The state predates capitalism but changes its form and function as the economy and society develops. In medieval times, power rested with the Crown, which controlled economic activity through the granting of charters, licences and other privileges sold for money to merchants and landowners. As independent economic activity developed in the towns and countryside, the antagonism between the Crown and Parliament grew. After two periods of conflict in the 17th century, power shifted from the Crown to Parliament and into the political hands of the rising bourgeoisie.
Not long after Parliament had finally turned the monarchy into a figurehead institution at the end of the 17th century, England and Scotland formally unified their kingdoms at Westminster and created the conditions for what became Great Britain to pioneer an economic revolution.
The development of new technologies made possible the innovative system of the manufacture of goods in factories rather than in people’s homes or small workshops. So the state focused on facilitating the development and expansion of the new economy, while those involved in production and trading got on with their business, assisted and encouraged by the political system. Economic and political power was thus shared for mutual benefit and has remained so to this day.
The state played a crucial role in the 18th century by building a powerful navy that literally ruled the waves. Its essential purpose was to fend off all threats to Britain’s trading routes from rival nations like France and pirates alike. Forts were established in the West Indies, for example, to protect colonies and facilitate the slave trade that provided much of the capital required to develop production in Britain. By the end of the Napoleonic wars in 1815, Britain’s economy was predominantly capitalist and became the driving force for the biggest empire in history.
The rise of the corporatocracy
Over several centuries there has been a mutually conditioning process whereby the developing capitalist economic form has shaped trade, governance, law, the state and constitution. Of course, within that there is resistance and there are parties that have, at certain moments, implemented reforms and created, for example, the National Health Service and a welfare state.
Throughout this period, the essence but not the form of the state has remained unchanged. However, in the last 30 years the state has undergone a dramatic change in its form and in its role in relation to economic and financial forces.
Corporate-driven globalisation, aka neo-liberalism, has transformed most aspects of modern life, including the way we are ruled. As a consequence, the state’s relationships with the people have been shaken to the core which has led directly to the crisis of democracy that we are now living through in countries around the globe.
When the post-war economic order – with its currency controls and restrictions on the movement of capital – broke down in the 1970s, it led to a hyper-form of globalisation which was in full swing by the 1990s. While globalisation is many centuries old, its new form was something qualitatively different. Revolutions in information and other technologies helped sweep away the old economic order of national economies directed by national state bodies.
By the 21st century, fewer than 100 transnational corporations (TNCs) dominated the world economy, operating on a global scale with semi-autonomous centres in most industrialised countries. Some were merely brands that outsource their production to cheap labour regions in Asia and South America. Investment now moved freely from country to country in search of maximum profits while trade barriers were torn down. Countries like India, China and other nations of Asia were integrated into the world economy.
As deregulation continued apace in the 1990s, a global financial system emerged that changed the nature of banking. A web of financial devices like derivatives and credit default swaps were invented while millions of mortgages were diced and sliced prior to selling them. Financial markets made and broke governments dependent on them for loans by moving capital in and out of countries overnight.
Many corporations became richer and more powerful than the states that seek to regulate them. Some of the largest TNCs now have annual profits exceeding the GDPs of many low and medium income countries. It is estimated that the TNCs account for 80% of world trade each year.
The changes in the state have been equally dramatic, especially in the UK. No longer seeing itself as a mediator between classes, or provider of support to domestic industry, or sustaining welfare, the state adapted itself to the new conditions and to theories developed by right-wing economists like Milton Friedman.
From the 1980s under Thatcher to the New Labour governments under Blair which lasted until 2010, the state was refashioned. In came privatisation of state assets like energy and transport, outsourcing, the Private Finance Initiative, financial deregulation and the introduction of the market in education, the National Health Service, social care and many other areas of public life like the arts.
State institutions were cut down in size as more and more functions like prisons were transferred to the private sector. Each department within government was directed towards the facilitation of the global market economy, encouraging inward investment and putting ownership of key structures like airports up for sale to corporations and global banks. In came ‘light touch’ self-regulation of the financial system.
The state made a transition from a welfare to a surveillance, market state where the business of the government was business itself. As inequality and alienation grew, so did political disaffection with a system that identifies itself with big business in an openly partisan way.
The financial crash of 2008, and the speed at which the state used taxpayers’ money to prop up rotten, corrupt banks who had speculated with other people’s money and assets, sent shock waves through society. When the 2010 coalition imposed the most ruthless spending cuts in living memory, it was self-evident that while the banks were too big to fail, real, living people could be cut to the bone.
The crisis of globalised corporate capital has led to political changes in which large numbers, even the majority realise that despite having the vote, they are effectively disenfranchised.
Decisions by national governments and central banks (like the reduction of base interest rates to – and below – zero) are influenced by their internalised sense of responsibility to preserve the integrity of the system, to keep the show on the road – at all costs. That’s what is meant by acting to preserve the status quo.
Regional and global agencies created to solve the problems and advance the interests of capitalist social relations, like the European Union, the European Central Bank, the World Bank, the International Monetary Fund and the World Trade Organisation, have transcended nation states in their influence and power.
Key decisions that determine the way we live, that result in these multiple, interacting crises are determined not by the needs of the majority, but are taken in the boardrooms of giant corporations.
The single determining principle of their decision-making process is to satisfy their shareholders’ requirement for a return on their investment in the shape of dividends. A network of lobby companies advance the individual and collective interests of these giant corporations pressing governments to agree trade deals.
Ironically, as a result of the decisions taken by corporations, governments and central banks to optimise the conditions for generating shareholder value, the fundamental social relations that define the capitalist system are breaking down.
As the system has become ever more dependent on credit for its survival, control of the giant, increasingly transnational corporations has passed into the talons of the managers of global investment funds – ‘vulture’ funds.
This is how representative democracy, fought for so hard by the Chartists and the Suffragettes amongst others, which found its expression in the formation of the Labour Party, was undermined. This is how representative democracy was hi-jacked by the forces of anti-democracy, how government and the present Parliament has become the means through which corporate and financial power impose their interests on the 99%.
Fracking, for instance, and the continued extraction of oil, although unpopular and even suicidal according to nearly all scientists, are imposed from above in the interests of the corporations. Local objections, even local council decisions, are simply over-ridden.
The state is in crisis because its claim to rule for the whole of society is increasingly hollow and rejected as a fraud. Today the present, narrowly-based state lacks the capacity to tackle major crises that are global in character like climate change. The free market narrative it imposes on society offers no tangible alternative to those who reject these ‘Western values’ and, instead, can be attracted by terrorism and other outlets for their frustration.
These powerful corporate forces require the capitalist type of state to follow a course of action which brings it into direct conflict with the majority: destroying living standards, trashing rights and smashing expectations. At the same time they are oblivious to the reality that the conditions for life on the planet are being obliterated.
There is no other explanation to the signing of the Comprehensive Economic and Trade Agreement between Canada and the EU which gives enormous power to corporations and subjects goods and services to market forces. The crisis of the UK state came to a head in the summer of 2016 when, contrary to all expectations, 52% of the electorate voted to leave the EU, which itself had been transformed into a neo-liberal institution also known as the single market. A transition to a real democracy is long overdue.
Over to you
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