Mainstream WeeklyEl Salvador incarcerates 1 percent of its citizens, Argentina’s recent legislation allows employers to pay wages in goods, and India’s labor regulations redefine "essential service" widely enough to make most strikes illegal. The state power that got built under these regimes was not what was promised. These governments bypassed traditional legislative constraints using executive-driven emergencies, omnibus deregulation, and labor reclassification to dramatically expand state authority over citizens and workers.
These developments are not isolated national peculiarities but expressions of a broader structural tendency. While each government justified its actions in the language of economic efficiency or national development, the cumulative effect has been the expansion of executive power and the restructuring of legal institutions in ways that secure conditions favorable to capital while narrowing the political and economic autonomy of labor. This raises a more fundamental question: if the state repeatedly intervenes to reorganize social relations in favor of capital, can capitalism be understood simply as a market economy, or must it also be understood as a political and legal order constituted through state power? The answer requires moving beyond the conventional separation of state and market to examine their constitutive relationship.
Capitalism is often understood as merely an economic system organized around commodity exchange and private ownership. However, it is also a system of law, politics, and economics, whose existence is closely tied to the state. Although the market is the defining institution of capitalism, it is neither natural nor self-sustaining. The capitalist market presupposes a stable framework of property rights, contractual obligations, and legal certainty. These conditions do not arise spontaneously; they are constituted and enforced through legal and political institutions. These institutions derive their existence, power, and legitimacy from the overarching authority of the state. Rather than existing outside the market, the state provides the legal base within which capitalist exchange becomes possible. The state is not an external support for capitalism but part of the very social relations that make capitalism possible.
The material foundation of capitalism is the private ownership of the means of production. Private property, however, is not merely an economic category — it is a legal relation created and defined by the state. The legal ownership of property acquires meaning only when it is defined, recognized, and protected by law. Property rights, contracts, and commercial transactions all depend upon legal institutions that enforce them. Thus, capitalism presupposes a state that guarantees legally enforceable property rights and provides the institutional framework on which markets depend.
Where the state must actively intervene to create, secure, and reproduce the legal and political conditions necessary for capitalism, it assumes a central role. Classical liberalism characterized the state as a "night-watchman" institution that refrained from interfering with the market. However, the apparent "minimalism" of the liberal state is a misleading ideological representation; the state was never outside the economy, nor outside the process that shaped its subsequent development.
Capitalism has never been a self-regulating economic order existing independently of political authority. It has always relied upon an active legal state to establish, maintain, and adapt the conditions necessary for the reproduction of capitalist social relations. These social relations are constituted by the state’s legal recognition of private ownership of the means of production, wage labor, and capital accumulation.
Because the state is constitutive of capitalism, its role has not been static across the historical development of capitalism. The ways in which the state intervenes have changed over time, leading to corresponding changes in the legal and political functions of the state across different stages of development.
Crises are endogenous to capitalism, and capitalism adapts itself through them. Each crisis compels the state to undertake legal, political, and institutional changes. Because the state is the ultimate crisis manager, it repeatedly steps in to redesign its legal form and institutional arrangements to stabilize existing social relations and restore the conditions necessary for continued accumulation. The evolution from liberal, fascist, Keynesian, and neoliberal states may therefore be understood not as a sequence of unrelated political regimes, but as historically contingent responses of the state to successive crises of capitalist accumulation, and as modes of governance capable of stabilizing capitalist social relations. Thus, the history of capitalism is also the history of the capitalist state’s responses to crises.
Among the various responses through which the state has sought to stabilize the conditions producing capitalism, fascism has a distinctive place. It emerged as a historically specific response to the economic, political, and social crisis in Europe during the interwar period. The economic collapse precipitated by the Great Depression, the inability of liberal parliamentary regimes to provide stability, the growing strength of communist movements, and mass unrest collectively generated a crisis that threatened the conditions necessary for accumulation.
Fascism emerged as an exceptional state response when the liberal institutions of the state could no longer secure the political conditions necessary for the reproduction of capitalist social relations. The significance of fascism, therefore, lies not merely in its authoritarianism but in the transformation of the state’s legal and political functions. Whereas the liberal state sought to reproduce capitalism primarily through the legal protection of markets and private property while maintaining the appearance of political neutrality, the fascist state openly reorganized law, political authority, and civil society to suppress class antagonism and eliminate organized labor and socialist opposition, in order to restore the conditions for capitalist accumulation. Fascism represented not the abandonment of the capitalist state but its reconstitution in response to crisis.
Fascism, as a technique of authoritarian governance, was a comprehensive ideological project that sought to reconstruct the relationship between the state, society, and capital. The liberal conception of the state as a politically neutral guarantor of market exchange was bypassed; the state lost its appearance of neutrality, and society was conceived as subordinate to the collective destiny of the nation, in service of protecting the profit motive of capital.
This ideological transformation fundamentally altered the character of law. Under liberal capitalism, law derived its legitimacy from claims of neutrality, equality before the law, and the protection of private rights. Fascist law abandoned this appearance of neutrality. Law became an explicitly political instrument through which the state reorganized society in accordance with the ideological imperatives of national unity, authority, social discipline, and the preservation of political order — all in service of capital stabilization.
The legal and political institutions of the state did not erode; they were politicized. Instead of concealing the political prerequisites of capitalist accumulation behind the language of legal neutrality, the fascist state subordinated legal institutions to the political project of preserving capitalist order. Socialist and communist organizations were outlawed, trade unions were banned, and civil liberties were curtailed to advance the interests of capital. As a result, law functioned less as an impartial framework governing market relations than as a direct instrument of suppression.
Fascism sought to secure consent not by presenting itself as a politically neutral arbiter, but by grounding authority in an ideology centered on the myth of national regeneration. However, consent alone could not sustain the regime. As material contradictions deepened and the basis for stable consent collapsed, the state turned overwhelmingly to coercion, replacing liberal hegemony with overt state coercion and nationalist mass mobilization.
The violence committed by the fascist state was justified as a necessary means of defending the nation against its internal and external enemies; it was therefore not an accidental excess of the fascist state but a constitutive element of its legal and political order. Political violence, censorship, surveillance, emergency legislation, and the systematic repression of organized labor movements were not exceptional departures from fascist legality but integral components of it. The defining characteristic of the fascist state is the politicization of state institutions, in which political neutrality is apparently lost. The reconfiguration of the relationship between hegemony and coercion replaced a failing liberal hegemony with a nationalist one, backed by far more visible coercion.
While fascism represented one historically specific response to the crisis of capitalist accumulation, it did not become the permanent form of the capitalist state. After the defeat of fascist regimes, the postwar settlement gave liberal capitalism a temporary boost in stability. This settlement, however, proved historically contingent rather than enduring.
By the late 1960s, the postwar model of capitalist development entered a profound structural crisis. The economic growth sustained through state intervention, welfare expansion, and collective bargaining began to unravel under the pressure of declining rates of profit, resulting in stagflation. The legal and institutional structure of the welfare state — public ownership, labor protections, collective bargaining frameworks, welfare entitlements, extensive state regulation, and redistributive policies — had also become increasingly incompatible with the renewed imperatives of capital accumulation. As profitability declined, these institutional arrangements could no longer serve as mechanisms of stability but instead became legal and political constraints upon accumulation. The crisis, therefore, was not simply one of economic stagnation but of the existing legal and institutional order through which capitalism had been governed in the postwar period.
The response to this crisis was neither a return to liberalism nor a revival of overtly authoritarian political forms like fascism. Instead, capitalism underwent another process of institutional adaptation through the emergence of neoliberalism as a new mode of capitalist governance.
The neoliberal restructuring of the state was principally undertaken through comprehensive processes of liberalization, privatization, and deregulation — legal and political reorganization strategies adopted by the state to overcome the crisis of accumulation and restore profitability. Liberalization sought to remove legal and administrative barriers restricting the movement of capital, investment, goods, and services across national boundaries. Privatization transferred public utilities and essential services from public ownership into private enterprise, thereby creating new avenues for capital investment and profit generation. Rather than eliminating state intervention, neoliberal states dismantled legal rules that restricted the flow of capital while simultaneously introducing new legal frameworks to secure competition, protect investors, strengthen property rights, and facilitate financial expansion.
The reproduction of capitalist social relations remains the essential function of the state, but the legal form and political rationality through which it is accomplished change. The legal and political rationality of the neoliberal state is defined by organizing state power around the imperatives of market competition, efficiency, and capital accumulation. Its distinctive feature is the depoliticization of economic governance. In doing so, the neoliberal state constructs a new form of hegemony by portraying market outcomes as beyond political contestation and as naturally occurring. The legal order thus conceals its political character by presenting itself as the objective embodiment of economic rationality.
This depoliticization constitutes a distinctive form of neoliberal hegemony. Consent is secured not through mass mobilization but through the normalization of market rationality. Individuals are increasingly constructed as entrepreneurial and self-responsible market actors rather than as members of social classes. Structural inequalities are reframed as questions of individual productivity, employability, or competitiveness, while class relations are obscured by the language of opportunity and personal responsibility. Market rationality becomes the dominant common sense of society.
The market becomes the most rational, efficient, and legitimate principle for organizing society itself. Competition, entrepreneurialism, privatization, and individual responsibility are naturalized as objective economic imperatives rather than contested political choices. Neoliberalism thus depoliticizes social relations by translating political questions concerning property, labor, inequality, and redistribution into technical questions of efficiency, productivity, investment, and economic management. The technocratic character of neoliberal governance constitutes a powerful hegemonic strategy by presenting market-oriented reforms as objective necessities rather than political choices.
Citizens are positioned less as political subjects capable of collectively shaping social relations than as rational market actors responsible for maximizing their own productivity as human capital. Social problems such as unemployment, poverty, or inequality are correspondingly interpreted as failures of individual adaptation to market conditions rather than as consequences of structural class relations or political decisions.
Neoliberalism does not eliminate politics; it conceals political choices behind the language of economic necessity, presenting historically contingent policies as if they were the only rational and scientifically justified course of action. The effect of this transformation is the consolidation of a distinct form of capitalist statehood. State intervention is not diminished but reconstituted around the imperatives of market competition and capital accumulation, while simultaneously appearing politically neutral and technically objective. The neoliberal state therefore exercises power less through overt political command than through the institutionalization of market rationality within law, public administration, and economic governance.
Coercion under neoliberalism is no longer concentrated in overt political repression; it is not exercised through exceptional measures but is instead embedded within the ordinary operation of legal and political institutions. The coercive dimension of neoliberal legality is evident in labor law reforms that increasingly prioritize labor flexibility over employment security, in the weakening of collective bargaining, and in the facilitation of contractual work leading to precarious forms of employment.
Hegemony is secured by establishing market rationality as the dominant common sense through which individuals understand both society and themselves. The interests of capital increasingly appear as universal economic necessities. Coercion, however, remains constitutive of neoliberal rule. Rather than being concentrated in spectacular displays of political violence, it is dispersed throughout the legal and institutional order. The coercive power of the state is therefore rendered less visible — not because it has diminished, but because it is increasingly mediated through legal and economic institutions that present themselves as politically impartial. Through decades of institutional transformation — restructuring law and politics and reshaping prevailing common sense and subjectivity — neoliberalism produces ideological change in everyday life in an exceptionally pervasive manner.
The historical trajectory of capitalism demonstrates that the state has never been external to the market, nor a passive guarantor of economic exchange. Rather, it has remained an indispensable legal and political institution through which capitalist social relations are constituted, reproduced, and transformed. The transition from the liberal state — which legitimized accumulation through claims of legal neutrality — through the fascist state — which openly instrumentalized law in the name of national unity — to the neoliberal state — which reconstructs capitalist order by appealing to market rationality and economic necessity — reflects the changing forms of state power in response to successive crises of capitalism. Yet these transformations have not altered the state’s fundamental function. The legal rationality, ideological justification, and institutional strategies of the capitalist state have evolved historically, but each has sought to stabilize the conditions necessary for the continued reproduction of capitalist social relations. The history of the capitalist state is therefore not one of diminishing intervention, but of changing modalities of rule, in which law, hegemony, and coercion are continually reconfigured to secure the persistence of capitalism under new historical conditions.
(Author: Divya Rashmi is a student of international law at South Asian University)