‘Drawing the Line’: Market Rule and Liberal Planning in the Governance of Capitalism

Abstract

This article critically engages with the ‘death of neoliberalism’ debate. Its purpose is not to determine whether neoliberalism is dying or not but to highlight the limitations of the question, ‘is neoliberalism dead?’ The question invites answers that cannot satisfactorily account for both continuities and transformations in capitalist governance. Existing sides of the debate miss the fact that market discipline is a shared commitment of all iterations of liberal governance, not only neoliberalism. Liberal governance, I argue, is a balancing act between market discipline and planning measures to manage the social costs of accumulation. The argument develops in two steps. First, it presents a brief intellectual history of social liberalism – the most explicitly pro-planning voice in the liberal canon – highlighting its similarities with neoliberalism. Second, it theoretically engages with the Open and Political Marxist traditions to discern the drivers behind the state’s concurrent impulse to expand and self-limit the scope of planning.

Introduction

Secular stagnation, financial instability, the global pandemic and the accelerated effects of climate change have all converged to test the viability of the free market. In response, governments have adopted a range of interventions – both temporary and more permanent – from emergency bailouts and furloughs to unorthodox monetary policies and activist industrial strategies. The return of economic nationalism and the pursuit of national champion policies in the North and South seem to mark a break with past policies of unfettered liberalisation. Similarly, the growing role of Central Banks as permanent risk absorbers for the private financial sector has demonstrated the difficulty of upholding free market principles in a context of financial turbulence. The post-2008 political economy landscape has been marked by a series of unending crises and destabilising trends forcing states across the world into increasingly exceptional and unconventional measures to maintain social cohesion and economic competitiveness. For a Financial Times commentator, ‘the return of government to centre stage marks the close of an era in which power and responsibility migrated from states to markets’ (Stephens, 2021).

The ‘statist turn’ in global capitalist governance has spurred discussions over the fate of neoliberalism in the 21st century. As I suggest, there are three main scholarly perspectives on the current state of neoliberal governance: the neoliberal demise, the neoliberal resilience and the interregnum perspectives. Neoliberal demise perspectives understand the current juncture as a paradigm shift where neoliberalism is being progressively replaced by an alternative, state-driven governing order (Gerbaudo, 2021). For neoliberal resilience arguments, the current moment is a crisis in, not of, neoliberalism (Saad-Filho, 2019). Rather than declining, neoliberalism is transforming by adapting to the crisis-ridden environment that it creates. Finally, interregnum perspectives see the current conjuncture as a lasting limbo phase whereby neoliberalism’s hegemony is declining, but no competing paradigm has emerged to replace it yet (Stahl, 2019).

This article contributes to discussions on the ongoing crisis and tensions of capitalist governance yet seeks to shift away from the literature’s focus on neoliberalism’s health status. The purpose of the article is not to directly determine whether neoliberalism is dying or not but to point to the limitations of the question ‘is neoliberalism dead?’ What is problematic is the underlying periodisation informing the debate which treats neoliberalism as a distinctively market-oriented paradigm. Furthermore, if neoliberalism is transient, then the debate’s implicit assumption is that it is possible to forge a post-neoliberal order in which markets are managed and put to the service of social aims. This article suggests that this underlying assumption obscures the shared commitment to market rule that underpins all iterations of liberal governance, including its more welfarist strands. Liberal governance, I argue, constitutes a balancing act between imposing market discipline and pursuing state planning to manage the crisis tendencies of capitalist growth. I develop the argument in two parts: first, through the lens of intellectual history and second, through a theoretical engagement with Marx and the Open and Political Marxist traditions.

To understand the relationship between market discipline and state planning, I initially examine how liberals have responded to the crises of market civilisation in the past through an original reading of early 20th-century social liberals. Similar to present proclamations on the ‘death of neoliberalism’, the early 20th century was also marked by the widespread perception that the laissez-faire doctrine had exhausted itself (Fisher, 1907). As support for laissez-faire liberalism declined, social liberals – also referred to as new or reform liberals – emerged as the most explicit advocates of state interventionism within the liberal canon. In direct opposition to the ‘laissez-faire’ dogma, reform liberals, such as Keynes, Hobhouse and Hobson, maintained that the state’s response to social and economic crises ought to take the form of liberal planning. By liberal planning I refer to forms of government intervention that seek to directly supplant market mechanisms in given social areas without, however, threatening the overall framework of the market economy. By social liberals’ own admission, planning is not only a process of expanding state responsibilities but also of limiting and disciplining state action in line with market imperatives. In other words, liberal planning broadens the state’s functions but, crucially, also sets limits to its responsibilities. By revisiting social liberalism, I seek to suggest that despite the novelties it brought to the liberal tradition, it too shared a commitment to market rule and market discipline just like 19th-century liberals and 21st-century neoliberals. Market rule is therefore not a peculiarity of neoliberalism but an underlying commitment of every iteration of liberalism.

Why, however, is liberalism constrained by the framework of market discipline? To understand liberalism’s persistent commitment to market rule, I draw on the work of Karl Marx, Ellen Wood and the Open Marxist tradition to advance a theoretical framework that sheds light on the nature of the capitalist state as a ‘limited state’, that is a state that concentrates political but not economic power (Bonefeld, 2012: 651). Such a perspective contends that the state is at once responsible for ensuring the reproduction of commodity relations and for mitigating capitalism’s tendencies towards stagnation, low labour demand or environmental degradation. As such liberal crisis management involves both transformations in the scale and form of intervention as well as the restoration of market rule. The article moves beyond the impasses of the ‘death of neoliberalism’ debate through a theoretical framework that accounts for both the endurance of disciplinary market logics and transformations in the form and scale of state intervention.

The current tensions in global economic governance may therefore signal neither a radical rupture with market rule nor the continuation of neoliberal business as usual. Instead, I argue that the tensions in the global governance of capitalism showcase a growing political difficulty to manage ‘the permanent instability of social existence under capitalism’ (Clarke, 1994: 218). Far from reasserting the authority of states over markets, rising interventionism in fact reflects the growing intensity and gravity of the crises that confront states today.

Neoliberalism in Crisis?

There are three main perspectives on the crisis of neoliberalism today. I call them the neoliberal demise, neoliberal resilience and the interregnum accounts.

For the neoliberal demise account, the current moment represents a paradigm shift. In other words, there is a progressive transition away from neoliberalism and into a post-neoliberal, state-driven political economy. According to this perspective, neoliberalism’s decline is reminiscent of earlier paradigmatic shifts in the history of global capitalist governance. Indeed, neoliberalism’s unfolding decline began with the 2008 Global Financial Crisis, just like its predecessor, ‘embedded liberalism’, entered into crisis with the onset of the stagflation crisis in the 1970s (Duménil and Lévy, 2011). According to this argument, neoliberal free market principles have become increasingly unsustainable. They are unable to adequately deal with the crises defining our epoch including increased social inequalities and climate change (Stiglitz, 2019). The 2008 crisis and the COVID-19 pandemic further delegitimised neoliberal ideology, showing that a policy of deregulated markets and limited welfare is no recipe for financial crashes and pandemics (Kılıç, 2021). In sum, the political management of recent crises allegedly offered prismatic glimpses of a future in which repeated economic and ecological crises force governments to abandon their commitment to free market principles and endorse more robust forms of interventionism.

Neoliberal demise perspectives do not argue that a more progressive alternative will automatically supersede neoliberalism. Kotz (2015), for instance, outlines three possible post-neoliberal orders: a regulated capitalist order in which labour’s political voice continues to be marginalised, a social democratic form of capitalism founded on a labour-capital compromise or a socialist alternative beyond capitalism. For Gerbaudo (2021), the present political landscape constitutes the battleground between two different versions of a neo-statist form of governance. For the right, Gerbaudo argues, post-neoliberal governance consists of nationalist politics of strong borders and migration controls. For the left, this order could take the shape of a politics of social protection and democratic control over the economy. According to neoliberal demise perspectives, whatever the exact shape of the post-neoliberal order, it will likely be one that ‘restricts the market as regulator of economic activity’ (Kotz, 2015: 200).

Neoliberal resilience perspectives are best understood through the distinction Saad-Filho (2019) makes between crisis of and crisis in neoliberalism. Whereas for the neoliberal demise camp it is the neoliberal paradigm itself that is in crisis, resilience arguments insist that the post-2008 crises are managed within the neoliberal framework without threatening its hegemony (Crouch, 2011; Mirowski, 2014). Neither the Global Financial Crisis nor the recent pandemic have led to policy adjustments significant enough to deviate governments from their neoliberal course (Bayliss et al., 2024). Unlike previous accumulation crises, no new regime has emerged, and instead, ‘the global political economy has entered a radicalised phase of neoliberalism’ (Ayers, 2024: 417; see Davidson, 2017). Peck (2010: 106) describes neoliberalism as a ‘crisis-driven form of market rule’ that capitalises on crises to reinvent itself. Neoliberal free market principles continue to prevail regardless of the degree of state interventionism. As Cahill (2010: 313) notes ‘the mere presence of regulation’ is not sufficient to diagnose the end of neoliberalism. Furthermore, as Peck et al. (2012: 273) suggest, neoliberalism is not a ‘monolithic structure’; it has always coexisted with other forms of statecraft, including Keynesianism, developmentalism and social democracy. Commentators within this camp, therefore, point to a gap between the neoliberal rhetoric that demands free markets and limited government and ‘actually existing’ neoliberal statecraft, which often involves intensive forms of interventionism to rescue market rule (Cahill, 2010).

Neoliberal resilience arguments suggest we are witnessing neoliberalism’s mutation, not decline (Callison and Manfredi, 2020). Some commentators point, for example, to the consolidation of an ‘authoritarian neoliberalism’ that reorganises the state apparatus in increasingly coercive and undemocratic ways (Bruff, 2014; Fabry and Sandbeck, 2019). Faced with dwindling legitimacy, neoliberal states are progressively shrinking the space available for the democratic contestation of neoliberal policies (Bruff and Tansel, 2020). Many governments, the argument goes, no longer seek to build consensus around neoliberal policies and instead impose them through processes of technocratisation, the violent crackdown on dissenting movements and in the case of the EU the strengthening of restrictive supranational budget rules (Tansel, 2017). Another similar neoliberal mutation is the rise of what Hendrikse (2018) calls neo-illiberalism. Neo-illiberalism refers to an ‘illiberal mutation and restoration of transatlantic neoliberalism’ that erodes not only democratic institutions but basic liberal constitutional principles and civil liberties too (Hendrikse, 2018: 169).

Finally, the interregnum argument offers a third interpretation of neoliberalism’s health status (Babic, 2020; Stahl, 2019). According to it, the current era resembles the interwar period where the laissez-faire of the classical liberal age lost its hegemonic position and fascist, socialist and reformist movements engaged in a political struggle to replace it. Within the IPE literature, the most sophisticated articulation of the interregnum perspective is put forward by Stahl (2019). Stahl criticises traditional understandings of hegemonic shifts in international political economy which see crises as brief transitory moments between two longer and more stable phases of capitalist governance. The duration of such ‘transitory’ periods – the Great Depression in the 1930s, the stagflation crisis in the 1970s or the post-2008 era – can be historically significant, Stahl argues. Interregna are not just brief interludes in the transition from a decaying governing regime to another. Instead, they constitute ‘periods in their own right’ (Stahl, 2019: 335).

Stahl (2019: 338) defines the interregnum as a ‘semiordered system’ where different elite groups and coalitions of social forces compete to impose their preferred political programmes, but none yet emerges as hegemonic. In the post-2008 interregnum, for instance, neoliberal institutions are still in place, and neoliberal policies continue to be implemented, but their effectiveness and legitimacy tend to wane. Applied to the current juncture, the interregnum ‘transcends the dichotomy between neoliberal hegemony as either in a terminal crisis or having already overcome the crisis’ (Stahl, 2019: 354). Rather, the outcome of the current crisis is still unclear and will be determined by the political battles between aspiring hegemonic projects. As Lapavitsas notes, the ‘contest for hegemony’ has sharpened after Covid with US-backed neoliberalism losing its appeal but other models (e.g. Russia and China) failing to offer a convincing global alternative (Lapavitsas and EReNSEP Writing Collective, 2023). For the interregnum account, the current moment constitutes neither the victory nor the demise of neoliberalism but rather a limbo phase whereby competing paradigms are struggling for dominance.

Thus, while the neoliberal demise account sees contemporary forms of state activism as the birthmarks of neoliberalism’s neo-statist successor, the neoliberal resilience and interregnum perspectives are more cautious. For neoliberal resilience accounts, contemporary state transformations represent attempts to save neoliberalism by adapting it to a changing context. Interregnum accounts see the messy post-2008 policy mix as symptomatic of neoliberalism’s hegemonic crisis from which no clear successor has emerged.

The debate is therefore at an impasse: depending on the symptoms one looks for, neoliberalism can be declared dead, dying or alive. It is the framing of the question – is neoliberalism dead? – that contributes to these impasses. What is problematic is the underlying periodisation informing the question which conceives of capitalist governance as a succession of relatively coherent and distinct institutional regimes. Seeing neoliberalism as a distinct capitalist epoch raises crucial definitional issues. Some scholars have shed doubt on the usefulness of ‘neoliberalism’ as a concept, pointing to the literature’s lack of a shared definition (Dunn, 2017). As Venugopal (2015: 178) puts it, ‘a single moniker [i.e. neoliberalism] is shared by a confusing array of hypothesized real-world processes that are not just different but stand in contradiction to one another’. Without a coherent and widely shared definition, the criteria by which to judge neoliberalism’s demise turn out to be unclear. Nevertheless, others like Laruffa (2024) have tried to identify a ‘common core’ underpinning the variety of definitions of neoliberalism. For Laruffa, this minimum definition understands neoliberalism as the de-democratisation of the economy and the subordination of state and society to the market’s logic. According to this view, what distinguishes the social democratic from the neoliberal era is the ‘higher degrees of democratisation’ that characterised the former (Laruffa, 2024: 602). Yet, if it is a matter of degrees, how do we judge the passage from one era to another? It is not clear at which point exactly the balance between marketisation and democratisation signals society’s shift away from neoliberalism.

Furthermore, the prevalent understanding of neoliberalism as a uniquely market-oriented paradigm creates an artificial rupture between neoliberalism and other iterations of liberal governance. For instance, the extension of market relations was a tendency already inscribed within the so-called ‘embedded liberalism’ era. Indeed, for Lacher (1999: 352), while the Bretton Woods arrangement may have offered some limited protection to people, it was nevertheless founded on ‘the overall extension and deepening of the commodification of social life, including the “life-world”’. The pre-neoliberal era was based on the growth of a mass market at home and the progressive liberalisation of global trade that led to the further subordination of state and society to the global logics of accumulation. Ultimately, as Edgerton (2021: 31) suggests, neither social democracy/Keynesianism nor neoliberalism can usefully serve as ‘general descriptors’ of whole eras of capitalist history. It is indeed difficult to unambiguously describe the period from 1945 to 1975 as a coherent social democratic or Keynesian era. Wincott (2013) suggests there is a chasm between the conventional periodisation and the empirical evidence since the development of the welfare state experienced wide discrepancies between countries and also within that same period. These discontinuities are not well accounted for by the notion of a ‘golden age of welfare capitalism’. Similarly, throughout the so-called neoliberal era, states have consistently had recourse to policies that seemed to challenge the neoliberal playbook, including large-scale bailouts for market actors, deficit financing to stimulate economic activity and high levels of social spending to palliate the social costs of deindustrialisation (Pollin and Epstein, 2021; Tomlinson, 2021). Neoliberalism and Keynesian interventionism may best be understood as co-existing policy impulses within the wider spectrum of liberal governance, rather than as distinct epochs or regimes.

Conventional forms of periodising neoliberalism do not map well onto the messy and tension-ridden reality of governing capitalism (Copley and Moraitis, 2021). As I argue in the next sections, liberal governance has always been an exercise in expanding state responsibilities and disciplining state action in line with market imperatives. I begin by engaging with what is often considered neoliberalism’s opposite, social liberalism, in order to highlight their shared commitment to market rule.

Liberal Planning

Today’s narrative on the ‘death of neoliberalism’ echoes early 20th-century discourses on the ‘end of laissez-faire’ (Keynes, 1963). Amid the perceived crisis of laissez-faire, reform liberalism – also known as new or social liberalism – appeared as an alternative and socially progressive form of liberalism. Reform liberalism developed in the late 19th and early 20th-century Britain around the work of, among others, Hobson, Keynes, Hobhouse, Rowntree, and Samuel and is closely associated with the politics of the old Liberal Party. Reform liberals argued that the laissez-faire dogma had become anachronistic and failed to provide any viable response to the entrenched poverty and recurrent crises of industrial capitalism. Central to their alternative vision of economic governance was the principle of social reform, that is, ‘the rational and planned remedying of social ills’ (Freeden, 1978: 13). To address the social challenges of their era, they called for a shift towards what I term liberal planning, that is, the introduction of legislative constraints that limit the influence of market mechanisms in given social areas. Because of its emphasis on the state’s agency, new liberalism’s policy programme has often been misunderstood as a demand to use ‘the power of the state to tame the power of the market’ (Fawcett, 2014: 186). However, such a definition offers only a partial insight into the principles of reform liberalism. Indeed, reform liberalism also warns against the misuse of state power. Liberal forms of planning involve both the extension and the conscious self-limitation of the state’s responsibilities. Liberal planning redraws the boundary between the realm of political authority and the realm of free market activity without ever abolishing it.

The call for liberal forms of planning was not an arbitrary demand. Social liberals observed that governments – even conservative ones – had de facto embraced forms of state interference that ran contrary to the laissez-faire dogma. Hobson (1896: 187), for instance, argues that throughout the 19th century, the British government introduced various forms of ‘socialistic legislation’ that in practice infringed the principles of private property and economic liberty. Legislation regulating labour conditions, working hours, child labour and even state initiatives such as public works were becoming commonplace and constituted ‘a considerable and growing restriction of the sphere of private enterprise’ (Hobson, 1896: 197). In their desperate attempt to deal with mass pauperism, industrial unrest and economic crises, governments introduced piecemeal reforms and ad hoc interventions whose unintended consequence was to discredit laissez-faire (Polanyi, 2001). The aim of social liberals was to turn governments’ ad hoc responses to turmoil into a conscious plan for social reform in wage, pension and industrial policy. They offered theoretical justification for the forms of intervention that states were already undertaking, albeit in an unsystematic and haphazard manner.

The case for reform liberalism is most emblematically defended in Keynes’ ‘The end of laissez-faire’. Laissez-faire had become a problematic guide to policymaking, Keynes argues. The old economic liberal principle according to which the pursuit of private interest naturally enhanced the public good had turned into an unfounded ‘metaphysical’ principle (Keynes, 1963: 312). Indeed, for Keynes ‘[i]t is not a correct deduction from the principles of economics that enlightened self-interest always operates in the public interest’(Keynes, 1963: 312). Unfettered free market competition generates a series of socioeconomic problems – from rentierism, to stagnation, to unemployment – whose ‘cure lies outside the operation of individuals’ (Keynes, 1963: 318). What was therefore needed was ‘some coordinated act of intelligent judgement’ that only a collective agency such as the state or state-sanctioned bureaucracies can exercise. Liberal planning, for Keynes, is necessary to harmonise private interests and the public good. As such Keynes calls for the redefinition of the political by inscribing matters previously ‘left entirely to the chances of private judgement and private profits’ into the functions of government (Keynes, 1963: 319).

Yet the forms of liberal planning advocated by Keynes and other social liberals remain liberal in character in so far as they seek to uphold the line that separates the political from the economic. For Keynes, there must be a clear differentiation between functions which are ‘technically social’ and belong to the state from functions that are ‘technically individual’ and belong to the market (Keynes, 1963: 317). Liberal planning is compatible with the ‘money making and money-loving instincts of individuals’ which shall remain, for Keynes, ‘the main motive force of the economic machine’ (Keynes, 1963: 319). At the end of the day, Keynes’ planning does not stand in opposition to the free market but seeks to reconfigure the space within which market activity can safely take place without eliminating the boundary that separates politics and economics. The purpose of planning is not to contravene the principles of market competition but to reach socially acceptable wage and employment levels while leaving the principle of ‘private initiative and enterprise unhindered’ (Keynes, 1963: 318). The challenge of planning is to enable public forms of intervention that provide social and economic stability while retaining the profit motive and the incentive to work as the main regulative principles of civil society.

Reform liberalism was, however, criticised by other liberal currents. It was first attacked by the fin-de-siècle old liberal guard that remained committed to laissez-faire, with Spencer leading the charge and later by neoliberals such as Hayek for whom the new liberals glorified the state and inadvertently opened the door to totalitarianism. The main line of critique against liberal planning centred around its allegedly intrusive government regulations and redistributive policies. Old liberals and neoliberals feared that state planning would end up trespassing the limits of the private sphere and undermine the principles of private property and market liberty. However, their critiques missed that for reform liberals the private sphere was to be preserved at all costs. Indeed, Samuel (1902: 147) argues that ‘the hope of personal gain and the fear of personal loss are strong incentives to efficiency in the conduct of business; public spirit may not prove a sufficient substitute for them’. Similarly, Hobhouse (1911: 93) argues that the point of state planning is ‘not to displace or destroy personal initiative, freedom of choice, private property’. Neither it is to replace the labour market and ‘private responsibility’ with ‘State charity’ (Hobhouse, 1911: 164, 182). Social reform aims to combat the adverse conditions (e.g. unemployment, pauperism, stagnation) that prevent workers and consumers from meaningfully exercising their market freedom.

In other words, social reform does not entail the wholesale abandonment or distortion of market principles as its detractors feared. Since its inception, social liberalism has sought to ensure that social reform did not contravene market discipline. For Booth (1897: 419), an early social reformer, the expansion of state intervention must take place ‘within the limits of moderation’. By interfering excessively with market competition, public action ‘will reduce the chances of profit’ and ‘may forestall the natural flow of enterprise’ thereby exacerbating economic problems (Booth, 1897: 419). Thus, whatever its precise form, state planning ought to be ‘cautiously and carefully undertaken’ if the dynamism of the private sector is not to be undermined (Booth, 1897: 419). Throughout the years, social liberals have defended similar positions, seeking to show the compatibility between social reform and private enterprise. For instance, Samuel (1917: 84) discards the accusation that ‘industrial regulation. . . would be a violation of the laws of political economy’. State planning merely constitutes a ‘conscious and organised resistance to economic forces which continually tend to depress the level of well-being of labour’ (Samuel, 1917: 85). Such an objective was hardly in tension with the plethora of already existing labour legislations alluded to earlier and often defended by laissez-faire liberals themselves. For reform liberals, state intervention is not meant to go against the laws of political economy but to civilise the existence of labour within the system of political economy. For Samuel (1917: 85) ‘this is no more a violation of the laws of political economy than to go upstairs is a violation of the law of gravity’.

For social liberals, state policy ought not to go against the laws of the capitalist economy but to work with them. Social reform cannot be based on ‘misstatements of industrial economics’ (Robertson, 1912: 230). Robertson (1912: 229–231), for instance, warns against Labour leaders promising a higher share of the total product for workers without considering whether firms can afford it. Some sort of market discipline must thus be in place to prevent economic ruin. Rowntree illustrates this point in relation to the reform of wage policy. For social liberals, one of the primary goals of social policy is to introduce regulations that enable workers to improve their working conditions and wages. However, Rowntree acknowledges that the share of the social product going to workers must conform to the ‘laws of political economy’. Wages should not grow as far as to harm profitability and future investment. There must be ‘safeguards for capital’ too (Rowntree, 1914: 20). Wages can be raised only ‘up to the point at which the investment of capital in the industry ceases to be attractive’ (Rowntree, 1914: 20). If workers push for higher wages than is profitable, they will ‘drive capital into other fields’ or ‘into foreign investments’ (Rowntree, 1914: 21). Domestically, the result will be ‘a lessened demand for labour all round, and widespread unemployment’ (Rowntree, 1914: 21). In other words, liberal planning does not entail the abolition of the market’s disciplinary logic. In a liberally planned economy, capital flight and the investment strike continue to act as an ‘automatic check to the demands of the workers’ (Rowntree, 1914: 22). In other words, the point of liberal planning according to social reformers is not to challenge the disciplinary logic of the laws of political economy but to allow the maximum of well-being for workers within the limits of the market. At the end of the day if workers ‘demand concessions for which the capitalist and the consumer will not pay, they must not blame employers who shut the gate against them’ (Rowntree, 1914: 92). Three decades later, William Beveridge would grapple with similar anxieties in his famous proposals for a full employment policy in post-war Britain. Full employment contains a ‘real danger’ he argues because it may inadvertently encourage trade unions to engage in ‘[i]rresponsible sectional wage bargaining’, leading to ‘a vicious spiral of inflation’ (Beveridge, 1944: 3–4). When industrial discipline is lacking, ‘wage determination will perforce become a function of the State’ (Beveridge, 1944: 216). In Beveridge’s welfare state, the state itself becomes responsible for ensuring that market discipline reigns among the ranks of workers.

Explicit in the social liberal argument is the notion that there are limits that state planning ought not to overstep. Keynes puts this eloquently in a letter to Hayek praising The Road to Serfdom. He recognises the kernel of truth in Hayek’s critique of state planning: planning, Keynes (1980: 387–388) argues, consists of ‘dangerous acts’ that may well be ‘the way to hell if they were executed by those who think and feel wrongly’. In other words, planning is a delicate exercise that only a technocratic elite committed to liberal principles can safely undertake. In the hands of socialists, that is those who ‘feel wrongly’, planning could be mobilised for unsound purposes and undermine modern market civilisation according to Keynes. Although Keynes (1980) admits that he and Hayek would draw the line between state planning and market activity ‘in different places’, they ultimately both sustain that ‘the line has to be drawn somewhere’ if liberal civilisation is to be salvaged (p. 386; my emphasis).

As such liberal planning also involves limits on the scope of state action. Robertson for instance does not reject ‘laissez-faire’ ‘as a principle of rational limitation of state interference’. Instead, it must be rejected only when ‘deadly social evils’ can be addressed through ‘curative treatment by State action’ (Robertson, 1912: 64). In other words, for social liberals, the limitation of the state is not incompatible with the pursuit of policies that seek to maintain social stability. Still, as Samuel (1902) puts it ‘the state must be cautious in taking up industrial functions’ (p. 148). Endorsing liberal planning does not mean allowing the state to take full control of the economy. The difference between social liberals and socialists is that for the latter ‘the road is not obscure’; they do not acknowledge the ‘dangers’ of state expansion, according to Samuel (1902: 149). To avoid the dangers of planning, the separation of state and civil society must be reinstated. The separation is also needed to allow the state some autonomy from unions and interest groups that may seek to steer policy in their interest. In fact, Samuel (1902: 151) argues, if price and wage levels were determined by political discretion instead of impersonal market mechanisms, governments would face the constant ‘protests of organised classes who would each be constantly using its political power to improve its economic position’. In undertaking social reforms, the state must thus be able to simultaneously moderate working-class demands for redistribution. As Robertson (1912: 233) explains, the ‘popular class-interest is a great motive power towards social betterment’ it is nonetheless ‘a motive power that needs enlightenment and constant correction’. For social liberals, a sound government must resist both the sway of socialist ideologies and the allegedly exorbitant demands of workers. In sum, liberal planning is a ‘dangerous act’ that must be undertaken in a disciplined and safe manner to avoid disrupting the liberal order.

It should be acknowledged that social liberalism contains both conservative and more radical elements. For instance, like many key liberal figures from Adam Smith to John Stuart Mill, Keynes’ thought has been subject to diverging interpretations with some describing his contribution as just a distinct brand of neoliberalism and others as radically socialist (Crotty, 2019; Henry, 2018). James Crotty (2019: 2) advances the most sustained interpretation of Keynes as a liberal socialist who wants to replace capitalism ‘with a planned or state-guided socialist economic system’. For Crotty, had Keynes’s proposals been implemented, the result would not have been just a different version of capitalism but an entirely different social system. Indeed, Crotty (2019: 10–11) suggests that while markets, money and consumer choice would continue to exist, this would no longer be capitalism because the bulk of investment decisions would be determined through collective political processes. For Crotty, the reason why the post-war economy did not take the form of Keynes’ ‘liberal socialism’ is that both policymakers and mainstream economists failed to fully embrace Keynesian ideas. However, as I want to argue below, the capitalist character of the state cannot be reduced to the ideological leanings of governments. If social reform were to take an anti-capitalist turn it would not just involve a battle over ideas but over the class relations that sustain the modern state. By drawing the line ‘too far’, social reform risks provoking mass capital disinvestment and lead to the state’s exclusion from the global circuits of money. Faced with such a threat, the state can either succumb to the discipline of global capital or confiscate the property of capitalists (see Benanav, 2020: 70–71; Smith, 2017: Ch. 8). Wresting control over private resources from capitalist hands is, at the end of the day, not a matter of fine-tuning policy but a matter of revolutionary strategy. Social liberalism, however, emerged as a moderate alternative to both old-school laissez-faire and revolutionary socialism (see Allet, 1981). As a result, even if the intent of certain social liberals is radical social change, in practice social reform has historically ‘drawn the line’ in ways that ultimately reproduce the disciplinary logic of capital.

The Limits of the Capitalist State

For Wood (1995), the bifurcation of society into a political and economic sphere is a historically novel phenomenon that emerges with the dissolution of feudal serfdom and the rise of capitalist property relations. Modern society is founded on a historically unique division of labour between state and civil society: the ‘political’ means of law-making and physical violence are centralised in the hands of the state while ‘economic’ functions related to the production and distribution of the social product are instead delegated to the market. Unlike pre-modern societies where this bifurcation was generally absent, in capitalism, the ‘allocation of resources and labour does not, on the whole, take place by means of political direction, communal deliberation, hereditary duty, custom, or religious obligation, but rather through the mechanisms of commodity exchange’. (Wood, 1995: 29). The distribution of the social product is chiefly regulated by the impersonal ‘“economic” forces of the commodity and labour markets’ (Wood, 1995: 28). Within capitalism’s bifurcated social order, different social functions are ‘allocated separately’ to the private/economic and the public/political realm (Wood, 1995: 30).

Although political Marxists such as Wood aptly trace the historical emergence of this overarching bifurcation, the work of Open Marxists explains in greater depth its implications for understanding the nature of the capitalist state (Bonefeld and Holloway, 1995; Bonefeld and Psychopedis, 2000). For Open Marxism, it is the state’s liberal form as an apparently neutral institution standing above civil society and its particularised social interests that reproduces the domination of capital over society (Bonefeld, 2010). The political-economic differentiation does not imply that state and market are independent of each other. It is precisely the differentiated allocation of economic and political functions to distinct entities that bring capitalist relations into being as a singular social logic. In the words of Bonefeld, ‘the political complements the economic as. . . different forms of the same fundamental class antagonism’ (Bonefeld, 1992: 113). Through its monopoly over the means of force, the state upholds property rights and secures the existence of civil society as a depoliticised realm where dispossessed proletarians and capitalist producers meet each other as formally free and independent market actors. As Open Marxists insist, the political-economic separation amounts to ‘an institutionalised illusion’ (Burnham, 1995: 101). Indeed, the ‘act of ‘depoliticising’ is itself political’ (Burnham, 1995: 101). The separation rests on the state’s capacity to continuously uphold the principles of private property and economic liberty against social struggles that threaten to politicise capitalist social relations.

In his mature work, Marx argues that this historically peculiar social arrangement gives rise to an impersonal form of domination that imposes itself on all social actors both within civil society and the state. For Marx (1976: 476), social interactions are impersonally regulated by the law of value, which ‘determines how much of its disposable labour-time society can expend on each kind of commodity’. Indeed, the value of the different types of commodities present on the world market is determined by the average labour-time expended by society as a whole to produce them. Capital can be valorised only to the extent that the labour expended ‘is socially necessary for the production of a use-value’ (Marx, 1976: 303). To realise their commodities’ full value in exchange, capitalist producers must match the productivity standards dictated by the market or otherwise face lower-than-average returns and potential bankruptcy. This competitive dynamic over productivity subjects the whole of society to a form of economic compulsion to permanently valorise capital just to avoid economic ruin (Bonefeld, 2023). The valorisation of capital recognises no limits and tends to overshoot the limits of both the market and the environment. Capitalism’s developmental logic consequently subjects society to escalating cycles of overproduction and stagnation, financial instability, labour market insecurity and environmental degradation (Alami et al., 2023; Moraitis, 2022). Value is both the regulatory principle of economic interactions in civil society and the source of various destabilising tendencies that threaten civil society’s successful reproduction.

Although Marx’s mature work does not systematically engage with state theory, his earlier work laid significant groundwork for understanding the state’s limits in a society ruled by value (Flohr, 2023). This is the case, for instance, of Marx’s (1975) ‘Critical Notes’ written in 1844. In the text, Marx’s primary aim is to show the limited capacity of social reform to address the modern ‘social evils’ of bourgeois society such as pauperism. As he argues, the modern state ‘no longer sets out to eliminate it [pauperism], but. . . strives instead to discipline and perpetuate it’ (Marx, 1975: 409). For Marx (1975: 411–412), the modern state is torn by a tension between ‘the vocation and the good intentions of the administration, on the one hand, and its means and powers on the other’. This tension expresses the ‘contradiction between public and private life’ on which the modern state is built (Marx, 1975: 412). The state is on the one hand endowed with an administrative apparatus that, in principle, it can mobilise to pursue public goals, yet at the same time, the state’s ‘means and powers’ are circumscribed by the boundaries of the public-private dichotomy. As he puts it, ‘the scope of its [the state’s] own power comes to an end at the very point where civil life and work begin’ (Marx, 1975: 412).

The consequences of the state’s limited character manifest most clearly when it comes to managing ‘the anti-social effects’ and crises of accumulation (Wood, 1995: 47). As Marx suggests elsewhere ‘the intervention of the state power’ has historically been necessary to hold in check ‘the measureless demands of Capital’ (Marx, 1988: 184). At the same time, state intervention does not necessarily eliminate the sources of crises. In ‘Critical Notes’, Marx observes the state’s limited power to overcome the social ills emanating from restless competition in civil society. As he puts it:

when we consider the consequences arising from the asocial nature of civil life, of private property, of trade, of industry, of the mutual plundering that goes on between the various groups in civil life, it becomes clear that the law of nature governing the administration is impotence (Marx, 1975: 412; emphasis in original).

For Marx, the modern state does concentrate society’s political power, but he also notes the fundamental impotence and ‘vacuity of such power in the face of the real, lived social contradictions that rift the space of civil society’ (Balasopoulos, 2012: 18).

Such impotence means that when the state does attempt to hold civil society’s crisis tendencies in check, it can only confine itself to a symptomatic treatment of social maladies. In fact, in ‘Critical Notes’ Marx stresses the self-defeating character of reformist approaches to government: governments vainly seek ‘the cure . . . in administrative measures’ (Marx, 1975: 411). The state can only address social defects indirectly, that is by reforming its own administration – its ‘organising agency’ – since it is the only thing that it directly controls (Marx, 1975: 411). In the case of pauperism for instance, Marx (1975: 409) argues, the state cannot go far ‘beyond administrative and charitable measures’; it can only address pauperism through public relief, administrative reform or punitive measures such as the establishment of workhouses. Yet such measures do not eliminate pauperism. Eliminating it would entail ‘the abolition of the proletariat’ and the ‘need to earn a livelihood’, something requiring the wholesale reorganisation of social relations, not mere administrative reform (Marx, 1975: 410).

The state’s ‘administrative impotence’ leads to an overarching political paralysis where the different political parties – progressive and conservative alike – fail to locate the ‘source of social evils in the “state and the organization of society”’ (Marx, 1975: 411). Instead, they tend to blame the ‘politics of the other party’ (Marx, 1975: 406). They attribute social ills to the dysfunctional policies introduced by opposing parties. Yet Marx insists the state’s structural impotence is built into the economic-political dichotomy, not unsound policies. As he puts it: ‘If the modern state desired to abolish the impotence of its administration, it would have to abolish the contemporary private life’ (Marx, 1975: 412). The ‘cut-throat world of modern business’ and the modern ‘organisation of society’ would cease to exist (Marx, 1975: 412). Thus, in response to the crises tormenting civil society, the modern state confines itself to measures compatible with its liberal form but insufficient to eradicate the roots of these crises. While for social liberals, upholding this boundary is necessary to preserve liberty, for Marx it simply reinstates society’s generalised subordination to the rule of value and its crises.

Open Marxists take Marx’s proposition forward by emphasising the dynamic and historically evolving character of the political-economic separation. As Holloway (1991: 236) notes, this separation is ‘not an established fact but an ever-repeated process’. Liberal governance is a tension-ridden exercise that continuously redraws the boundaries between state and civil society as the state responds to concrete social evolutions by adopting new functions and discarding others. On the one hand, the state is pressured to temporarily ‘overstep’ the boundaries of civil society and attenuate the effects of capitalism’s crises (Clarke, 1988: 147). On the other, it is pressured to uphold the primacy of private property to ensure the continuous flow of private investment within its borders (Holloway, 1995). State managers must reinstate the political-economic divide to signal global investors that profitability is insulated from the political pressures of social movements (Bonefeld, 2012). Affirming the political-economic divide is not just a normative liberal demand but a world market imperative. While the exact differentiation is determined by contingent political developments, global monetary flows pressure states to draw the line to avoid their exclusion from the circuits of global capital. Governing capitalism is a double-sided process whereby the state both negates its liberal form in the face of social expediency and affirms its to abide by market pressures.

Capitalism’s crisis-ridden development generates constant struggles over the ‘scale’ and ‘forms’ of state intervention even from within the liberal canon (Clarke, 1991: 43). For neoliberals for instance, the state’s responsibilities must be strictly circumscribed by constitutional rules that protect the free economy from mass demands for wealth redistribution (Bonefeld, 2012). Keynesianism instead proposes a more pragmatic approach to government that is more open to negotiating the boundaries between state and economy. It recognises that the preservation of liberal principles often requires the introduction of new state functions to ensure that poverty does not reach riot-inducing levels (Mann, 2017). Both Keynesian interventionism and neoliberal constitutionalism remain committed to the separation of state and civil society. Yet they propose different forms of intervention to ensure its viability. Liberal governance is a spectrum of governing tools that includes both neoliberal logics of market discipline and Keynesian impulses for greater intervention (Copley, 2022; Copley and Moraitis, 2021).

(Dis)continuities, Limits and Crises

In this last section, I highlight the implications of the preceding analysis for understanding the contemporary tensions in global capitalist governance.

The first implication is that the governance of capitalism involves both transformations in the forms of intervention and enduring continuities in upholding market rule. Debates on neoliberalism’s health status are in essence debates over continuity and change: either neoliberalism continues to dominate the principles of economic governance or we are at the brink of a paradigmatic change that sees the progressive abandonment of neoliberal principles. In practice, however, there is both continuity and change. For instance, the work of Alami and Dixon points to the proliferation of state capitalist impulses involving the ‘expansion of the state’s role as promoter, supervisor, and owner of capital across the spaces of the world capitalist economy’ (Alami and Dixon, 2024: 2). Yet they also point out that state capitalism has not replaced neoliberal impulses but has ‘been deployed alongside, and sometimes in tandem with, more conventional neoliberal policies’ (Alami and Dixon, 2024: 235; see Alami et al., 2024). An adequate account of capitalist governance must be able to explain simultaneously the accelerating changes in policymaking and the persistence of market rule. The question ‘is neoliberalism dead?’ tends to invite either/or answers that cannot satisfactorily explain both. Some resilience accounts attempt to explain this simultaneity by advancing a more dynamic account of neoliberalism as an adaptive political project compatible with a range of different state interventions. For instance, Peck and Theodore (2019) defend an expansive conception of neoliberalism according to which neoliberal states are always ‘more-than-neoliberal formations’ (p. 251). They suggest that we ‘should appreciate the conjunctural, cohabitative, and combinatorial forms that variegated neoliberalisms (must) take’ instead of looking for ‘fixed, narrow, and essentialized’ definitions (Peck and Theodore, 2019). Such conceptual flexibility is also problematic. It allows a continuous stretching of neoliberalism’s definition just to prove its hegemonic position. Neoliberalism’s resilience becomes a self-fulfilling prophecy: neoliberalism is still resilient because of its resilient nature. As I have suggested, rather than assessing the health of neoliberalism, it is more useful to explain the duality of contemporary governance by focusing on the nature and character of the capitalist state which is called to both manage the effects of capitalist crises and ensure the reproduction of commodity relations. In this vein, we can see the ‘politicised state interventions’ proliferating since 2008 as part of what states do and have always done to secure the reproduction of capitalist social relations (Burnham, 2011). They do not, in themselves, mark a departure from market rule. At the same time, the endurance of market rule is not simply due to neoliberalism’s hegemonic strength, as per the neoliberal resilience argument, or the failure of a new paradigm to emerge yet, as in the interregnum argument. Rather, the continuous subordination of state policy to the discipline of the market is symptomatic of what I refer to as the limited character of the state.

The second implication is that liberal governance is fundamentally an exercise in (re)producing and policing the boundaries between state and civil society. Liberal governance is bound by limits built into the nature of the capitalist state itself. As I argued, these intrinsic limits are well captured by the liberal theorists most sympathetic to state planning. Indeed, for reform liberals, the state must broaden the scope of planning but, crucially, also set clear limits to its responsibilities. In other words, liberal interventionism does not empower the state relative to the market but reintroduces market discipline at a different level. As such, the commitment to market discipline is not a neoliberal peculiarity but a commitment central to the broader liberal tradition including these reform liberals that neoliberal theorists like Hayek have often designated as their political opponents. Keynes and Hayek, for instance, share the same commitment to the independence of civil society and warn against potential misuses of state power that would undermine it (Skidelsky, 2006). One could think of the tensions between the different varieties of liberalism as an internal dialogue over ‘where to draw the line’ between the political and the economic (Keynes, 1980: 386). The challenge of liberal governance is well captured by Keynes (1963: 313) in ‘The end of laissez-faire’: ‘We have to discriminate between what Bentham. . . used to term Agenda and Non-Agenda, and to do this without Bentham’s prior presumption that interference is, at the same time, “generally needless” and “generally pernicious”’. Where social liberalism innovates compared to 19th-century liberals is in recognising that what belongs to the government’s agenda and what belongs to the market realm is not set in stone but an indeterminate political process subject to contingent social developments. Where Hayek and the broader neoliberal tradition innovate is in their emphasis on the politically constructed character of the market (Bonefeld, 2017). For this tradition, a free and competitive market can be sustained only through appropriate state action. In the words of Röpke (1996), ‘a satisfactory market economy. . . does not arise from our energetically doing nothing’ (p. 28). The market is ‘an artistic conception’, ‘an artifice of civilisation’ that comes into existence only through ‘strenuous efforts’ (Röpke, 1996). In other words, the market is not a natural sphere preceding the state’s existence. It is state-enabled. As such, for neoliberals, liberal governance does not just distribute activities between the state and the market but also produces the distinction where it does not exist in the first place. The state, for Hayek (2001), must ‘plan for competition’; it must create the legal and institutional conditions that make the functioning of markets possible in the first place. Their different emphases notwithstanding, the social liberal and neoliberal traditions point to the dynamic character of liberal governance as an ongoing process of (re)producing the state-economy dichotomy.

A third implication is that the transformations in the scale and form of intervention reflect the intensity and reach of capitalist crises. The current tensions in the governance of capitalism may be best captured, not in terms of a struggle between competing hegemonic projects, but as a struggle internal to the state. This struggle consists of the political difficulties in managing the state’s impulse to mitigate the various crises of contemporary capitalism while affirming its liberal form. Contra the neoliberal demise argument, escalating form of state interventionism reflect not so much the strengthening of the state vis-à-vis the market, but the growing scale and gravity of the crises with which it is confronted. Ongoing transformations in the governance of capitalism showcase the state’s growing difficulty in upholding the political-economic separation and containing today’s crises ‘within the limits of its liberal form’ (Clarke, 1988: 19). Capitalist states across the world are called to manage the consequences of the global economy’s entrenched tendency towards economic stagnation, financial instability, persistent underemployment and the accelerating climate crisis. Although these crisis tendencies manifest themselves in uneven and variegated ways, they are global in reach. What is unique about the current moment is that states are not simply confronted with yet another transitory crisis, such as those typically associated with the ups and downs of the business cycle, but with a series of entrenched and worsening crises that render the governance of modern society increasingly uncertain and precarious. The result of these intersecting trends is an overall more fragile and accident-prone system that requires simultaneous and escalating forms of state intervention on multiple fronts to avoid social disintegration (Alami et al., 2023). Escalating interventionism, however, does not place the state in a better position to resolve these crises. Liberal planning is a tool of crisis management, not crisis resolution. The liberal form of the state does not limit the range and type of interventions states can undertake but their effectiveness in tackling the source of social ills (O’Kane, 2020). States have always deployed emergency or more permanent forms of planning to abate the social consequences of capitalist growth with various degrees of success. Yet neither planning nor market-making offer a durable solution. The sources of crisis emanate from the mode of social interaction in civil society, not the administrative measures of the state. As long as commodity exchange constitutes the mode of socialisation in the economic realm, the state can at best palliate the socially destabilising tendencies of capitalist growth, not arrest them, no matter the scale of intervention.