The State’s Evolving Role in the Era of Globalisation

The State was once seen as the ultimate protector – the provider of welfare, the regulator of markets, and the guardian of citizens’ rights. But the rise of globalisation over the last three decades has fundamentally rewritten this script. Borders have become porous to capital, ideas, goods, and even diseases. International institutions shape domestic policy. Private corporations rival governments in economic heft. So, what exactly does the State do now? And more importantly, what should it do? This post explores how the State’s role is evolving in the globalisation era, the tensions this creates for public administration, and the delicate balancing act required to ensure that equity does not get sacrificed at the altar of efficiency.

From welfare provider to competitor 🔗

For most of the twentieth century, the State – particularly after the Second World War – positioned itself as a welfare provider. It built hospitals, ran schools, owned steel plants, operated airlines, and intervened in the economy to smooth out market failures. In India, the years between Independence and 1991 saw a strong State that controlled what was produced, in what quantity, at what price, and by whom.

That model began unravelling in 1991. Facing a severe balance-of-payments crisis, the government launched the Liberalisation, Privatisation and Globalisation (LPG) reforms under then Finance Minister Manmohan Singh. Industrial licensing was dismantled, public sector monopolies were opened up, and the economy was plugged into global trade and investment flows. The administrative apparatus that once granted permits and approvals had to reinvent itself almost overnight.

The emergence of the Competition State 🔗

This transformation produced what political scientist Philip G. Cerny famously called the Competition State. Rather than shielding citizens from market forces, the Competition State actively exposes the domestic economy to global competition and reorients itself to attract mobile capital. Cerny argued that the transformation of the nation-state into a Competition State lies at the heart of political globalisation, as both State and market actors try to reinvent the State as a quasi-enterprise in a wider global context.

Paradoxically, this does not mean less State. In fact, Cerny observed that this process may actually require an expansion of regulation and intervention in the name of competitiveness and marketisation. The State sheds some old functions – running factories, fixing prices, providing cradle-to-grave welfare – but picks up new ones: drafting competition law, enforcing intellectual property rights, regulating capital markets, managing trade agreements, and chasing foreign direct investment.

Commodification of the State’s functions 🔗

One of the sharpest criticisms of the Competition State is that it commodifies functions that were once considered inherently public. Water supply, health, education, transport, and even security have increasingly been opened up to private delivery. Public administration thus moves from a decommodifying role – protecting citizens from pure market logic – to a commodifying one, where services are priced, contracted out, and measured by efficiency metrics.

This shift is closely tied to the rise of New Public Management (NPM), which borrows heavily from private-sector practices. Governments are expected to deliver high-quality services that citizens value, maintain rigorous performance management, and be receptive to competition. This new paradigm, variously called ‘redesigning the state’, ‘reinventing government’ and ‘new public management’, has been described as a good example of globalisation at work, spreading technological change and managerial ethics across nation-states and international institutions alike.

A paradox, not a retreat 🔗

It is tempting to describe all this as a “rolling back” of the State. The reality is messier. According to the United Nations World Public Sector Report 2001, globalisation does not actually reduce the size of the State; governments of open economies tend to spend a significantly larger portion of GDP and collect additional taxes for the task. What changes is what the State spends on, how it regulates, and which coalitions it builds.

Challenges to the State’s traditional role 🔗

Globalisation has squeezed the State’s capacity to protect the disadvantaged in several visible ways.

Erosion of policy autonomy 🔗

International financial institutions, trade agreements, and credit rating agencies now shape domestic economic decisions. Loan conditionalities attached to structural adjustment programmes often require reductions in subsidies, privatisation of public enterprises, and cuts in social expenditure. Policy making, scholars argue, has been shifting downwards, outwards and upwards under devolution, privatisation and internationalisation – with the State transforming from a political vanguard of a community into a manager of an internationalised economy operating under the competitive logic of global capitalist production.

Shrinking public space 🔗

When public spending on social sectors is trimmed to maintain fiscal discipline demanded by international investors, the consequences fall hardest on the poor. Critics in the Indian context have repeatedly pointed out that aggressive liberalisation tends to deepen inequality, weaken social safety nets, and concentrate the gains of growth among the already-privileged.

Human security threats that cross borders 🔗

Climate change, pandemics, organised crime, cyber-attacks, and terrorism do not stop at national frontiers. No single government – however powerful – can address them alone. The COVID-19 pandemic made this painfully obvious, exposing how dependencies in supply chains, vaccine production, and health infrastructure run across countries. The State must cooperate, but cooperation often demands compromises on sovereignty.

The opportunities hidden inside globalisation 🔗

Despite these pressures, globalisation is not a one-way story of decline. It has also given the State powerful new tools to address issues that were once considered purely domestic.

Human rights and social awareness 🔗

Faster communications and social media have made rights violations more visible, and have created transnational movements that hold governments accountable. Social globalisation has created greater awareness of human rights violations, child labour abuses and corruption, with lower transport and communication costs giving people new tools for disseminating information on democracy, poverty alleviation and transparency. International treaties and conventions – on the rights of children, on the elimination of discrimination against women, on the rights of persons with disabilities – give States both a benchmark and a push to legislate domestically.

Gender equality and inclusion 🔗

Global norms have accelerated domestic reform in areas like gender equality, LGBTQ+ rights, and protections for marginalised communities. Courts and legislatures increasingly refer to international human rights standards while interpreting constitutional guarantees. This cross-pollination of ideas would have been far slower in a less globalised era.

Sustainable development and climate action 🔗

Multilateral frameworks like the United Nations Sustainable Development Goals and the Paris Agreement on climate change have created shared vocabularies and targets that guide national policy. States can leverage global finance, technology transfer, and peer learning to tackle problems that no country can solve alone.

Knowledge and technology transfer 🔗

Globalisation has enabled the inward transfer of knowledge, skills, and technology. India’s rapid strides in IT, pharmaceuticals, telecommunications, and digital public infrastructure – from UPI to Aadhaar-linked direct benefit transfers – owe a great deal to this exchange.

The balancing act for public administration 🔗

The real test for the State today is not whether to engage with globalisation – that ship has sailed – but how to engage on terms that preserve social equity, human security, and long-term development. Public administration today is caught between the pressures of globalisation and the demand to be more humanistic, eco-friendly and egalitarian.

Reimagining the role as facilitator and regulator 🔗

Rather than producing goods and services directly, modern governments increasingly act as facilitators, creating enabling environments for growth; regulators, writing and enforcing the rules of the market; strategic investors, directing resources to areas where markets fail; and coordinators, mediating between stakeholders. Initiatives like India’s Digital India programme illustrate this new posture, with the State enabling the ecosystem rather than owning every piece of it.

Strengthening social safety nets 🔗

A Competition State that abandons the poor is politically and morally unsustainable. Mechanisms like the Mahatma Gandhi National Rural Employment Guarantee Scheme, the National Food Security Act, and Ayushman Bharat represent conscious attempts to rebuild the social floor in an open economy. The idea is simple: markets generate growth, but the State must ensure the benefits of that growth are widely shared.

Building administrative capacity 🔗

Civil servants today need competencies that their predecessors never required – knowledge of international trade law, data governance, climate science, public-private contracting, and cyber-security. Training institutions like the Lal Bahadur Shastri National Academy of Administration have been reworking curricula to prepare officers for this complex terrain.

Keeping democracy at the centre 🔗

Technocratic competence is not enough. Globalisation can produce winners and losers very quickly, and without democratic deliberation the losers are rarely heard. Participatory planning, strong local governments under the 73rd and 74th Constitutional Amendments, transparent procurement, and active civil society engagement are essential correctives against a State that listens only to global capital.

The Indian experience in perspective 🔗

India’s post-1991 journey captures these tensions vividly. Three decades of reforms have lifted hundreds of millions out of extreme poverty, created a vibrant private sector, and made India one of the world’s largest economies. At the same time, inequality has widened, agrarian distress persists, informal employment dominates, and environmental costs have mounted. The Indian State has not disappeared; it has been reshaped. It runs a vast digital welfare architecture even as it courts foreign investors, negotiates trade deals, and sits at the high tables of G20, BRICS and the UN.

The challenge going forward is to ensure that the pursuit of competitiveness does not hollow out the constitutional promise of justice – social, economic and political – enshrined in the Preamble. The Competition State works best when it remembers that it is, first and last, a democratic State answerable to its citizens.

What do you think? 🔗

What do you think? In your view, has the shift towards a Competition State made the government more efficient at serving citizens, or has it quietly narrowed the space for welfare and equity? And which traditional responsibilities – if any – should the State never outsource to the market, no matter how globalised the economy becomes?

References

1. https://en.wikipedia.org/wiki/Economic_liberalisation_in_India
2. https://www.cambridge.org/core/journals/government-and-opposition/article/abs/paradoxes-of-the-competition-state-the-dynamics-of-political-globalization/D3C41C1416BC222939036273AE94085D
3. https://www.researchgate.net/publication/229755584_Paradoxes_of_the_Competition_State_The_Dynamics_of_Political_Globalization
4. https://repository.up.ac.za/bitstream/handle/2263/24284/02chapters4-5.pdf
5. https://www.cvs.edu.in/upload/bureaucracy.pdf
6. https://academic.oup.com/policyandsociety/article/40/4/522/6509338
7. https://sdgs.un.org/goals
8. https://unfccc.int/process-and-meetings/the-paris-agreement
9. https://www.digitalindia.gov.in/
10. https://nrega.nic.in/
11. https://www.lbsnaa.gov.in/