What capitalists need to understand

Iain Martin’s observation – “A culture war has been launched against free markets and so far the hostilities have been astonishingly one-sided” – unfortunately applies just as much to America as to Britain. Our capitalists, from think-tank intellectuals to businessmen, are unforgivably timid in the face of an anti-capitalist onslaught of bailouts, handouts, deficit spending, and central planning. Why?

Because most accept the central argument behind the onslaught: that today’s crisis is the result of overly free markets, that laissez-faire philosophy and economics have been discredited, and that the mess they left can only be cleaned up by government intervention.

In fact, today’s crisis illustrates the evils of government intervention in the economy and vindicates supporters of laissez-faire capitalism. The traditional, laissez-faire view of government, held by thinkers such as philosopher Ayn Rand and economist Ludwig Von Mises, was that the sole purpose of government was to protect individuals rights against force and fraud.

This purpose necessitates, in Rand’s words, “the abolition of any and all forms of government intervention in production and trade.” Laissez-faire thinkers explained how any and all of the supposedly moderate, progressive government interventions in the economy, from the money-printing Federal Reserve to government insurance of failing banks, were morally unjust and economically disastrous.

But genuine capitalism was abandoned long ago in favor of a mixed economy – an unstable combination of economic freedom and economic coercion by government. Today’s crisis, like the 1970s stagflation before it and the Great Depression before it, took place under, and is growing under, a mixed economy – not a free market.