Bringing the state back in is the title of a much cited volume edited by Peter Evans, Dietrich Rueschmeyer and Theda Skocpol back in the 1980s. The book complained that social science had lost sight of the state as an autonomous political agent in its own right, tending instead to see the state as an epiphenomenon, its dynamics driven by rational individual behaviour or social structures and conflicts. This was blamed on an Anglo-centric perspective which focused on the dynamics of liberal capitalist societies where the state appeared to have a less decisive role.
Three decades later, we can conclude that this appeal to consider the state has failed, at least as regards political science. Even worse, this intellectual neglect of the state has coincided with a political rejection of the state as a useful instrument for achieving social objectives, which has underpinned the liberalizing reforms of the past quarter century. Ironically, this anti-state bias hasn't actually reduced the power of the state all that much, rather it is shifted state priorities away from developing long-term social and economic objectives, and towards propping up the privileges and powers of favoured groups, as well as mopping up the failures of the neoliberal model. But intellectually and politically, the notion that the state could be a useful tool for solving social problems and improving people's lives seems quite dead.
It is striking to read descriptions of the activist states of the 1950s and 1960s, as I've been doing in the last few days (in particular, I've been reading about the state enterprises in Italy, a brief account of which can be found in Andrew Shonfield's masterful Modern Capitalism). In this period, probably naively and over-optimistically, the consensus view was that the state could achieve great things through interventionist policies such as public investment and control of the banking system, and state management and planning in key industrial sectors. Since the 1970s, the neoliberal counter-attack against these ideas - inspired by the 'public choice' school of economics - has won out, to such an extent that even now, with the catastrophic failure of laissez-faire approaches to pull the west out of a deep economic crisis, nobody is talking about the state as having anything much to offer.
So instead, we press on with doling out cash to privately owned and or/managed banks, who are free to decide how best to invest the abundant capital stored up by the winners of the economic changes of the last three decades. Britain's public infrastructure is threadbare, there are large reserves of unused labour, and there is a pile of capital that is looking for a return, and yet what do we do? As far as I can see, print money for banks to lend to speculative investors to buy up property in the few parts of the country where the economy is still alive. This is a coordination failure of massive proportions, and it has been delivered by private actors driven by market forces.
Somehow, we need to change the image of the state. Despite the fact that without strong state intervention there would probably not be an economy left by now, the notion that the state can actually actively contribute not only by kickstarting the economy but also by enhancing the prospects for economic progress into the future is still taboo. Yet looking around, all I see are coordination failures that are holding back growth (chief amongst them at the moment, the inability of the construction industry to build homes for people who are desperate to buy them). I am probably, like the Shonfields of the 1960s, way too optimistic about what can be achieved by concerted state planning and investment, but the least you can say is that the jury is out on the value of the current model. There is no strong intellectual reason for not considering active state involvement in investment and consumption decisions.
So there you have it. Instead of just stockpiling it in the banks, print money to buy government debt allowing the state to build, educate, train and back the people and organizations that will produce stuff in the future. And if that creates inflation, raise interest rates. It might not work, but what we are doing now is clearly not working either. It's worth a try.