You have to give credit where credit is due. The lead editorial in the Oct. 20 Washington Post didn't declare free-market capitalism dead after the failure of several financial institutions led to massive government intervention - as a front-page story on its Oct. 10 edition declared. Instead, the editorial pointed out the how the market that failed wasn't exactly free to begin with.
"The deregulation of U.S. financial markets did not reflect only the narrow ideology of a particular party or administration," the editorial said. "And the problem with the U.S. economy, more than lack of regulation, has been government's failure to control systemic risks that government itself helped to create. We are not witnessing a crisis of the free market but a crisis of distorted markets."
As the editorial explained, the government was involved in the markets in many aspects because of actions by both Democratic and Republican politicians - not what Adam Smith had in mind when he outlined free-market capitalism in his writings.
"We'll never know how this newly liberated financial sector might have performed on a playing field designed by Adam Smith," the editorial said. "That's because government interventions of all kinds, from the defense budget to farm supports, shaped the business environment. No subsidy would prove more fateful than the massive federal commitment to residential real estate -- from the mortgage interest tax deduction to Fannie Mae and Freddie Mac to the Federal Reserve's low interest rates under Mr. Greenspan."
In the future, the Post editorial advised policymakers to be "more selective" when intervening in markets.
"Government must be more selective about manipulating markets; over the long term, business works best when it is subject to market discipline alone," the editorial said. "In those cases -- and there will and should be some -- in which government intervenes on behalf of social goals, its support must be counterbalanced with taxpayer protections and regulation. Government-sponsored, upside-only capitalism is the kind that's in crisis today, and we say: Good riddance."
Editor at Large
Comments Policy
Hurting The Poor
October 20, 2008 - 10:19 ET by melpolhttp://www.associate...
It is wrong to blame government deregulation policies for causing the recession when the government was responsible for making the laws that regulated the lending policies of the banking industry. They permitted banks to lend without a credit check or down payment on mortgages, and stood idly by as predatory lenders reaped a harvest. This was not letting free market forces rule but only giving special interests the freedom to rip off potential home owners.
They did not PERMIT banks
October 20, 2008 - 10:29 ET by mattmThey did not PERMIT banks to make loans without credit checks, they forced them to do it.
Then, under Clinton, they made it so banks could sell their shakier loans off to other financial institutions, which naturally ended up in the government-run Fannie and Freddie.
There is no way a bank would make those loans unless they could pawn them off onto someone else or if they could get the government to bail them out. Either way, the only people who get hurt are those of us who pay our bills and pay our taxes.
I'm sure you know this, but I just wanted to clarify...
"Government must be more
October 20, 2008 - 10:50 ET by R D Helm"Government must be more selective about manipulating markets; over the
long term, business works best when it is subject to market discipline
alone,"
Wow, how did that get past the gate-keepers at WaPo?
-Dave
We exist in inverted and bass-ackward times.
this is still screwy
October 20, 2008 - 14:32 ET by mbuelAny Government "control" or "manipulation", is going to adverse side effects.. Every action has SOME SORT of negative consequence.
The market would work best with NO government manipulation or controls. (and no union controls either...)
Palin has accomplished great things, while Obama has continued to make empty promises that the world owes you a living.
The WaPo, unlike the NYT,
October 20, 2008 - 11:11 ET by Chris NormanThe WaPo, unlike the NYT, occasionally stumbles into common sense and truth - like with the surge in Iraq. Unfortunately, even though they may, on occasion, exhibit a modicum of common sense that isn't drawn from the Kool Aid pitcher of liberalism, they still support only liberals - like Obama. It's infuriating to see a paper, like the WaPo, who has the ability to occasionally view a problem without the usual liberal orthodoxy, always snap back and support liberal candidates automatically.
McNotObama '08
WE HAVE TO TAKE CHARGE!
October 20, 2008 - 11:05 ET by MazziWE HAVE TO TAKE CHARGE! Check out Operation Expose Obama!! http://operationexpo...
"We just want truth, we want fairness. We want that balance." ~ Sarah Palin (re: hypocricy of the press)
"Injustice anywhere is a threat to justice everywhere" ~ Martin Luther King Jr.
Where's my tinfoil hat?
October 20, 2008 - 11:59 ET by BlueCat57My head hurts and I'm about to become a conspiracy nut. OK. So if the WaPo editors know this isn't free market capitalism. And they know that government regulation doesn't work. Then why do liberals (read Democrats, read Socialists, read Communists) want to INCREASE government involvement in the economy? If they know what works, why are they promoting what doesn't? The only conclusion is that their only goal is power and the wealth that will come to them as a result. That explains the motivation of Warren Buffet and George Soros. That explains why "Wall Street" donates more to Democrats. Am I a paranoid nut, or is someone really out to get my money?
That's like reading Marx to become an entrepreneur.
Do you have any extra tinfoil
October 20, 2008 - 12:19 ET by ahusserI am starting to think the financial crisis and the stock market roller coaster undulations were orchestrated. You can short the hell out of 1 stock (Lehman Bros) and cause a general panic in all stocks. Because of the coincidence and what it cost McCain/Palin. They had gone on top in the polls and boom the market conveniently crashes the polls dramatically swing the other way. Gas prices conveniently come down so the calls for drilling ease up. Chavez and other middle eastern types could manipulate oil prices. Soros made his chops by shorting the British Pound and has the means and motives and ability to cause financial upset. Domestically the Dems are up to their ass in the Fannie Mae/Freddie Mac frauds (and the Wash Po, of course, makes it a bipartisan issue) and could have leaked damaging info to cause the markets to tumble. It only takes a pebble to start an landslide, or a shout to cause an avalanche. This week it was announced that Obama's campaign had raised 150 million in a month. (Unless I misunderstood and that was a cumulative total) If true where is this money coming from? No one is investigating the amount of money involved in the Dem side of the election or the coincidental damaging timing of the market panic. The Dem campaign and their candidate is an iceberg with most of its structure unseen under water. I think I am going to watch the movie "Conspiracy Theory" again.
Yet they endorse Comrade
October 20, 2008 - 12:49 ET by greenfairieYet they endorse Comrade Obama anyway!