Forgetting Adam Smith at all our peril. Farewell to the Free Market?

Every choice, but the right ones. They have failed to get out the way in a misguided attempt to replicate FDR, as taught in schools, how he saved America in the Depression. The reality was just the opposite. Unlike the romantic bilge perpetuated in American schools and economic texts, FDR failed miserably, perpetuating the economic failures throughout the depression and institutionalizing his failures with new, wasteful and regulatory bureaucracies.

Sounds familiar, doesn't it? ♘

Farewell to the Free Market? by Nicole Gelinas, City Journal Winter 2012

Western governments have compounded the economic crisis by rejecting the one force that can end it.
Winter 2012

In the years leading up to 2007, the rules necessary to govern a flourishing market economy broke down, producing a financial and economic crisis. Rather than responding to the crisis by fixing those rules, the West aggressively repudiated market economics, and the repudiation continues to this day. Through their actions, which have lately involved everything from European debt to the American financial system to house prices in Britain, government officials around the world have revealed a disturbing assumption: that they can decide how to allocate resources better than markets can. No longer, it seems, do Western governments use investor signals as valuable feedback in devising effective policies; instead, they ignore those signals and plow ahead with their policymaking, leaving chaos in their wake. Often, in fact, public officials actively mute market signals in a vain but destructive attempt to impose their own will on struggling economies.

The rejection of markets helps explain the strange inertia of 2011. Across the free world, the year went out just the way it had come in. In December, German chancellor Angela Merkel and French president Nicolas Sarkozy convened a breakthrough summit to rescue Europe’s single currency and its debt-crushed nations from speculators—just as they had done a year earlier. President Barack Obama ended the year bickering with Congress over short-term stimulus measures to jump-start recovery—just as he had done a year earlier. British prime minister David Cameron concluded 2011 promising to do something about bank executives’ rewarding themselves with massive bonuses while refusing to lend to home buyers and small businesses . . . just as he had done in late 2010. Global stock indices were stuck in limbo, at best, with the Dow Jones Industrial Average listlessly flirting with 12,000 as 2011 came to a close, just as it had 12 months previously.

Western leaders’ attack on free markets has made perfect sense to them. After all, the dominant narrative of the crisis has described the alleged failure of capitalism. As Obama put it in a December speech, the Great Recession struck because “everybody [was] left to fend for themselves and play by their own rules.” Sarkozy lamented back in 2008 that “financial capitalism” had “imposed its logic on the whole economy.” People close to Merkel tell reporters that she feels “duped” by investors. Yet free markets aren’t to blame for the various problems threatening Europe, America, and Britain, and abandoning market economics will weaken the West in ways that will be hard to reverse.

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