THE ROLE OF THE STATE IN ECONOMIC THEORY has rarely been examined owing to the mistaken notion that the State is a political structure or institution that is wholly “adventitious” or epiphenomenal or superstructural and so entirely extraneous to the reproduction of society, albeit not to its “foundation”. This seems incongruous if not contradictory because, if indeed the State is essential to the establishment of a society – indeed, of the “re-public” -, then it seems odd that it should not play also an essential defining role in the constitution of the most basic “economic” categories and relations of that “society” or “republic”. This peculiar theoretical flaw and lacuna is due in part to the approach of classical political theory to the State which sees it as simply being the collective noun for its constituent building blocks such as the individual or the family household or the tribe or the city and finally “the people”.
Because economic theory is exclusively concerned with the production and exchange of goods and services between “individuals” or individual “units” and not with the “reproduction” of society as a whole – that is, not with the metabolism of a society with its “environment” which would entail the analysis of “economic” relations in the broader context of the “choices” selected by a society and its members from virtually limitless options and possibilities -, for this very reason economic theory has universally neglected the role of the State in the economy. Yet, whereas economic theory sees Politics as an intrusion in Economics, in reality it is economic theory that wrongfully extrudes Politics from what it claims to be its “scientific” ambit. By contrast, the notion of metabolism serves to restore the ineluctable element of “choice” and “project”, and therefore of the Political, in the selection of alternative social relations of production.
Owing to these twin misconceptions, aided and abetted by the political interests and outright violence of the bourgeoisie, economic theory has always emarginated the role of the State in “the market economy” to that of mere “Police” – to that of a purely “administrative” body that preserves or conserves and regulates the autonomous “natural rights” obtaining between individuals historically and analytically in a societas naturalis that existed prior to the establishment of the societas civilis and the State, as in the Lockean jusnaturalist version, - or else, as in the Hobbesian version, to one where the State is instituted wholly contractually for individuals to exit the anarchy, lawlessness and civil war of a hypothetical state of nature. In the former case, the Lockean, the State acts merely as an arbiter – as an independent judge – to adjudge and enforce the respective natural rights of individuals, which are thought to be historically prior to and analytically independent of the State. In the latter, Hobbesian case, the State is the actual founder of human society; it undertakes a restauratio ab imis of human society or erects a “total constitutional order” - so much so that State and civil society are indistinguishable as status civilis as against the lawless state of nature or status naturae that preceded its contractual foundation (v. Hobbes, De Cive, X, I; or Rousseau, Le Contrat Social, or consider Pufendorf’s “extra rem publicam nulla salus”).
Yet even in the Hobbesian version of jusnaturalism, where the State is actually the fons et origo of these “rights” (the status civilis of legal positivism), it is still not considered to determine the substantive content, the “essence”, of economic categories. Thus, in both versions, the State enforces these “rights” without actually determining their content, which supposedly arises from an autonomous “economic” sphere consisting of the utilitarian needs and wants of individuals. In both cases therefore - and this is the decisive point –, the economic sphere exists independently of the State in a fundamental historical and analytical sense. Indeed, even the mechanistic Hobbesian state by institution that could never be said to have existed historically on account of its extreme suppositions threatens to become a state by acquisition in the Lockean sense because once a civil society descends into civil war of the kind hypothesised by Hobbes, then it will be impossible for humanity to escape or exit from that State.
Whereas in classical political theory the State was identical with society itself, either as the ethical dimension of being human (as with Aristotle’s zoon politikon, for which Politics is the continuation of Ethics) or as the worldly embodiment of a divine or transcendental Reason (as in Thomas Aquinas’s notions of animal sociale or animal rationale), in modern theory the State is quite distinct from society either historically as postdating a primordial pre-statal society or analytically by virtue of the assumption that such a society devoid of all “statality” – either a state of complete “anarchy” (Hobbes’s bellum civium) or a societas naturalis (Bodin, Locke, Rousseau) – is indeed possible.
The “science” of economics became imaginable only once the triumphant capitalist bourgeoisie seriously set up its central political aim to confine the role of the State precisely to the perpetuation of this false separation of the Political from the Economic. This in turn required the identification and isolation of a sphere of social life that is not contaminated by “values” other than the Value of economic theory – “exchange value”. The cardinal point to consider is that this “technical neutrality” of the State had to proceed hand in hand with the destitution of “individuals” of all Ethico-Political values and their reduction from “citizens” to economic atoms whose activities could be calculated and measured in isolation from one another so as to lend “scientific” economic Value to the utilisation and production of social resources. But in fact and in reality, this reification of human living activity – its reduction to “measurable” labour-power - is a specific form of social violence perpetrated by the capitalist bourgeoisie.
Even Marx, in his critique of political economy, sought to establish that in the process of commodity production and therefore of economic value the capitalist derives a profit by extracting surplus value from the labour-time “socially necessary” to produce those commodities. But one source of surplus value that Marx specifies arises from the fact that the capitalist does not pay workers for the sociality of their “individual labours” – for the fact that what are supposedly “individual labours” are in reality indivisible aspects of social labour. Thus, in his effort to present his theory in a scientific guise, Marx neatly obscures what he clearly recognizes, that is to say, that it is impossible to specify and calculate economic Value independently of the “sociality” of human living activity – which therefore leads us inevitably to ethico-political values as the real matrix of economic value.
Marx’s discovery of the Doppelcharakter of production in capitalism, contrasting the “use value” of human production with its “exchange value” under capitalism echoes the ancient Aristotelian distinction between the oikonomia (the laws of the household) and the chrematistike (the speculation of finance). It was meant to highlight the fact that “use values” point well beyond the uni-verse of “economics” with its “exchange value” toward the multi-verse of human values. That is why Marx thought Proudhon’s famous motto - “property is theft” (more than just an aphorism encapsulating Rousseau’s thesis in De l’Inegalite’) - was so worthy of approbation. Yet even though the notion of property is so obviously “legal” and requires of necessity the existence of a State apparatus to enforce it, even Marx could conceive in his own “critique of political economy” that it was possible to isolate the role of the State from that of “property” or “the market” or “the economy” as an object of “scientific” inquiry. There are two senses of the social category Value which reflect the Doppelcharakter of social resources identified by Marx. On one side, we have Ethico-Political Value, and on the other we have Economic Value. Our thesis in this review of the role of the State in economic theory is that these two meanings of Value are indeed inseparable – and that their separation is only the product of the modern distortion of social and political theory that comes with the rise of the capitalist bourgeoisie and of its “science” par excellence – “economic science”.
The isolation of Ethico-Political Value from Economic Value requires the specification of a scientific sphere for the latter such that its precise quantitative determination can allow the State to become technically neutral and to extrude all other “values” from the sphere of economic value. This is the contrary of what Habermas contends in Theory and Practice where he equates the advent of the bourgeois State to the scientization of politics tout court. Yet, as is quite evident, the claim of liberalism is precisely the opposite – that is, to be able to “free” the Political , not by scientizing it, but by isolating it scientifically from the Economic. Liberalism does not pretend that Politics can be turned into a science; its main claim and injunction on which the dictatorial rule of the capitalist bourgeoisie is based is rather that Politics must not interfere with the “science” of Economics. That is the entire rationale behind the homologation of Politics and Economics behind both Classical and Neoclassical Political Economy – a free society and a dictatorial workplace!
Here it is not just Habermas’s thesis about the scientization of politics but even Constant’s distinction between the “freedom” of Antiquity and the “liberties or guarantees” of Modernity that is neatly surpassed and sidelined. Indeed, far from accepting that politics can be turned into a science, Constant himself – the greatest theoretician of liberalism after Locke - went so far as to claim that it is the “science” of Economics that is the ultimate and perhaps most desirable or efficient “guarantor” of the Political and of its bourgeois liberties against the interventionist State: specifically, for the French theoretician, it is the mobility of capital between nation-states that is the most effective discipline and corrective against “interventionist” States and governments: in other words, it is “the economic law of competition” that disciplines governments!
The retreat of the citizen from active participation in the political life of the State to the passive spectatorship of the bourgeois is entirely justified by the scientization of the Economy that allows the ambit of the Political to be confined to the sphere of public opinion. Habermas’s entire enterprise is thus set on the wrong path in that it focuses on the antinomies already evident in Hobbes regarding how the contractum unionis turns into the contractum subjectionis, - in other words, how the freely-entered rational contract is possible given the inability of individuals freely and rationally to control their desires. Liberalism does not rest on these antinomies because, with Locke and then Constant, it already posits the possibility of a societas naturalis based precisely on rational-scientific economic relations, on the scientisation not of Politics (!) - as in Machiavelli, on whom Habermas relies to advance his thesis - but rather on strictly rational economic behaviour, not of the ethico-political and ideological superstructure, but rather of the reproductive and productive necessity of society (scarce resources), not of the sphere of choice, but of the sphere of necessity – bourgeois economics is the “science of choice”!
To be sure, following Aristotle, we must avoid the identification of all social relations with those of “statality” – that is, those relations that require the existence of a State. But our thesis here is that there is no possibility of a separation of the Economic from the Political or of a choice or trade-off between state and market! The notion of “market” is a fiction because the question is not one of whether human beings exchange individual labours but it is rather one of how human beings organise social labour! (In this sense, Durkheim is the perfect antidote to Adam Smith’s spurious derivation of the division of “labour” – by which he meant “individual labours” – from exchange. Had Smith started instead from the notion of social labour, he would have understood that indeed it is exchange that is made possible only by the fictitious and coercive parcelisation of social labour into individual labours!)
Bourgeois economic science since Adam Smith is founded on the spurious conundrum of economic co-ordination: it asks, how is it possible for self-interested atomic individuals to co-ordinate their activities so that exchange is possible between them? And the obvious answer – which condemns all neoclassical theory to irrelevance – is that it is utterly impossible for self-interested atomic individuals ever to exchange or to co-ordinate anything at all with one another! As Robert Clower has properly pointed out, there can be no “market” as theorised in all neoclassical equilibrium theory – because there is no meaningful “market process” between human atoms: even Walras’s tatonnement does not amount to market process because prices are not final until all “markets” clear and general equilibrium prices are reached. The question from which we must start instead is the exact opposite: how is it possible for human beings who are species-conscious beings ever to create a society that enforces individualism on them? This is what Rousseau did when he inverted the question of the existence of “property”: instead of assuming that property rights are “natural”, he asked: how and when did “property” become a social reality? Similarly with “statality”, we ask not how the State arises from civil society, as if the two spheres were insuperable antinomic metaphysical entities such as “body” and “soul”, because there is no solution to a problem set in these terms. Rather, we must ask how a society of private individuals can arise from human species-conscious being.
Alchian-Demsetz, to give yet another example of the rampant stupidity of Nobel Prize laureates in economics, quite incorrectly select a negative definition of capitalism – the absence of government in the economic process - and completely leave out the “individual”:
The mark of a capitalistic society is that resources are owned and allocated by such non-governmental organizations as firms, households, and markets. [First sentence of “Production, Information Costs and Economic Organization”.]