Paradoxes of Neoliberal Governance: How Markets Make States

PUBLISHED

Amy Cohen is John C. Elam/Vorys Sater Professor of Law at Ohio State University Moritz College of Law.

Jason Jackson is an assistant professor in the Department of Urban Studies and Planning at MIT. His research focuses on the relationship between states and markets.

PUBLISHED

Amy Cohen is John C. Elam/Vorys Sater Professor of Law at Ohio State University Moritz College of Law.

Jason Jackson is an assistant professor in the Department of Urban Studies and Planning at MIT. His research focuses on the relationship between states and markets.

At the height of the Covid-19 pandemic, in September 2021, the Hindu nationalist Bhartiya Janata Party (BJP)-led Indian government pushed a set of agricultural market reforms through the Lok Saba. As Navyug Gill explained in a recent LPE blog interview with Veena Dubal, these new laws cater to the sourcing preferences of large agribusiness and retail corporations. They remove caps on the amount of commodities market actors can hold. They also facilitate direct sales and longer-term contracts between farmers and corporations outside of India’s wholesale food market or mandi system—with its complex regulatory arrangements of taxes, license fees, and dispute resolution services, all of which are controlled by states rather than by the national government. Farmers worry that with these liberalizing reforms, the central government will retreat from its “minimum support price,” a price floor it sets for select commodities and enforces through public procurement, especially of the rice and wheat produced in Haryana and Punjab.

The outcry against these reforms was immediate and has led to a sustained campaign of street protests by hundreds of thousands of farmers, which has captured the attention of the global media. Numerous commentators have characterized these (and predecessor) reforms as “neoliberal” while describing processes of deregulation where private markets eclipse state power and multinational corporations displace local market actors and challenge state authority. Gill likewise discusses the new farm laws as part of a “larger neoliberal agenda where public systems of distribution are demeaned, decried and denounced” in favor of market rule.

In a recently published article, we use the case of agricultural market liberalization in India to explore what we see as a counter-intuitive aspect of neoliberal governance: that paradoxically, states may desire particular kinds of markets – and hence market actors – to strengthen their political control. These are economic actors that do more than engage in commercial exchange based on price competition, private property rights, and formally free labor—all of which characterize existing mandi trade. Under neoliberal modes of governance, ideal-typical market actors are also organized to facilitate “a key characteristic of modern government: action at a distance.” We suggest that in India, as potentially elsewhere in the developing world, large-scale corporate capital purports to offer such regulatory and market governance benefits against existing small-scale traders. Hence, we analyze how different kinds of market actors appear to produce political authority, and not simply economic gain, for a neoliberal state.

Here we take our cue from Foucault. Neoliberalism, he explains, inverts a classical perspective on the relation between the state and the market. Whereas classical liberals “ask[ed] the state what freedom it will leave to the economy,” the neoliberal “asks the economy how its freedom can have a state-creating function and role, in the sense that it will really make possible the foundation of the state’s legitimacy.” But in contemporary India, we argue, policymakers do not look to “actually existing” markets but rather to an imagined utopic model of “free markets” to advance the regulative and legitimating goals of development and good governance. Thus, we argue that only certain kinds of market actors – most recently large domestic conglomerates, such as the Adani Group and Mukesh Ambani-led Reliance Group and their foreign partners, are deemed capable of creating the types of ‘modern’ markets that would legitimate the Indian state (this despite, we should add, widespread accusations of crony capitalism).

To advance our argument—that there is an important link between the central Indian government’s efforts to liberalize agricultural markets on the hand, and its efforts to consolidate political control, on the other hand—let us briefly describe how existing agricultural markets work.

In India, roughly 95 percent of the country’s produce currently travels from small farmers to small retail vendors via a dense network of wholesale markets. In these markets, farmers or trader-aggregators link up with brokers who make quick, expert, tacit quality assessments. Brokers then hold auctions or negotiate sales for a commission, providing trust-based connections among often otherwise anonymous sellers and buyers. Depending on how they assess their potential to make margins, brokers may also double as wholesale traders. And both brokers and traders combine multiple forms of economic activity—financing production, transport, storage, and processing—with social forms of regulation such as “religion, biradari (brotherhood), caste, ethnicity, clan, and gender,” as Barbara Harriss-White has shown.

These combinations of economic activities have produced deeply resilient supply chains that enable petty capital to expand through proliferation more than through accumulation, as Harris-White has further argued: “The margins between the prices of purchases and sales set by the mercantile activity of local oligopolies, together with their webs of credit, enable petty capital to enter, to generate small livelihoods, to multiply and be perpetuated in varying degrees of dependence—though rarely to accumulate.” These practices, which combine the centralization of local oligopolies on the one hand with the multiplication of small-scale capital on the other—create markets that appear opaque, inefficient and unethical to state actors and, crucially, seem resistant to national-level state control.

To be sure, and as this description suggests, these markets do produce maldistributions and inequalities, an argument that proponents of the farm bills use to argue for disintermediation and corporate consolidation. Other analysts, however, are sceptical and call for more egalitarian reforms. For example, Shoumitro Chatterjee and Mekhala Krishnamurthy recently argued that “in the context of physical agricultural markets in India, disintermediation is itself usually a misguided goal, but addressing the political economy of intermediation and creating the conditions for greater competition among intermediaries and logistics operators is important.”

The challenge, however, in advancing more democratizing and egalitarian interventions to reform existing agricultural markets is not simply that there are competing ideas about what constitutes producer and consumer welfare and how best to achieve it. The challenge is that reforms that privilege disintermediation and large-scale corporate consolidation—such as those broadly advanced by the new farm laws—also embed a dominant political rationality. “A big organized licensed firm is subject to the scrutiny of law more than a small firm,” a central government official told us. “Monitoring thousands is rather difficult [compared to] one,” another suggested. Tellingly, today Prime Minister Narendra Modi’s BJP pursues reforms under the banner of One Nation, One Market. This is a nationalist imaginary where the triumph of creating the single geographic space of India at independence is deemed incomplete because it has yet to produce a single market—a market that is legible to and governable by a single, centralized state.

In 1963, historian Gabriel Kolko challenged dominant interpretations of the rise of the American regulatory state by highlighting how market actors need the state. Under conditions of intense market competition, powerful business leaders did not resist but rather lobbied for national level regulatory interventions because they wished “to attain conditions of stability, predictability, and security—to attain rationalization—in the economy.” By contrast, our case of Indian agricultural distribution suggests an inverse relationship between state and market: not only do market actors require legal and regulatory rules to facilitate and stabilize exchange, political elites in developing economies may also desire powerful market actors to help rationalize and legitimate the state.

Related Content