"The narrative that government is inefficient and its optimum role should be ‘limited’ to avoid disrupting the market is extremely powerful. At best, the story goes, government should simply focus on creating the conditions that allow businesses to invest and on maintaining the fundamentals for a prosperous economy.

Importantly, we are told, government does not ‘create value’; it simply ‘facilitates’ its creation and – if allowed – redistributes value through taxation. Such ideas are carefully crafted, eloquently expressed and persuasive. They have resulted in the view that pervades society today: government is a drain on the energy of the market, an ever-present threat to the dynamism of the private sector.

But while this is the accepted view of government’s role, a brief glance at the history of capitalism reveals some other powerful, if less simplistic, stories about government’s place in the economy.

The Austrian economist Karl Polanyi wrote a very important book: „The Great Transformation“. In it, he argued that markets were far from ‘natural’ or inevitable – rather, they resulted from purposeful policymaking:

Polanyi traced the long history of local and international markets. In the process, he showed that the national capitalist market – the one studied in economics classes with supply and demand curves – was actually forced into existence by the state. Government, Polanyi asserted, does not ‘distort’ the market. Rather, it creates the market.
Put bluntly: no state, no market."

(Excerpt from: Mariana Mazzucato: "The Value of Everything. Making and Taking in the Global Economy" )