THE STATE IN ECONOMIC THEORY

Property is theft. Proudhon, Philosophie de la Misere

They say that patriotism
Is the last refuge
To which a scoundrel clings.
Steal a little and they
Throw you in jail,
Steal a lot and
They make you King, Bob Dylan in Whats a Sweetheart like You doing in a Dump like This.

Property, as we are learning increasingly now that it is concentrated in ever-fewer hands, is the
exclusion of others from what are unavoidably social human resources. Resources or
use values are social not in the sense that they are shared by individuals by
human beings understood as atoms but rather in the sense that they afect single
human beings in their very being human just as the Ebola virus does not afict
individuals but attacks us as specimens of the one species. Marxs discovery of the
Doppelcharakter of production in capitalism, contrasting the use value of human
production with its exchange value under capitalism, was meant to highlight the fact
that use values point well beyond the uni-verse of economics with its exchange
value toward the multi-verse of human values. That is why Marx thought Proudhons
famous motto about property (more than just an aphorism encapsulating Rousseaus
thesis in De lInegalite) was so worthy of approbation. Yet even though the notion is so
obviously legal and requires of necessity the existence of a State apparatus to enforce it,
even Marx could conceive in his own critique of political economy that it was possible
to isolate the role of the State from that of property or the economy as an object of
scientifc inquiry.
In what could only be the heightened perceptiveness of a poet, Bob Dylan instead brings together
the existence of the State, of the re-public or public thing, which is shared by all
citizens, and our sense of duty and devotion to it as the objectifcation of our social
existence thus, patriotism in a gripping contrast with the fact that it is those
scoundrels who own the most property and therefore steal a lot who end up being
made kings or members of Congress or Parliament, whereas it is those with the least
property those who steal a little who end up in jail! What this reveals is that only
scoundrels have every right to be patriotic because the rest of us have very little
stake in the defence of the public thing, of the republic, and therefore of the State!
The twin crises of the Ebola virus and of the ISIS two most virulent diseases that
threaten our very humanity from opposite ends, the microscopic and the macroscopic -;
these twin crises bring prepotently before our eyes what is the real disease of capitalist
society: the utter and devastating impossibility of true patriotism for those living under
the rule of the capitalist State. It is this collapse of the capitalist State as re-public that
requires imperiously a re-assessment of the role of the State in economic theory so that
we may elaborate a strategy of attack against a machine, an apparatus that grows
more leaden and obsolescent, corrupt and corrosive with every passing hour and that
fnally, as in Hong Kong right now, threatens our most basic needs for freedom and
fulflment or, as in Mexico with the obscene hecatomb of our student comrades at the
hands of corrupt police and gangsters, threatens our very lives!
There are two senses of the social category Value, then, which refect the Doppelcharakter of social
resources identifed by Marx. On one side, we have Ethico-Political Value, and on the other
we have Economic Value. Our thesis in this review of the role of the State in economic
theory is that these two meanings of Value are indeed inseparable and that their
separation is only the product of the modern distortion of social and political theory that
comes with the rise of the capitalist bourgeoisie and of its science par excellence
economic science.
The isolation of Ethico-Political Value from Economic Value requires the specifcation of a
scientifc sphere for the latter such that its precise quantitative determination can allow
the State to become technically neutral and to extrude all other values from the sphere of
economic value. But this in turn requires the identifcation and isolation of a sphere of
social life that is not contaminated by values other than the Value of economic theory
exchange value. Before the science of economics was even imaginable, social and
political theory had to isolate the Political from the Economic so as to confne the role of
the State precisely to the perpetuation of this false separation. This technical neutrality
of the State had to proceed hand in hand with the destitution of individuals of all
Ethico-Political values and their reduction from citizens to economic atoms whose
activities could be calculated and measured in isolation from one another so as to lend
scientifc economic Value to the utilisation and production of social resources. In fact
and in reality, this reifcation of human living activity is a specifc form of social violence
perpetrated by the capitalist bourgeoisie.
As Marx established in his critique of political economy, in the process of commodity production
and therefore of economic value, the capitalist derives a proft by extracting surplus value
from the labour-time socially necessary to produce those commodities. But one source
of surplus value that Marx specifes arises from the fact that the capitalist does not pay
workers for the sociality of their individual labours for the fact that what are
supposedly individual labours are in reality indivisible aspects of social labour. Thus, in
his efort to present his theory in a scientifc guise, Marx neatly obscures what he clearly
recognizes, that is to say, that it is impossible to specify and calculate economic Value
independently of the sociality of human living activity which therefore leads us
inevitably to ethico-political Values as the real matrix of economic value.
Bourgeois economic science is founded on the conundrum of economic co-ordination: in other
words, how is it possible for self-interested atomic individuals to co-ordinate their
activities so that exchange is possible between them? And the obvious answer which
condemns all neoclassical theory to irrelevance is that it is utterly impossible for self-
interested atomic individuals ever to exchange or to co-ordinate anything at all with one
another! The question from which we must start instead is the exact opposite: how is it
possible for human beings who are species-conscious beings ever to create a society that
enforces individualism on them? This is what Rousseau did when he inverted the
question of the existence of property; instead of assuming that property rights are
natural, he asked: how and when did property become a social reality? Similarly
with statality, we ask not how the State arises from civil society but rather how a
society of private individuals can arise from human being.
[Aristotle and Bodin]
THE ROLE OF THE STATE IN ECONOMIC THEORY has rarely been examined because the State
is supposed to be a political structure or institution that is wholly adventitious or
epiphenomenal or superstructural and so entirely extraneous to the reproduction of
society, albeit not to its foundation. This seems incongruous if not contradictory
because, if indeed the State is essential to the establishment of a society indeed, of the
re-public -, then it seems odd that it should not play also an essential defning role in
the constitution of the most basic economic categories and relations of that society or
republic. This peculiar theoretical faw and lacuna is due in part to the approach of
classical political theory to the State which sees it as simply being the collective noun for
its constituent building blocks such as the individual and the family and the tribe and
then the city. And as a corollary it is also due in part to the fact that economic theory is
exclusively concerned with the production and exchange of goods and services between
individuals and not with the reproduction of society as a whole that is, not with
the metabolism of a society with its environment. Economic theory sees Politics as an
intrusion in Economics, whereas in reality it is economic theory that wrongfully extrudes
Politics from its scientifc ambit.
Owing to these twin misconceptions, the role of the State in economic theory has always been
confned to that of mere Police to that of a purely administrative body that either
regulates the autonomous natural rights obtaining between individuals historically and
analytically prior to the establishment of the society (jusnaturalism) or else is actually the
fons et origo of these rights (legal positivism) without thereby playing any role in the
constitution of their substantive content, of their essence. In the former case, the State
acts merely as an arbiter as an independent judge to adjudge and enforce the
respective natural rights of individuals, which are thought to be historically prior and
analytically independent of the State. In the latter case, the State is the actual founder of
human society, so much so that State and civil society are indistinguishable as status
civilis as against the lawless state of nature or status naturae (v. Hobbes, De Cive, X, I; or
Rousseau, Le Contrat Social, or consider Pufendorfs extra rem publicam nulla salus). Thus,
even in the latter case, the State founds the enforcement of these rights without actually
determining their content, which supposedly arises from an autonomous economic
sphere made up of the utilitarian needs of individuals. In both cases, therefore - and this
is the decisive point , the economic sphere exists independently of the State in a
fundamental historical and analytical sense.
Whereas in classical political theory the State was identical with society itself, either as the worldly
embodiment of a divine or transcendental Reason (as in Thomas Aquinass notions of
animal sociale or animal rationale) or else as the ethical dimension of being human (as in
Aristotles zoon politikon, where Politics is the continuation of Ethics), in modern theory
it is quite distinct either historically as postdating a hypothetical state of nature or
analytically by virtue of the assumption that such a state of nature devoid of all
statality either a state of complete anarchy or a state of pure economic exchange is
indeed possible. In modern political theory the sphere of social life to which belong all
social relations independent of the State is known as civil society (cf. A. Ferguson, An
Essay on Civil Society on which Adam Smith relied), and the State is theorised as the
institution that complements civil society by ful-flling and com-pleting or
preserving it by supplying the order or law or administration without which
civil society would not be able to govern itself. For those political theories that see civil
society as a self-sustaining sphere for which the State provides merely a guarantee of
social peace (Locke, Constant), the State is seen as a defensor pacis in that it merely
defends a social peace that is inherited either from divine sources (Marsilius, Bodin), or
from natural rights (Pufendorf, Grotius and Locke). For those theories instead for
which the State provides the very legal and political foundation indispensable for the
establishment of civil society (Hobbes, Spinoza, Rousseau), the State is seen as a creator
pacis a veritable deus mortalis, (cf. C.Schmitt, The Leviathan); it is the mechanical
resultant of the natural physical confict between atomistic individuals in the state of
nature that precedes the civil state (Hobbes and the negatives Denken from
Schopenhauer to Nietzsche and the Austrian School).
The basic building blocks of the State for classical political theory from Aristotle onwards are
almost exclusively ontogenetic, in the sense that the State is seen as the political pro-duct or
construct of more basic elements such as the individual, the family, the group or tribe, the
city, and fnally the nation hence, the nation-State. Although the State is identifed
immediately with civilisation as societas civilis as against a societas naturalis, the
statality of human being is never considered. There is never a suggestion that the State
may actually be a necessary precondition of human being, of being human in a
phylogenetic sense, in the Marxian sense of species-conscious being (Gattungs-wesen) or
that the State is an essential element in the metabolic productive capacity of a society. Nor
does classical political theory even envisage the contrasting possibility that the State may
contain, in the sense of limiting, hampering or even stifing, the productive forces of
civil society except as an aberration and degeneration of the true political goal of the
State. Even in the negatives Denken (Schopenhauer, Nietzsche, Kierkegaard, Weber and the
Austrian School), where the role of the State is the negative one of creating or
maintaining the salus publica (social peace), and even in its liberal counterpart (Locke,
Constant, Maine, Bastiat), the State is not seen as the source of social confict but merely
as the necessary guarantor of social peace. Only when the State deviates from its
scientifcally required neutrality from civil society does it interfere with its productive,
and specifcally its economic, potential. An even more negative view of the State is
adopted by Marx and Schumpeter for whom the State actively stifes the creative
productive potential of civil society.
To the extent that the reproduction of social units is identical with the broadly political aspects
of social life, as societas civilis or civitas or polis, then it is indistinguishable from the
status civilis that follows the exit of humanity from the state of nature into the State itself.
But to the extent that this status civilis begins to be diferentiated from the reproduction
of independent social units that may or may not coalesce into a State, then the State is
distinct from this preceding civil society. This tendency to draw a clear distinction
between social interaction or social relations, on one side, and social reproduction or
social relations of production, on the other side, only becomes prominent once the notion
of labour intended as individual labour as a separate source of social wealth is
isolated from other forms of social interaction, from Hobbes and Locke until the
defnitive culmination in Hegel and Marx. With Hobbes and Locke, for the frst time in
human history the notion of a status civilis is separated from that of the State in that the
possibility is canvassed of a status naturae in which relations between individuals are
possible although unstable either in a state of civil war or in one that can degenerate into
one, whereas in all political theory prior to Hobbes and Locke only the possibility of
stasis or civil war could be countenanced, but never that of a state of nature historically
prior to or analytically distinct from the status civilis or societas civilis.
It is thus thatcivil society as the repository of all economic as against merely socio-political or
ethico-legal relations is neatly isolated from the State as the political pro-duct and mere
legal guarantor, not the creator or founder of civil society either in its ethical (family,
tribe, social values and goals) or strictly economical aspects (market exchange,
production).
Because for the negatives Denken, as the true theoretical matrix of liberal bourgeois politico-
economic theory, the proper function of the State is to ensure the untrammeled operation
of the self-regulating market and the laws of competition (the level playing feld), any
interference by the State with these laws through the imposition of extraneous
political or ethical goals is denounced as improper in that it transgresses against
individual rights, or even as unscientifc in the sense that it distorts the quasi-mechanical
economic choices on the part of individuals.
Even in the case of socialist economic theory, in which the State plays obviously a central role, the
State intervenes only to plan and to co-ordinate individual economic choices in the
interests of society as a whole so as to spare it from the deleterious efects of capitalist
anarchy in which short-term self-interests are placed before long-run economic and
social health. In other words, for socialism, and even for Marx, the economy and social
reproduction are still realities separate from the State on which the State can intervene
only in an ethico-political or super-structural capacity (liberalism) or in a scientifc
capacity (socialism and Marx) correcting the anarchy of individual actions so as to
maximise the public good or social welfare (cf. Pigou, Lerner, Dobb), but not in a
fundamental manner as an essential part of those social relations of production.
The schism, the Great Divide, in economic theory is always between the methodological
individualism of the negatives Denken society and the economy are products of
spontaneous individual choices for which economic theory can only provide rational
alternatives (a mathematical proof of existence, Walras and equilibrium theory, or a
science of choice, Hayek and Robbins) and the methodological objectivism of the
Sozialismus for which social choices must be imposed scientifcally and collectively on
individual members. But crucially in both instances whether for individualism or for
collectivism the State does not fgure as a fundamental, indispensable, constituent
ingredient of the scientifc and practical sphere of economic action. For both liberalism
and socialism (and even for most Marxisms), the economy is an Object (a neo-Kantian
thing-in-itself) of scientifc inquiry whose operation can be determined objectively,
scientifcally, for the beneft of its individual members taken ontogenetically as in-
dividuals in accordance with the Law of Value, that is, by acknowledging and positing
the supreme truth that economic relations are rationally (logico-mathematically)
quantifable either in a relative sense (Value is the mechanical resultant of subjective
individual utility schedules, as in Neo-classical equilibrium theory) or in an absolute
sense (socialist-Marxist notion of Value as socially necessary labour time).
[Level-playing feld, laws of exchange and competition. Socialism and Planifcation] Sphere of
necessity or choice wants and provisions or system of needs questionable as
independent of the Political.
For both Hegel and Marx, the category of civil society, at least in its economic dimension as
burgerliche Gesellschaft, as bourgeois society, becomes quite distinct from that of the
State in that the State is pro-duced by civil society. But for Hegel this antithesis of
bourgeois and citoyen can be resolved only if the State can be reconciled with the ethicity
of civil society. For Marx, instead, the resolution of the antagonism of civil society will
result in the withering away of the State, in its atrophy. Here we can see how Hegel still
posits a staticity, an ethicity that is independent of the Economic because it
encompasses it and therefore cannot be attained solely through the Economic. For Marx
again, contrarily to Hegel the contradiction of bourgeois and citoyen can be superseded
only through the economic sphere of civil society, whereby the superstructural State is
rendered super-fuous, and thereby decays or withers away, once the contradictions of
capitalist social relations of production are resolved.
In this sense, whereas Hegel still quite rightly! insists on the need for civil society to become
reconciled with its staticity, Marx denies that this Ethico-Political superstructural
sphere of the State can ever play a role in the extrinsication of the dialectical antagonism
of civil society and of the wage relation because it is merely the epi-phenomenic, super-
structural pro-duct of the real source of social antagonism whose resolution lies in the
scientifc rectifcation of social relations of production, that is, still in the sphere of
alienated labour understood as materially exploited labour through the theft of
labour-time and labour-power, of surplus value! This kind of Automatik does not
exist in Hegel, despite the speculative character of the dialectic denounced by Marx
already in the Paris Manuscripts and in the early Critique:
Hegel is not to be blamed for describing the State such as it is [which in any case will be
absorbed by civil society in communism], but rather for presenting the existing State
as the ideal State, which, for Marx, clearly is an impossibility both because the existing
State is not ideal and because the ideal State is one that will be abolished!
There are two types of eschatology (prophecy for Schumpeter) in Marx, then: the frst is in
the Manuscripts where the overcoming of alienation is a necessary fnal stage of human
history; and the second is in Zur Kritik where this overcoming or supersession
(Uberwindung, Auf-hebung) is the fnal outcome of the scientifc abolition of wage labour
within civil society and, with it, of the State superstructure as well. We say that this is
eschatology because Marx fails to see Hegels correct positing of the problem: - namely,
that staticity must be reconciled with subjectivity and that the former necessarily re-
defnes the Economic as a category that must also be Ethico-Political in nature. It is
impossible for Hegel to accept the Marxian separation of structure and superstructure
because the two could never be separate. It is possible, thanks especially to the
Grundrisse, to rescue Marxs schematic schism or simply schematicism - of base and
superstructure by arguing that this mechanical dichotomy applies only to the pre-
history of humanity in the sense that once alienated labour is abolished, then Ethicity
and Economy will be reconciled. Still, as Arendt (Between Past and Future) and Habermas
(Knowledge and Human Interests) have insisted - in too idealist-phenomenological and
neo-Kantian a fashion, respectively - Marx had always the tendency to reduce the
question of alientated labour to the materialist one of the theft of labour time. What
seems closer to reality instead is that the discipline of labour-time or better, the wage
relation is the specifc form of social violence perpetrated by the bourgeoisie what
makes it capitalist: but the fact that it is violence means that there is only a political
basis and most certainly not a scientifc one! Indeed, to the degree that the wage
relation is increasingly less able to measure accurately the level of social violence needed
by the bourgeoisie to perpetuate its command over our living activity, to that degree the
neat division between Economic Value and Ethico-Political Value is dissolving. The entire
recent experience of central-bank monetary intervention to maintain the fnancial
pyramid through quantitative easing certainly points in this direction that is, the
inability of capitalist State authorities to control the market price mechanism of various
assets in terms of proftability, and therefore ultimately in terms of the binding and
biting discipline of the wage relation at a societal level.