The Role of the State in Capitalist Space Economy

The role of the state in capitalist society, as assumed in social democratic theory, is to

sustain the condition of production for the national interest in the growth of national

wealth, and to counter the imbalance of the market system through its distribution

policies. The state is seen as an institution separated from the economic system, and so has the ‘neutrality’ as a political institution. The state is a means of regulating and facili­

tating the operation of the private market, since the market itself worked imperfectly for new development. To maintain the market’s efficiency, the state uses urban planning as a

device to renovate the spatial organisation of the city for new uses, to ensure allocative

efficiency, also to free up land for more profitable investment. The state also operates to

ensure distributive justice. It acts as a supplier of public goods and services, with the aims of countering social-economic imbalances caused by the imperfect market mecha­

nism. The allocation and distribution of resources are seen in the general interest of

society.^'

This view has been criticised by scholars whose work is based on the Marxist

tradition. The state is seen as shaped fundamentally by an underlying logic of capital

accumulation. The state operates to counter the tendency of the decline of profit rate and to resolve the crisis of capital accumulation. Hence, the neutrality of state intervention is

limited. The main function of the state in capitalist society, in broader terms, is to create

favourable conditions for the capitalist economy, such as maintaining capital accumula­

tion, eliminating cyclical influence and defusing social discontent. By doing so, the state

takes on many of the functions of the capitalist, in an attempt to avert an economic crisis

For a review o f the debate on the role o f the cap italist state see B o n ed eld , 1987; Jessop , 1988; Clark, 1988.

and to stabilise the class struggle. From this view, the state acts as an instrument of capitalist interest (Miliband, 1969, 1973).

To assist capital accumulation, the state takes actions to stabilise and rationalise

capital investment in the primary circuit.^^ If the over-accumulation crisis occurs in the

primary circuit, the state assists the circulation of capital between circuits by its policy

measures. As noted earlier, investment in the secondary circuit, in particular, needs

money supply and long-term commitment. If there is no certainty that investment in the

secondary circuit can be productive, excessive capital tends to over-accumulate in the

primary circuit instead of moving into the secondary circuit (Harvey, 1978a, p. 107).

Hence, the flow of capital from the primary circuit to the secondary circuit can not be accomplished without certain institutional factors surrounding regulation, subsidisation

and taxation. There also should exist a functioning capital market and a state that is

willing to finance and guarantee long-term, large-scale construction projects. The state- controlled financial institution often acts as a collective ‘nerve centre’, governing and

mediating the flow of capital. The state also plays a substantial part in creating a

favourable environment for investment. It provides extensive funds for infrastructure

development, transportation system, urban renewal and new town programmes. Tax

concession and special credit arrangement are also given to home-owners and the construction industry. Sometimes the state even applies relative weak planning regulation

to reduce the costs of property development (Feagin, 1987, pp. 173-89).

However, while social democratic theory overestimates the autonomy of the state,

orthodox Marxist theory under-estimates the possibility of that autonomy. There are

many different capitalist interests involved in the production process. The state has to

unify the divergent factions of the capitalist class by assisting capital accumulation in the

long-run, even against the immediate demand of different factions pursuing their own

short-term interests. The state also has to satisfy popular aspirations which necessarily

conflict with the interest of capital. From this view, the state is not autonomous but

reflects the balance of power among classes. It acts as a regulator of class interests but

its decisions work in the long-term interest of monopoly capital (Poulantzas, 1969).

An alternative approach, although inspired both by social democratic and Marxist

theories, has firmly rejected to interpret the state from purely capital logic. The state

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Chapter Two 57

takes actions to secure the condition for capital accumulation, but at the same time it

avoids compromising legitimacy by identifying itself with any particular interest. This is because the state cannot guarantee the condition for capital accumulation without

securing social consensus and social integration among citizens. The state has to ensure

acceptance of law and order and thereby create a stable environment for capital invest­

ment. It also need to secure the basic welfare of the people, especially those who are vulnerable and who therefore are most likely to attack the capitalist system. The

integrative function of the state, as a means of reconciling conflicting interests and

reproducing the cohesion of society as a whole, should be redressed (Offe, 1972;

Habermas, 1973; Gold, Lo and Wright, 1975).

The state has dual functions; legitmation and accumulation. It attempts to fulfil two

distinct and contradictory functions through its public expenditure (O’Conner, 1973, pp.

103-57). The state uses ‘social capital expenditure’ to assist investment in both capital

production and labour force. This category is consisted of social investment, social consumption and social expense. Through social investment, the state prevents the rise of

organic composition of capital, thereby stabilising the fall of profit rate in the primary

circuit. Through social consumption, the state reduces the necessary costs for the

reproduction of labour power which should be borne by industrial capital. Through social

expenses, which are mainly military and welfare expenditures, the state plays down the struggle of the working-class and maintains social harmony (Gough, 1975a, 1979).

The dual function of the state reflects on its provision of goods and services for

‘collective consumption’ (Castells, 1977). Through organising and subsidising public

goods and services, such as housing, transport, health service, education, training and

research facilities, the state helps to counter the falling rate of profit in the private sector,

to combat under-consumption, and to stimulate the demand in the economy. The provision of collective goods and services is also necessary to regulate the process by

which labour power is reproduced. It transfers the costs for the reproduction of labour

power to society as a whole through the mechanism of public finance. The social wage is

used to supplement real wages in the productive sector, and helps to reduce the social

cost for reproduction. Most importantly, through providing basic welfare and encourag­

ing home ownership, the state wins popular support and effectively deflects political

From this point of view, the state has become an organic element for both economic and social reproduction. However, the selection o f a particular type o f accumulation

strategy is decided politically, according to the need to secure social-bases of support for

that strategy. The realisation of an accumulation strategy is always based on a compatible

political-ideological ‘hegemonic structure’ or ‘hegemonic project’ (Hirsch, 1983; Jessop,

1983). The ‘hegemonic project’ is exercised through specific political, intellectual and

moral practice, aiming to mobilise support for state actions and to provide the motives

and opportunities for popular participation in the pursuit of development goals. It can be concerned with non-economic objectives, including military success, social reform,

political stability or moral regulation, or broader issues grounded in the field of civil

society and the state (Jessop, 1990, pp. 207-9). The policies pursued by the state to

sustain accumulation are always the contingent results of the political process of the

state, determined by its own political priorities.

The state, as a bureaucratic form o f domination, can be explained not only by the

interest it serves, or the economic function it performs, but in terms of its function as a

political institution which is designed to maintained the stability of the whole social system. The state can act in the interest of capital, but in certain circumstances it can

pursue its own interest, which is, a framework to hold the state and society together. The

autonomy of the state, however, seems to be inherent in the structural relationship between the state and society.