The following is in two parts. The first part is a continuous narrative that explains how the state props up the capitalist system. The second part breaks it down into sub headings for those who prefer that style. As a whole, this ends the argument that capitalism requires a small state. It is only the state that keeps it breathing.
Part 1
The state plays a pivotal role in sustaining and perpetuating the capitalist system, ensuring its continuity by intervening in ways that preserve its fundamental structures, address its crises and mitigate its contradictions. This role is multifaceted, encompassing mechanisms such as wage regulation, financial bailouts, social welfare systems, monetary policy, and the enforcement of property rights. By examining these interventions, it becomes evident that the state acts as both a stabiliser and an enabler of capitalism, even when its actions appear to address social concerns or economic inequalities. Far from challenging the system, these actions reinforce its dominance.
One of the most direct ways the state supports capitalism is through its influence on wages. Capitalism inherently operates on the exploitation of labour, with workers selling their labour power to employers for wages. These wages, however, are not naturally determined by the “invisible hand” of the market but are shaped by state policies, including minimum wage laws, tax regimes, and social welfare provisions. While minimum wage legislation is often framed as a protective measure for workers, it simultaneously serves the interests of the capitalist system by preventing wages from falling to levels that would jeopardise workers’ ability to sustain themselves. In doing so, the state ensures the reproduction of labour power, which is essential for capital accumulation.
At the same time, the state subsidises low wages through welfare programmes such as Universal Credit, housing benefits, and childcare subsidies. These forms of support effectively allow employers to pay workers less than what is required for a decent standard of living, with the state filling the gap. This dynamic shifts the burden of maintaining the workforce from employers to taxpayers, enabling businesses to maximise profits while relying on public funds to sustain their employees. Large corporations in sectors such as retail and hospitality, where low wages are prevalent, benefit disproportionately from this arrangement, as they are able to externalise part of their labour costs to the state.
In times of economic crisis, the state’s role in propping up capitalism becomes even more apparent. Financial bailouts, a recurring feature of modern capitalism, exemplify the extent to which the state intervenes to rescue failing businesses and stabilise markets. The 2008 global financial crisis offers a stark illustration of this dynamic. Faced with the collapse of major banks and financial institutions, governments around the world deployed trillions of pounds in taxpayer money to bail out private entities deemed “too big to fail.” In the UK, the government nationalised Northern Rock and provided substantial financial support to institutions such as RBS and Lloyds Banking Group. These interventions were justified as necessary to prevent systemic collapse, but they also revealed a profound contradiction: while capitalism is celebrated for its supposed efficiency and self-regulating nature, it depends on state intervention to survive its own crises.
The bailouts of 2008 did not merely stabilise the financial sector; they also ensured the continuation of a system that privileges the interests of capital over those of labour. The austerity measures that followed the crisis further underscored this dynamic. To recoup the costs of the bailouts, the UK government implemented severe cuts to public spending, disproportionately affecting working-class communities. Public services were slashed, wages stagnated, and social safety nets were weakened, all in the name of fiscal responsibility. Meanwhile, the financial sector recovered swiftly, with profits and bonuses for bankers reaching pre-crisis levels within a few years. This sequence of events highlighted the state’s dual role as a guardian of capitalism and a manager of its contradictions, ensuring that the costs of crises are borne by the broader population while the benefits are concentrated among the elite.
Beyond bailouts, the state supports capitalism through monetary policy and the management of economic cycles. Central banks, such as the Bank of England, play a critical role in maintaining economic stability by setting interest rates, controlling inflation, and providing liquidity to financial markets. Quantitative easing (QE), a policy widely employed in the aftermath of the 2008 crisis and during the COVID-19 pandemic, exemplifies this function. By injecting money into the economy through the purchase of government bonds and other assets, central banks aim to stimulate investment and spending. However, the benefits of QE have been disproportionately concentrated in financial markets, driving up asset prices and enriching those who already own significant wealth. This has exacerbated wealth inequality while doing little to address the structural weaknesses of the economy.
The state also intervenes to manage unemployment, a persistent feature of capitalist economies. While full employment is rarely achieved under capitalism, the state employs various strategies to mitigate the social unrest and economic instability associated with high levels of joblessness. These include public employment schemes, training programmes, and unemployment benefits, all of which serve to cushion the effects of economic downturns. However, such measures are often designed to ensure the availability of a reserve army of labour—an unemployed or underemployed population that exerts downward pressure on wages and provides a pool of readily exploitable workers. By maintaining this reserve, the state helps preserve the conditions necessary for capital accumulation while containing the social tensions that might otherwise threaten the system.
Property rights and the legal framework enforced by the state constitute another cornerstone of capitalist stability. Capitalism relies on the private ownership of the means of production, and the state plays an indispensable role in upholding this arrangement. Through laws governing contracts, intellectual property, and land ownership, the state ensures that the rights of capital owners are protected, often at the expense of the broader population. For instance, evictions and land seizures are carried out under the guise of legal authority, while intellectual property laws enable corporations to monopolise knowledge and technology, stifling competition and innovation. The enforcement of these rights underscores the extent to which the state prioritises the interests of capital over those of labour and the commons.
In addition to these economic mechanisms, the state sustains capitalism through ideological means. Education systems, media institutions, and cultural narratives are often shaped to legitimise and normalise the capitalist mode of production. The emphasis on individual responsibility, entrepreneurialism, and the sanctity of the free market obscures the systemic inequalities and exploitation inherent in capitalism. By promoting these values, the state fosters a sense of inevitability about the current economic order, discouraging efforts to imagine or pursue alternative systems.
The relationship between the state and capitalism is further reinforced through international institutions and trade agreements. Organisations such as the International Monetary Fund (IMF), World Bank, and World Trade Organisation (WTO) operate within a framework that prioritises market liberalisation, privatisation, and the free flow of capital. These institutions, often dominated by the interests of wealthy nations and multinational corporations, impose policies that entrench capitalist structures on a global scale. Developing countries, in particular, are subjected to structural adjustment programmes that demand cuts to public services, deregulation, and the opening of markets to foreign investment, often with devastating social and economic consequences. The state, acting in concert with these institutions, ensures that capitalism remains the dominant global economic system.
In the face of growing inequality, environmental degradation, and social unrest, the state’s role in propping up capitalism has come under increasing scrutiny. Critics argue that the state’s interventions often serve to entrench the very problems they purport to address. For instance, while welfare programmes alleviate poverty in the short term, they do little to challenge the underlying dynamics of exploitation and inequality that produce poverty in the first place. Similarly, bailouts and monetary policies may stabilise the economy during crises, but they also reinforce a system that prioritises profit over people and the planet.
Despite these critiques, the state continues to act as a guarantor of capitalism, adapting its strategies to address emerging challenges. The COVID-19 pandemic provided a stark illustration of this adaptability. Governments around the world implemented unprecedented measures to support businesses and workers, including furlough schemes, direct cash transfers, and massive stimulus packages. While these interventions were necessary to prevent economic collapse, they also highlighted the extent to which the state is willing to mobilise resources to protect the capitalist system. Many of the measures, such as loans to corporations and subsidies for private enterprises, prioritised the interests of capital over those of workers and communities.
Therefore, the state plays an indispensable role in sustaining capitalism, intervening in ways that stabilise the system, address its crises, and manage its contradictions. From regulating wages and providing welfare to bailing out financial institutions and enforcing property rights, the state ensures that capitalism remains the dominant economic order. While these interventions often mitigate the worst effects of capitalism, they also reinforce its structural inequalities and exploitative dynamics. As the challenges of inequality, climate change, and social unrest intensify, the state’s role in propping up capitalism will undoubtedly face growing resistance and calls for transformation. Yet, until alternative systems are imagined and realised, the state will remain a central pillar of capitalist stability.
Part 2
Capitalism, as an economic system, relies on the state in numerous ways to maintain its structure, legitimacy, and functionality. Without the state’s active involvement, capitalism would struggle to survive due to its inherent contradictions and vulnerabilities. These contradictions include economic crises, social unrest, exploitation, and inequality, all of which require state intervention to manage and mitigate. If the state were removed from the equation, capitalism would likely collapse under the weight of these issues. The following outlines the mechanisms through which the absence of the state would precipitate the system’s collapse:
The Erosion of Legal and Institutional Frameworks
Capitalism depends on a robust legal system to enforce property rights, contracts, and the rule of law. These legal frameworks, upheld by the state, provide the foundation for market transactions, private ownership, and corporate operations. Without the state, there would be no authority to guarantee these rights, leading to widespread uncertainty and instability. For example:
- Property rights: The state enforces ownership claims, whether over land, resources, or intellectual property. Without state-backed property laws, disputes over ownership would become intractable, undermining the confidence necessary for investment and trade.
- Contracts: The enforcement of contracts is crucial for business operations. Without courts or legal systems, businesses would lack a reliable mechanism to ensure that agreements are honoured, eroding trust and discouraging economic cooperation.
- Corporate structures: Companies rely on state-registered entities and regulations to operate. Without these systems, corporations would lose their legal status, leading to chaos in corporate governance and ownership.
The absence of these legal structures would result in a breakdown of economic coordination, making it difficult for capitalism to function.
Unchecked Economic Crises
Capitalism is inherently prone to cycles of boom and bust. These crises are often caused by overproduction, underconsumption, speculative bubbles, or systemic shocks. The state plays a critical role in managing these crises through interventions such as monetary policy, fiscal stimulus, and bailouts. Without the state:
- Financial markets would collapse: Central banks like the Bank of England stabilise financial markets by providing liquidity during crises, setting interest rates, and acting as lenders of last resort. Without these mechanisms, banking systems would be unable to withstand panics or credit crunches, leading to widespread bank failures.
- Recessions would spiral out of control: Governments often implement stimulus packages to counteract recessions, such as public works programs or direct payments to households. Without such measures, unemployment would skyrocket, demand would plummet, and businesses would fail en masse.
- No safety nets for systemic shocks: Events like the 2008 financial crisis or the COVID-19 pandemic reveal capitalism’s vulnerability to unexpected disruptions. The state’s ability to mobilise resources and stabilise markets is essential for recovery. Without it, these crises would deepen, leading to prolonged economic devastation.
In the absence of state intervention, capitalism’s cyclical crises would become unmanageable, ultimately paralysing the economy.
The Breakdown of Social Stability
Capitalism generates significant inequality and exploitation, which can lead to widespread social unrest. The state acts as a mediator, providing welfare systems, policing, and public services to maintain social order. Without these mechanisms:
- Social unrest would intensify: Workers and marginalised groups often protest against exploitation, poor wages, and inequality. Without the state to mediate through welfare or law enforcement, these tensions could escalate into widespread rebellion or societal breakdown.
- Inequality would become unsustainable: Welfare systems and progressive taxation partially offset capitalism’s tendency to concentrate wealth among the elite. Without these redistributive mechanisms, extreme inequality would destabilise society, eroding the trust and cooperation necessary for economic activity.
- No resolution to class conflict: The state plays a crucial role in managing the inherent conflict between labour and capital. By setting labour laws, regulating working conditions, and enforcing collective bargaining agreements, it prevents these tensions from boiling over. Without the state, class conflict would likely escalate into unmanageable confrontations.
The unchecked exploitation and inequality inherent in capitalism would erode the social cohesion required for the system to function, leading to its collapse.
The Failure to Reproduce Labour
Capitalism requires a steady supply of healthy, educated, and skilled workers to sustain its operations. The state ensures this through public services such as education, healthcare, and infrastructure. In the absence of the state:
- Education systems would collapse: Without state-funded schools and universities, the workforce would lack the necessary skills and knowledge to meet the demands of modern industries.
- Healthcare systems would disintegrate: Capitalism relies on a healthy workforce, but without public healthcare systems or safety regulations, workers would face higher mortality rates and reduced productivity.
- Infrastructure would deteriorate: Roads, public transport, energy grids, and communication networks are often funded and maintained by the state. Without these systems, businesses would struggle to operate efficiently.
The collapse of these public services would disrupt the reproduction of labour power, making it increasingly difficult for capitalism to maintain its workforce.
The Dissolution of Currency and Monetary Systems
Money is the lifeblood of capitalism, facilitating trade, investment, and savings. However, the value and stability of currency are underpinned by state authority. Central banks regulate money supply, control inflation, and stabilise exchange rates. Without the state:
- Currencies would lose value: Without central banks to manage monetary policy, hyperinflation or deflation could destabilise economies, rendering money unreliable as a medium of exchange.
- No mechanism for financial stability: Capitalism relies on credit and investment, but without state-backed institutions, confidence in financial systems would erode, leading to a collapse in lending and investment.
- Fragmented monetary systems: In the absence of a unified currency, barter systems or localised currencies might emerge, but these are inefficient and incapable of supporting complex capitalist economies.
The disappearance of state-backed monetary systems would undermine the foundations of capitalism, making trade and investment increasingly difficult.
Environmental Exploitation Without Regulation
Capitalism’s relentless pursuit of profit often leads to environmental degradation. The state intervenes by enforcing environmental regulations, managing natural resources, and addressing externalities such as pollution. Without the state:
- Environmental destruction would accelerate: Without regulations, businesses would exploit resources unsustainably, leading to ecological collapse and undermining the conditions necessary for human and economic survival.
- Climate change would spiral unchecked: Governments play a crucial role in coordinating responses to climate change through international agreements, funding for renewable energy, and carbon pricing. Without these interventions, capitalism’s short-term profit motives would exacerbate environmental crises.
- Resource conflicts would escalate: The state manages access to and distribution of resources. Without this oversight, competition for scarce resources could lead to violent conflicts, further destabilising societies and economies.
Environmental collapse would create uninhabitable conditions for human and economic life, bringing capitalism to its knees.
The Loss of Global Coordination
In the globalised capitalist system, states act as key players in maintaining international trade, investment, and diplomacy. They negotiate trade agreements, enforce intellectual property laws, and regulate cross-border financial flows. Without state involvement:
- Global trade would collapse: International trade relies on agreements facilitated by state actors and organisations like the WTO. Without these frameworks, trade disputes would proliferate, and supply chains would fragment.
- No enforcement of international standards: Labour rights, environmental protections, and financial regulations are often enforced through state-led initiatives. Without these, exploitative practices and corruption would become widespread, undermining global economic stability.
- Geopolitical instability would rise: States play a crucial role in resolving conflicts and maintaining order. Without their involvement, geopolitical tensions could escalate, disrupting trade and investment.
The absence of state coordination would fragment the global economy, disrupting the interconnected networks that capitalism relies upon.
Without the state, capitalism would collapse under the weight of its own contradictions. The legal frameworks, social stability, crisis management, monetary systems, and global coordination provided by the state are essential to the system’s survival. While capitalism is often framed as a self-regulating and efficient economic model, it is deeply dependent on state intervention to manage its vulnerabilities and crises. In the absence of the state, capitalism would be unable to address the social, economic, and ecological challenges it generates, ultimately leading to its dissolution.
For those who debate any of the above the onus is on them to prove it with fact not opinion. Opinions are pointless without clear substance.
