Guest lecture @ Erik Castren school of international law summer school 2012, part 1

1. State and capitalism
State as the site of accumulation
1. lecture
Teppo Eskelinen

2. The common story

Common story: with globalisation, there is
”less government” and ”more markets”

Less government decision, less government
intervention, less government capability

This represents ”freedom” (of mobility of
goods, money, human beings etc), however
one assesses this freedom normatively

3. Criticism of the story

Mobility increases, but very selectively: need a
better theory to explain the logic of selection
(capital vs goods, several criteria for human
mobility)

Questionable, whether we are witnessing
government withdrawal rather than a
reorientation of the function of a government

4. State as a site of accumulation

Need to study the tensions related to the role
of state as fostering capital accumulation

Accumulation (profit) driving force in
capitalism

5. State vs profit-motive tension

Taxing capital for welfare

Long-term planning

Long-term growth

Majority democracy

Political mechanisms for improving the
societal conditions of the poor

6. State supporting profit motive

Taxing (mainly) low-and middle class wage-
earners (for necessary maintaining of the state
functions)

Guaranteeing ownership rights, creating and
maintaining market institutions, maintaining
social stability (by coercion if necessary)

7. The emergence of modern nation-
state

Intimately connected with globalisation of
trade

Most nation-states formed as governance
apparata for colonial trade

The nation-state did not exist prior to
economic globalisation, it was created to
govern it

Yet naturally the nation-state has taken and
will take different forms

8. Origins of capitalism and the state
(1)

Marx: ”The so-called original accumulation”

Landowners' long-time attempt to close the
commons

Succeeded only with the legalisation of the
new appropriations and the new ownership
system = the state

Key elements of the mode of production:
wage-labour system, dependence on money,
extension and legal guarantee of ownership

9. The birth of financial capitalism

Key element of capitalism: the invention of
credit-money

The role of the state: to control and govern
debt relations (later monetary policy)

The monetary sovereignty of the state vs the
subordination of the state to financial interest

10. Capitalism in the third world
Credit money fully accepted form of money
High capital mobility, little controls
Total commodification or labour-force
organisation lacking (subsistence economies),
struggles over ownership

11. Theorising the state as a site of
accumulation

Analysing basic internal contradictions within
capitalism

Seeing possible forms a state can take,
analysing these from the perspective of group
interests

12. Tensions within capitalism (1)

The wage level needs to have a tendency to
decrease, in order to enable constant
accumulation and profitability.

The wage level needs to have a tendency to
increase, in order to keep the demand for
products in an adequate level to facilitate their
initial production

13. Tensions within capitalism (2)

The interests of the financial sector and the
productive sector are in constant tension

Example: eurozone crisis countries

Bankruptcy and debt restructurings as
economic necessities

Monetary policy: expansive or restrictive

14. Tensions within capitalism (3)

Accumulation is predicated on capable
workforce, public goods, commons and
political institutions

Basic profit-motive leads to hostility towards
taxation

The expansionary logic leads to attempts to
privatize any cultural commons

15. Responses to wage contradiction
(1)

Demand-driven social contract: low capital
profitability, restricted capital mobility, demand
by wage increases and redistributive policy.

Problems: inflation, difficulty to access credit,
financial sector lobbying

After Keynesian social contract, new
responses are needed

16. Responses to wage contradiction
(2)

Migration control: globalised economy with
partial wage stagnation or decrease, partial
increase.

State takes over a function in controlling the
movement of individuals

Refers to average wage, naturally there are
specificities

17. Responses to wage contradiction
(3)

Debt: ongoing possibilities to increase
consumption by increasing debts of all agents
(households, firms, governments).

A natural consequence of finance liberalisation

At some point, debt service will begin to shrink
the economies

Theoretically, extensive growth will solve the
problem: georaphical extension, cultural
extension. Political and legal systems crucial

18. Responses to finance/production
contradiction

Intermediating monetary policy possible

Yet times of crisis force to choose one interest
over the other

From each country's point of view, export-
orientation solves the problem, yet not
everyone can maintain a terms-of-trade
surplus

No principles for debt restructuring

19. Responses to conditions of
accumulation -contradiction

Political struggle over tax policy

Priorising firm interest, capital interest etc

20. To conclude

The state and the market have always existed
in a symbiosis, yet never without tensions

The functions of the state can be explained as
responses to key internal contradictions of
capitalism

The decline of the Keynesian welfare state
has lead to new and more intense
contradictions, which are presently fully
unfolding