The shrinking state? Understanding the assault on the public sector

This article explores the 'shrinking state', the potential erosion of the state from its customary intervention in regulating economic growth and promoting redistribution and the overall weakening of the state as an institution in local/regional affairs. State retreat may be seen in the withdrawal of finance, services and staff as well as the failure to increase these resources to match growing needs, both of which are referred to as 'retrenchment' or, in the European case, 'austerity'. The erosion of the state as an institution is visible in underfunded social programmes, a smaller public sector, weakened regulatory structures, foregone infrastructure projects, public assets sales and continued privatization. This article argues that the 'shrinking state' both produces and is a product of a restructured social contract between government and citizens and the private sector that has transformed regions and localities. Although we have not seen wholesale state decline, there have been gradations of state change, especially in qualitative markers such as shifts in state functions, scales of activity, constituencies served and private sector involvement in governmental affairs. These changes, in turn, have led to shifts in state capacity and policy orientation that leave populations bereft of needed public services, increased inequality across geographic areas and sociodemographic groups, and political effects such as the growth of right-wing populism.