This article briefly reviews the evolving role of major institutions thought to form, reproduce and transform individual as well as collective identities and values, with an emphasis on the impact of state vs market forces via educational systems. This is accompanied by a discussion of various pressures against the state to exert social control on identity and value formation processes. The growing influence of market forces on education and in turn on identity and value formation processes is outlined with reference to specific policy prescriptions that are aligned with the neoliberal agenda, for example the No Child Left Behind Act in the US. The analysis suggests that these prescriptions have contributed to a narrower role for education which may have positive as well as negative implications on identity and value formation processes.