The Greek crisis has generated a lot of comment along the lines of a government takeover of the economy and resurgent socialism, represented by Syriza. The theoretical consequences of recent events however should not be seen as an unexpected and radical departure from the evolution of ideas of the last 10 years on the state-market relationship, but as a natural conclusion of existing processes of change, albeit accelerated by crisis.
Major economic crises usually act as catalysts for significant theoretical shifts, but often serve to bring to the fore existing or developing conceptual changes. As the Great Depression ushered the era of the welfare state and temporarily laid to rest unhindered laissez faire, so the oil crisis of the 1970s undid the embedded liberalism model and ushered the era of neoliberalism, but in both cases the seeds of change were present before the financial press was alerted to the change. A child of the 1970s convulsions, neoliberalism, defined as the withdrawal of the state from the market and as a distancing of political control over economic decision making, since finding its policy expression in the Reagan and Thatcher years became basic common sense at a global level. The theoretical dominance of neoliberalism however expressed as the global policy doctrine of the Washington Consensus in the late 1980s and the early 1990s began to be questioned as a result of its application to the post-communist countries of Eastern Europe, especially in Russia.
The often missed message of the current crisis is that it signifies the end of the neoliberal interpretation of the market-state relationship, centred around a minimal state, not because the debt crisis has delivered such a massive shock, but because the current crisis offers a pragmatic illustration of what theory has been highlighting since the East Asian and the Russian market crises of 1998, namely that neoliberal policies underestimated the need for institutional support and regulation of the market. The emergence of New Institutional Economics under the leadership of Douglass C North and the dissemination of the message that the state has a wider role to play in the economy, beyond the definition and allocation of property rights and the establishment of contract laws, has challenged neoliberal orthodoxy to such an extent that a Post Washington Consensus accepting a new level of state and legal/regulatory intervention has become generally accepted.
What is the role of the Greek election therefore in the wider theoretical discussion as to the role of the state in the economy? This crisis will help break the last grasp of the neoliberal mindset on policy making and offer the theoretical shift that has been already taking place the momentum it needs to become the new dominant paradigm. As with the other two major crises mentioned above therefore, the current financial meltdown will leave us the legacy of a new consensus that accepts the state as the main actor of economic development.