Theories of
State
Libertarian/NeoLiberal Minimal State
Perspective
Introduction:
• Post second World War, there was a change in the perspective towards the
State and the functions it was expected to perform.
• The idea of neo-liberalism demands a return of classical liberalism. Classical
liberalism is often associated with the belief that the state ought to be
minimal, which means that practically everything except armed forces, law
enforcement and other “non-excludable goods‟ ought to be left to the free
dealings of its citizens, and the organisations they freely choose to establish
and take part in.
• One of the fundamental principles that concerned liberal thinkers was the
fact that the State should be conceived mainly as following a set of basic
rules and procedures rather than delivering certain outcomes. Oakeshott,
“State as nomocratic and not telocratic.”
Main features of Neo-Liberal State:
• Mainly neo-liberalism is concerned with minimising the interference of the State in the
practice of individual liberty, especially economic freedom. Modern Liberalism often
advocated the intervention of State in economy especially for supply of essential goods
and services. Going back to the night watchman State.
• Another important branch is that of libertarianism including thinkers like Nozick and
Rothbard. Even Hayek’s views closely match theirs. It may be seen as a radicalized
variety of classical liberalism with excessive concern economic and commercial liberty,
with social justice seen as a traditional and vague value that may mean different things
for different people.
• David Harvey in his definition of neo-liberalism puts forth the functions of the State as
envisaged by the neo-liberals. He says, “The role of the state is to create and preserve an
institutional framework appropriate to such practices (entrepreneurial freedom). The
state has to guarantee, for example, the quality and integrity of money. It must also set
up those military, defence, police and legal structures and functions required to secure
private property rights and to guarantee, by force if need be, the proper functioning of
markets.”
Main neo-liberal thinkers:
• F. Hayek (Road to Serfdom)- He was one of the leading proponents of neo-liberal
thought and part of the Austrian school. Hayek was a critic of central planning and
believed no person or body could ever know what people wanted and this
eventually leads to totalitarianism.
• Hayek goes back to the ideas of Adam Smith to propound the theory of a limited
State. He provides a scathing critique of social justice as a concept, which he
believed disguises the protection of corporate interests from middle class.
• State is to perform the function of providing a legal framework to guarantee basic
rules of exchange. Hayek considers that Keynesians transform the State into “an
economic dictator”. At the same time, he also made way for provision of a
minimum security net for the masses without compromising the equality or
freedom of all.
• M. Friedman : His theory comes up as a critique of Keynesian focus on fiscal
policy instead of monetary policy. Friedman argued for deregulation in most
areas of the economy, calling for a return to the free market wisdom of
classic economists, such as Adam Smith. He challenged contemporary notions
of deficit spending and suggested that, in the long run, only dis-coordination
and inflation could result from expansionary fiscal and monetary policy.
• He argued for free trade, smaller government and a slow, steady increase of
the money supply in a growing economy. Economic freedom is seen as
necessary for human freedom. According to Friedman, economic power can
be much easily decentralised than political power. Thus he argues in
“Capitalism and Freedom” that if economic power is joined to political
power, concentration seems almost inevitable. On the other hand, if
economic power is kept in separate hands from political power, it can serve
as a check and a counter to political power.
• R. Nozick: Nozick in his “Anarchy, State and Utopia” invokes
Lockean theory of natural, inalienable rights. The State
according to Nozick should be a minimal one with narrow
functions pertaining to protection against force, fraud, theft
and enforcement of contract.
• The State should not use its coercive apparatus to force
people to help others or prohibit activities that are good for
them. For Nozick liberty must get precedence over equality
being enforced by State in the name of social justice.
• Welfare state is seen as destroying the liberty of individuals
and he opposes policies like progressive taxation and positive
discrimination.
Criticism:
• Foucault’s concept of ‘homo economicus’ or economic man focuses on how
neo-liberalism by only concentrating on the economic aspect ends up in
comodification of man.
• Furthermore, by promoting a minimal State the rights of a mass of people
such as labourers are ignored. Furthermore, feminists argue that the rolling
back of State often adds pressure on women. Furthermore in has also led to
feminisation of poverty.
• John Gray argues how neo-liberals wanted to limit government, but the
upshot of their policies has been a huge expansion in the power of the state.
Deregulating the financial system left banks free to speculate, and they did so
with reckless enthusiasm. The result was a build-up of toxic assets that
threatened the entire banking system. The government was forced to step in
to save the system from self-destruction, but only at the cost of becoming
itself hugely indebted. As a result, the state has a greater stake in the financial
system than it did ever before.