MARKET, STATE AND SOVEREIGNTY

From the neoliberal myth to the return of the state

For over forty years, one of the most profound cultural transformations in Western economy has been built around a seemingly simple premise: if left free to operate, the market would naturally tend towards efficiency, growth and collective well-being.

This premise has become one of the dominant ideas of the neoliberal era. The market has been progressively portrayed as an almost natural, self-regulating mechanism and in some cases, even morally superior to politics.

The State, by contrast, has been described as inefficient, bureaucratic, costly and structurally incapable of allocating resources as effectively as private capital.

The claim that “the State is the problem, not the solution” encapsulated a political and economic era that swept through the United States, the United Kingdom and subsequently spread across much of Europe, Latin America and Asia.

This view has also influenced political circles traditionally associated with progressive values, helping to spread the idea that liberalisation, privatisation and globalisation were not merely economic tools but an inevitable path towards modernity.

The history of recent decades, however, points to a far less reassuring conclusion.

Whilst the market was hailed as the great victor of the Cold War, many advanced economies experienced:

• weaker economic growth;
• a growing concentration of wealth;
• widening inequalities;
• the progressive erosion of social protection systems;
• a reduction in the State’s capacity to steer strategic investment.

The promise of widespread prosperity did not materialise for everyone. The so-called “magic of the market” worked primarily for those who already possessed capital, property, technology and bargaining power.

The issue, therefore, is not simply to determine whether the market works. We must understand for whom it works, under what conditions and with what consequences for society as a whole.

Development without progress

Before examining the transformation of contemporary capitalism, it is necessary to clarify a fundamental distinction that is often overlooked in economic debate: development and progress are not synonymous.

Development is predominantly quantitative in nature. It concerns:

• growth in gross domestic product;
• the expansion of production;
• increased trade;
• capital accumulation;
• an increase in economic transactions.

Progress, by contrast, has a qualitative dimension. It concerns a society’s ability to tangibly improve people’s lives through:

• greater rights;
• a fairer distribution of resources;
• better working conditions;
• wider access to healthcare and education;
• greater social security;
• environmental sustainability;
• the collective ability to shape the future.

This distinction is decisive. A society can grow economically without progressing socially.

GDP may rise whilst wages stagnate. Overall wealth may grow whilst its distribution becomes more unequal. Financial markets may reach record levels of capitalisation whilst families face increasing difficulties in purchasing a home, accessing essential services or accumulating an adequate pension.

An economic system may even become more efficient in productive terms whilst simultaneously becoming more fragile in social terms.

This is the paradox of development without progress.

Neoliberalism has often equated quantitative growth with the general improvement of society, assuming that the benefits of economic development would inevitably trickle down.

Growth, however, is not automatically redistributive and the market does not spontaneously produce fairness. It produces outcomes consistent with the incentives, the rules and the initial distribution of power.

When the rules favour the concentration of wealth, the market tends to concentrate capital even further.

The metamorphosis of capitalism

To understand the contemporary economic world, we must distinguish between two forms of capitalism which, whilst profoundly different, have characterised the past fifty years.

The first is an undercapitalised form of private capitalism, lacking a long-term industrial strategy.

The second is global financial capitalism: overcapitalised, transnational and capable of exerting growing influence over public decision-making.

The transition from one to the other has radically transformed the nature of economic power.

Dysfunctional private capitalism

The first model is represented by undercapitalised businesses, often family-run or concentrated in the hands of a few owner groups, which are incapable of sustaining significant investment in:

• research;
• innovation;
• infrastructure;
• skills;
• technological transformation.

This model was widespread in numerous Western economies between the 1970s and the 1990s and in various forms, in many emerging economies.

These were often companies that survived on rent-income, public support, the exploitation of existing assets or the pursuit of immediate profits, without building any real industrial capacity for the future.

There are numerous international examples.

In Latin America, some conglomerates acquired or privatised major energy sectors without managing to modernise them.

In Eastern Europe, several telecommunications operators destroyed value rather than transforming inherited infrastructure into platforms for innovation.

In Africa, some companies involved in mining transferred wealth out of their home territories without contributing to the development of an adequate local productive ecosystem.

In many cases, the result has been a form of capitalism poor in productive capital and technological capacity: a form of capitalism capable of extracting value but not necessarily of creating it over the long term.

Industrial and technological assets built over decades have been progressively weakened or dismantled and replaced by fragile structures dependent on public subsidies, concessions and rent-income.

In such cases, privatisation has not necessarily coincided with modernisation. At times, it has merely meant transferring ownership of an asset without also transferring the investment capacity needed to ensure its development.

The rise of global financial capitalism

At the same time, from the 1980s onwards, a radically different form of capitalism has emerged.

It was no longer lacking in capital but over capitalised. It was no longer predominantly national but transnational. It was no longer focused solely on industrial production but extended across finance, technology, energy, logistics, infrastructure and data.

It is the capitalism of:

• major sovereign wealth funds;
• tech giants;
• global investment funds;
• energy groups;
• digital platforms;
• multinational corporations.

Within this system, capital can move across borders in real time, acquire strategic shareholdings, control critical infrastructure and influence global value chains.

The key players in this transformation include:

• sovereign wealth funds with financial resources comparable to the budgets of entire States;
• major investment funds with cross-sector holdings in strategic sectors;
• insurance and financial companies capable of allocating capital on a global scale;
• tech giants capable of influencing regulations and standards;
• digital platforms that concentrate data and information infrastructure;
• multinational energy and industrial corporations with global bargaining power;
• private rating and financial analysis groups capable of influencing access to markets and the cost of capital.

Their power stems not only from the amount of capital they possess but also from their ability to use capital and information as a means of influence through:

• lobbying;
• regulatory pressure;
• control of data;
• technological dependencies;
• concentration of infrastructure;
• the international mobility of investment;
• control of supply chains.

In other words, global financial capitalism is no longer merely an economic system. It has also become a geopolitical actor.

The four transformations of economic power

The process that has led to the current situation can be traced back to four fundamental transformations.

1. Financial deregulation

The liberalisation of financial markets, particularly in the United States and the United Kingdom, has enormously increased the ability of capital to move between countries, currencies and economic sectors.

Finance has acquired growing autonomy from production and has increased its ability to shape industrial strategies and public policy decisions.

2. Privatisation

In Europe, Latin America and Asia, numerous assets previously controlled by the State have been transferred to the private sector.

Privatisation has often been presented as a means of modernisation and efficiency. Its results, however, have been mixed.

In some cases, it has improved the quality of services. In others, it has merely transferred public monopolies to private operators, reducing the State’s ability to steer strategic sectors.

3. The globalisation of value chains

Production has become fragmented on an international scale.

This transformation has increased the economic efficiency of many supply chains but it has also created new strategic dependencies. Technology, industrial components, raw materials and infrastructure have become elements of a global network in which States increasingly depend on private entities and foreign suppliers.

The pursuit of maximum efficiency has often reduced the redundancy and resilience of production systems.

4. Digitalisation

Economic power has progressively shifted towards the control of information, algorithms and data.

A handful of global platforms are now capable of exerting extraordinary influence over communication, the digital economy and indirectly, political debate.

It is the combination of finance, technology and globalisation that has produced a new form of economic power—one that no longer necessarily coincides with territorial sovereignty.

When multinational corporations become political actors

The turning point is represented by the growing asymmetry between States and large corporations.

Multinational companies operating in technology, finance, energy, pharmaceuticals, logistics and the security sector work in different fields but they share a fundamental characteristic: they possess the financial resources, technological capabilities and a scale that enables them to negotiate with governments from a position of strength.

In some cases, they can directly or indirectly influence:

• tax policies;
• industrial strategies;
• trade rules;
• technological standards;
• infrastructure choices;
• the organisation of work.

This does not mean that corporations formally govern States. The process is more subtle.

In a globalised economy, a State may find itself having to compete to attract capital, technology and investment. A large corporation, by contrast, can decide where to locate production, research, infrastructure and capital.

The balance of power has therefore shifted.

Capital is no longer merely a force that responds to political decisions. In many circumstances, it helps to determine the boundaries within which those decisions can be made.

This is where global financial capitalism takes on a distinctly political dimension.

The withdrawal of the State and the commodification of rights

The gradual extension of market logic has affected areas that, for much of the twentieth century, were regarded as essential components of the public sphere:

• healthcare;
• education;
• pensions;
• welfare;
• strategic infrastructure.

The principle of universal rights has gradually been accompanied and at times, replaced by the principle of access regulated by the ability to pay.

Within this process:

• the citizen becomes a consumer;
• healthcare becomes a service;
• education becomes an individual investment;
• pensions become financial exposure;
• infrastructure becomes an asset.

This process is not necessarily negative in all its forms. The problem arises when financial return becomes the dominant criterion, even in sectors characterised by a collective interest that cannot be measured exclusively in monetary terms.

The pandemic made this tension clear. The health crisis demonstrated that certain essential goods require:

• public co-ordination capacity;
• strategic reserves;
• resilient infrastructure;
• long-term planning;
• investment not contingent on immediate returns.

Similarly, higher education cannot be assessed solely as an individual financial investment. A pension system cannot be regarded merely as a portfolio exposed to market volatility.

When fundamental rights are treated as mere commodities, the risk is that we may end up with more economic transactions but less social cohesion.

Once again, more quantitative development and less progress.

The great mistake of the State’s withdrawal

During the thirty years following the Second World War, Western economies were largely mixed economies.

The State did not necessarily control every sector, but it retained a strategic role in areas such as:

• energy;
• aeronautics;
• steel;
• transport;
• electronics;
• defence;
• infrastructure;
• research.

The State funded, coordinated, regulated and in some cases, produced it directly.

This model was not without its inefficiency. It did, however, recognise a fundamental principle: certain industrial capabilities are too important to be entrusted exclusively to the logic of short-term returns.

From the 1980s onwards, this paradigm was gradually abandoned.

Decisions concerning where to invest, which technology to develop and which territories to support were increasingly left to market dynamics.

But the market bears no political responsibility.

A company must generate value and returns for its shareholders. A State must also consider:

• national security;
• territorial cohesion;
• employment;
• economic resilience;
• technological autonomy;
• the well-being of future generations.

These are different objectives.

Confusing them means transforming a political choice into an apparently inevitable consequence of the market.

The return of industrial policy

A credible progressive outlook for the 21st century must acknowledge a historic error: the indiscriminate privatisation of strategic sectors has not automatically led to greater efficiency, innovation or sovereignty.

In some cases, it has had the opposite effect:

• it has reduced the ability of States to steer investment;
• it has increased technological dependencies;
• it has weakened industrial supply chains;
• it has transferred strategic capabilities to private entities;
• it has subordinated long-term decisions to the expectations of financial markets.

The answer cannot be a nostalgic return to a fully State-controlled economy.

The challenge is more complex: the need to build a new strategic industrial policy.

A policy that does not merely distribute incentives but sets long-term objectives.

A policy that does not simply protect existing businesses but builds future capabilities.

A policy that uses private capital without allowing private capital alone to define collective priorities.

From industrial policies to public missions

One of the most significant concepts for the future is that of public missions.

A mission is not a slogan. It is a strategic, measurable and verifiable objective around which the State mobilises:

• research;
• capital;
• infrastructure;
• skills;
• industrial capacity;
• public demand.

The private sector participates and capital is remunerated, but strategic direction is defined by a public vision.

History offers numerous examples.

The Manhattan project

The Manhattan Project mobilised unprecedented scientific and industrial resources to develop nuclear technology.

Beyond its historical and military implications, it demonstrated the State’s ability to coordinate research, industry and expertise around a strategic objective.

The Apollo Programme

The Apollo Programme demonstrated how public intervention could steer innovation and generate technological spin-offs across numerous sectors, from electronics to advanced materials.

Airbus

Airbus is an example of European industrial policy capable of creating a global competitor in a strategic sector characterised by enormous barriers to enter it.

Asian Industrial Strategies

Japan’s semiconductor strategy and South Korea’s industrial policy have contributed to the creation of highly advanced production systems and global conglomerates such as Samsung and Hyundai.

The European Energy Transition

Energy policies adopted in countries such as Denmark and Germany have fostered the development of industrial expertise in the renewable energy sector.

The common principle is clear: the State has not necessarily replaced the market but has created the conditions for the market to develop in a strategically desirable direction.

The new missions of the twenty-first century

Today’s major challenges call for a new era of public missions.

1. Decarbonisation

Decarbonisation is not merely an environmental objective. It is an industrial, energy and geopolitical transformation.

It requires new production systems, energy networks, infrastructure, skills and technology.

2. Public Artificial Intelligence

The development of transparent, publicly governed artificial intelligence oriented towards collective interest is essential to prevent strategic technology from being controlled exclusively by a handful of private operators.

3. Sovereign Digital Infrastructure

Cloud systems, networks, semiconductors, operating systems, data and computing capacity have now become fundamental components of economic sovereignty.

Reducing technological dependencies means strengthening political and industrial autonomy.

4. Biotechnology and Health Research

Advanced health research requires long-term investment, public coordination and the ability to transform scientific knowledge into infrastructure and production.

5. Advanced Materials

New materials are fundamental to industrial competitiveness, the energy transition, aerospace, defence and electronics.

6. Food Security

Food security is increasingly linked to climate change, geopolitical stability and the resilience of supply chains.

7. Mobility and Energy

Electric mobility, hydrogen, energy-storage systems and new energy technology are sectors in which industrial capacity and strategic autonomy coincide.

These missions are not merely economic programmes. They are instruments of sovereignty.

A society that does not control its critical technology, digital infrastructure, energy sources and supply chains cannot consider itself fully autonomous.

Industrial policy therefore becomes a geopolitical issue once again.

State versus market: a false dichotomy

The current debate is often framed in terms of a simplistic dichotomy: State versus market.

This is a false dichotomy.

The most advanced economies in modern history did not arise from the absence of the State. They arose from the interaction between:

• public institutions;
• private capital;
• research;
• infrastructure;
• innovation;
• education and training.

The real issue is not whether to choose between the State and the market, but determining who sets the strategic direction of the economy.

When that direction is determined exclusively by the pursuit of short-term financial returns, investments that are fundamental to the future risk being neglected.

When, on the other hand, the State seeks to replace the market entirely, the risks of inefficiency, bureaucratisation and the loss of incentives for innovation emerge.

The solution requires an institutional balance based on three principles:

1. A dynamic market operating within a public strategy.
2. An innovative private sector, accountable to collective objectives.
3. Powerful financial capital, subject to rules that prevent economic power from becoming uncontrolled political power.

The market is a tool, not sovereign

The market is not a magical entity and global financial capitalism is not neutral.

It is an economic, financial and increasingly geopolitical actor. It has interests, strategies and the capacity to exert influence.

The central issue of the 21st century is not whether the market should exist. The market is necessary.

Rather, the question is what role the market should play and what role should be entrusted to politics.

The real alternative is not between capitalism and State control. It is between:

• a system in which politics governs the economy;
• a system in which the economy ultimately governs politics.

Regaining economic and democratic sovereignty means restoring the ability of States to steer production, innovation and strategic investment.

Not in order to replace the market but to prevent the market from replacing politics.

The 21st century calls for new architecture governing the relationship between the State, capital and society:

• an architecture in which private capital can continue to create value but within a democratically defined strategic framework;
• an architecture in which innovation is not merely a source of profit but also a tool for progress;
• an architecture in which economic growth is not automatically confused with social improvement.

Because development and progress are not the same thing.

The former measures how much we produce. The latter measures how much we improve.

The former is quantitative. The latter is human.

Society can grow without making progress. It cannot, however, regard itself as truly advanced if that growth does not lead to:

• greater freedom;
• greater equality;
• greater security;
• greater sustainability;
• greater informed participation;
• a higher quality of political, economic and social relations;
• greater co-operation among individuals.

The greatest challenge of our time is not to free the market from politics. It is to restore the capacity to govern the market to politics.

The market can be an extraordinarily powerful tool. But no tool, however powerful, should ever become sovereign.

Comendador (BR) Dr. Eng. Giancarlo Castagnoli
President, PROYTEC GROUP