The State

Introductory economic textbooks treat the modern state in a wholly unsatisfactory way. An institution which today controls almost 60 percent of the British national income1 is simply viewed as an exogenous ‘black box’ whose basic characteristics are never examined in depth. Contrary to this view, we believe it is fruitful to inquire more closely into the nature of the state and how it intervenes in a modern capitalist society. This is the objective of this chapter. The first section will be a brief description of state expenditure under modern capitalism. The second section outlines the orthodox theory dealing with state intervention. It will try to show the theoretical weakness and empirical irrelevance of the concepts traditionally used to explain this phenomenon. The third section will outline an alternative Marxist approach. Such an approach will not pretend to answer all questions related to public finance (orthodox theory has given insights into restricted areas); but it will better explain movements of state expenditure over time, as well as trying to map out the fundamental forces that act upon the state in our societies, and what kind of economic role the state itself represents in society.