Liberal Views on the Modern State: Neutral Arbiter or Self-Serving Entity?

Few questions in political theory are as persistent as this one: what is the state actually for? Is it an impartial referee that stands above society and protects everyone’s rights equally, or is it a self-interested machine that grows fat at the expense of the people it claims to serve? Liberalism, the dominant political tradition shaping modern democracies, has answered this question in strikingly different ways over the past three centuries. This tension between the state as neutral arbiter and the state as self-serving entity sits at the core of how liberals understand power, freedom, and government.

The liberal foundations: why the state exists at all 🔗

Liberal thinking about the state begins with the individual, not the collective. Classical liberal philosophers like John Locke argued that humans possess natural rights to life, liberty, and property, and that the primary purpose of government is to protect these rights. In this framework, the state is not a moral teacher or a builder of national glory. It is an instrument created by free individuals to secure their pre-existing freedoms.

This produced a distinctive view of legitimate authority. A government earns its right to rule only through the consent of the governed, and that authority is conditional. If the state fails to protect rights, or worse, begins violating them, it loses its claim to obedience. The state, in this reading, is a means to an end. The end is individual liberty.

Liberalism also developed a particular discomfort with state power even as it accepted the state’s necessity. Because concentrated power is dangerous, liberals championed devices to restrain it: constitutional government, the rule of law, separation of powers, and representative institutions. The goal was to build a state strong enough to protect citizens but limited enough not to dominate them.

The protective state and individual rights 🔗

The most minimal version of this idea is the so-called night-watchman state. Here, government confines itself to the narrowest possible role: protecting people from violence, theft, and fraud, defending against external threats, and enforcing contracts and property laws. Beyond this, it stays out of people’s lives. Interestingly, the term itself began as an insult coined by the German socialist Ferdinand Lassalle in 1862, who thought a state doing so little was neglecting its duties. Classical liberals later embraced the label with pride.

The philosopher Robert Nozick gave this idea its most influential modern defence in Anarchy, State, and Utopia (1974). He argued that a minimal state limited to enforcing rights against aggression, theft, fraud, and breach of contract is the most extensive state that can be morally justified. Any state that does more, such as redistributing wealth or regulating personal behaviour, necessarily violates someone’s rights along the way.

Not all liberals went this far. Friedrich Hayek, often considered the foremost classical liberal of the twentieth century, accepted that the state has a legitimate role in ensuring basic necessities and providing certain public goods that markets struggle to supply, such as infrastructure and a minimum safety net for those in extreme need. This shows that even within the “limited state” camp, there was real disagreement about exactly where to draw the line.

Classical pluralism: the state as a neutral arbiter 🔗

If the protective state answers why government exists, classical pluralism answers how it should operate in a complex society full of competing groups. This is where the image of the state as a neutral arbiter becomes central.

Pluralism is a theory about how political power is distributed. It holds that power is widely and evenly dispersed across society rather than concentrated in the hands of a single elite or ruling class. Society is made up of many groups: business associations, trade unions, farmers’ bodies, religious organisations, caste associations, professional lobbies, and countless others. Each pushes for its own interests, and none permanently dominates.

In this picture, the state acts as a mediator. It does not take sides or impose its own agenda. Instead, it facilitates negotiation and compromise among competing interest groups, balancing their demands to maintain peace and stability. The state represents what pluralists call the common interest, standing above the fray rather than being captured by any one faction.

Why neutrality matters to liberals 🔗

The idea of neutrality runs deep in liberal thought. Because people genuinely disagree about what makes a good life, and these disagreements are often irreconcilable, liberals argue the state should not pick a winner among competing visions of morality or the good life. Thinkers like John Rawls and Ronald Dworkin held that the state ought to remain neutral on the question of the good life, giving people the means to pursue their own self-chosen values rather than dictating which values they should hold.

This connects neutrality to tolerance. A truly liberal democracy, in this view, is one in which diverse groups can compete freely, with the state acting as a fair umpire that enforces the rules without rigging the game. Pressure-group politics is seen not as a problem but as a healthy sign that democracy is working, because competition among groups keeps any single interest from monopolising power.

The role of civil society 🔗

Pluralists place great weight on a vibrant civil society. Non-governmental organisations, community groups, the media, and voluntary associations all act as watchdogs. They hold the state accountable, expose abuses, and advocate for groups that might otherwise be ignored. A strong civil society is what keeps the state honest and prevents it from drifting away from neutrality. In a country like ours, the work of the press, public interest litigation, and grassroots movements illustrates exactly this watchdog function in action.

The shift to the welfare state 🔗

Over the twentieth century, liberalism itself changed. The minimal night-watchman state gave way to a far more active government. Modern or welfare liberals argued that real freedom requires more than the absence of interference. A person trapped in poverty, illiteracy, or ill health is not truly free to pursue their goals, even if no law stops them.

This newer strand of liberalism emphasised moral freedom, distributive justice, and the expansion of human capabilities, treating the state not as a necessary evil but as a positive agency of public welfare. Governments took on responsibility for education, healthcare, social security, and economic regulation. The state grew thicker, more interventionist, and far more involved in everyday life. In our own context, this welfarist vision is visible in the Directive Principles of State Policy and decades of development planning that cast the state as the chief engine of social progress.

The New Right: the state as a self-serving entity 🔗

The expansion of the welfare state provoked a powerful backlash, and this is where the image of the state flips from neutral arbiter to self-serving entity. From the 1970s onward, a movement known as the New Right argued that the interventionist state had grown bloated, inefficient, and harmful to the very freedoms liberalism was supposed to protect.

The New Right is closely associated with neoliberalism or market liberalism, and it shaped the policies of governments such as those of Margaret Thatcher in Britain and Ronald Reagan in the United States. It represented an adaptation of classical nineteenth-century laissez-faire liberalism to late-twentieth-century conditions, centred on cutting back state intervention and trusting market mechanisms instead.

The critique of excessive intervention 🔗

New Right thinkers raised several connected objections. They argued that a large welfare state breeds dependency, weakening individual initiative and self-reliance. The label nanny state captured their complaint that government had become an overbearing parent, smothering citizens with rules and handouts. Critics charged that welfare provision could sap the moral fibre of a nation by removing the incentive to work and take responsibility.

They also attacked the economic costs. Heavy taxation to fund state programmes, extensive regulation of business, and large public bureaucracies were said to stifle enterprise, distort markets, and slow growth. The solution, in their view, was deregulation, privatisation of state-owned enterprises, and a sharp reduction in the size and scope of government.

Public choice theory and the parasitic state 🔗

The deepest part of the New Right critique came from public choice theory, developed by economists associated with the Virginia School. This approach demolished the pluralist assumption of a neutral state by asking a simple question: why should we assume that politicians and bureaucrats act selflessly in the public interest?

Public choice theorists argued that government actors are driven by self-interest just like everyone else, the same “economic man” who tries to maximise his own advantage in the marketplace. Politicians chase votes, bureaucrats seek bigger budgets and more staff, and both respond to organised pressure groups that lobby for special favours. The result is a state that does not serve the common good but instead becomes a vehicle for the self-advancement of those who run it and those who can capture it.

From this angle, the state can become genuinely parasitic. Rather than mediating fairly among groups, it gets captured by well-organised special interests and poorly informed voters, expanding endlessly because everyone inside the system benefits from its growth. This produces what critics called “government overload”, a state that takes on more than it can competently deliver while consuming ever more resources. The pluralist umpire, in this critique, turns out to be a player with its own team and its own winnings to protect.

Two faces of the same tradition 🔗

What makes liberalism fascinating is that both images, the neutral arbiter and the self-serving entity, come from within the same intellectual family. They are not the views of liberals versus their enemies. They are competing tendencies inside liberal thought itself.

The pluralist sees a state capable of rising above sectional interests to serve everyone. The New Right sees a state that, left unchecked, inevitably serves itself. Both share liberalism’s foundational commitment to individual freedom; they simply disagree about whether the state is freedom’s protector or its greatest threat. This unresolved tension is precisely why debates about the size and role of government never seem to end.

For developing societies across Asia, Africa, and Latin America, this debate is not merely academic. These states often carry enormous responsibility for nation-building, economic development, and social welfare, which makes them powerful and central to public life. Yet that same centrality raises the public choice worry: a large, interventionist state offers more opportunities for capture, rent-seeking, and self-serving behaviour. The challenge is to build a state active enough to drive development while keeping it accountable enough to remain a genuine servant of the people rather than its own master.

What do you think? Should a state that aims to reduce poverty and inequality risk becoming the bloated, self-serving entity the New Right warns about? And in a society as diverse as ours, can any government truly act as a neutral arbiter, or is perfect neutrality among competing groups simply impossible to achieve?

References

1. https://www.cliffsnotes.com/study-notes/21252246
2. https://en.wikipedia.org/wiki/Night-watchman_state
3. https://en.wikipedia.org/wiki/Minimal_state
4. https://legalclarity.org/what-is-a-minarchist-the-night-watchman-state-explained/
5. https://www.tutor2u.net/politics/reference/pluralism
6. https://thewidevision.com/theories-of-the-state-liberal-marxist-and-pluralist-views/
7. https://link.springer.com/chapter/10.1057/9781137319203_8
8. https://www.drishtiias.com/blog/the-liberal-theory-of-state
9. https://revisesociology.com/2024/12/02/neoliberalism-and-social-welfare-policies/
10. https://link.springer.com/article/10.1007/BF00999475