Discuss the impact of globalization on the internal functioning of the state. (2016, 10 Marks)
The Westphalian state claimed supreme control over what happens within its territory and what crosses its borders. Susan Strange (The Retreat of the State, 1996) argued that where states were once masters of markets, markets now master states. Inside the state, though, the record shows reorganisation more than retreat.
How the internal machinery changes
- From provider to regulator. Privatisation shrinks the producing state, while Giandomenico Majone’s regulatory state grows: independent agencies such as SEBI, TRAI and the Competition Commission in India, deliberately insulated from elected control.
- The competition state. Philip G. Cerny (1997) describes states reorganising policy to attract mobile capital. India’s 2019 corporate-tax cut, the four labour codes in force from 21 November 2025 (consolidating 29 laws) and states’ investor summits fit the pattern; Atul Kohli (Poverty Amid Plenty in the New India, 2012) calls the result a pro-business state.
- A new balance inside the executive. Finance ministries and central banks gain ground over welfare and labour departments, which Robert W. Cox calls the internationalisation of the state. India’s FRBM Act (2003) and the RBI’s inflation-targeting Monetary Policy Committee (2016) show it, while credit ratings discipline budgets in advance.
- Executive over legislature. Trade and investment treaties are negotiated by the executive and presented to parliaments as packages, and federal units find their subjects bound by external commitments.
- Welfare restructured. Bob Jessop traces a shift from the Keynesian welfare state to a workfare state; elsewhere welfare is retargeted, as in India’s direct benefit transfers.
- Supraterritorial problems. Climate change, pandemics and capital flight cannot be solved alone, so domestic policy is increasingly made through international regimes, and diasporas now shape domestic campaigns.
The limits of the erosion thesis
- Linda Weiss (The Myth of the Powerless State, 1998) shows that domestic institutions mediate external pressure, and Georg Sørensen finds that capable states bargain while weak post-colonial states lose substance.
- States still discipline transnational firms. Australia’s News Media Bargaining Code (2021) pushed platforms into paying publishers, and under Canada’s Online News Act (2023) Google agreed to pay about C$100 million a year, though Meta blocked news instead. India’s Digital Personal Data Protection Act (2023) asserts territorial jurisdiction over data.
- Crises reinstate the state. The 2008 bailouts and the COVID-19 lockdowns, income support and vaccination drives were state actions, and so is the industrial-policy revival of 2022–26.
Conclusion
Globalisation has rewired the state: it is leaner as a producer, larger as a regulator and more executive-centred. The impact varies with state capacity, so no single verdict applies everywhere. The real cost is the democratic deficit: decisive economic parameters increasingly lie beyond electoral contest.