The global capitalist crisis is impacting dramatically across nation states and their economies. Although a complete collapse of the system appears to have been avoided by decisions to take co-ordinated interventionist action to shore up short term demand, governments have generally rejected the more radical actions required to address the fundamental issues posed by the crisis. This is likely to have significant and long term consequences for education policy. In this article the importance of understanding the relationship between education policy and the wider economy is emphasised, as is the extent to which the shape of the former is increasingly driven by the imperatives of the latter. The article begins by exploring the relationship between education policy and the economy, and then identifies ways in which the current economic crisis is likely to shape education policy in the short and medium term. It argues that whilst the consequences for education policy are likely to be deeply damaging, there are new opportunities to reassert the case for education as a public good based on the values of local democracy and economic stability.