Following the recent financial crisis, there have been three kinds of reactions in general
The socialists are on a rampage denouncing capitalism, free enterprise, greed and the profit motive. It is difficult to miss a note of glee in their screams. It is almost as if the financial crisis and the alleged role of capitalism in causing it helps them get over the failures of socialism. However loud their screams may be, socialism is so completely discredited today that their screams are irrelevant.
A small number of free market advocates are using principled arguments about the working of the free market and the nature of government interference in the economy to interpret the crisis as a failure of the unfree market. However well reasoned and sound their arguments may be, these are not the men who run things today and the immediate impact of their ideas is going to be small.
The most interesting reaction is the one by the pragmatists. They claim that the financial crisis demonstrates the failure of deregulation and that what is needed is better regulation, more in line with the modern realities of today’s markets. They claim that the focus of the debate should be not whether regulation is needed or not, but what sort of regulation is required. They reject any principled arguments as “just theory”. What is interesting about their reaction is that they are the ones who were in charge of the situation the whole time. These are the people who “believe” in free markets and the gold standard and fiscal discipline and claim to be protecting capitalism. By doing what? By chairing the federal reserve. The blatant contradictions do not bother them. After all Bernanke is supposed to have said “There are no atheists in foxholes and no ideologues in financial crises”. Even after a century of failed attempts at regulation, these pragmatists are still searching for better ways of regulating the economy. There is an old saying that goes “When you find you have dug yourself into a hole, the first thing to do is to stop digging”. But perhaps that too is “just theory” for these pragmatists.
Sadly, more regulation and more crises is what we are going to get, atleast until pragmatism gets discredited. For that to happen however, we need to learn that the way to get out of a crisis is not to renounce principles, but to discover, understand and practise them. Understanding the ideas in these piecies would be a good beginning.