It has become a key aspect of liberal dogma that deregulation and the “free market” are to blame for the collapse of the global economy. But blaming laissez-faire for the world’s economic malaise is a lot like blaming U.S. “isolationism” for 9/11: it ignores years of government interventions — like bailouts, cheap credit from the central bank and overseas military campaigns — that contradict the ideologically convenient retellings of history preferred by those eager to cast every crisis as the fault of anyone but the state and the political establishment.
Claiming that a non-existent free market is what got us to where we are today is to pretend that the Bush administration was in good faith, if naively, pursuing a hands-off approach to the economy — in essence, arguing that if they were guilty of anything, it was being too ideologically committed to allowing people to exchange goods and services with minimal state intervention. But if anything, the Bush administration modeled its economic policy more off Mussolini than Adam Smith, actively expanding state power to enrich its corporate cohorts through the type of crony capitalism best embodied by quasi-private firms like Halliburton and Goldman Sachs.
The media are busy perpetuating a myth that the United States has been a beacon of “free market” capitalism. This is a lie. The United States never had free market capitalism and certainly the system in place over the last three decades hardly qualifies.
The U.S. put in place policies designed to transfer income from the poor and middle class to the wealthy. This is most evident now with the hundreds of billions of dollars being spent bailing out the banks. For the last three decades, the banks and their top executives, made vast fortunes using a free government insurance policy called “too big to fail,” under which bond holders and other creditors could lend money to the banks knowing that the government would honor their debts if they ever got into trouble.
It is an outright lie to call this a “free market.” This is a huge government handout. This insurance policy is enormously valuable and the banks did not have to pay a penny for it. The banks are ardent opponents of free market capitalism. None of them have advocated that they be allowed to collapse.