The death of laissez faire is being proclaimed left right and centre. Government spending and Keynesian economics are coming to the fore and free market ideology is taking a hit.
Keynesian economics is often seen as the middle ground between Marxism and laissez faire as put forward by Adam Smith. The cause of the resurrection of the economy after the Great Depression, British economist John Maynard Keynes is widely regarded as the biggest influence on modern economic policy and thought, with his mixture of freemarket idealism with government regulation and spending.
But was the current failure in the world economy the direct result of the failure of the free market itself or more specifically the failure of the baking industry? One may argue that the banking industry in itself was de-regulated and that is what caused the crisis in the first place and therefore laissez faire is to blame.
But consider the theories of Milton Friedman, who said that regulating the banks and the money supply alone in a free market economy will provide the adjustment needed to avoid any major pitfalls. In this particular crisis, money supply went out of control and so much artificial wealth was created, essentially a tower of rocks built on a base of clouds, that things had to eventually collapse.
Greed, many say, is the underlying cause of it. Sure, if people weren’t greedy they wouldnt have taken those housing loans thay couldnt pay, but what about an industry that wasnt prudent in its lending? how could individuals have anticipated the crash of housing markets and the fall in the values of their homes?
And another thing, capitalism is essentially defined as being the same as a free market economy. But that is in essense, an incorrect assumption. Capitalism has come to be associated with all that is detrimental in human nature; greed, growing gaps in income, opression, poverty etc. But these are characteristics that will undoubtedly prevail in any type of economy be it socialist, royalist or communist because they are the causes of evil; individual greed and a lack of concern for ones fellows.
And that cannot be fixed by any new ideology.