The state and capitalism

   Until now I have seen another example of the failure of the system "capitalism" in Morocco. That's why I wanted to share the paper about the relationship between the state and capitalism that I wrote two years ago.

~The state and capitalism~

   The state and capitalists have such a mutualistic relationship that not only the state protects capitalists, but also capitalists supply monetary resource for the state. Given the nature and functions of the capitalist state, I will explain the factors behind the inadequacy of effectiveness.

   State provides capitalists protection and infrastructure. First, state procures protection. For instance, the English King Henry the 8th was separated the Roman Catholic Church from the Church of England to avoid papal authority. Because governing was absolutist, Henry was above the law. Taxes were collected to provide military protection for the wealthy. Economic historian Giovanni Arrighi states that violence could be used to protect property owners from the theft and invasion of non-property owners. For instance, police engage in violence against workers who went on strike, in the fear of accumulation of wealth. Another example, state did not protect county from pollution, it permitted the person to cut down the trees if the return was profitable. Court decided the person who would cut the trees dependent to his/her wealth. Finally, state builds infrastructure which is a system of roads, airports, bridge etc. Everybody benefits but most of us use it for work or vacation. On the contrary, wealthy uses it to make more money. People pay taxes for they do not benefit it equally. Hence, this is how capitalist gain from the state.

   Had the state not been existed, economic growth would have been slower. To keep its power up, state needs, firstly, the territorial jurisdiction. Every state has its own territory with globally accepted boundaries. Within these boundaries every country has the formal jurisdiction over them. Yet, for the capital accumulation seekers, the idea that one should interfere politics only within its own territory is very paradoxical. Because the movement of money capital and goods is more mobile than that of labor power. Secondly, within its territorial jurisdiction state has power to dictate the social relations of production. State only accepts legislative limitations which are imposed by itself. The main object of all such legislation is to commodificate the labor power by imposing tax obligations which enforces some to be the wage laborer. However, state discouraged the full proletarianization by introducing the residential limitations and welfare obligations. Thirdly, even though it is not special to historical capitalism and used as government income in the earlier times, capitalist state uses taxes as remarkable source of income. State is the crucial actor to control these sources. Because, tax collected is distributed and is included in the capital accumulation (Wallerstein, 1996: 47-72).

   Does the state collect taxes or redistribute the capital accumulation fairly equally among population? Well, not really. For example, regressive tax, that damages the low-income families more than the higher-income families, provides capital accumulation to circulate among capitalists and the state. With this in mind, another example, the book "Profits from Power" by Frederic Lane, mentions about how Venice could remain wealthy until 16th century. He says there are three models: Model A, B and C. Model A: Venice had engaged in a battle with the financial support of capitalists that are loans named "monte nuovo", in return state provides private property and protection etc. The loan that is borrowed from capitalists used to be paid by the loots received during the wars. Model B: However, after a while Venice started to lose wars and the loans were being paid by the regressive taxes levied on the Venetian citizens. As a result, rich got richer and poor get poorer, because of asymmetric income distribution within the city. In the Model C, income tax which is proportional to wealth was imposed. Meantime, Venice was facing a budget deficit, thus sold more "monte" to offset this indebtedness, named Ponzi financing. Particular to Ponzi scheme as a structure, government had offered higher returns with high interest rate. Therefore, the rich had never paid extra, because the interest received was strictly higher than the tax paid. However, lower classes had faced a decline in their real incomes. Briefly, throughout history, governments did not redistribute income fairly equally but polarized the accumulation of capital (Lane, 1979: 73-81).

   There are three subunits of polarization of accumulation of capital. First, governments grant outright allowance for the large scale capital holders. Second, corrupted taxation processes and abuse of public revenue are the main sources of the government to accumulate large amount of capital. Third, throughout the historical capitalism, as scale of risks and losses gets bigger, government's probability of intervening the privileged parties to avoid recessions increases. This is done by “individualization of profits and socialization of the risks” (Wallerstein, 1996: 54). For example, AIG, an American multinational insurance corporation, experienced a caustic financial crisis in 2008, and rescued by government, thanks to the taxes collected from whole society.

   Likewise, as Wallerstein states “states have monopolized armed force"(Wallerstein, 1996: 55) to not only does state normalize people or keep them as tools of the social hierarchy by the police, also it has a salient role in international area by protecting state's position from its rivals by army. This notion is similar to Charles Tilly's concept of state making that eliminating or neutralizing their rivals inside territories. However, it is crucial to underline that state strengthen its international power not through the scale of armed forces but through the amount of accumulated capital. In like manner, Charles Tilly states "...racketeer as someone who creates a threat and then charges for its reduction..." meaning that state works as a racketeer, creates the peril and guard at a price. This peril is created by state itself and could be fictional. Also, Tilly suggests that government monopolized means of violence (Tilly, 1985: 171). This means, for instance, if someone does not pay its taxes it will be punished. State, thus, is protecting public from state itself, all in all protection is to deactivate obstacles encountered by capitalists.

   In conclusion, the state and capitalists have a symbiotic relationship. The prospects for the future will be bleak and grim unless the symbiotic relationship among capitalists and the state ends.

References:

Lane, F. C. (1979). Profits from power: Readings in protection rent and violence-controlling enterprises. Albany: State University of New York Press.

Tilly, C. (1985). War Making and State Making as Organized Crime. Cambridge University Press

Wallerstein, I. M. (1996). Capistalist Civilisation

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