Richard Holloway On October 7, 1948, the BBC Third Programme broadcast a discussion on the role of the writer in society. One of the participants was Graham Greene. Greene believed that to artists the kindness of the state was more dangerous than its indifference. He pointed out that in the Soviet Union artists belonged to a privileged class, but the state had asked in return that they should cease to be artists. He said this danger did not only exist in totalitarian countries. The bourgeois state, too, had its compromising gifts to offer artists.

In a subsequent letter to V S Pritchett he claimed that disloyalty was the primary virtue of the artist: "I would emphasise the importance and the virtue of disloyalty. If only writers could maintain that one virtue unspotted from the world. Honours, state patronage, success, the praise of their fellows all tend to sap their disloyalty Loyalty confines us to accepted opinions: loyalty forbids us to comprehend sympathetically our dissident fellows; but disloyalty encourages us to roam experimentally through any human mind: it gives to the novelist the extra dimension of sympathy."

These are cautionary words for those of us who have been recruited by the state to do the very thing Greene opposed: to mediate its support for the arts. That is why we should bring to our thinking about the state's engagement with the arts a cleansing suspicion that we are involved in something that is far from being morally straightforward. If we take that as an ethical prophylactic, we may be able to protect ourselves against the cruder forms of co-option by the state.

That said, artists have always engaged in a form of exchange with society. As well as being done for its own sake, art has entertained us and helped us fill time with meaning. And the state soon grasped the importance of art for the wellbeing of its people. We find an example of this in the history of the arts council movement in Britain. In 1940 the Committee for the Encouragement of Music and the Arts was established by royal charter to boost morale and provide employment for artists, whose usual opportunities had been reduced by the war. In 1946 it evolved into the Arts Council of Great Britain. Though funded by the Treasury, its autonomy and integrity were protected by the famous "arm's-length" principle, which freed it from state interference in its funding decisions. Given that the arts council movement was a response to the cataclysm of the Second World War, it would be churlish to find fault with what the state had done. It recognised art's power to offer healing and hope to a nation confronting the aftermath of war; more simply, it wanted to cheer its people up in a dark time.

This is the easiest of the instrumental uses of art to justify, and a state that does it should be commended, not condemned, providing we keep Greene in mind, pointing to the possible perils of the exercise.

Perils did emerge, of a sort unanticipated by Greene. The danger to artists turned out to be not that the embrace of the state would compromise their disloyalty - artists have never hesitated to bite the hand that feeds them - but that they would become dependent on its largesse for their survival. It turns out - and why should this surprise us? - that artists and arts organisations are no more immune to the paralysis of institutional dynamics than the rest of us. Clearly, the challenge for the state's support of the arts is to do it in a way that allows space for surprise, innovation and risk. The test for Creative Scotland will be to learn from this history, and develop strategies that are less likely to harden into predictable forms.

Another element to emerge in the state's engagement with the arts is its recognition of their usefulness to its social-policy objectives. Economic poverty and stunted aspiration are enduring evils in our society. Experience proves that if you connect children to their creative instincts their skills improve across the board. It stands to reason that if creativity is intrinsic to our nature, its suppression or denial diminishes us, while its expression will help restore us to wellbeing. A caring state will want to apply the transformative energy of the arts to the lives of its excluded children, and practitioners are happy to play their part in working for this common good.

The state has recently deployed the concept of the creative economy. Unfortunately, "economy" is a word that has artistic purists reaching for their revolvers, so let me try to reclaim the word from the accountants. Economy comes from the Greek noun oikos, the word for house or home, and the verb nemo, to manage or distribute. Oikonomia, household management, is close to an even grander Greek word, oikumene, the inhabited earth, humankind and, by extension, culture. Unlike other animals we are adaptive beings, constantly finding new and better ways to manage things; never at peace, crawling further out on the limb of history to see what lies ahead. And it is summed up in the word creativity, which distinguishes us from our fellow creatures, and which unites us across the spectrum of human activity. So we should not limit our thinking about creativity to the important elite we call artists. While they, as a class, may possess creativity to a heightened degree, it is a basic human attribute. The fact that we are alive demonstrates that our forebears were the ones who took the risks that enabled them to flourish and get their DNA out there working into the future.

The idea of creativity must include the whole oikumene, or human family. We need to unleash it in every aspect of our national lives. When we do, everything gets better: from school room to board room, from cinema to concert hall, from art gallery to the streets. The global community is catching on to this, and Creative Scotland should be up on its board, surfing the wave as it builds. But while Creative Scotland's primary purpose may be to further the creative economic agenda of the government, it would be tragic if the new agency abandoned earlier goals for the state's engagement with the arts: human wellbeing and the power to transform lives. Living with the tension between these competing aims will give us edge and keep us on our intellectual toes. Government, too, will have to recognise that we may not always be a comfortable ally as we each pursue our legitimate purposes. We will be vigilant in protecting the spiritual integrity of Scotland's art-makers, including their right to bite the hands that feed them. And we will never forget Graham Greene's admonition that disloyalty is the primary virtue of the artist. If we can hold all this together without cracking, then Scotland will truly become a creative nation.

Richard Holloway is chairman of the joint board Scottish Arts Council/Scottish Screen. This is an extract from a longer essay available at Richard Holloway is chairman of the joint board Scottish Arts Council/Scottish Screen. This is an extract from a longer essay available at transition.creativescotland.org.uk or scottisharts.org.uk or scottishscreen.com