The Changing Role of the State in the Economic Policy

Abstract

The participation of the state in the economic policy has changed significantly over the centuries, and has been saturated with various contents. During the period of absolutism, the interests of the state expressed the ruler’s interests in the first place, in order to give way later to the market needs of free competitive capitalism, the often hectic realm of self-interests. The obviousness of market failures, the recognition of the cyclical nature of capitalism and the escalation of the capital-labour opposition required that the state would incrementally accept the difficult task of regulating the market from the last quarter of the 19th century, leaving its watchman position. Adopting the idea of social democracy and building up the institutions of the welfare state after the Second World War has created about three decades of “happy times of peace” for Western European citizens, allowing by then the scope of the widespread concept of the definition of public interest to extend to the lower classes. However, the dominance of monetarist-neoliberal doctrines since the last quarter of the 20th century resulted in that the states became “marginalised” compared to their previous national economic position, and they were forced to start a “project” to break down the welfare state – in parallel, the free market mantras which required the following of self-interest took the highest level of the podium. Indeed, the neo-liberal trends proclaimed the primacy of the market processes, the drastic reduction of the state’s economic and social intervention and the necessity of the international economic integration. But as a result of the global economic and financial crises which broke out in 2008, many people reconsidered their former beliefs about free market mechanisms.