ABSTRACT
The poor performance of the centralised command economies of the formerly communist countries40 and the unsustainability of the ‘golden age’ of Keynesian aggregate demand management in the social democratic countries41 has meant that the last quarter of this century has been dominated by ‘conservative capitalism’.42 Central to this capitalism has been a successful attack on the extent of State intervention in the economy and a consequent attempt both to reduce that extent and to refashion the residual public sector. However, one must be careful what one means when one says this. Judging at a time when the energy of the introduction of conservative capitalism now appears to be spent, the extent to which monetarist economic policy has been able significantly to reduce the macro-economic role of the public sector (and hence produce the ‘supply side revolution’), and public choice theory to reconstruct what remain non-economic State activities along market mimicking lines, seems limited. Whatever one’s opinion of these aspects of conservative capitalism, however, the general legitimacy of the State’s direct provision of economic goods has been destroyed and the recognition of a public economic good now is accepted (in intellectual circles at least) as almost a last resort of economic policy. Goods provided in this way are to be provided along market mimicking lines when possible. It is in these two senses, of shrinking direct provision through privatisation43 and marketisation of residual public good provision,44 that the State is ‘contracting’.
