In 1990, British political economist Grahame Thompson observed: One of the most remarkable features of the 'conservative turn' experienced in the UK since 1980 is the paradoxical emergence of extensive reregulation of economic activity in a period supposedly typified by drastic deregulation. (Thompson, 1990: 135) Thompson's comments point to one of the central, but least understood, contradictions of neo-liberalism: that a system which is justified on the premise of a withdrawal of state intervention in the economy has entailed an active role for the state in its implementation and maintenance. This article examines the realities of neo-Iiberalism in practice through an analysis of the history and experience of electricity privatisation in Australia. Such realities are contrasted with common assumptions made about neo-Iiberalism by both its advocates and some of its opponents. The case of electricity privatisation, it is argued, highlights not only the failure of neo-liberalism to deliver its promised benefits, but also the centrality of the capitalist state and class conflict to the dynamics ofneoliberalism in practice. We therefore reject the 'withering away of the state' approach to understanding neo-liberalism. In doing this we are contributing to a critique of the role of capital and the state in neoliberalism.