The growing popularity of the corporate university model raises the question of whether the market principles are suitable for planning the policy of a key enterprise like the university without weakening its capacity of pursuing critical knowledge and teaching for democracy. Does the inclusion of the free market imperatives in the functioning of the university improve its overall quality? Is there a clash between the values of the university and those of the market? What is really at stake for democratic societies? This paper addresses these questions through a conflict perspective on neoliberalism as the orthodoxy of state planning and the implications of this operational model on the core values of the Western university. The paper also takes a historical approach on state intervention to explain the political circumstances that accompanied this orientation to public policy and to offer perspective on the relevance of the state to liberal democratic society.