The Comeback Of Statism

It’s not long ago that the state belonged to a dying breed. An American President in a highly acclaimed speech declared that the state had no business meddling in the economy. A German Chancellor announced that the role of the state had to be reduced and people’s self-reliance strengthened. A German Minister of Economics coined a slogan that said those in the economy must determine political economics, not those in politics. Over the past twenty years, the victory march of the market seemed unstoppable and the decline of the state a done deal. At any rate, that’s how they like to relate the history in the corridors of power, in the executive suites of business, in the lecture halls of colleges.

But suddenly everything has changed. The state is making an amazing comeback these days and it is doing it, in of all places, the country where individual freedom and the pursuit of happiness has become a national doctrine. A country in which the reign of neo-conservatism was going to bring that doctrine to perfection, both nationally and internationally. When U.S. President George W. Bush and his Treasury Secretary were forced to bail out the crumbling U.S. economy with a 700 billion dollar assistance package, that was not only an admission of failure on the part of many economics experts. It also signaled the failure of an entire economic school of thought that was considered the one and only true model.

In plain language, because the financial world lost control over its own policies while playing the global money game, the state (and that means every individual citizen) now has to make good for this failure. While the elites of the economic and financial sectors peddled the free market to us and reaped the profits of it for decades, they now want to put the risks for that freedom (and the losses it caused) onto everyone’s shoulders. The amount of the final bill that will come down to taxpayers and consumers is as yet unknown in the USA as well as in Europe.

It’s historic irony that the state now is called upon to save precisely those who minimized the dangers. Those who profited most from globalization and who, through their power and influence, were successful in limiting the maneuvering room of would-be controllers. At the behest of business taxes were cut, regulations discarded and entities privatized. The general population profited very little from it all. The chasm between rich and poor grew, real wages sank and the infrastructure eroded.

There’s much to be said for a new re-thinking of the role of the state. In any case, the neo-conservative view of the state is now obsolete. When it comes to national security, one doesn’t get a strong force (as is needed in the war against international terror) if your economic security lies outside the country. While many U.S. citizens are monitored and controlled by security agencies and Germans are forced to surrender more and more of their civil rights, investment banks like Morgan Stanley or Goldman Sachs are subjected to only very lax oversight in the United States. Governmental control of financial institutions in Europe is also very limited. Wherever a bit of control does exist, it’s often ineffective.

Take the example of energy: when previously state owned companies were privatized, it came with the promise there would be more competition and lower energy prices. Today, the market is controlled by four oligopolies, energy costs constantly increase and regulatory agencies are powerless. Another example is the environment: when hurricane Katrina laid waste to New Orleans, the government failed miserably in the one area for which they have basic responsibility, the safety of citizens.

Actually, a change in thinking has already begun, and not only in combating the banking crisis. That president who originally wanted to keep government out of the private sector recently proposed an economic package in the hundreds of billions because he no longer trusts the market able to heal itself. That Chancellor who wanted to reduce government involvement in everything, now has to admit her party is helping to expand government involvement. That Economics Minister who once wanted to leave politics to the business managers now watches as his successor contemplates how to break the energy companies’ stranglehold on power grids.

The state, long believed to be dead, is awakening to new life, and one species has been removed from the endangered list.