October 10, 2008 - 10:32am
Reports of capitalism’s death have been greatly exaggerated by the news media.
Take the Washington Post’s front-page “analysis” on Oct. 10 that warned the financial crisis “is claiming another casualty: American-style capitalism.” The article was the latest obituary for capitalism – following CNBC’s claim Sept. 19 and Post columnist Steven Pearlstein’s death notice Aug. 1.
Anthony Faiola’s Post analysis continued the mainstream media’s trend of blaming capitalism for the recent tremors in the financial system.
Faiola’s article said, “But the hands-off brand of capitalism in the United States is now being blamed for the easy credit that sickened the housing market and allowed a freewheeling Wall Street to create a pool of toxic investments that has infected the global financial system.” The Post story had no rebuttal from free market economists who say this was not market failure after all.
Free market economists argue that the financial markets weren’t really so “hands-off” – and that it was a series of government meddling that created the problem.
George Mason University economics professor and Business & Media Institute adviser Don Boudreaux called the claim that deregulation and capitalism created the problems “utter mythmaking.”
Another BMI adviser, Hillsdale College professor Gary Wolfram cited Fannie Mae’s government sponsorship, the Community Reinvestment Act of 1977 , the creation of the secondary mortgage market and imposition of government accounting rules as caused of the financial crisis in an Oct. 8 op-ed.
Faiola’s article quoted a Columbia University economist who said countries have lost respect for the American brand of capitalism in the wake of U.S. financial turmoil. That could be a result of the American media’s willingness to incorrectly blame the problems on deregulation and “unfettered capitalism.”
The Post also wrongly claimed that “Other than a few fringe heads of state [referring to Hugo Chavez] and quixotic headlines, no one is talking about the death of capitalism.” But the paper’s own financial columnist sounded the death knell for entrepreneurial capitalism on Aug. 1.
Steven Pearlstein said,
“It’s always risky to call turns in history, but my guess is that this consensus [toward free markets] is unraveling.”