CHICAGO (Project Syndicate)–“The return of the state” is a phrase seemingly on almost everyone’s lips nowadays. Given the global challenges posed by the COVID-19 pandemic and climate change, the argument goes, it is governments, not markets, that should be responsible for allocating resources.
The neoliberal revolution started by Ronald Reagan and Margaret Thatcher has apparently run its course. New Deal-style state intervention is back.
But this opposition of state and market is misleading, and it poses a major obstacle to understanding and addressing today’s policy challenges.
The state can promote markets
The dichotomy emerged in the 19th century, when arcane government rules, rooted in a feudal past, were the main obstacle to the creation of competitive markets. The battle cry of this quite legitimate struggle was later raised to…