We accept as a fact of economic life that plush times inevitably give way to lean times. Just as the moon waxes and wanes, the economy goes through booms and busts.
Median home price increased by 150 percent from August 1998 to August 2006. Over the next two years, home prices fell by 23 percent. Foreclosures skyrocketed.
The stock market has followed a similar course. When the New York Stock Exchange closed on Oct. 9, 2007, the Dow was 14,164.53, the highest close ever. Thirteen months later, it closed at 7,552.29, a drop of 46.7 percent. Retirement portfolios have been eviscerated. Unemployment has increased. When the figures are compiled the way government calculated them in the 1970s, the unemployment rate in November 2008 was 16.7 percent.
These personal dimensions of busts are used to justify government intervention, whether creating a safety net or drawing up regulations aimed at smoothing out the cycle supposedly inherent in the free market. But is this inevitable? Is the market economy really prone to sudden, inexplicable episodes of massive business error — or could something outside the market be causing it?
If politicians are honest in seeking a culprit, they will find that it’s not capitalism. It’s not greed. It’s not deregulation. It’s an institution created by government itself.
