Discuss the factors responsible for the changing nature of states in contemporary industrial societies and explain its impact. (2026, 20 Marks)
The state in industrial societies such as the United States, Germany and Japan has changed its functions far more than its size. The Keynesian welfare national state of 1945–75, built on demand management, nationalised industry and social insurance, gave way first to a regulatory and competition state and, since 2008, to a selectively strategic and security-minded state. The causes are economic, ideological, technological and geopolitical; the result is a reshaped, not a retreating, state.
Factors behind the change
- Exhaustion of the post-war settlement: stagflation, the oil shocks of 1973 and 1979 and the end of Bretton Woods broke demand management. James O’Connor (The Fiscal Crisis of the State, 1973) showed the costs of accumulation and legitimation outgrowing the tax base.
- Ideological counter-revolution: Friedrich A. Hayek‘s case that planners cannot command dispersed knowledge, public choice theory of budget-maximising bureaucrats, and Robert Nozick‘s rights argument supplied the programme of Margaret Thatcher and Ronald Reagan: privatisation, deregulation and independent central banks.
- Globalisation and financialisation: mobile capital disciplines fiscal choices. Susan Strange (The Retreat of the State, 1996) saw authority leaking to markets, and Dani Rodrik‘s trilemma (2011) holds that deep integration, national sovereignty and democratic politics cannot all be had at once.
- De-industrialisation: manufacturing moved east and wage inequality widened.
- Technology and demography: platforms, data and AI are new objects of regulation and tools of surveillance; ageing raises pension and health bills while shrinking the workforce that funds them.
- Geopolitical shocks: the 2008 crash, COVID-19, the war in Ukraine and US–China rivalry pulled security back into economic policy.
Impact on the nature of the state
- From producer to regulator: Giandomenico Majone‘s regulatory state does less directly but regulates more; the EU’s Digital Markets Act extends the logic to platforms.
- From welfare to competition: Philip G. Cerny‘s competition state and Bob Jessop‘s Schumpeterian workfare regime subordinate social policy to competitiveness through targeting and conditionality. Yet spending has held up; Paul Pierson (Dismantling the Welfare State?, 1994) showed retrenchment is politically harder than expansion.
- Pooled sovereignty: authority moves up to the EU and down to regions.
- The information state: digital identity and data surveillance make it more intrusive than the mid-century state.
- Return of the strategic state: the US CHIPS and Science Act (2022) and Washington’s 9.9% stake in Intel (August 2025); US tariffs since 2025, re-based on other statutes after the Supreme Court’s February 2026 ruling; NATO’s Hague pledge (June 2025) of 5% of GDP by 2035; Germany’s March 2025 exemption of defence from its debt brake. World military spending reached $2,887 billion in 2025, 2.5% of global GDP (SIPRI).
- Legitimacy strain: Colin Crouch‘s post-democracy and the populist surge, such as the AfD’s 20.8% in February 2025, reflect the erosion of the class compromise that legitimised the post-war state.
Weighing the change
Kenichi Ohmae predicted the state’s demise; sceptics such as Paul Hirst and Grahame Thompson denied real novelty; transformationalists like David Held describe reconfiguration, and the evidence favours them. Karl Polanyi‘s double movement explains the rhythm: market expansion provokes social self-protection, today in nationalist form. Convergence is limited; Peter A. Hall and David Soskice‘s varieties of capitalism show liberal and coordinated economies diverging under the same pressures. India’s post-1991 shift from licence-raj producer to a state of regulators (SEBI, TRAI, the Competition Commission) repeats the pattern in compressed form.
Conclusion
The industrial-society state is thinner in production but thicker in regulation, information and security. Its capacity has not withered; what has weakened is the consensus that made its authority legitimate, now the central contest of politics.