What role do States have in the economy?
One of the most identifying marks of La Libertad Avanza is profaning the end of the State. Javier Milei’s most famous phrase in this regard dates back to early June of this year when he unscrupulously stated: “I am the mole that destroys the State from within.” But what role do States have in the economy?
The Nation-State is the model of political organization characterized by a delimited territory, a stable population, an effective government and its own sovereignty.. Although there were previously organized societies, the foundation of the modern State was the Peace of Westphalia in 1648, which ended the Thirty Years’ War and gave rise to the State being the first subject of international law, understood as the political organization of a territory. The concept of “nation”, for its part, refers to the group of people who share history, geography and culture. Europe and America saw the birth of their national States in the course of the 19th century, in a period where there were two parallel processes that would be vital for the global economic revolution: the formation of national states and the transition to capitalism. Although the latter had its beginnings long ago in the case of the central countries, it was not until the 19th century that it was able to develop and expand, with Latin America being inserted into this process of transformation of economic structures as a consequence of its novel situation as ex-colonies.
Historically, the first function that the State assumes is to provide peace and security, that is, to achieve the much-desired order necessary for the capitalist machinery to be put into operation.Its second function is to provide certain citizen rights such as habeas corpus and private property.in the first instance (where the figure of John Locke stands out) and, later, the acquisition of civil rights by all individuals. In the second half of the 19th century, the State began to assume the function of providing and promoting active rights of citizenship, that is, individuals acquired political rights – participation and representation – expanding the concept of citizenship. This stage coincides with what we could call the pluralist tradition, based on the democratic opening of the liberal State. In the fourth stage, the State adopted the intervening function, actively participating in education, salary levels, health, housing, and general well-being. Citizens acquired social rights, forming this stage what was wrongly called the “Welfare State.” The reforms propagated by the economist Keynes after the financial crisis of 1929, to avoid the collapse of capitalism and the virtual onslaught of communism, ended up configuring a multi-functional role for the State..
This State, with multiple functions of direct economic promotion and consolidation of a network of state-owned companies, was eroded by the advance of global financial capitalism from the 1970s onwards. The idea of a Minimal State that would guarantee order and private property returned in the 1980s, where there was a significant decline in social rights, mainly. Today we may be in a moment of technological transition and a model of production and capital accumulation as radical as that of the first industrial revolution marked by Artificial Intelligence, digitalisation and data, but we will address this issue in a future note.
To return, this very brief account of the modifications of the State dilutes the internal processes, the ups and downs and the multiple differences. In the comparative studies, international, national and institutional heterogeneities are analysed from a broad stream of varieties of capitalism, of which Hall and Soskice constructed one of the best-known typologies. They identify there two ideal types of “varieties of capitalism” according to whether the majority of these institutional areas generate market patterns (liberal market economies, LME) or strategic coordination (coordinated market economies, CME).
Argentina is no stranger to this process and throughout history we can find how these stages of global capitalism have been expressed in our economy and therefore in the formation of the Nation State. Thus, in terms of the role of the State we find broadly two perspectives: a traditional-orthodox view that assigns regulatory functions to the marketwhich would guarantee the improvement of society as a whole and of all the subordinate dimensions of the economy. On the other hand, an alternative vision that supports and integrates institutions (including the State) into economic functioning, where coordination and regulation between different areas are the result of socio-political choices.
In some ways, these two antagonistic ideological perspectives have been expressed differently over time: free traders vs. protectionists, countryside vs. industry, neoliberal vs. progressive, colony or homeland, and today market or stateObviously, antagonisms do not allow us to understand the profound positive synergies that really exist behind each of these actors, sectors or institutions of the political economy of a country, but they have reflected throughout history the political struggle between two totally opposite political options. And here it is essential to understand the fundamental contradiction: If Milei places the political arena as a NO State, we must understand that the staunch defense of the State and its institutions are fundamental elements to allow the resurgence of an Argentina that has sustainable institutional balances towards those who do not have a wallet that protects them.
Economist, Director of Banco Ciudad.
Source: Ambito
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