State–Market Interface and Globalisation

Introduction

Globalisation has unleashed strong and prominent impact on the State and its sovereign identity. The market evolved starkly in response to the forces of globalisation, and the State incrementally had to make structural adjustments to fit into the altered framework to retain its legitimate identity. The changes within the territorial boundaries of the State instilled subtle and permanent characteristics to the state–market relations across the global economies. India is a classic case study to understand the continuous interactions of the State and the market (Das, 2008).

In the contemporary discourse on the State, sovereignty has attained almost universal usage. In the closing decades of the 15th century, Europe comprised more or less 500 independent political units which were in a state of decline. This was accompanied by an emergence of a new set of social and economic conditions which increasingly characterised expanding trade. The emergent manufacturing class gained strength and was supported increasingly by the centralised monarchies. This brought into effect other changes that were in the form of competent civil servants and hired armies, and there was imposition of royal taxes. The obedience of the individual to the overload and allegiance to the village got replaced by political obligation to the monarchical authority. This was consequently marked by a decline in the authority of the Church which paved the way for secular absolutism. It was closely associated by the Westphalian state system with centralised administration and a monopoly over the legitimate use of violence. The new form of political control, relocation of population and reorganisation of territory promoted the expansion and growth of trade. This new form of the State was based on a notion of sovereignty that redefined the idea of private property. The idea of private property came to be recognised as the right to exclude others from the possession of commodity, that is, land, labour or capital. These developments facilitated the growth of absolutist states with absolute sovereignty with a strong spree of extending sovereignty beyond territorial boundary resulting in colonial expansion (Menon, 2008).

Max Weber (1968 [1922]) in Economy and Society stresses that modern states monopolise legitimate use of force within a defined territory. Weber also stresses on three more important elements: territoriality, monopoly of the means of physical violence and legitimacy. Legitimacy signifies rightfulness of the State, thus transforming power into authority. The legitimate exercise of authority by the State over the governed ensured that laws are obeyed and those who disobeyed the commands of the States were punished. However, the omnipotence of State authority is represented by the government. The government is not a monolithic structure but an amalgamated whole constituted by the three arms of modern state—the legislature, the executive and the judiciary—which function in cohesion with each other. The government is constrained by the law of the land, that is, the Constitution. The government is the administrative organ of the State; thereby, governments are called administrations, for example in the USA, Obama Administration, Biden Administration and so on.

The French philosopher, Michel Foucault in his lecture on Security, Territory and Population (1978) asserted the role of the government as the administrative apparatus of the State and identifies the State as the result of the practices of the government. The State, according to Foucault, is the reflection of the government of conduct. According to Foucault, governmentality is a rationale of governing that takes the form of a series of mundane practices done on a regular basis for social ordering. It operates through normalisation, which means the processes through which every individual is made to conform to the dominant norm. This dominant norm is a means by which the State tends to establish itself as formidable and all-comprehensive seat of legitimate authority regulating socio-economic and politico-cultural spheres of action (Das, 2008).

The forces of globalization has unleashed a paradigmatic shift in the nature and the role of the State. It has led to a greater interlocking of different parts of the world. It is a multidimensional process which includes economic, cultural and political aspects. Globalisation loudly pronounced the rise of a ‘borderless world’ which signalled the decline of bounded territory which was integral to the idea of state sovereignty. The impact of globalisation on state sovereignty is much complex and cannot be explained with reference to the ‘end of the state’ thesis. Paul Hirst (1993) examines the issue of state sovereignty in the context of a distinction between internationalised economy and global economy. Under internationalised economy, companies trade from their distinct national settings while, in a globalised economy, national policies are redundant. The State is to provide governance and solutions to the problems originating on account of global market forces.

Hirst (1993) examines the question of state sovereignty in the context of globalisation to scrutinise the ability of the individual states and the state system to retain the degree of autonomy, although it may fall short of the attributes of a sovereign state. Hirst distinguished between internationalised economy and globalised economy. Under internationalised economy, companies continue to trade from their bases in national settings while, in the globalised economy, national policies are redundant. According to Hirst’s observation, there is a strong prevalence of internationalised economy which retains the viability of the national policies to strengthen national economies. This makes the sovereignty of the nation states relevant and significant. Although nation states’ centrality in determining the relationship of population to its territory remains sovereign in its earlier form, a critical change was observed. It emerged that the states determine, along with other states, the creation of new international agencies and bodies to re-regulate trade, investment and other issues that are to be addressed by the state sovereignty. Thus, Hirst opined that the State would continue to use its sovereignty to determine the re-ordering of power and authority both ‘above’ and ‘below’ it. The more the world economy is internationalised, the greater would be the need for sovereign nation state. The sovereign state system may be cautioned by the growth of the global civil society but will not be able to destabilise sovereign state (Menon, 2008).

The State’s response towards the forces of globalisation to an extent is determined by its origin and evolution. This assumption very well applies in the context of the Indian State because the State represents a set of ideas and attitudes. A post-colonial nation is born at the interstices of the colonial and post-colonial and is both transnational and translational, and India, with a colonial history, is no exception to this. It is imperative to delineate between the State in India or the Indian State to understand and discuss the behaviour of the State specifically with respect to the market which is rapidly evolving and reflecting the impact of globalisation. The new political economy approach to study the relation of the State and market in the context of India critically analyses the responses of the Indian State to the market. The approach emerged in response to the massive economic reforms since the early 1990s, with a renewed concern for revamping State institutions and enabling them to bring about rapid economic changes. This is paradigmatically divergent from the approach of Marxist political economy. The neo-liberal agenda known as structural adjustment necessitated the building of institutions which will be accountable, transparent and stable to function as vehicles of economic change in the age of globalisation. Francine Frankel (2005), in India’s Political Economy, 1947–2004, discusses the paradox as one of bringing about rapid redistribution of wealth, status and power. Rudolph and Rudolph (1987) argue that institutional capacity to make policy changes and manage societal conflicts are radically depleted by the following factors:

Rising demands and mobilisations;

These would create ‘demand overload’ which is likely to make it problematic for the State to address the stress in its system.

Stanley Kochanek, in Political Governance in India: The Challenge of Stability and Diversity (2001), argues that India’s institutions of governance have been weakened and eroded by the centralisation and personalisation of power which expanded participation and proliferated demands of a mobilised society. The new political economy school discusses India’s crisis more as a political economy rather than being only an expression of her socio-economic conditions.

The crisis was essentially sought to be dealt with in the political domain for it had to deal with the incapacity of political institutions. Atul Kohli, in Democracy and Discontent: India’s Growing Crisis of Governability (1990), describes the crisis as one of governability which obstructs the inability of the government to govern the people. The elements of new political economy in the age of globalisation are in sharp contrast to that of the Nehru-Mahalanobis period (1950–1980). The question focusses on market with a reference to economic reforms with a political discourse which neither jeopardises the economic reforms nor undermines the democratic strength of the Indian polity. A strong state capacity is a prerequisite for economic reforms. The point of debate is set on the neo-liberal economic reforms and its impact on the Indian State. The question relates to the retreat of the State in India in response to neo-liberal economic reforms. Peter Robb claims that the State remains crucial to India’s social and economic development. Baldev Raj Nayar (2009) re-asserted with empirical evidence to challenge and refute the claim of the critics that the forces unleashed by globalisation eroded the welfare role of the State in India. The strengthening of the role of the State is reflected through the increase in social spending since the days of structural adjustment. Ashis Nandy argues that, in the wake of India’s overwhelming crisis, the Indian State articulates its discourse around development to attain its hegemonic effect on the society. It supported the Indian political culture which facilitated the emergence of the nation state in India as the hegemonic actor in the public realm. Globalisation has undoubtedly loosened the grip of the central political authority and has also contributed to disaggregation of levels of governance and political power. It has released the democratic forces, which are likely to affect the bind of a nation and increasingly make the State incapable to restrict them. This has consequently increased the desperation in the States’ responses towards the disruptive forces of globalisation. The evident outcome had been that the phenomenal spread of police, paramilitary and special forces and growth of extraordinary powers act for sparing use by the State. The monopoly of the State over the legitimate use of violence was challenged by the establishment of parallel governments and their emergence of rival centre of coercion and force. This consequently challenged the State through the use of violence which was constructively legitimised. Despite the constant process of state building, the authority of the State is questioned and challenged repeatedly. This compels the State to perennially engage itself in institution building to retain its sovereign authority vis-à-vis the market (Chatterjee, 2010).