1. The State , Society and Develop m e n t :
Compe ting Theories
RAJ KUMAR PANDEY, MBS, MA
1.0 INTRODUCTION:
The theoretical concern on the state has been stimulated by the important role the state
1
plays in the governance and development of society. The state emerged out of society as a
historical construction, which has been largely associated with the compromise of national
ruling class with the society and accepted by the social forces as a credible, legitimate and
acceptable governing institution. It is important to bring insights of various theories of the
state into this analysis and concretize the study in the light of those theories and approaches.
The state, or more concretely, public order and administration, is the capacity for effective
political action in the society. One of the central characteristics of a state is its sovereignty
which espouses the idea of jurisdiction over territory and population inhabiting it as societies.
The society is defined as an “ensemble of systems of action” wherein power is dispersed and
relocated to the field of symbolic struggles over the control of historicity: that is, the cultural,
cognitive, economic and ethical models by which a collectivity produces a culture” (Touraine,
1988:30-40). State power depends ultimately on the acceptance of its authority by the
stakeholders of society such as families, communities, voluntary associations, religious
associations, business enterprises, research institutions, media, local governance institutions
and the nation.
Ferdinand Tonnies while studying the rise of capitalism, modernity and the modern
nation-state, elaborated two distinctly ideal concepts Gemeinschaft (inherited community)
and Gesellchaft (self-chosen society and association). To him, rural communities are
governed by folkways, religion and tradition rooted in the family while urban communities are
based on rational self-interests, laws and social contracts. Acutely aware of the maladjustment
of conservative elites caused by individual rationalism and capitalism he strongly supported
the “organic solidarity” of labor movements. Emile Durkheim rejected the individualist basis
of society made by a “contract” between individuals and argued that the norms that govern
contracts are embedded in a social solidarity—mechanical and organic, the former refers to
primitive society with little division of labor while the latter includes highly specialized
division of labor. To him, society is prior to individual and, therefore, cannot be reduced to
individual’s psychology. In this context, the ability of the state to promote public goods and
services, resolve conflicts and command loyalty and compliance of citizens depends very much
on how it is embedded in the midst of society, a society that “finds its unity in the political life
and organiza-tion of the state” (Habermas, 1996: 1). This view holds that the society is
centered in the state and, consequently, the state balances the general and particular interests
of society, between economic and civil society and keep the pressure of social diversity and
social complexity in manageable proportion. The development of market requires the
formulation of rule of law by the state so that the entrepreneurship and transactions of society
can take place.
1 A number of disciplines have dealt with the theory of the state. “The economic theory of the state regards
internal and external protection and the provision of public goods as the central duties of the state. Legal
theory discusses the functions for regulating human co-existence in the relevant state and identifies peace,
liberty, social security, social integration and cooperation as these duties. Sociological theory established
the classic distinction between civil liberties, political participation and social subjective rights—that is,
legitimate demands on the state and the modern political economy identifies the political regulation of the
market, the provision of a public infrastructure and sociopolitical adjustments as the main functions of the
state within the socio-economic sphere” (Zurn,1 999:38).

2. The profound societal transformation of the Industrial Revolution innovated the notion of
citizenship, self-determination of nations and the ideology of nationalism. The emergence of
state as distinct organization has been facilitated by its monopoly over the extraction of
revenues, standing army, police and bureaucracy as well as other resources from society,
expansion of the state organizations, the imposition of state interests and activities, a
mechanism (technical, bureaucratic and organizing) for maintaining effective control over the
public and private lives of citizens and prevent rebellion. Beefed up by the ideology of
mercantilism associated with protectionism and economic nationalism, the “reasons of state”
subordinated the society and economy and formulated public policy on the basis of political
determination of economics. Economic nationalists hold the primacy of national interest as
opposed to class interest as Marxism believed or competing group interests as liberalism
claimed. Marxists doubt on the homogenous formation of “national interests” and make
distinction between the particular interest of “political regime” and general interests of all the
citizens. To them, national interests often conceal some very specific interests because
homogeneity usually occurs within classes, not states. Liberals claim that an increase in the
scope of state’s power has produced proportionate decrease in its authority. For example, the
rights of citizens against the state entrenched in the idea of democracy and development of
humanitarian norms, including international law, softened the absolute power of the sovereign
to encroach upon citizens’ lives. The traditional division of labor in society and its hierarchical
control which enhanced the political equilibrium of state are facing the pressure of horizontal
forces such as market, civil society, solidarity associations based on language, memories,
affinities, region and communities and sovereign citizens who know they are the authors of
law and the state power has to circulate at their will. The frame of reference of “development” 2
also fundamentally altered from the historical notion of “liberation from oppression,”
“individual rights,” “entitlements,” to newer concepts blended with “social opportunities”
deemed essential for the self-realization of people in a sustainable manner.
Today, statehood comprises three critical dimensions: “recognition, resources and the
realization of governance goals. Statehood in the national constellation was characterized by a
convergence of all these three elements in one political organizations, that is the nation-state”
(Zurn, 1999:2). It is inaccurate to use the terms “nation ” and “state” as interchangeable.
3
“The state, in the modern sense, implies a population that occupies a definite territory, subject
to a government that is accorded sovereignty and has a regime recognized as legitimate by
other states…while the nation is a large social grouping whose people share common customs,
language, heritage, and a sense of group identity” (Lopez and Stahl, 1989:7). In the
“pluralist conception, the state itself is equated with the ‘political system’ and as such becomes
the main focus of democratic political pressure.
2 Johan Galtung, for example, talks about balanced development. He says: “ If development is the
progressive satisfaction of needs of human and non-human nature, then the problem of environmental
degradation becomes a priority. Three propositions are relatively clear: homo-centric development,
whereby human needs are given priority to the exclusion of nature’s needs (or more precisely, non-human
nature), a nature-centered development, whereby nature’s needs are given priority to the exclusion of
human needs; and homo/nature-balance development, whereby some compromise is struck” ( Galtung,
1996: 129)
3 Not all states can be labeled as nation-states, for example, some are based on civic nation embodying
shared commitments to the constitution and representative government; while others have propensity
towards cultural nationhood based on the active conformity of its citizens to shared understanding of
national culture, history and civilization; still, some are ethno-national states based on common ancestry,
race, religion and institutions. The transnationalization of economy and information technology today has
provoked increased ethnic consciousness, emergence of ethnic organizations and ethno-nationalist
movements and affecting the base of civic nation-state. The growing ethnic movements are creating new
identities and shared interests for “virtual communities” that transcend geography, gender and socio-
political boundaries.

3. If society comprises a whole series of interest groups more or less in competition with one
another for economic resources and access to political power, then the state’s role is to balance
these pressure-group claims in order to secure political and social stability” (McLennan,
1993:83). Conflicts among various interest groups represented through political parties
express a democratic manifestation of the class struggle though with the decline of ideology
other social attributes such as age, sex, religion, region, caste and ethnicity are affecting the
formation of class.
The state essentially means a fixed polity commanding authoritative and legitimately
influential roles by which social forces are organized, ordered and regulated. The “legibility of
a society provides the capacity for large-scale social engineering, high-modernist ideology
provides the desire, the authoritarian state provides the determination to act on that desire,
and an incapacitated civil society provides leveled social terrain on which to build” (Scott,
1998:5). The state system “can likewise be treated as an imagined political community with
its own specific boundaries, conditions of existence, political subjects, developmental
tendencies, sources of legitimacy and state projects” (Jessop,1999: 3). The degree of
autonomy and legitimacy of the state determines the integrity and stability of the political
system. The states are central nexus of governments’ institutions; they are not only repressive
and extractive force but also ideological and cultural ones that help shape political culture and
collective action. A state, in this sense, marks fundamental distinction from the government;
the latter only executes the short-term and long-term programs of the state according to the
principles of utility and ensures the conditions of public good that are necessary to the birth of
a “shared national community,” linked to the historicity of people residing in a territory.
“Historicity helps erode traditional forms of consciousness, linking history with nationalist
claims to sovereignty” (Tucker, Jr. 1998:121).
In democracies, every state is served by the periodic alteration of governments and the
state is more effective in ruling than the government. Sometimes, the state can set itself above
and outside the constitution deliberately and detach much of its activities from democratic
oversight, especially on questions of national security. “The governments only represent the
state, they cannot replace it. A government is not a sovereign body: opposition to the
government is a vital activity at the heart of liberal democracy; opposition to the state is a
treason” (Taylor, 1985:110). The “arts of state” or statecraft is, however, coterminous with
the performance of governance though assuming office of government does not guarantee full
access to the instruments of state power. From ancient Athens to today “the historic purpose
of democratic government has been to protect the poor from the rich” (Parenti, 1995: 2),
defend people’s needs and not just defend property rights. The decisive thrust toward the
consolidation of state can take place only if lower strata of population can articulate claims for
participation and build up their own efficient organization. Government refers those units that
formulate, execute and adjudicate the laws and regulations according to which the state
conducts its domestic and foreign policy.
Behavioralist scholars like Arthur Bentley and David B. Truman reduced the process of
government to an informal process of more or less well organized interacting groups of society
in political competition with each other. Their analysis tended to lay entire stress on process-
orientation of checks and balances found in society and rules of the game and disregard the
role of formal institutions. These groups exert pressure on the government for producing
favorable policies to them and they satisfy through incremental adjustments. Interest-based
logic of development is becoming more, or less, plausible among the policy-makers in East
Asia. “Some combination of markets, bureaucracies and informal mechanism in the pursuit of
power and conventional material gains makes sense both to political leaders and to people in
the street” (Evans, 1996:5).

4. David Easton, on the other hand, considers the concept of state superfluous and favors
instead the “political system” because, to him, multi-functionality of polity is sufficient to
maintain the boundary between the society and the polity. He argues “The reintroduction of
this nineteenth-century term (ideologically closely tied to the notion of sovereignty) into the
contemporary research lexicon contradicts our frequently expressed desire to increase the
clarity of our tools of analysis rather than to compound their obscurities” (Easton,
1997:25-26). Gabriel A. Almond by articulating a plurally functional system rather than self-
interested state views “an image of public authority as relatively, or at least ideally,
disinterested and managerial, processing inputs into outputs, managing the flow of stimuli
into feedback, and guarding good-fences-good-neighbors difference between polity and
society” (Emmerson, 1986: 143). Constitutionalism and comparative politics are
considered “system maintaining” theories while Marxism-Leninism as smashers of liberal/
pluralist paradigms.
Liberalism’s thrust on the separation of state from civil society is essential prerequisite of
a democratic order, provisions of fundamental rights of citizens and the creation of a space for
individual autonomy, initiative and creativity including the preservation of other values such
as respect for minorities, human rights and democracy. The state is often linked to “civil
society,” the whole range of intermediary non-governmental, popular institutions, networks,
voluntary relationships, associations and social movements that make up a vibrant public life.
Civil societies, as shared enterprises, are organized from below, work for the promotion of
public good and are relatively independent of the state and market institutions. The
administrative power of the state regulated through political control differentiated itself from
the regulation of economic system and thus produced the separation of civil society from both
the bureaucratic state structures and the free market institutions. Civil society thus constituted
through voluntary participation and spontaneous initiative of people created institutional
basis of welfare state politics and the development defined as the realization of human
interests without destroying the regenerating capacity of nature. There are several competing
theories to explain state-society relations and their contribution to development. Each theory,
in turn, has a distinctive set of implications for state policies and societal practices. This study,
however, focuses on three major strands: liberal/pluralist, Marxist and political economy—
combining both non-Marxist and neo-Marxist schools.
2.0 LIBERAL/PLURALIST THEORIES:
The idea of liberal/pluralists is the “neutral state” that seeks to create a just society, a society
that does not impose any particular conception of the good but allows individual citizens to
chose competing concepts of the good life according to their own preference. The liberal
conception of politics is underlined by three conditions: “first, a specification of certain rights,
liberties and opportunities (of a kind familiar with democratic regimes); second, a special
priority for these freedoms; and third, measures assuring all citizens, whatever their social
position, adequate all purpose means to make intelligent and effective use of their liberties and
opportunities” (Rawls, 1996:xlvii). These conditions combine the realization of a state both
strong enough to do its job and democratically legitimate to develop subjective and objective
rights of the citizens as a basis of social unity. The development of democratic welfare state 4
following the Second World War and Keynesian economic policy while allowing the expansion
of capitalism brought the state and economy into democratic scrutiny and enforced social
welfare measures to pacify the class conflict in the sphere of production.
4 The steady development of the “democratic welfare state is directed against those modern relations of
power and dependence that arose with the capitalist enterprise, the bureaucratic apparatus of domination,
and, more generally, the formally organized domains of action of the economy and the state” (Habermas,
1995:336).

5. By combining economic freedom and social responsibility, it politicized the formulation
of economic policies and beefed up the power of governmental hierarchy by increasing its
capacity to regulate market forces as well as protect people from uncertainty.
The post-war system in most liberal capitalist states provided the parastatal and
bureaucracy a decisive role in governing the patterns of organizational innovation, structural
change and a means of exercising power. It invented the concept of “social labor previously
subordinated to the unrestricted power of disposition and organization exercised by private
owners of the means of production” (Habermas, 1995: 361) and established the legitimacy of
high spending for social purposes. Sociologist Daniel Bell popularized the idea of the “end of
ideology” as the welfare state and mixed economy achieved pluralist consensus and removed
ideological conflict at the national and international level. After the 1970s the Keynesian
rationales for state expansion and state management of total demand for goods and services to
suit the interest of full employment as the key to capitalist prosperity suffered. It hit the
developing countries’ demands for a massive transfer of international loans and then debt
repayment. As the economic strength of welfare states became weak, it led to chronic
budgetary deficits, distributional conflicts, social movements and the revival of right
extremism who were not adjusted to the consensus on welfare state. The authority of the state
to define the theory and praxis of development was subsequently questioned.
The retrenchment of welfare functions of the states and the spread of laissez-faire,
structural adjustment and domestic restructuring following the collapse of communism in
Eastern Europe also caused economic, ideological and geopolitical crises and reversed policy-
makers’ attitude towards government spending. Interventionist state found a lack of
supporters as the “primacy of public” marked a paradigm shift to public-private mix and even
an increased role for private sector. This also set a trend toward the monetization and
capitalization of politics. Big theoretical assertions were made by the proponents of neo-
liberalism in favor of a minimalist state. This condition even posited problems to the
constitutional state and its constituent parts. How to combine the respect for national
sovereignty that is still in vogue with popular sovereignty that goes beneath and beyond it?
How can a democratic government promote egalitarian rights of citizenship and tolerate class
inequalities generated by the operation of free market economy? By implication, how does the
state manage an uneasy coexistence of citizenship and class as well as social cohesion and
social differentiation? Can a democratic state really coexist with an economy drifting towards
globali-zation? It is difficult to answer straightaway.
Liberal/pluralist theories regard politics and economics as two separate and relatively
autonomous sphere of activities and assume that power and wealth are sought by a variety of
social forces, including the state and non-state organizations, civic and private institutions,
political parties, social classes and business groups that generate liberty and produce
pluralistic goods of free society. An efficient functioning of the market economy and property
rights will allow individual citizens to choose their own conception of the good. They believe
that public policy is best determined by the pluralistic struggle among all the legitimate
interest groups. But, the states are the crucial ones because they set rules and procedures that
enable the society to secure these goals. State apparatuses acquire distinctive public space
related to the sphere of power, authority, responsibility and accountability while the society
constitutes a private sphere outside the direct control of the state though it provides a unifying
political framework for a series of identity-forming societal forces—both institutional and
cultural, existing within state boundaries. The behavior of states and those of other forces is,
however, determined by the constraints, incentives, institutions and the critical resources
available to them. The power of the state to penetrate society and exercise subtle forms of
social control and the power of society to make the state authorities accountable to their
actions constitute the dynamics of state-society relations.

6. Perceiving the danger of absolutist state, liberal theorists tried to construct popular
sovereignty, seeking to neutralize its despotic power through internal pacification process such
as constitutional mechanism of separation of power and checks and balances among the
functionally differentiated governmental institutions, citizenship rights, legitimate laws,
sociopolitical reforms and accountability. “To split or decentralize power is necessarily to
reduce the absolute amount of power, and the competitive system is the only system designed
to minimize by decentralization the power exercised by men over men” (Hayek, 1972:145).
Decentralization of power and decision-making might allow the participation of people from
the base, reform the state and delegate public functions. But in many developing countries,
decentralization has involved not these functions but only the atomization of conflicts. Liberal
thinkers, therefore, propounded the doctrine of a non-interventionist state on economic
transactions and underlined the freedom of choice to matters as diverse as marriage, religion,
economic and political affairs and uphold the values of reason and toleration in the face of
tradition and absolutism (Held, 1989:13). To them, the structure of economy is considered
as non-political because it is regulated by private contracts, not by the state. Yet, critic argues
that an economy cannot be isolated from the labor and environment. A massive division
between those who own and control the means of production and those who live by wage labor
create uneven political power in society. “By defending private property in the means of
production, the state has taken a side” (Held, 1989:145). How can a state that takes the side
of capital against workers embedded in society as a neutral institution and claims to be an
autonomous entity?
Through free exchange of commodities, removal of restriction on private investment and
the division of labor in society spawn benefit to all as a result of the optimum utilization of the
nation’s scarce resources. Constitutionalization of arbitrary authority (specific to feudal and
praetorian regimes) of the state and society strongly applies a weak state but by no means 5
inefficient or relatively less autonomous one. The requirement of the democratization of
bureaucratic authority of the state brings to close the process of will-formation and public
discourse as well as horizontal and vertical linkages of the state with society so that society
6
5 Gunnar Myrdal views that the establishment of “strong states” in South Asia is hampered by the
attitudes, institutions and inhibitions of rulers and ruled alike. The resistance to authority, personalism
and the lack of social discipline created what he terms as “soft-states,” where hard policies are difficult to
implement. Despite the leaders’ pronouncements of social and economic revolutions, the policies of the
region are often piecemeal and gradualist (1972:182). Patronage type of political economy in which
management often produce inefficiency, overstaffing and corruption consequently weakened the process of
both economic development and democratic culture. Nepal’s case fits with this notion of soft-state, having
weakness, ineffectiveness and inefficiencies in policy formulation and implementation. Despite the
practice of multi-party democracy over more than a decade, governance goals have remained unattainable
and the role of international institutions and foreign aid too favored the state agents (political classes) and
economic interests without strengthening either the state, economy or the society. This explains the reason
of societal resistance to globalization sponsored by the state agents and economic interests. This
paradoxical situation also indicates as to why policy interests of the state is institutionally disembodied
from the public. The government’s rush for the privatization of public wealth (industries), public power
(downsizing of state) and public welfare (public utilities, health and education), etc indicates a trend
towards public deficit in favor of particular interests. Due to inconsistencies in policies foreign direct
investments have been geographically clustered in a few locations of the East and Southeast Asian nations.
This clustering has roots in the policy initiatives of developed countries than just the recipients of foreign
direct investments. Social scientists characterize the states on the basis of their functions, such as collapsed
state (Somalia), ineffective, inefficient and weak state (Rwanda), predatory, corrupt and rogue state
(Guatamala, Cambodia), and cooperative, accountable, flexible and developmental states (Southeast Asian
Nations).
6 “Vertical relations plagued by inequality and an unequal distribution of power and opportunity
(often accompanied by exclusion and indignity) can instigate violent conflict. The absence of horozontal
relations—of cross-cutting ties between unlike groups in a multicultural society—can erupt into hostilities if
one group is seen as monopolizing resources and power to the disadvantage of others” (Colletta and Cullen,
2000:15).

7. supplies the critical resources to the state’s organizational integrity and functioning.
Liberalism considers that individuals are prior to society and, therefore, political system and
the state should allow them requisite freedom to pursue self-determined goals. It rests on
social, institutional and methodological pluralism in which each competes for power and
resources but shares values and norms with the other. Yet, none in society is entitled to special
privileges. “The primary units of the state’s social basis were individual political subjects
endowed, as citizens of the national state, with various legal, political and social rights and
organized as members of economic-corporate organizations (trade unions and business
associations) and/or a supporters of responsible political parties” (Jessop, 1999:6). The
state thus focuses on the citizenship—the identification of individuals with the state,
constructs national ideology for the citizens and links that ideology with the collective identity,
symbols and consciousness ensuring their loyalties.
Those scholars who do work in pluralist paradigm rationalize the democratic constitu-
tional state assuming that it limits the absolute political authority, provide political framework
for social and economic justice and democratize the state power by providing the citizens
rights of political participation and right to development. It is also associated with
utiliterianism of J. S. Mill, laissez-faire economics, property rights and the creation of
egalitarian society by the state. Liberal, representative democracy is institutionalized in state
structures. “Liberalism includes individua-lists such as John Locke and Robert Nozick, who
deduce the just society from the principles of personal and voluntary choice, as well as system
theorists such as Emile Durkheim, Talcott Parsons and John Rawls, for whom institutions are
judged in large measure by the social effects that they foster and sustain. The social
commitments of liberals are no less diverse: they have both favored and opposed monarchy,
popular democracy, free trade, rights of workers’ association, government intervention in
economic affairs and the welfare state” (Bowles and Gintis, 1986: 14-15). The capacity of
states to implement social and economic policies and to mobilize public support rests on the
structure of society as well as compliance, participation and legitimation available to state
leaders in their pursuit of social control over power, markets and identities.
Liberal democratic states have put a premium on a large middle class assuming that this
class has the propensity to develop a more gradualist views of political change as well as craft
social contract as a legitimate and secure principle of government. Accordingly, they entered
into mediation between the labor and the capital under the constitutional rules of the game.
They derive legitimacy from general elections and the provisions of freedom to organize
political parties and civil society. These states also rendered economic decision-making
accountable to the heterogeneous societies whose strength vary in their coherence,
organization, leadership, ideology and shared cultural attributes. They thus established the
notion of popular sovereignty which means political power is accountable to the citizens which
in no way absolute and unitary as described by Jean Bodin, the sixteenth-century philosopher
or even Thomas Hobbes who recommended to remove all sources of competing political
authority in the state so that it can counter the threat of anarchy and preserve peace, security
and freedom.
The rise of modern nation-state in eighteenth and nineteenth-century following the wave
for constitutional democracy removed the state’s absolutist character. There is “the multiple
centers of power in liberal democratic capitalism and indeed in most social orders, and that
this pluralism of power captures an essential aspect of a democratic society” (Bowles and
Gintis, 1986:4). An ardent advocate of pluralist theory, Robert A. Dahl, states that elections,
a free press, autonomous associations and inclusive citizenship are among the liberal
institutions required to make “polyarchy” (2000:37) functional. But, this does not mean that
state provides equal rewards to each man and women, age cohort and social group of society.
Rewards very much depend on their political clout, skills in negotiation and bargaining.

8. Each citizen has equal voting power in the polity does not mean each enjoys equal
sovereign power. In democratic societies political priorities are set by political process and the
concept of democratic accountability is sustained by the government by becoming increasingly
sensitive to the weight of public opinion.
Critical pluralists affirm that “business corporations wields disproportionate influence
over the state” (McLennan, 1993: 85) and manipulate the state system. Why should
economic actors wield disproportionate power and play a privileged role in governance when
they constitute only a part of the whole and do not make up representational power? How can
the state serve as mediating agent among societal asymmetries in such a condition? Or, is
liberal state less interested in regulating the powerful private sphere? The obvious answer is
that in the developing countries bureaucracies are weak and the state, public and private
sector economies are fused in those dominant interest groups whose leaders wield enormous
economic power and control political decision making processes. But, these interest groups are
also enmeshed in an institutional structure of the state, pay taxes and are bound to orient
towards public interest functions. If the state cannot regulate economic actors and fail to
deliver public goods, the politics of identity becomes salient. The ideological orientation of
decision-making elites seeking the autonomy of economy reflects a trend towards the social
7
disempowerment of the state which increases the costs to both civil society and democratic
development. 8
The state is treated as a set of institutions which manages the provisions of public goods
and services for the society. This view has been the center of analysis among liberal/pluralists.
As power is dispersed in society, persistent political competitiveness in sustaining the
commitment of political parties, whether in or out of the government and social mobilization
can help the construction of mass participation in the decision-making of the state. Political
parties and functional interest groups mediate between the state and society as a transmission
belt and increase the participation of social forces in the political system. They also aggregate
various interests, present themselves in the everyday life of society, provide sustained political
education, elect and control the performance of representa-tives in the parliament and serve
as integrative forces by means of socialization and mobilization. High participation of public
reflects mass consensus for the political system.
The nature of state is determined by the shape, institutions and socio-economic dynamics
of social formation because inputs flow into the state from the various competing interest
groups of societies including social classes and these inputs are subject to conversion into
outputs for decisions and/or feedback to and from the state policies for either decision
legitimation or again input formation. In this cycle, state institutions are considered to be
impersonal and neutral bodies to which different groups in society can articulate and so
produce policies that favor their members.
7 Taking cue from Karl Polanyi, Karl Polanyi Levitt argues: “In the course of past two-hundred
years, economic life has been progressively disembedded from the societal and cultural matrix. As
“improvement” (read “efficiency”) conquers “habitat” (read “security”), as labor, land and money have
become commodified, the economy has acquired an existence of its own, driven by “laws” of its own,
whether conceived in classical or Marxist terms. It is the central argument of The Great
Transformation that the liberal “Utopia” of a generalized “self-regulating” market is a prescription for
disaster” (1995:4). He argues that disembodied capital must be regulated and contained by the role of state
in society.
8 Held, for example, argues : “Liberalism’s thrust to create a sovereign democratic state, a diversity
of power centers and a world marked by openness, controversy and plurality is radically compromised by
the reality of the so-called free market—the imperatives of the system of corporate power and multinational
corporations, the logic of commercial and banking houses and the economic and political rivalry of the
power blocs” (Held,1989:166).

9. Since modern society consists of very many overlapping interests –labor, farmers,
business, home owners, consumers and so on –no one group is ever able to dominate the state
and each state is in effect an umpire adjudicating between competing interests. The balance of
interests served very well as governments change but the state remain pluralist in nature and
able to respond to a wide range of interests (Taylor, 1985:118). Democracy provides scope
for consensus, compromise, competition and coordination among contending groups and
serves as institutionalized mechanism to mediate state-society relationship. The state can
serve the people only if democracy is well established in society.
The questions that hit often the liberal/pluralist paradigm are: how can a political
community or the state emerge in a condition when each political or interest group of society
inclines to satisfy the claims of its own interest without any care for the expectation of others?
To be more precise, when inequalities are dispersed among the groups in society and one
group dominates the other, how can the state stabilize social and political life against the rise
of authoritarianism? One obvious answer can be by preventing the totalitarian tendency of
each subsystem such as economy, class, caste, ethnicity, religion, etc which purports to
transform the entire society in its own image and undermine a variety of plural life-worlds.
The other can be by institutionalizing, diffusing and devolving political power to macro and
micro-institutions of self-governance and crafting an integrated political community building
project. The idea is that a healthy community life is essential to prosperity. A society lacking
9
political community often resorts to primordial loyalties. And a lack of political
institutionalization, meaning “adaptability, complexity, unity and autonomy” (Huntington,
1968:13) of the institutions of the state as well as regularized, stable and continuous
participation of society for mutual advantage under common agreement on law suffers from a
crisis of governance.
The liberal democratic thinkers strongly argue that the logic of global capital and its
mobility reduce both the autonomy of the state, its sovereignty in policy matters and
ownership over those policies due to the dependency of each nation-state on global processes,
institutions and norms. Robert A. Dahl notes the cohabitation of liberal state with capitalism
and democracy and observes that “democracy and market capitalism are locked in a persistent
conflict in which each modifies and limits the other.” Because market spurs growth, allocation
of income, therefore, satisfaction of human needs. Balancing the hierarchical requirements of
the state and decentralized requirements of the market constitutes the constitutional reality of
liberal states. In the 1980s, the ideology of the New Right, most notably represented by the
philosophy of Friedrich Hayek and Robert Nozick, submitted the neo-classical thesis on supply
side economics and the “roll back the state” or even deregulation of societies in social and
economic management. The neo-classical thesis of this roll back that came to be known
Reaganomics and Thatcherism depends on the economic policy of monetarism and creation of
private opportunity in all areas of life by minimizing the role of overloaded state teetering on
the brink of crisis and facing legitimacy deficit.
The neo-classical thesis rests on a number of key assumptions: first, individuals’ rational
motivation for profit create efficiency in the marketplace and efficiency is important to
promote economic growth, secure public interest and social goods. The drive for achievement
cannot be socialized. Second, the state fails in efficient allocation of resources because it is not
able to collect and process all the necessary information for market. And third, market
economies enable an efficient use of information through specialization and efficiency.
9 The state fosters a “sense of community among its otherwise unrelated members,
institutionalizes their sense of mutual concern and gives their collective life both a public focus and
historical continuity. By interposing itself between society and government, it protects each from the
unrestrained domination of the other, and creates conditions for a relatively inviolate private realm, an
autonomous civil society, and an efficient, rationally planned and professional management of public
affairs” (Parekh, 1996:45).

10. For them, the key economic problem is not the optimal efficiency in the allocation of
resources but how to secure the best use of resources known to individuals of society for
objectives whose relative importance only they know. Accordingly, the policies of
individualism, market discipline, privatization, denationali-zation, deregulation, tax reduction,
cuts in public expenditure, etc assumed utmost priority. To them, development is an apolitical
process. In other words, globalization of economy has been regarded as a liberation from
national constraints which have limited economic activities to territorial inscriptions.
The proponents of neo-liberal school claim that national borders are insufficient
territories for the state to function as self-contained economy and government intervention
distorts the market decision-making processes as well as individual freedom. The new ideology
of the market forces thus allows to challenge those national regulations that have protective
impact forcing them to adopt “flexibility” on economy and create a framework of stability that
is conducive to foreign investment. They believe that economic exchange maximizes the gains
to those states disadvantaged by political and geographical isolation and facilitates integration
process. They further argue that such regulations create costs for the production of goods
which may turn out to be counterproductive in terms of competitive-ness. Nation-states have
reached a degree of globalization which make their strength too narrow to face the modern
challenges. In the future, therefore, the “firms will locate and relocate their production on a
global scale so as to minimize their expected future costs; the employment prospects in each
country will therefore depend on each nation’s ability to create an attractive business climate;
and the ability of any governing group to secure reelection will depend on important measure
on the employ-ment situation in the period preceding elections” (Bowles and Gintis, 1986:
189).
If the reality of market dictates the term of economic life where is the place for social
consciousness? Why should the citizens hold by the idealism of national constitution? And
how can every men and women be able to realize their self-worth? The decline in national
economy not only deepened de-industrialization, dis-investment in public sector
undertakings, skill obsoleteness, job layoffs and caused indiscri-minate exploitation of natural,
ecological and labor resources but also created a crisis of political representation. It thus
underestimated the role of nation-states as intermediary institution between the society and
global regimes that helped to articulate national aspirations. Development economists thus
more concretely argue that if individuals are accorded absolute sovereignty to pursue their
own rational self-interests, then they will undermine the legitimate claim of community for
common good with the peril of increasing dissolution of community lives and citizenship.
Sensible democrat even admits the need of a balance between money and equality to increase
social liberties: “If drastic limits are placed on inherited wealth, it would neither result in a
paralysis of capitalist impulses nor would it restrict democratic liberties excessively” (Peters,
1996:50).
The classical liberalism from the days of Adam Smith often viewed “society as a mere
sum of individuals” and, therefore, rejected the traditional arrangement of society while
neo-liberalism of today subordinated social goals of the family, community and the state to
market institutions and the legal framework made for them. The neo-liberal project thus
favors the minimalist state and prefers the subordination of political and civil society (also
state) to the market in the hope that market promotes innovation, competitiveness and
efficiency. In the execution of the global neo-liberal model in a competition of nation-states
where each state seeks to maintain national security and promote economic growth but
constrained by its own limits to attract international capital, the state is “reduced to the
equivalent of the perfectly competitive firm in neoclassical economics. Unable to control prices
and other aspects of the economic environment, it simply does the best it can within the
constraints set by these parameters” (Bowles and Gintis, 1986: 190).

11. The transcendence of markets beyond the economy to other boundaries established by
constitutional process, accountable neither to the citizens nor to civil society constitutes a
setback to the social contract built on constitutional state provoking reactive re-tribalization of
minority groups. The relaxation of barriers to capital flows allowed a new predatory form to
take roots in speculation around currency prices, market shares and other derivatives thus
enlarging the gulf between value and price. “The free trade argument directly and concretely
challenged the sovereignty of countries, their authority to regulate borders, evoking a
confrontation between nation-states and markets, where the market position was represented
by Washington Consensus” (Wachtel, 2000:247). The rationalist discourse in political science
focused on international regimes and international institu-tions. An increase in the growth of
10
international regimes above the nation-state level points a transformation of sovereign states
and popular sovereignty towards post-national solution. Jurgen Habermas argues “The
globalization of commerce and communication, of economic production and finance, of the
spread of technology and weapons, and above all of ecological and military risks, poses
problems that can no longer be solved within the framework of nation-states or by the
traditional method of agreements between sovereign states” (1998: 1).
The weakening links between territorial states and their corresponding national
societies affect the capacity of the nation-state to achieve governance goals. The rationalist
realm of profit and cultural realm of identity trespassed the institutional boundaries
of state. Post-national state forms are “oriented to the management of recently rediscovered
or newly formed regional economies on various sub-and supranational scales, including
localized cross border linkages, as well as their articulation with the emerging global-regional
dynamics”(Jessop,1999:7). Critics, however, argue that the operation of neo-classical
political economy at the state, regional and international level cannot be expected to promote
either social stability, democratic pluralism or sustainable development. Institutional develop-
ment theorist strongly argues, “Neo-classical theory is simply an inappropriate tool to analyze
and prescribe policies that will induce develop-ment. It is concerned with the operation of
markets, not with how markets develop. How can one prescribe policies when one doesn’t
understand how economies develop? The very methods employed by neo-classical economists
have dictated the subject matter and militated against such a development”(North,
1996:342).
In many developing countries the intensification of social struggle for political power and
their social movements for access to resources became identical as both aim to secure essential
public goods through the use of alternative institutions such as the state, NGOs, community,
self-help and other indigenous organization in the mediation of development process. A
central consequence of neo-classical theory on the state, ecology and workers is that it
revitalized the importance of participatory development that valued local knowledge and
autonomy, devolution of power, self-governance and social mobilization to overcome obstacles
to collective action through networks and plurality of institutions.
10 Since the evolution of the General Agreement on Tariffs and Trade (GATT) in 1947, the multi-
lateral trade negotiations set the lower trade barriers and tried to remove government intervention at the
borders and tariffs on manufactured goods. In the Kennedy Round (1964-7) GATT focused its attention to
non-tariff measures, in Tokyo Round (1973-79) and Uruguay Round, its attention shifted to government
subsidies, anti-dumping, government procurement and customs and licensing procedures. As the GATT
was replaced by World Trade Organization (WTO) in 1995, the question of regulation got applied to not
only the state but also the non-state societal actors. The WTO meeting in Seattle in 1999 indicated that the
global consensus for free trade has broken down. The developing countries had made major concessions on
trade with the hope that developed countries would open up their markets. On the contrary, developed
countries remained unyielding for their own domestic political reasons.

12. 3.0 MARXIST THEORIES:
3.1 Orthodox School
Marxist conception of the state refers to the radical critique of capitalism. Its theories on
the state can be divided into several competing schools and tendencies yet all believe that
public policy reflects the interests of capitalist class. The orthodox (Marxist-Leninist) school
conceives the state a special repressive force of bourgeoisie to dominate and exploit the
masses. In “The Communist Manifesto” Marx and Engels say that “the modern state is but
a committee for managing the common affairs of the whole bourgeoisie.” It is deeply
enmeshed in the capitalist mode of production and works for the general interest of capitalist
class to create social order, institutions of private property and development spur. According
to Marxist conception, economics determines politics and political structure of the state.
The state, however, maintains relative autonomy from the members of the particular segment
of capitalist class. Marx suggested that the state gains ‘relative autonomy’ by balancing the
interests between competing segments of the ruling class.
He envisioned a classless society to eliminate exploitation and alienation through the
abolition of private property and sought the ultimate “withering away” of the bureaucratic
state and capitalist economy by a proletarian revolution for the creation of a democratically
self-regulating society. In such a democratically self-regulating society production of goods
and services would be based on social utility, rather than maximiza-tion of profits. Marxist
scholars from structural school acknowledge that “a relatively autonomous state is viewed
acting as a factor of cohesion for the bourgeoisie and as a facilitator of the bourgeoisie
dominance over the economy and society” (Koo,1984:43). F. Engels in his “The Origins of
the Family, Private Property and the State” (1894) supposed the state a product of society at a
certain stage of development, but it is placing itself above the society and increasingly
alienating from it. He attributes the sexual division of labor, exploitation of working class and
the formation of state to the private ownership of the means of production. Under Marxist
theories, this study includes orthodox, instrumentalist, structuralist, derivationist, and
commodity-centered political economy and hegemony schools.
The core propositions of orthodox school rest on the fact that the state is a mere
superstructure dependent on economic, social and political power of dominant class and,
therefore, serves their common interests; the state and its bureaucracy are the class
instruments, not neutral or non-partisan entity; it coordinate the divided society in the
interest of ruling class; the state defends the private ownership of the means of production;
and only through the struggle for resources and their allocation restructuring of property
relations can be made. With the application of collective action by working class (revolution)
the proletariat can achieve human emancipation. In the “State and Revolution” (1917) V.I.
Lenin recognized the existence of state within capitalist society but claimed that the needs of
different national capitalisms to expand domestic production markets led to geopolitical
conflicts and the expansion of monopoly finance capitalism, including its highest form—the
imperialism. Lenin favored the use of revolution to seize the state apparatuses by the working
classes and transform economic and social relation for the creation of a new socialist society
free of human exploitation and class antagonism. Many of these conceptions could not
establish their validity on the way of the dissolution of capitalist states. The functions of state
became irreversible even in those countries such as former Soviet Union, China, Cuba,
Vietnam, etc which established communist regimes and even became life-chances for a
number of social groups of society. When communist parties captured the state they developed
a “new class” of entrenched oligarchy enjoying privileges over the working classes (for
example, Yugoslavia) or committed class suicide and even developed state-conscious-ness
(Mazrui, 1996: 56). Some totalitarian state completely embraced the activities of society and
individuals, undercut their autonomy and displaced societal institutions.

13. 3.2 Instrumentalist School
The modern version of Marxist theories of the state has been provided by Ralph Miliband
who says that the “state in capitalist society is the capitalist state,” not the neutral arbiter
among social classes as pluralist theorists maintain. Specific private interests have nexus to
particular institutions of the state. But in general the state represents class interests and,
therefore, it is an intrinsic part of, and a player in, defining social relations. Miliband provides
instrumentalist theory of the state as he views the state an instru-ment of capitalist class. It
does not stand above society. As it represents class interests it does shape the social dynamics
within the classes, regulates property relations and the rules of social, economic and political
engagements in society. While trying to prove the class nature of the pluralist state, he
collected data on the social, economic and political background of the state class and revealed
that all came from the same dominant elite group who owned and controlled the means of
production and produced consensus in the transformation of capitalist economy into capitalist
society through the strategies of repression and ideology including the doctrine of anti-
communism. This class is able to manipulate the state apparatuses irrespective of democratic
constitution, existence of majority of working class in the country and whichever party is in the
government.
Miliband believes that “state apparatus is a crucially important and committed element in
the maintenance and defense of the structure of power and privilege inherent in advanced
capitalism” (Miliband, 1969:129). He claims that pluralist competition in election is a myth
because the dominant class monopolizes the intellectual, informational, commercial, political
and social capital of society through their disproportionate representation in the institu-tions
of governance. And economic power behind capitalist interest groups is far more influential
than other groups in society. To him, minority interests of the burgeoisie dominate state
politics. He, therefore, believes in the “class struggle from below” through a partnership
between democratic socialist state and the movements of social power. The strong function of
the state is to supervise the transition from capitalism to socialism. (Kovel,1994:57).
3.3 The Structuralist School
The structuralist position on the theory of state has been maintained by Nicos Poulantzas.
He developed a critique of economic determinism specific to orthodox school and opposed the
stress on individual actors and their motivations revealing that the state is broadly determined
by the structures of society and constitutes a creating, transforming and making reality.
Poulantzas viewed that modern capitalism has three components—the state, ideology and the
economy—each maintains relative autonomy to the other. The power bloc in society is
composed of the condensation of class relations emerged out of political practices of the ruling
classes in a capitalist formation. “It depends on the existence of a ‘plurality’ of dominant
classes (and fractions) characteristic of this formation” (Poulantzas, 1973:231). He asserts
that the state is a factor of cohesion for capitalist system and serves the needs of its interests,
regardless of private-public collaboration. To him, bureaucracy and social structure are
mechanisms used by state apparatuses to link the state with capitalist class. But, the capitalist
state separates economic from political and maintains the relative autonomy of the state from
the dominant class. It is this relative autonomy that makes possible for the state to pursue
general interests of the capitalist class and political action as a whole against particular
interests and policies of specific capitalists. This freedom of movement enables the state to
forge class alliance with bourgeoisie while devitalizing the unity of workers through the
transformation of workers into individualized citizens.

14. In that sense, it cannot cohesively function by coercive means alone. The state maintains
ideological domination of the working class through socialization, constitutionalized form of
coercion, training and subjection into various positions and occupations to produce. And the
classes are not determined by economic factor alone but also by political and ideological
factors. “The state is capitalist because it operates within the capitalist mode of production.
This sets constraints on the range of actions that is possible so that the state has no option but
to conform to the needs of capital. The introduction of liberal democracy does not change this
fundamental property” (Taylor, 1985:119) of the stability of capitalist system, the
reproduction of capitalist production relations and the continuation of capitalist domination.
As Poulantzas does not differentiate class power from the state power, he considers the state
as a vehicle of system maintenance—the maintenance of capitalist system while at the same
time concludes that political practices brings about social changes by recognizing the state as a
locus of conflict and cohesion. The state can only function if it has the power to raise tax and
material resources. To him, the nature of state is always determined by the need to sustain
capitalist accumulation. He, therefore, pleads for a continuous process of class struggle for
improving their position in the state power and resources. The weakness in Poulantzas’ view is
that it does not differentiate state power from class power. How an internally divided (on class
lines) state supports its own reproduction and expansion?
3.4 Derivationaist School
The derivationist school rejects both instrumentalist and structuralist schools in favor of
Keynesianism. The evolution of the social democratic state marked the “reproduction of a
skilled and healthy labor force for the long-term interests of capital. In this role of
coordinating capital and reproducing labor the state may appear neutral and above the
political conflict between capital and labor” (Taylor, 1985:120). Taylor argues that “The
Marxist political analyses, developed by Miliband and Poulantzas in their different ways,
cannot adequately answer this question because they have foresaken the holism of political
economy” (1985: 120). Yet, both went beyond the traditional Marxist theories of the state.
Eduard Bernstein and Karl Kautsky made systematic attempts to revise and reform Marxist
assumption of the inevitability of the collapse of capitalism. The ameliorative trends in
capitalism, the expansion of small scale enterprises and social welfare programs preventing
class polarization and the growth of educated and civilized public led to the development of
social state with what Joseph Schumpeter calls “socialization of the economy.” By explaining
changes in the social, economic and political nature of Western capitalism, derivationist
school attempts to identify the condition which resurrected a new form of collective action—a
form which legitimized, among others, the class and non-class based movements of people,
re-negotiation of social contract, right to free collective bargaining and co-determination.
3.5 Class Mediating School
Influenced by the Frankfurt school, Claus Offe offers commodity-centered approach to
the state and contradicts the view of Poulantzas’ that the state is intrinsically capitalist and
Miliband’s thesis that the state enmeshed in capitalist society is capitalist state. Offe argues
that the state is independent of instrumental and structural control but it is caught in capitalist
contradictions and, consequently, seeking to maintain its own legitimacy by means of
mediating the demands of working class. On the one hand the state has to sustain the process
of accumulation, the private appropriation of resources and commodification on the other
hand it has to manage the crisis to guard the commodity form by several methods: inaction
(hoping for self-corrective mechanism of the market), and subsidies to both labor and capital
to participate in exchange relationship and arbiter class interests, thereby legitimating its
power (Held, 1984: 71).

15. “The problem with this welfare state type of dealing with decommodified values is that it
becomes too costly in fiscal terms, thus sharpening the fiscal crisis of the state” (Offe and
Ronge,1982: ).
There is institutional self-interest of the state in accumulation of taxation, production and
finance and that the state does not defend the interests of one class, but the common interests
of all members of a capitalist society. There is a “dual determination of political power in the
capitalist state: by its institutional form access to political power is determined through the
rules of democratic and representative government, by its material content, the use of political
power is controlled by the course and the further requirements of the accumulation process”
(Offe and Ronge, 1982). Offe and Ronge conclude that the “link between the political and
economic structure of capitalist society is the commodity form. Both substructures depend
upon the universalization of this form for their viability.” Owing to increasing
bureaucratization of state, institutionalization of everyday life of citizens and the colonization
of the life-world by the system, movements of the new political paradigm adopt autonomous
and extra-parliamentary forms of struggle which take place within civil society—in an
intermediate space between the private and the public sphere, where they challenge both the
boundaries of state-sanctioned politics and liberal ideology (Offe,1985:820). New social
movements comprise three segments of social structure—the new middle class, elements of
the old middle class and those people outside the labor market or peripherally involved and
their demands are non-negotiable, such as peace, environment, gender rights, etc. They seek
to politicize civil society in ways that are not constrained either by the state or bureaucratic
and political authorities.
In a society divided by plurality of interests, interest groups engage in intermediation,
linkages and negotiation to determine the status and life of groups rather than becoming more
involved in class wars. Offe believes that an alliance between the new social movements and
the traditional left, especially unionized working class can lead to an effective and successful
challenge to old form of politics where collective bargaining and representative party
government were the exclusive mechanism for resolving political and social conflicts. The
importance of state action in “enabling the capitalist system of the industrialized world
increased, not reduced, as that system spreads internationally. If states do not control the
movement of capital or of goods, it is not because they cannot but because they will not—it is
an abdication of state power, not a lack of power” (Marcuse, 2000:25).
3.5 Hegemony School
The theory of hegemony has been provided by Antonio Gramsci. He argues that dynamics
of struggle for domination and opposition among the social groups contributed to the
formation of nation-state and its ideology. To him, the state is run by the ideas of ruling class
and those ideas generate ideology in society. The media, schools, political parties and religion
are used to educate and persuade as well as to muster consent from the governed to produce
hegemonic sense of state legitimacy. This view has been shared by others too. For example,
Parekh says “every modern state has relied on education to propagate a common system of
values, a shared sense of national identity, and a uniform conception of the good citizen to
bring about the cultural and political homogenization of its members” (1996:37). Gramsci
asserts that “ The modern state substitutes for the mechanical bloc of social groups, their
subordination to the active hegemony of the directive and the dominant group, hence
abolishes certain autonomies, which nevertheless are reborn in other forms, as parties, trade
unions, cultural associations. The contemporary dictatorships legally abolish these new forms
of autonomy as well, and strive to incorporate them within state activity: the legal
centralization of entire national life in the hands of the dominant group becomes totalitarian”
(1996:54).

16. In the 1960s and early 1970s, three trends appeared to have dominated the state-society
discourse: anti-state ideology of social movements groups that offered “alternative” vision for
the transformation of society; New Left tried to revive and rehabilitate traditional form of
workers-based class power and devised a political strategy on behalf of the working class; and
inter-movement solidarity groups and civil society that sought to democratize the state power
and tried to counter the ideology of neo-liberalism through democratic means.
The state through intellectual and moral leadership entertains hegemony over other
authority and people and consolidate the sovereignty of the nation-state in the internal and
external affairs. Critiques argue that although the state “retains its capitalist nature and many
of the structural and cultural features of the past, contemporary society operates under a
different capitalism, one not only engendered in the market but also promulgated under the
state tutelage” (Chodak, 1989:19). The neo-Gramscian thus treats the modern state an
“ensemble of socially embedded, socially regularized and strategically selective institutions,
organizations, social forces and activities organized around (or at least involve in) making
collectively binding decisions for an imagined political community” (Jessop, 1999:2).
4.0 THEORIES OF POLITICAL ECONOMY:
Political economy refers to the methodological and substantive use of economic reasoning to
explain the interrelationship of economic and political factors with the society and the state,
and the adoption of public policies by the government to accumulate resources and power
needed to achieve social objectives. “The distribution of power creates patterns of property
rights within which wealth is produced and distributed; changes in productive efficiency and
access to resources affect relations of power in the long-run” (Keohane,1984:18). A more
practical approach to political economy defines political activity as a “contest for power to
determine the distribution of economic resources or status, or to make, defend and change the
rules of the game; where as the political arena is the state” (Bowles and Gintis, 1986:23).
The struggles around political power are ultimately about socio-economic resources and their
allocation. The concept of power includes all relations in society that are needed to shape the
state-society relations. Out of a commitment to development or to stay in power, the state
class tries to control the behavior of the certain economic and social actors and extract
resource while at the same time appeases powerful interest groups of society to secure special
advantages thus rendering the determination and execution of public policies to little
consequence to the powerless sections of society. The dynamics of power relations in society is
a function of the reciprocal interaction between power and wealth.
A more radical version of political economy has been provided by neo-Marxist theories
divided into four schools—world system, dependency, modes of production and unequal
exchange. Meanwhile, this study also deals with non-Marxist rational choice, Weberian and
state-in-society schools. These theories provide critical insights into the global process of
capital accumulation and expansion as causes of underdevelopment of developing countries.
All these theories reduce political institutions and the state to the mode of production.
4.1 World System Theory
The cardinal point of world system theory is not to explain the domestic class relation but
of global division of labor, the movement of advanced capital and the cycles of global
capitalism. It purports to explain the specific position of peripheral nation-state in the context
of global dynamics of capitalism. The key assumptions of world system theory expounded by
Immanuel Wallerstein is that capitalist world economy transcends the state boundaries. The
drive for capital accumulation causes increasing competition among capitalist producers for
labor, goods and markets.

17. The uneven development causes the growth of three types of societies—the core societies
have strong states, powerful industrial base, a large wage labor class and are engaged to
influence the policies of non-core societies. The peripheral societies have weak states, a large
peasant class, produce raw materials and are dependent on core societies for their survival and
development. The semi-peripheral societies are caught in between the two, limit the
polarization and provide continuity to the state system.
The world system theory examines the consequence of changes into its sub-units, for
example, the states, nations, regions, classes and ethnic groups. Wallerstein theorizes that
“since the states are the primary arena of political conflict in a capitalist world-economy, and
since the functioning of the world-economy is such that national class composition varies
widely, it is easy to perceive why the politics of states differentially located in relation to the
world-economy should be so dissimilar. It is also then easy to perceive that using the political
machinery of a given state to change the social composition and world-economic function of
national production does not per se change the capitalist world-system as such” (1979:293).
This suggests that only strong states promote development goal because they are capable of
11
appropriating the surplus of society of both semi-peripheral and peripheral states and develop
their society for the general good of all. This process locks the development of peripheral states
into “metropolis-satellite” chain and promotes “dual” societies and economies in the
underdeveloped countries contributing to what Andre Gunder Frank calls “the development of
underdevelopment.” 12
4.2 Dependency Theory
The proponents of dependency theory assert that nothing could be imagined outside the
dominant logic of a single world capitalist system. Dependency theorists stipulate “ We
conceive the relationship between external and internal forces as forming a complex whole
whose structural links are not based on mere external forms of exploita-tion and coercion, but
are rooted in coincidences of interests between local dominant classes and international ones,
and on the other side, are challenged by local groups and classes” (Cardoso and Faletto,
1979: XVI). All states participate in the world capitalist system and are variously constrained
by it. But what is more “important is the organizations of production, the class relation-ship,
and the class character of the state which differentiates societies and ultimately provides
meaning to their insertion within the world system” (Petras, 1978:36). The rise of globalism
is intimately related with the logic of capital, technological change, declining profits for state,
crisis in welfare and Soviet states and the demise of national development thereby sapping the
popular aspirations for nation-building in the periphery.
11 Strong states are those which have a high capacity for promoting the economic development and
which can perform well in terms of the welfare of entire population in general. A high degree of autonomy
is a precondition for development strength of the state. “The original placement of a state in this inexorable
international division of labor determines whether a state is hard or soft. Whereas the former is able to
resist external market forces, channel them to its own advantage, and can effectively manage its own
economy, the latter is pliable, at the mercy of external market forces and cannot control its own economic
affairs. Thus soft states and dependent economies are caught in a web of market forces from which escape
is very difficult” (Gilpin, 1987:71).
12 Frank suggests that “global extension and unity of the capitalist system, its monopoly structure
and uneven development throughout its history and the resulting persistence of commercial rather than
industrial capitalism in the underdeveloped world (including its most industrially advanced countries)
deserve much more attention in the study of economic development and cultural change than they have
hitherto received” (1992:117).

18. Explaining the role of activist state of the Third World in dismantling welfare measures
for the sake of neo-liberal ideology of globalization Petras and Polychroniou assume “There is
a dialectical relation between the state role in the domestic economy and in the process of
globalization. By pursuing policies of lowering wages, implementing social cuts in the budget,
transfering pensions to private capital, the third world state reconcentrate income upward for
overseas expansion (globalization or capital relocation)” and suggests “ in order to
counter effectively the process of globalization, bridges of international labor solidarity must
be urgently built and the state must be viewed as a major resource and lever for change. This
view must be accompanied by an approach that minimizes bureaucracy and maximizes the
redistribution of resources within civil society” (1997:2250-52).
4.3 Modes of Production
Modes of Production School (MOP) emerged as a critique of dependency theory chiefly
articulated by Frank and Wallerstein. It rejects economic reductionism, determinism and
structuralism. This school elaborates the domain of capitalist mode of production to embody
pre-capitalist (primitive communal, ancient, slave and feudal mode of production), capitalist
and non-capitalist economies existing in the peripheral states and societies where power is
dispersed and fragmented. It is determined by the social rather than economy, state or other
institutions. Political socialization of rural societies into national political culture, the
commercialization and industrialization of their economies and spread of education and
communication began to redefine the development process of class formation and economic
growth. Accordingly, power is reproduced and contested through the articulatory practices
constituting social relations. Ernesto Laclau and Aiden Foster-Carter are, among others, chief
exponents of this school who made comprehensive survey about the under-development of
Latin American states. According to Laclau, modes of production combine four factors: the
patters of ownership of the means of production, the forms of appropriation of economic
surplus, the degree of division of labor, and the level of development of the forces of
production (Laclau, 1971:39). Applying all these variables he concluded that a lack of
uniform capitalist mode of production in peripheral states produces new politics of democratic
pluralism. This means there is a scope for the articulation of indigenous development. 13
4.4 Unequal Exchange
Unequal exchange school is represented by Samir Amin. He agrees with Paul Baren who
identified monopoly as the source of “unequal exchange” and affirms that the process of
“unequal exchange” between the core and periphery produced auto-centric and dependent
development. Amin argues that the dynamic core is autonomous and the periphery adjusts to
the demands and constraints of dominant capital. The condition for unequal exchange rests on
productivity and specialization differences in which surplus of periphery acquired through
primitive accumulation is transferred to the core. The monopoly capital created a structure in
which exports of the periphery were highly considered while their imports were overvalued.
Amin sees the role of state in regulating competition between units of accumulation and,
therefore, stands above them. In order to set constraints on imperialism arising out of unequal
development within the capitalist system there is a “necessity of a state, not only in the nature
of things belonging to the world system of states, but also necessary to articulate the popular
hegemonic alliance and to organize development of the forces of production.
13 “The distribution of the fertility rents among labor (higher wages), consumers (lower prices), the
state (taxes), interest groups (privileges) and citizens (protective regulations, public amenities) is
necessarily a matter of politics. In these matters nation-state are sovereign. They are also sovereign in the
distribution of the costs and benefits of adjustment to changes in national and international markets. The
world market cannot dictate employment or wage levels in a country. The primacy of politics implies the
responsibility of politics for the social effects of the market system—that is, for its domestication”
(Kamppeter,1995:241).

19. The state is then the locus of these struggles between the ‘socialist path’ and the ‘capitalist
path’, that is the path of constituting a new mode of exploitation (revisionism). Since the state
is locus of these struggles, the option for social management by the masses (in contrast to a
management by cadres) remains imperfect, contradictory and under permanent threat”
(Amin, 1990:136). To him, in the real class struggle state becomes effective means to defend
the weak member of society. Inspired by neo-Marxist school, Raul Prebisch made policy
prescriptions for altering the structure of production, largely through an active state in import-
substituting industrialization, large public sectors, trade diversification, access to foreign
markets and the formulation of related tariff policies.
4.5 Rational Choice
Robert Bates provides rational choice paradigm as a critique to the neo-Marxist theories
arguing that underdevelopment of African states is largely the consequence of government’s
policy choice rather than the structure of dependence. Rational choice model reduces political
structure and institutions to the choice processes of decision-makers. He asks, “How do public
choices, ostensibly made for the public good, become the basis for private aggrandizement? By
what process does a vision of the public order erode?” (Bates,1981:6). Explaining the plight
of African peasants and societies owing to underproduction in agriculture, massive rent-
seeking and corruption, excessive reliance on imported foods in already commodity rich states
and overtaxing of peasants, Bates affirms that the state intervention in the markets is meant to
generate “political resources to be distributed to build organized support for the political elites
and policies they propound” (Bates, 1981: 7). Likewise, he asserts, the development
programs are largely used to build “political organizations” and to “institutionalize the
patterns of bias” in the development process. Mancur Olson, however, thinks that the state
intervention may be justified for “public goods” services for which no market exists or likely to
emerge. He explains that the growth of government is caused by “economic prominence,” yet
the entrenchment of interest groups in political organizations for their own benefit caused
economic decline. DeLong, therefore, finds the benefits of rapid market-generated economic
development for three reasons. ““First, productivity gap between periphery and industrial core
has never been larger. Second, government now have a larger number of positive examples to
copy (as well as negative examples to avoid) in planning market-conforming development
strategies. Third, investors in the industrial core now have the confidence and resources to
materailly assist in peripheral development” (1999:10). Amartya Sen agrees on the overall
achievement of the market but says that those achievements are “deeply contingent on
political and social arrangements” and that opportunities offered by them are “reasonably
shared” (1999:142).
South Asian states including Nepal looked for favorable foreign investments and aid as a
means of escaping from capital constraints as well as to increase capital goods imports,
improve the balance of payments, reduce inflation and facilitate technology transfer. While
Weberian thinkers call this rational-choice theory ahisto-rical, asocial and partial because they
believe that agenda, activity and paradigm of the state do not change by the sole motivation of
policy makers. They have historical sequence and outcomes. Neo-mercantilist theories,
therefore, criticize both liberal and Marxist assumptions for underesti-mating the significance
of the nation-state, emphasize on national political goal of economic takeoff, situate the non-
state actors in the context of the interest of nation-state and narrate the role of state in crafting
public policies in order to increase the power of state to negotiate with the actors that
constitute international regimes.

20. 4.6 Weberian School
The Weberian scholarship constitutes a new thinking on state theories but goes beyond
the definition of Max Weber who says that the ideal-type state is based on “a system of order”
that exercises binding authority and monopolizes the legitimate use of coercion within its
jurisdiction. To him, the crucial factors in politics are not the classes, but bureaucracies which
shape the social order by means of domination—whether patriarchal, patrimonial and legal-
rational. As organizations become more bureaucratized power becomes concentrated in the
hands of elites at the top to strengthen what Robert Michels calls “the iron law of oligarchy.”
Peter Evans, Theda Skocpol, Dietrich Reuschmeyer and Szymon Chodak, among others, are
the prominent thinkers who contributed to state-oriented literature and analyzed the role of
state in relation to social structures and processes and its contribution in initiating vast socio-
economic change without “glorifying state power or overstating its efficiency” (Evans,
Ruesch-meyer and Skocpol, 1989: 305) as Hegal, Hobbes and Machiavelli did.
The state does maintain political neutrality or relative autonomy because of the diversity
of production structure and that no class holds the absolute balance of power in the economy
and society. The state is an integral unit within a configuration of domestic and international
forces and, therefore, continues to mediate between the capital and labor and between
domestic and international capital. The three actors: the state, local and international capital
constitute what Peter Evans calls “triple alliance” for the domination of state, society and
economy. To most dependency theorists, the triple alliance naturally constitutes the power of a
“comprador class,” which in alliance with international capitalist class subordinates national
industries for its own material interests, facilitates the flow of primary products, allows capital
flight and circumscribes the social and economic basis of the state. Others, however, argue
that the transfor-mation of state on particular type depends on the political culture of the
ruling elites.
Criticizing the bias of the neo-liberal and neo-utilitarian paradigm in social science of the
more advanced countries that treated the Third World states as “predatory” and “rent-
seeking,” Evans pleads for a more differentiated view of states depending on their
development perfor-mance. He draws inspirations from organiza-tional theories, for example,
how economic models about bureaucrats function and what kind of incentive system
bureaucrats create. Evans cites the cases of three different types of states, for example,
“incoherent absolutist domination” of the “klepto-patrimonial” Zairian state, “embed-ded
autonomy” of the East Asian developmental states and the “intermediate state,” of Brazil
achieving different types of development payoffs . Evans upholds that “the efficacy of the
14
developmental state depends on a meritocratic bureaucracy with a strong sense of corporate
identity and a dense set of institutionalized links to private elites” (Evans,1989:561). To him,
the most effective states are characterized by “embedded autonomy” with dense societal ties
but without dominating their societies as predatory state does.
14 Citing the Zairian case Evans argues “Personalism and plundering at the top destroys any
possibility of rule-governed behavior in the lower levels of the bureaucracy, giving individual maximization
free rein. At the same time, however, marketization of the state apparatuses makes the development of a
bourgeoisie oriented toward long-term profit-based productive investment almost an impossibility”
(1989:570). In the case of developmental state of Japan he affirms, “That formal competence, rather than
clientilistic ties or traditional loyalties, is the prime requirement for entry into the network, makes it much
more likely that effective performance will be a valued attribute among loyal members of various batsu”
(1989:573). While the Brazilian case illustrated largely the predominance of clientelistic norms. “Unable to
transform the bureaucracy as a whole, political leaders try to create “pockets of efficiency” within the
bureaucracy, thus modernizing the state apparatus by addition rather than transformation” (1989:577).

21. Active government and mobilized communities can enhance each other’s development
efforts to capture the possibility of state-society synergy—a synergy that combines
complimentarity and embeddedness (Evans, 1996:178).
Evans asserts that developing countries are underdeveloped not because they lack
adequate capital to invest. What they lack is entrepreneur-ship in the sense of willingness to
risk the available surplus by investing in productive activities. A developmental state can take 15
risks while others cannot, whether they are auto-centric or dependent. In explaining the
notion of “depen-dent development” he summarizes the key features of Brazil’s post-world war
development trajectory. Evans, notes “if classic dependence was associated with weak states,
dependent develop-ment is associated with the strengthening of strong states in the semi-
periphery. The consolidation of state power may even be consi-dered a prerequisite of
dependent development” (1979: 11). He argues that the prevailing neo-liberal political
economy served as a source of prescription for policies in order to promote economic growth,
but it did not provide a tool for the institutional analysis of the state itself. Evans claims that in
the developing countries the “states expanded, not because of increased demand for collective
goods, but because of self-seeking bureaucrats. Rent-seeking took what had been traditionally
seen as aberrant, corrupt practices and transformed them into the core of the political
economy of public institutions” (Evens, 1997:75) thereby weakening the power of state. His
solutions are: “reducing the resources allocated” by the bureaucracy, replacing the norms of
public service and marketizing the administrative structure to produce state-society synergy.
Influenced by the comparative-historical research of Marx on political structuralism and
Max Weber on macro-sociological variables, Theda Skocpol combines the role of state
structures, class relations and international forces to explain the origin and success of social
revolution and the dialectics of social change. She asserts that the contradiction in the old
regime of France, Russia and China, with the dominant class and international competitors
caused revolution and the post-revolutionary states had been used to transform societies. But,
she does not believe in either economic determinism of Immanual Wallerstein or reducing the
state to class power advocated by orthodox school, even relative deprivation of non-Marxist
school yet grudgingly admits the role of ideology used by classical Marxists. Throughout
modern history the state “represents an analytically autonomous level of transnational realism
—interdependent in its structure and dynamics with world capitalism, but not reducible to it”
(Skocpol, 1979:2). Agreeing with the softer-type of structural Marxism she asserts that the
state is “potentially autonomous organizations located at the interface of class structures and
international situations—to the very centers of attention” (Skocpol, 1979:33).
She explains that the states are “organizations claiming control over territories and
people” which “formulate and pursue goals that are not simply reflective of the demands or
interests of social groups, classes or society.” “State autonomy is characterized by its
independent goal formulating ability while state capacities refer to implementing official goals,
especially over the actual or potential opposition of powerful social groups or in the face of
recal-citrant socioeconomic circumstances” (Skocpol, 1989:9). Skocpol also elaborates the
rationality of state actions because “state officials are judged to be specifically capable of
formulating holistic and long-term strategies transcending partial, short-sighted demands
from profit-seeking capitalists or narrowly self-interested social groups”(1989:15). She views
revolutions as radical political processes springing from the dynamics of political culture,
coalition building and agency.
15 The development state has the propensity to prioritize the interests of those who are in need of
development. This means development states defend, protect and execute people-oriented policies and
programs based on the diverse social, economic and cultural needs and priorities of people by means of
restoring their capacities and fulfilling their cognitive, material, moral and spiritual needs.

22. The revolution thus occurs as a consequence of state weaknesses combined with
institutional deficit that provide seeds to dissatisfied elites and popular groups with
opportunities for effective collective action against the state’s efforts at the domestication of
society and imposing uniformity. A weak state, a state that lacks proper authority and power,
fails to meet the needs of its diverse population, faces the emergence of anti-establishment
forces and loses the loyalty of its citizens. In a recent effort to refine state-society relations
Skocpol et al. (1985) in their “Bringing the State Back In” provide powerful arguments in
defense of the state as an autonomous actor capable of shaping the social and political
processes, economic policy and influencing political cleavages and collective action in the
context of societal forces under which it has to operate.
4.7 State-in-Society Approach
Joel Migdal et. al. (1994) have emphasized on contemporary emergence, development
and impact of social forces on the state and how these forces have made the state “contested
arenas.” They, therefore, focused on “state-in-society” approach. They argue that states are
embedded in society, beef up their capabilities on the basis of societal support and reshape
each other’s goals, policies and strategies. Migdal rejected the view of state autonomy and
viewed that states are dependent on societal support for their survival and legitimacy. States
make policies in response to the claims of social forces. In response to the widespread
resurgence of social movements, states are increasingly yielding a portion of their sovereignty
downwards though the degree of devolution differs from decentra-lization, local autonomy,
self-governance, federalization to even self-determination. “The ability of any social force,
including the state, to develop the cohesion and garner the material and symbolic resources to
project a meaningful presence at the society-wide level depends on its performance in more
circumscribed arenas. In those arenas, it must dominate successfully enough (close to total
transformation or, at least, incorporation of social forces) so as to be able to generate
resources for application in other arena struggles and, ultimately, the society as a whole”
(Migdal, 1994:30).
The state-in-society approach provides a counter-point to the modernization theory that
recognizes the centrality of central governmental institutions in transforming society from
tradition to modernity. It focuses on the mutual transformation of the state and society and,
consequently, the reshaping of the patterns of authority, order and compliance in society. In
order to be effective, the state has to appeal to the “authority of human reason present in
society” (Rawls, 1996:383). Migdal thus trims state’s engagement with social forces, starts
with process rather than structure and provides a blueprint that focuses on a limited state
(1999:221). Political scientist Francis Fukuyama who says that social world is too
complicated to be reduced to economic means has laid the primacy of social over the state and
economy. To him, creation of prosperity is based on social virtues and trust what he terms as
social capital—a term first invented by Jane Jacobs and used by James Coleman to describe
the “ability of people to work together for common purpose for wealth-creation.” Fukuyama
reveals that in the Southeast Asian region states are the major instruments to garner social
capital for development. While Brazil combined the role of state to expand domestic market
expansion, South Korea utilized the state for the expansion of external market.
To Robert D Putnam, the interpretive schemata of social capital includes the features of
social life, such as “networks, norms and trusts – that enable the people to act together more
efficiently to pursue shared objectives.” It refers to social connections of the people with the
life of their families, communities and societies as well as secondary type rationalized
associations though he misses the organizational dynamics, vibrant ties across classes and
localities by which civic association actually form.