chapter  5
The state and the economy
Pages 29

Chapter map In the introduction to the chapter, we define the state and examine its role in the economy. Section 5.2 focuses on the general concept of the state, emphasizing that states are the outcome of historical processes rather than existing as natural entities and highlighting the key notion of the ‘qualitative state’ (O’Neill, 1997). Section 5.3 reviews the development of the Keynesian welfare state, dominant in developed countries from the 1930s to the 1970s. This is followed by an examination of the notion of a ‘developmental state’, focusing particularly on the experience of the East Asian ‘tiger’ economies. We then turn to consider contemporary changes in state-economy relations, assessing how the state has been reformed since the late 1970s in response to processes of globalization and the spread of neoliberal or free market policy. Key aspects of change such as the internationalization of the state through the expansion of bodies such as the European Union (EU), the shift from welfare to workfare and the introduction

cussed. The main points of the chapter are summarized in the conclusion

The role of the state in the economy is wide-ranging, but often invisible to individual consumers, shaping the provision of goods and services in ways that are not always immediately apparent. For example, whenever you go to the pub for a drink, you will find that the state decides how long it can stay open; the size of the measures of beer, wine or spirits offered; how much of the price is taken in tax; how the drinks are labelled; the standards of hygiene governing the kitchen; and the minimum wages paid to the staff (Painter, 2006). A key underlying argument made in this chapter is that the state should be viewed as a dynamic process rather than a fixed ‘thing’ or object (Peck, 2001). Instead of focusing solely on the size of the state, expressed in terms of levels of taxation or expenditure, for example, we should examine how states intervene in economic life, the forms of economic policies that the state pursues and the effects of these on different social groups and regions (O’Neill, 1997). Our analysis of the geography of state intervention is informed by our political economy approach, incorporating a regulationist position that rejects the notion of an autonomous, self-regulating economy. The idea of a self-regulating economy is central to mainstream, neo-classical economics, emphasizing the role of the market in ensuring that supply and demand are balanced through the price mechanism, consigning the state to a limited role of upholding property rights and enforcing business contracts. Instead, we believe that the economy is regulated through a wide range of political, social and cultural mechanisms in addition to market forces (Aglietta, 1979). The state plays a key role in harnessing and coordinating these different mechanisms, formulating a wide range of rules and laws covering matters such as business taxation, trade policies, employment standards and financial markets (Table 5.2). The role of the state in the economy is generally directed towards the promotion of economic growth, attempting to create the conditions that allow

businesses to make profits and workers to find employment, thereby generating revenue through various forms of taxation. From a geographical perspective, states play a key role in regulating wider processes of uneven development, sometimes introducing policies that are focused on particular types of place (for example, depressed regions). Beyond these very general dimensions of state regulation, the specific forms and functions of the state change over time, as highlighted by the notion of modes of regulation, referring to specific institutional arrangements that help to create relatively stable periods of economic growth known as regimes of accumulation (section 2.4.3).