Not dead, just unborn

September 24, 2009

When one compares today's bloated, interventionist US Government with its minimalist counterpart of 1900, it is difficult to take seriously Gerald Houseman's contention that "privatising and non-regulatory urges" have characterised its development over the past century ("Objectionable content", 17 September). That Alan Greenspan, the head of the Federal Reserve, should boast that "all his economic knowledge came from Ayn Rand" tells us more about his hypocrisy than her philosophy: the Fed was born in 1914 in the wake of "the Panic of 1907", specifically to ensure that taxpayers' dollars would always be available to bail out bankers. It is hardly indicative of a free market in operation.

Houseman goes on to claim that "the free-enterprise system and the invisible hand are dead", yet deftly steers clear of the state's role in the current economic crisis. Fannie Mae, the mortgage lender that fuelled the disastrous US housing bubble, is a "government-sponsored enterprise": a blundering, statist leviathan, born of Franklin D. Roosevelt's New Deal, enjoying tax and regulatory privileges not afforded to the private sector and happy in the knowledge that it would always be bailed out with federal funds, no matter how much bad debt it acquired. Before we announce the death of the free market, can we give it a try first?

Gervase Phillips, Principal lecturer in history, Manchester Metropolitan University.

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