Evolution of State Theories: From Liberalism to Neo-Liberalism

The modern State is one of those ideas that seems deceptively simple at first glance – a sovereign authority that governs a defined territory and population. But scratch the surface, and you will find that philosophers, political scientists, and public administration scholars have been arguing about its true nature for centuries. From classical liberals who wanted the State to stay out of the way, to Marxists who saw it as a tool of class domination, to neo-liberals who pushed for a return to market-led governance, the conversation has never really settled. Understanding how our thinking about the State has shifted over time is crucial for anyone studying public administration, because every policy decision – whether it is about subsidies, privatisation, or welfare schemes – is ultimately rooted in a particular theory of what the State is supposed to do.

Why the nature of the State keeps changing 🔗

Political thought, broadly speaking, is concerned with the structure, nature, and purpose of the State. Unlike the natural sciences, where new theories replace old ones, political theories often coexist. Old and new ideas exist simultaneously, each claiming its rightful place, and thinkers constantly criticise or modify earlier formulations as new conditions emerge.

This is why debates around the State are rarely settled once and for all. Each generation of thinkers responds to the crises and contradictions of its own time – industrialisation, war, economic depression, decolonisation, globalisation – and reimagines what the State should be. The result is a layered intellectual tradition where liberal, Marxist, and neo-liberal perspectives often conflict, making it difficult to arrive at a single, holistic view of the contemporary State.

The liberal foundations: individual at the centre 🔗

Liberalism, as an ideology, is built on a commitment to individualism, freedom, toleration, and consent. The classical liberal vision of the State emerged in the seventeenth and eighteenth centuries through thinkers like Thomas Hobbes, John Locke, and later Adam Smith, all of whom shared a deep scepticism of concentrated political power.

Classical liberals believed that the government’s role should be restricted to protecting individual rights, maintaining law and order, and defending the nation. Anything beyond this was viewed with suspicion. John Locke’s social contract theory, elaborated in his Two Treatises of Government, proposed that people voluntarily surrender some freedoms to the State in exchange for the protection of their natural rights to life, liberty, and property.

The negative liberty tradition 🔗

Early liberalism rested on a few core features: inalienable natural rights, a clearly demarcated sphere of individual action, and the idea of liberty as absence of interference from the State. The individual was conceived as atomic and self-sufficient, owing little to society. Thomas Paine famously called the State a “necessary evil”, while Jeremy Bentham saw it as a utility provider meant to maximise happiness for the greatest number. Adam Smith provided the economic backbone of this view, arguing that if the State merely guaranteed the conditions of freedom, individuals pursuing their own material interest would produce a prosperous society on their own.

The shift to positive liberalism 🔗

By the late nineteenth century, industrial capitalism had revealed serious cracks in the laissez-faire vision. Poverty, unemployment, and inequality could not be wished away by invisible hands. Thinkers like T.H. Green and J.S. Mill reworked liberal theory to accommodate a more active State. For Green, the State is an instrument of perfection rather than an embodiment of perfection, and its function is to maintain conditions under which moral life becomes possible. Rights cannot exist without the State, because rights are maintained by it.

This shift gave birth to modern or welfare liberalism, which accepted the need for interventionist government to secure distributive justice, expand capabilities, and protect vulnerable sections of society. The Keynesian welfare State of the mid-twentieth century was the high point of this tradition.

The Marxist critique: the State as class instrument 🔗

While liberals debated how much the State should intervene, Marx and Engels offered a fundamentally different reading altogether. For them, the State was not a neutral umpire standing above society but a product of class conflict and an instrument of class rule.

According to Marxist theory, the State did not always exist; it emerged only when societies began accumulating surplus resources, leading to private property and class divisions. In primitive societies where resources were shared, there was no need for a coercive institution to arbitrate between competing economic interests. The State, in this view, is a historical product, not a natural or eternal one.

The instrumentalist and relative autonomy models 🔗

Marx and Engels did not leave behind a single, unified theory of the State. Scholars have identified at least two strands in their thought. Marx initially described the State as a kind of parasite – an institution alienated from society with its own bureaucratic logic. Engels, drawing on his observations of industrial England, developed what has come to be known as the class state: an instrument used by the economically dominant class to suppress others.

The Communist Manifesto’s famous claim that the executive of the modern state is essentially a committee managing the common affairs of the bourgeoisie became the foundation of the instrumentalist reading. Later Marxists like Ralph Miliband and Nicos Poulantzas refined this view. Poulantzas, in particular, argued that the State enjoys relative autonomy – it does not always take direct orders from capitalists, but its structures and functions systematically reproduce capitalist social relations.

Withering away of the State 🔗

The ultimate Marxist vision is radical: once class divisions are abolished, the State itself becomes redundant and eventually withers away. The proletarian revolution is meant to seize State power temporarily – the so-called dictatorship of the proletariat – use it to dismantle capitalist structures, and then dissolve it into a classless, stateless society.

Behaviouralism and the eclipse of the State 🔗

An important but often overlooked chapter in this story concerns the mid-twentieth century, when the State almost disappeared from mainstream political science. The behavioural revolution, which rose in the 1950s and dominated the 1960s, shifted attention away from institutions like the State and towards the study of observable political behaviour – voting patterns, group dynamics, public opinion, and decision-making.

As the behavioural approach established itself, a new emphasis on methodology and quantitative tools swept political science. Scholars like David Easton outlined the intellectual foundations of behaviouralism, stressing regularities in political behaviour, verification through testing, and value-neutrality in research.

In the process, the State as a distinct concept faded. As one account puts it, the State itself was downplayed, partially as a recoil from the overt statism of totalitarian regimes. Political scientists preferred to talk about “political systems” or “governments” rather than States, which seemed a loaded, old-fashioned term.

The return of the State in the late 1960s 🔗

The late 1960s and 1970s changed all that. Vietnam, civil rights movements, the oil crisis of 1973, stagflation, and widespread social unrest forced scholars to reckon with the coercive, distributive, and legitimating functions of the State all over again. A serious revival of Marxist interest in the State occurred during this period, stimulated by the apparent success of the Keynesian welfare national state and the contradictions it produced.

By the 1980s, the “Bringing the State Back In” movement, led by scholars like Theda Skocpol and Peter Evans, firmly re-established the State as a central object of analysis. Post-behaviouralism, as David Easton himself acknowledged, called for a political science that was more relevant, engaged, and attentive to real-world power structures – and you cannot talk about power without talking about the State.

The neo-liberal turn: rolling back the State 🔗

Even as the State made its comeback in academic theory, a very different political project was gathering steam in policy circles. By the 1970s, the welfare State was under strain. The oil shock, stagflation, high public debt, and the apparent failure of Keynesian economics to deliver stable growth created an intellectual and political opening for an alternative.

That alternative was neo-liberalism. Championed by thinkers like Friedrich Hayek, Milton Friedman, Robert Nozick, and Isaiah Berlin, neo-liberalism pushed for a return to minimal government and free markets. Their opposition to state intervention flowed from a deep concern for individual liberty, and all of them supported a largely negative view of liberty – freedom from state interference rather than freedom through state provision.

From Thatcher and Reagan to global consensus 🔗

Neo-liberalism moved from theory to practice in the 1980s. Margaret Thatcher in Britain and Ronald Reagan in the United States became its most prominent political faces. Leaders like Margaret Thatcher and Ronald Reagan implemented neo-liberal policies in the 1980s, pushing privatisation, deregulation, reduced trade union power, and cuts to social spending.

Thatcher popularised the now-famous “TINA” slogan – “There Is No Alternative”. The policies themselves were codified in 1989 by economist John Williamson as the Washington Consensus, a set of ten principles covering fiscal discipline, trade liberalisation, privatisation of public sector undertakings, deregulation, protection of property rights, and openness to foreign direct investment.

Neo-liberalism in India 🔗

For India, the neo-liberal moment arrived decisively in 1991. Facing a severe balance of payments crisis, the government adopted structural adjustment measures – dismantling the licence-permit raj, opening up to foreign investment, and reducing subsidies. The Reserve Bank of India’s later move towards inflation targeting and the emphasis on fiscal consolidation reflect the ongoing influence of neo-liberal priorities in contemporary governance. Disinvestment of public sector enterprises, GST rationalisation, and the push for ease of doing business all carry the unmistakable imprint of this tradition.

Competing perspectives, overlapping realities 🔗

What makes the contemporary State so fascinating – and so hard to pin down – is that all three perspectives remain active at the same time. The liberal tradition continues to underwrite discussions of rights, democracy, and rule of law. Marxist frameworks inform critiques of inequality, corporate capture, and the political economy of development. Neo-liberalism shapes policy choices around trade, regulation, and social welfare.

The 2008 global financial crisis is frequently cited as evidence of market failure resulting from inadequate State oversight – a failure of the neo-liberal model itself. In response, thinking has evolved towards what some call the “Post-Washington Consensus”, which gives more weight to institutional quality, regulation, and the State’s role in correcting market failures like public goods provision and externalities.

The Indian State as a site of all three traditions 🔗

India offers a particularly rich case. The Constitution carries strong liberal commitments – fundamental rights, rule of law, judicial review. The Directive Principles of State Policy gesture towards a welfare and quasi-socialist vision. Post-1991 reforms embedded neo-liberal logics into economic policy. Meanwhile, flagship schemes like MGNREGA, PDS, and direct benefit transfers suggest that the welfare State has not been abandoned but reshaped. The Indian State today is a hybrid, pulling in different directions depending on the policy domain.

Why this matters for public administration 🔗

For students and practitioners of public administration, these debates are not academic abstractions. How we theorise the State determines what we expect government to do. A liberal frame stresses rights protection, procedural fairness, and accountability. A Marxist frame draws attention to whose interests policies actually serve. A neo-liberal frame prioritises efficiency, choice, and market-compatible governance.

Every major administrative reform – from New Public Management to Digital India to targeted welfare – can be read through these lenses. Recognising the lens you are using, and the one your critics are using, is the first step towards more honest policy conversations.

What do you think? Is it possible to build a coherent theory of the State that accommodates individual liberty, social justice, and market efficiency all at once – or will these traditions always remain in tension? And when you look at the Indian State today, which of these three perspectives feels closest to the reality you observe around you?

References

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4. https://sociology.institute/sociological-theories-concepts/karl-marx-view-state-class-structure/
5. https://cosmonautmag.com/2023/11/why-the-ruling-class-need-not-rule-nicos-poulantzas-and-the-marxist-theory-of-the-state/
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