ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Politics and Governance

The debacle of the Soviet Union pro mpted many to reassert the inherent contradictions of a centrally controlled socialist system or the so-called command system of allocation and distribution of resources. On the other hand, the recent and lingering financial crisis, starting with corporate scandal in the United States followed by the bank failures and recession in the US and the UK and then fiscal profligacy and debt crisis in Europe, seems to have energised and consolidated the critiques of the capitalist system. To someone either inadequately endowed to understand the complex processes that characterise such events or to those who are turned off by the endless debate on a desired social order, an elementary proposition should not be so difficult to appreciate. In all events of economic and political crises, the role of the sovereign intervening institution, called the state, has been terribly undermined. In a way, whatever evolved through a particular historical process in a specific context as “the” desired role of the state got utterly compromised over the years.

The financial crisis that plagues the entire western hemisphere has been fundamentally inspired by the negligence towards state-supervised and administered regulations that are essential for guiding markets in general and financial markets in particular. Deep-rooted misunderstanding regarding the role of the State in a competitive capitalistic order is manifested time and again in statements celebrating “free trade” when an elementary theorem in trade theory asserts that gains from trade cannot be shared by all unless the State designs compensation schemes for the losers by taxing the gainers. While in a capitalist order the role of the State has a tendency to get a backseat due to the underlying political ethos of the system, it is not so easy to see how the State is actually undermined in a centralised state-controlled command system. The paradox that the State might be undermined by itself can be resolved to some extent once we admit that the singular political party in a socialist system may have a tendency to undermine the State, the governing institution. We know that the rules of the game, i e, the rules which dictate allocation and distribution of resources, have to be different in socialist and capitalist orders. Yet, given those rules, the State has to function to see that such strictures are not violated or twisted at will to serve any purpose extraneous to the constitutional directives provided to the State.

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