THE STATE AND LOCAL GOVERNMENT FINANCE
| Date | 01 June 1983 |
| DOI | http://doi.org/10.1111/j.1467-9299.1983.tb00509.x |
| Published date | 01 June 1983 |
THE STATE AND LOCAL GOVERNMENT FINANCE
CLIVE MARTLEW
The ’dual state’ thesis provides a useful starting point
in
analysing the relationship between
the central and local state. However the history
of
reform in local government finance
suggests that the dual state approach underemphasizes a number
of
important features of
the relationship. Notably the degree
of
diversity which exists between the interests
displayed by different sectors of the central state, the vertical linkages which exist between
national and local levels and the difficulty of pursuing coherent long term strategies in local
finance
.
INTRODUCTION
While a radical approach to the study of public administration has yet to be
coherently developed (Dunleavy 1982) there are parts of the field where progress
might be made. One such area is local government finance, and in particular the
financial relationships between state institutions arising from the demands made
by local services on the process of capital accumulation. There is now a range of
theoretical literature encompassing neo-Marxist and Weberian approaches which
provides a potential basis for a radical interpretation of these relationships.
One
of
the most important recent contributions has been that
of
Peter Saunders
(1981). He argues that the organization of the state is determined by the need
within the state apparatus structurally to segregate the potentially contradictory
issues of social investment and social consumption.
Saunders loosely follows O’Connor (1973) in arguing that different types
of
state expenditure may be classified according to the primary function they
perform. O‘Connor identifies two such categories:
social capital
which is
expenditure required for profitable private accumulation and
social expenses
which
is expenditure required to maintain social harmony
-
that is to maintain the
‘legitimacy’ of the social system. Social capital can be sub-divided into two
components:
social
investment
which increases labour productivity and
so
increases profit
(e.g.
roads, ports, public utilities and education) and
social
consumption
which lowers the reproduction costs
of
labour and also increases the
rate of profit (e.g. education, recreation, housing subsidies). O’Connor’s
argument is that social investment, social consumption and social expenses
all
function in the interests
of
monopoly capital.
Saunders accepts that the distinction between ‘policies that primarily represent
Clive Martlew is Lecturer in Public Administration, Glasgow College
of
Technology
Public Administration
Vol.
61
Summer
1983 (127-147)
0
1983
Royal
Institute
of
Public Administration
128
CLIVE
MARTLEW
a direct subsidy to capital
...
and those that represent principally a subsidy to the
working population’ (Saunders
1981,260)
can provide the basis for useful insights
into the behaviour of the state. His ‘dual state’ thesis holds the two forms of
spending to be potentially contradictory in that there is a conflict within the state
between committing resources to the support of private sector profitability (social
investment) and committing resources to provide for the welfare of the working
population (social consumption).
Policy in the two forms of state intervention is determined in a manner which
reinforces these potential contradictions. Issues of social investment are said to be
mediated through a ’corporate‘ process of negotiation between large capital,
organized labour and the state. While the question of fiscal policy is left somewhat
vague,
it
appears to be equated with the social investment function and not
distinguished
from
it.
A
corporatist form of mediation of issues concerning social
investment and fiscal policy
is
said to lead to the development of ’coherent
planning strategies’.
Social consumption issues on the other hand are mediated through a
‘competitive’ mode where non-incorporated interests such as public service
clients and small business press their demands.
A
further conflict then arises
between planning and democratic accountability.
One method of managing these conflicts
is
by structurally segregating each
function at
a
different level of the state: social investment at national and regional
level, and social consumption at local level. The ultimate subordination of the
latter to the former is a reflection of this position. The actions of local state
managers are held to be an expression of the contradictory functions, modes of
mediation and levels
of
state activity. They neither have separate interests nor are
they mere cyphers of dominant class interests.
A
number
of
difficulties relevant to the application of this framework to local
finance are evident. Firstly, it is not at all clear that the basis of the dual state thesis
-
the distinction between social investment and social consumption
-
can be
operationalized. Most state expenditure
is
of a ‘mixed type’ and cannot be
classified unambiguously. Thus, education expenditure constitutes social
investment to the extent that it raises the technical abilities of the workforce, and
social consumption to the extent that it increases individual earning power or
enhances the quality of life. Equally, public housing, in its importance to the
construction industry and its relevance to living standards,
is
both social
investment and social consumption.
I
take O’Connor’s assertion that ‘we can
determine the political-economic forces served by any budgetary decision, and
thus the main purpose (or purposes) of each budgetary item’
(1973,7)
to mean that
the classification of any particular type of spending will depend
on
the purposes it
serves in practice
and
cannot be determined in advance; nor can
it
therefore be
used as the basis for distinguishing levels
of
the state apparatus.
The difficulty of operationalizing the concepts of social investment and social
consumption raises the question of whether or to what extent the contradictions
between them provide the major basis of institutional conflict within the state.
I
hope to demonstrate that while conflict between and within different forms of
state spending does occur, beneath
it
lies a much more fundamental contradiction
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