Who would have thought that on the 15th January 2009 the Irish state would take a private bank into public ownership? Very few I imagine. The nationalisation is, of course, the outcome of policy making in recessionary times and therefore should not be taken as a dramatic shift in public policy. But, it does highlight the central and unavoidable multidimensional role of the state in the economy. The institutions of the state are fundamental to the operation of economics. This role of social organisation is too often ignored by market economists.
Over the past 20 years the very concept of the ‘national economy’ – and the continued effectiveness of national capitalist diversity – has come into question. An uncritical neo-liberal consensus came to dominate thinking in most national governments as well as international organisations. Over the past few months the role of the state in economic affairs has come back into central stage. Even republican Friedmanites in the US are forced to acknowledge that the state, as a multi-institutional actor, must act as a bulwark of national economies. This necessity becomes obvious when markets fail. The collapse of the national economy is simply not an option for any government. It begs the further question: how successful would an economy be if policy makers acknowledged the importance of social – state organisation to economic development?
This is particularly the case in financial markets. There has been a deep structural tension between internationalisation of finance and national financial regulation since the 1980’s. The response of most governments over the past 15 years has been to de-regulate. The legacy of this policy choice is now coming back to haunt governments across the world, not least in Ireland. The paperless world of global financial markets, and the abstract financial accounting techniques of ‘innovative’ financial services created a system that is not simply prone to cycles of bust and boom but completely unsustainable. The nationalisation of Anglo – Irish bank highlights that finance (and credit availability) is too important to be left to markets alone. Capital needs credit, labour and the state. How all these variables interact, and the priority assigned to each is a theoretical question that needs to be reactivated.
Nationalising Anglo Irish is an immediate solution to a local problem but it begs the question: What is the most effective policy response to the failure of internationalised financial markets? Prudential regulation? The creation of an international public body with the autonomy to regulate global financial exchange? The limits of a global self regulating market have been exposed. The collapse of financial-market capitalism provides a critical juncture for a new global, sustainable political economy.