It is critical for capitalists to debunk the myth that the free market caused the 2008 financial crisis, not only for the sake of defending liberty in the banking sector but also because the ramifications of allowing that myth to stand extends well beyond the financial sector.
For example, Karen Price Mueller's Bamboozled article is about a man and his health insurance trevails. Yet, check out the twists in this comment thread. In relation to regulation of health insurance companies, one correspondent demanded "checks" on capitalism. In response, I defined capitalism as:
When you say capitalism needs "checks," you are saying that some people have the right to impose their choices on others, with the government as their hired guns.
[Capitalism] is a social condition that upholds the individual's right to act on his own judgment, leaving people to live-and-let-live, solve their own problems, and deal with each other by voluntary association and trade, rather than force. Such a system can not exist without a government powerful enough to protect us from criminals, but not so powerful as to become the criminal.
To that, the correspondent threw this out, undoubtedly believing his clever curve ball could strike me out:
If you want to see what unchecked capitalism is like, just go back to 2008 and the global financial meltdown. There's your capitalism. Before you use the "well if it wasn't for government over-regulation, none of this would've happened" argument, I say Hogwash! The wealthy who own the corporations, who own the government need lots of regulation!
Just as for decades the statists rode the myth that laissez-faire Republican policies caused the Great Depression to justify their drive to grow the regulatory welfare state, so today's statists believe that the same magic can work in the coming decades regarding the Great Recession.
Though the 2008 financial crisis is off-topic, this correspondent's comment could not go unanswered. I replied:
Opinionsback, where, exactly, do you find anything resembling a free market in the financial sector in 2008? You have no facts, only hollow slogans and bigotry against profit-seeking businessmen. The government owns the monetary system, to start with. The entire financial sector was and is controlled lock, stock, and barrel by government, which is why it had to dance to the "affordable housing" music of the politicians. The list of regulatory agencies and laws are too numerous to list in an off-topic issue. But, right up until the meltdown, financial regulations were on the increase; up 23% just between 1999 and 2008. The financial crisis could never have happened in a free market, because there wouldn't have been "lots of regulation" and other coercive government intrusions to lead the entire sector down the same destructive path at the same time in the same way.
The banking industry was grossly misregulated, not unregulated. Having assumed control of banking, the government caused the meltdown because the government is not God and its bureaucrats are not imbued with omniscience and infallibility. How is it that home mortgages, which had been for decades the safest type of loan, could suddenly—starting in the late 1990s—turn into an economy-crippling cancer? The government rigged the incentives to favor a conveyor belt of bad lending, running from the Fed to the FDIC to "affordable" housing crusades to Fannie & Freddie. We paid the price.
The "free market caused the crisis" song is a big lie perpetrated by statists looking to cover up their own culpability and increase their own power.
Capitalism is the only benevolent political/economic/social system, because it is the only system that banishes force from human relationships, on principle.
I did not receive a reply from this correspondent, who calls himself "Opinionsback".
Where Does Valid Law End and Regulation Begin?
The Financial Crisis and the Free Market Cure—John A. Allison