure 5).

Figure 5: Divergence in contemporary capitalism: coordination and social expenditure in 14 counties (not including Japan) in 1994. Sources: OECD Factbook (2005), Soskice (1999, see appendix 1).

Coordination Score

051015202530354000.511.522.533.5Social Expenditure /

GDP (%)

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The level of state social spending continues to grow in all countries. It is increasingly the case that more of citizens’ real incomes are provided outside of the market in the form of ‘social income’. Overall state expenditure relative to GDP has continued to grow in all countries over the last 30 years. If the state has more agencies and is directly responsible for more production this would seem to problemise Jessop’s theoretical presumption that the state is less autonomous than in the past. Big increases in overall revenue would give the state more autonomy and options, although, to be fair, it is true that the state nonetheless continues to depend upon capital to maintain investment in the profitable non-government sectors.

Jessop indirectly argues that the Schumpeterian competition state is merely helping business achieve profits. However, this is unconvincing when it comes to increases in social expenditure. This is especially true for increases in the levels of overall direct transfers and other forms ‘social income’ for both working class and middle class citizens (see Figure 6). Although social expenditure (notably) fell in some countries between 1990 and 1996 it has since risen to above 1990 levels. The continued growth of public sector employment, including the growth of the bureaucracy, has occurred in almost all OECD countries, except Australia (OECD 2005). The state has also more generally increased its provision of public goods, especially education, but also in the provision of parks and other public spaces and facilities and also infrastructure. These things make it difficult to accept Jessop’s argument that society is being increasingly neoliberalised. However, he is right to highlight the ongoing pressure for the commodification of labour, although he over-generalises this pressure. Also, his deterministic analysis tends to presume neoliberal policy preferences are a function of economic constraints, rather than driven by simple ideological dogmatism or national-historical traditions.

Jessop’s best arguments are derived from Schumpeterian ideas. Increased competitive pressures have developed since the early 1970s and this has crucial implications. However, state ownership of public of companies has always been an important source of competitive influence on private companies. In Australia, state-owned enterprises such as the Commonwealth Bank have been an important source of pressure on the private sector competing against it. State-owned enterprises can be

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Figure 6: State social expenditure (welfare, unemployment, pensions, health and housing subsidies) in selected countries. Source: Lindert (2004: 12-13).

pace-setters for wages and conditions and standard-bearers in the provision of high quality services. The state can also cross-subsidise customers or activities or even

whole regions that rate as unviable for private profit-making.

The state’s role in the decommodified provision of health and other social services and education and decommodified provision generally cannot reliably be associated with the disembedding of markets. Block (2001), on Polanyian reasoning, dismisses the idea of disembedding as Jessop argues has occurred. Polanyi (1944) has argued that disembedding is not economically or even politically feasible because, firstly, the economy and thus capital is dependent upon the state to help facilitate and coordinate investment and production; and secondly, democratic pressure requires that the state compensates citizens for the deleterious social effects of the market.

Jessop’s argument about the autopoietic nature of the capitalist economy seems overstated. The state’s role in regulating the ‘fictitious’ commodities of labour,

05101520253035186018801900192019401960198020002020Social Expenditure /

GDP (%)AustraliaAustriaJapanSwedenUSOECD Median (21 countries)

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especially, but also land and money, gives it the ability to indirectly pressure business to increase productivity and to force compliance with politically-determined prerogatives, for example by regulating minimum wage levels. Thus Jessop is wrong to claim globalisation and the logic of accumulation alone as the main source of competitive pressures. He is also mistaken to claim Keynesianism alone as the reasons for growth in the Fordist years while overlooking the role of Schumpeterian methods of innovation.

Jessop argues that globalisation or regionalisation has meant that capital is less governable than in the past, and this will be increasingly the case. Governments, he argues, compete in an international deregulatory ‘race to the bottom’ to attract mobile or ‘footloose’ capital. Weiss counters that there is no evidence that capital invests where inputs are cheapest. Also, despite growing internationalisation, capital still has a ‘home base’, even if some production extends to the region.

The comparative empirical evidence does not support Jessop’s argument here. Deregulation has been a phenomenon more specific to the uncoordinated liberal economies rather than more generally. As Weiss shows, capital does not invest where inputs are cheapest. Instead, capital expands production internationally so that it can expand into new markets as a way of continuing to expand its customer base. Business locates (rather than relocates) new production in other countries in order to be closer to new markets for their existing products. However, this does not imply that the level of domestic investment will be affected (Weiss 1998: 174-178).

As Weiss has shown for the case of Japan, capital (other than financial capital) is actually highly immobile. The costs and risks of locating production in foreign countries are often very high. The Japanese state, for example, regularly provides assistance to business to aid the expansion of production into foreign markets. This attests to the immobility of capital. The difficulties associated with establishing production internationally are also accepted by Jessop. This is part of his explanation for why business, which finds it difficult to expand into new markets, shifts its emphasis to cost-cutting strategies. This seems to be at least partially self-contradictory, since he argues that globalisation means that business is more out of the reach of state regulators. However, Weiss only considers the abilities of countries that

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have already developed their capacity and ability to continually adapt. Polities with much less-developed state capacity and are unable to help business compete on a product or process innovation strategy are likely to continually face strident neoliberal resistance to governance and the state’s infrastructural power would be less.

Globalisation does not diminish state capacity or depend upon diminished state capacity. The need for business to globalise and the difficulties of doing so without state assistance can empower the state, although if the state can not assist the internationalisation process it may well increase business’s need to cut costs. It is more likely that the need for market deregulation is merely an ideological, rhetorical argument, that can be rallied against. In fact, as Polanyi (1944) has famously argued, ‘laissez faire was planned, planning was not’. Attempts at disembedding markets often require huge, deliberate political efforts. This in itself does not contradict Jessop: for him this is the state’s actual main role. However, Jessop goes further than this by arguing that liberalism is a ‘spontaneously developing philosophy’ (2002: 219). As Polanyi argued, however, the disembedding of markets is a more or less impossible task.

Deliberative politics is necessary because market mechanisms, or deliberate institutional mechanisms to implement markets such as the gold standard, have periodically disastrous consequences but also ongoing problems. Secondly, there will be immense political resistance from citizens to disembedding markets from society. Jessop discounts the possibility that political pressure has the potential to increase the state’s ‘autonomy’ vis a vis business (see Higgins 1985). He sees it more as a source of governance failure, because it promotes policy incoherence when the state tries to satisfy popular political pressure to the detriment of capital.

The Polanyian argument about the necessity of deliberative anti-liberalism does not underestimate the political difficulties which are often involved in overcoming neoliberal political resistance. In fact, much of Polanyi’s analysis of the state concentrates upon political conflict and policy ‘paralysis’ when liberal resistance cannot be overcome. Despite Jessop’s pessimism, the neoliberal economic project has not been uniformly successful across the various OECD countries. Jessop further argues that the market is still ‘ecologically dominant’, however this position is also

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untenable for at least two reasons: firstly, business regularly depends upon the state to expand successfully into foreign markets; and secondly, an ever-growing proportion of the economy is the state.

Total trade flows have fluctuated both up and down over the last century and Weiss also questions the reliability of statistics purporting to measure globalisation (1998: 171-176). In any event Jessop seems to uncritically accept that growing internationalisation is a new event that is inevitable and permanent. In contrast, Weiss argues that the state is more important now to augmenting an economy’s investable surplus than in the past and that this will continue to be the case in the future. However she does not adequately address the question of why the state was less important in the past nor does she attempt a theoretical understanding of the pre-globalisation state as Jessop does.

It is worth considering that the state was less important in the post-war boom period. Basically all of the OECD countries experienced full employment for most of the period, although this still allows for divergences in growth rates and overall levels of wealth. Jessop thinks it is important that during the boom period wages were treated by business as a source of demand rather than a cost of production. However, in boom periods the ratio of wages to profits is very low. It is only logical that business will seek to restrict wage costs in the post-1974 recession period when wages are a much higher proportion of overall production costs and profits are relatively harder to come by. Therefore, the shift to a focus upon wages as a cost of production rather than a source of demand is a contingent, cyclical phenomenon.

Schumpeterian ideas on the process of innovation are important during periods of increased competitive pressures. However, Schumpeter considered that capitalism involved a regular process of ‘creative destruction’. Thus viewed, the competitive ‘crisis’ phase of capitalism is naturally followed by a boom period of high investment and growth. Since Jessop identifies competitive pressures as the source of the need to disembed markets he should note that the current economic-political environment is contingent.

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The implications of the law of value also change at different stages of the capitalist business cycle. For Jessop, pressure from business for higher levels of surplus extraction is the inevitable result of the logic of accumulation in post-Fordism. To repeat, Jessop focuses upon the five main ways outlined by Schumpeter for business to increase profits in competitive circumstances: firstly, new or improved products; secondly, new economies of production; thirdly, new markets beyond the domestic market or new niches; fourthly, new (better or cheaper) sources of supply; fifthly, better organisation of the overall industry.

Jessop is sceptical about the possibilities of innovations 1, 2 and 5. Therefore an economy is ‘forced’ to pursue other strategies, 3 and 4, such as cost-cutting. Weiss counter-argues that the state can develop its capacity so that innovations 1, 2 and 5 can be realised. This is outlined in her work on ‘governed interdependence’. Taking hypothetically the ability or inability of the state to pursue successful governance strategies, two broad accumulation strategies appear, one based upon innovative development and one based upon cutting costs (see Appendix 2). The state which cannot create the conditions necessary for innovation and competitiveness will face pressure to follow the neoliberal agenda.

However, note that this is only true where an economy faces significant competitive pressures. Firstly, consider Australia and Japan. On the one hand, Australia got ‘lucky’ (Horne 1998). Japan, on the other hand, was a late developer which had to ‘catch up’. It was also confronted with the serious consequences of World War 2 and is low in mineral resources. These two countries are contrasting examples of economies with respectively low and high levels of general competitive pressures. Secondly, competitive pressures are generally lesser in boom periods when profits are comparatively easy to realise. The cycle is therefore likely to cause varying effects on the possibilities of politics. This too differs from country to country: for example, since Australia is heavily dependant upon the primary sector (as opposed to manufacturing), changing world commodity prices will have an important impact on its overall competitiveness.

For Weiss, how plausible is her claim that the state will be increasingly important in the future? If a future boom period is to follow the present period, based on new

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economies of production arising from technological development and new communications infrastructure or otherwise, what implications does this have for the need (or lack of need) for the state to coordinate investment? Weiss argues that the interdependence of business and the state creates important political possibilities and results in infrastructural power for the state. This claim would be potentially dubious in a future boom period when business makes profits easily and when business in probably less dependent.

However, much potential flows in the opposite direction. During boom periods the costs of state ‘interventionism’ or regulations for business are much less. There are also fewer pressures for wages costs to be cut and the state has a strong revenue stream. Thus the potential possibilities of politics are conceivably enhanced. For Jessop, the sociological disembedding of markets, which he thinks is so important, will only happen when there are significant competitive pressures. This pessimism would be less warranted in any future boom period when it is not so immediately critical for individual businesses to minimise costs.

On governance, Jessop has argued that governance requires a ‘reflexive irony’, where parties to governance need to be willing to continue ‘as if success were possible, though failure is likely’ (2002: 245). From the optimistic position, Weiss argues that governance has to be institutionalised, and this seems to complement Jessop’s argument nicely. Where there is a history of institutionalised governance ongoing attempts are more likely to be resilient.

In the post-war years in many countries there was comparatively little immediate need for new governance mechanisms. However this was not necessarily the case for all countries. For example, Switzerland and Austria, because of their size and location, have been historically open economies and have constantly faced competitive pressures (Katzenstein 1985). This is one of the reasons why these two countries have developed their capacities over a long period of time. In contrast, despite the long development of state capacity in Sweden over the first half of the century, there are some possible question marks over, firstly, the post-war dependence of business on the Swedish state; and secondly, over the (non-existence of) competitive pressures

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during the post-war years (Meidner 1993). It is interesting to note that the historically open countries usually have very well-developed state capacity (see Figure 7).

Figure 7: Economic openness (1960-1973) and the development of state capacity (1994) in 16 OECD countries. Sources: Soskice (1999), McKeown (1999).

Economic Openness Score

We should consider the possibility that the countries that developed unusual institutions and had a history of competitive pressures and institutionalised governance and corporatism maintained their capacity in the post-1974 recession period. Alternatively, the countries that have not had a history of developing their capacity have found it technically or politically difficult to develop governance capacities in the post-1974 period. Finally, future boom periods may create new possibilities for politics, although whether individual countries do actually develop their capacity is a separate matter. The levels of competitive pressures in different countries and policy areas may be significant, but so are the particular political

00.511.522.533.50102030405060708090100Coordination Score

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strategies of left-wing political parties, the labour movement and other progressive forces in society.

Literature from the social democratic tradition has suggested that democracy and state capacity is dependent upon the development of overall material wealth (Rogers & Streeck 1994). Marx also suggested that the market relations of production would not be abandoned until they became fetters. The social democratic view needs to be combined with the Marxist understanding of surplus value, because overall material wealth is created by a process of surplus-extraction. In fact, the capitalist economic system depends upon the ability of capital to extract a sufficient surplus of labour value from the worker in order to realise profits. However, what is a sufficient proportion of surplus extraction varies hugely over time.

Since wealth is created primarily in the manufacturing and primary sectors, all other economic activity is effectively cross-subsidised by these important sectors. A wealthy society can afford ‘social’ spending such as health spending but also other types of services such as recreation, entertainment or restaurants. Thus the possibilities of politics develop not only because of the need for crisis-tendency ‘management’ as Jessop argues. Politics becomes more and more possible over time as societies and economies become wealthier.

With extra wealth business can afford lower levels of surplus extraction in the form of higher taxes or higher regulatory requirements or higher wage costs. This is reflected in the long-term growth of government taxes as a proportion of GDP in all of the OECD countries. Almost all of the growth in government expenditure is related to de-commodified production or direct transfers. Over the last century, citizens have received a gradually larger and larger proportion of their incomes provided outside of the market.

The level of surplus extraction that business needs in order to make satisfactory profits varies across different countries depending upon the ability of the state to promote high levels of growth, particularly in the manufacturing sector, but also in the non-services sector generally. Thus equality and economic development are complementary rather than competing objectives. Where the services sector grows

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and the manufacturing sector shrinks this is a big problem since it represents a decline in the sectors that are actually responsible for the development of physical material wealth. Weiss has argued that there is no evidence that capital invests where taxes are lowest (see also Hobson 2003). In fact it is most likely that wage levels and the levels of taxes and regulations broadly reflect what business can afford. This is viewing the relationship between investment and taxes from the reverse angle. The higher general profitability of capital in one country could allow higher levels of taxes, wages and regulatory requirements. This is certainly far more plausible than the ‘deregulatory race to the bottom’ argument and it is supported by Schumpeterian theory.

Weiss is reluctant to seriously engage in detailed discussion about the importance of the general political environment for the process of governance. This probably makes her too optimistic. It is important to understand as a further object of research why some countries have not developed their capacity, and indeed why they may not be able to if they tried. Jessop’s analysis of the difficulties in developing capacity is important, however politics is always contingent; the sophistication of dominant political forces and alternative left-ish governments and their physical tactical ability to win power has an influence on the overall political landscape (Korpi 1983). The circumstances of election time are also very complicated and cannot be deterministically reduced to economic events.

I have hinted at an interest at various stages above in looking for historical or deterministic reasons why some countries have developed their capacity and some have not. However, such an approach would be potentially incomplete by itself. It is certainly likely that the political traditions in different countries and regions plays a very important part in shaping the political landscape. East Asian politics is certainly in a whole different category to western politics. Although I give some weight to the argument that Australia is a ‘lucky country’ it is important to ask why other ‘lucky’ countries might have developed their capacities more substantially than Australia; such as, arguably, Norway (Hodne 1983). Certainly the political climate in Europe has been very different to that in the English-speaking countries, and certainly the political tactics employed by particular political actors is important. Thus we need to take the contingency of politics far more seriously than Jessop does, and move beyond the logic of accumulation as an explanation for everything.

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On the other hand, Weiss still seems to be too optimistic about the ability of the state to overcome political resistance. Also the ability of the state to resist neoliberal pressures might vary depending upon the extent to which the state developed its capacity in the earlier boom period when the initial development of capacities was probably less resisted. Certainly, capital seems generally well informed by its own capitalist neoliberal ideology and is in a politically-strong position in a capitalist economy. However, the actual institutional framework that business operates within and the particular design of business institutions in itself can also be important institutional restrictions on a particular business’s unwillingness or even inability to engage in serious governance attempts.

It is interesting to consider Jessop’s argument about convergence on the neoliberal model here in the case of Japan. At the time of writing, the LDP government has just been re-elected on a fairly neoliberal program, including privatisation of the national postal system. It seems that even in Japan neoliberalism is on the horizon. The Japanese state remains largely ideologically divided over economic policy (Johnston 1999). In 1997 the Prime Minister of Malaysia, Dr Mahatia, proposed an anti-IMF response to the Asian crisis. The Japanese Ministry of Foreign Affairs (MOFA) indicated strong support for the IMF ‘sound governance’ plans, while the Ministry of International Trade and Industry (MITI) and Ministry of Finance (MOF) supported the so-called ‘Malaysian’ proposals. Notably, a large proportion of the support for the neoliberal agenda in Japan has come from the competitive areas of the economy.

The US’s role in pressuring Japan on both security and economic issues is salient (Johnston 1999). Internally, Japanese security concerns affect the political-ideological landscape. However, Japan has largely been involved in its own recent attempts to change the structure of its domestic economy. Thus, Weiss may have underestimated the ongoing political conflict over developing state capacity in Japan, for example with abandoned attempts by Japan to establish an Asian Monetary Fund in 1998. Certainly, the potential neoliberalising of Japanese (and German) economic policy in the last few years is an inviting area for empirical research, and Jessop’s arguments may have some merit here.

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Although the state has infrastructural powers, business has its own sources of incredible power. The state will normally be forced to negotiate with business and will rarely be able to politically achieve everything it sets out to. Of the two theorists, only Jessop analyses the consequences of the need to negotiate, where all parties are constantly re-evaluating what they can ‘get’. The state may often need to abandon some of its key goals, including democratic ones. Therefore it seems unlikely that the struggle for democratic or other outcomes will ever be resolved and will instead be an ongoing source of conflict and problems. The state should be involved in changing the cultures and structures of how businesses operate internally in order to have positive political effects for the success of governance. It could also be helpful to encourage the general business environment towards a longer-term focus for investing rather than being dominated by the constant need to maximise short-term profits, since this has a big impact on whether business competes based on an innovative or a cost-cutting strategy.

There are various reasons why both capital and business will be interdependent. However, this is not guaranteed at all by either the logic of accumulation or by the political process, and the level of interdependence can fluctuate over time and in different circumstances. Weiss is successful in arguing that there are many things that the state can do to deliberately increase the level of interdependency (Weiss 1998: 34-39). Nonetheless it remains the case that business is probably less dependent upon the state in a boom economic period. The state has increasingly found itself in many instances over the last thirty years where it is constrained by business opposition to state initiatives. However, this view must be moderated because of the growing level of state expenditure relative to GDP and other reasons I have given.

CONCLUSION

Jessop is wrong to blame the post-Fordist political-sociological environment upon the perceived obsolescence of so-called Keynesian policy tools. The abandonment of Keynesian policies are a more likely cause. It has further been well established in the Keynesian literature that capitalism is cyclical, and this is a far more plausible explanation of the differences between post-war and contemporary capitalism. Jessop is also wrong to overlook the fact that in contemporary capitalism more and more provision of goods and services is provided outside of the market. This undermines both his sociological analysis of contemporary capitalism and also his judgement of state autonomy and the possibilities of politics more generally. Both Jessop and Weiss have taken a rigid, permanent view of the possibilities of politics rather than considering cyclical effects.

Weiss needs to better understand the political and sociological aspects of capitalism and the ‘every man for himself’ profit-making logic of accumulation and also other significant bases for ongoing political conflict within corporatist institutions. Although in theory the state can use its infrastructural power to great effect, in practice the political environment often places huge constraints on this. On the other hand, Jessop is too sceptical. He generalises far too much about a range of very different economies and countries. Politics is always contingent: the strategies of different political actors and the general political environment have huge impacts. In addition, even liberal states have grown in size relative to the overall economy. However, it is also the case that there have been persistent pressures on the state to re-liberalise, even in countries with strong state traditions and even in Japan.

Marxist theorising on the state has been for a long time converging upon an acceptance of the valuable role of politics, but nonetheless focuses upon deterministic explanations rather than agency-centred ones. Jessop still describes the state as ‘one of’ the important elements of the economy, and almost exclusively sees the state merely as the agent of capital, disembedding markets. Although Jessop seems

Jade Connor 30 September 2005

optimistic about the development of regional governance, it is important to consider at a later date where this would leave the more isolated Australia and New Zealand.

Weiss has modernised the Weberian account to counter recent arguments about globalisation. However, the main thrust of her work is to analyse the successful countries and how the state has been able to develop its coordinating capacity through its infrastructural power and creating an institutionalised, interdependent negotiating relationship between itself and business. This needs to be combined more comprehensively with an account of why some countries have not been able to develop their capacity.

Importantly, this thesis gives evidence of the urgent need for many further areas of research. Theoretically, there is a need to do further work in the area of state theory. My work here needs to be further expanded, especially to better incorporate ideas from the Keynesian and Social Democratic traditions. On the empirical side, Marxist-informed comparative analysis of different economies is scarce. Weberian comparative research is usually limited because it does not focus on why some countries have not developed their capacity nor on the ongoing political problems in countries that have. The Weberians have shown us that politics is at least theoretically possible, but a better theoretical understanding of economies and the possibilities of politics is required. The critical understanding of state capacity in contemporary capitalism is still to be forged.

Jade Connor 30 September 2005

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APPENDIX 1: COORDINATION SCORES

Source: Soskice (1999).

OCED Coordination Score

--------------------------------

1980 1994

Austria 3 3

Germany (West) 3 3

Japan 3 3

Norway 2.5 2.5

Italy 1.5 2.5

Denmark 2.5 2+

Switzerland 2+ 2+

Finland 2+ 2+

Sweden 2.5 2

Netherlands 2 2

Australia 2+ 1.5

New Zealand 1.5 1

Canada 1 1

United Kingdom 1.5 1

United States 1 1

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APPENDIX 2: DIVERGENT COMPETITIVENESS STRATEGIES

COORDINATED - GOOD STATE CAPACITY

Product and technical innovation, human capital development, research and development focus
Wages seen as a fixed cost
Sophisticated physical and communications infrastructure strategy
Industry cooperation, industry develops as a whole rather than competing against each other, highly sophisticated individual industry associations with the ability to negotiate with government and coordinate cooperation internally
Better competitiveness of the final product
Focuses on long-term profits

LIBERAL - WEAK STATE CAPACITY

Proliferation of cost-cutting management consultants
Implementation of greater workforce flexibility to reduce labour ‘wastage’
Focus on cutting taxes and deregulation
Industry is atomised and so-called ‘collusion’ is outlawed, no sophisticated industry associations
Focus on achieving better access to international markets and opening up new markets for the same old pathetic, uncompetitive products
Usually focuses on short-term profits

Politics, Policy, Performance

State theory - Marxism v Weberianism

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