The state’s role is no longer confined to setting the rules, rather it becomes an active agent itself on the playing field. And this is the cause of the problems I have described. So how can we redraw the boundary between market and state? We should start by looking at the problem of banks’ systemic importance.
This should also be the first point we seek to tackle. The question we need to ask is: should banks be allowed to fail? My response is: of course banks should be allowed to fail. The possibility of market exit is a key element of any market economy. Business models that fail to succeed must make way for better business models.