These are troubled times for the global economy. However, we’re working to clarify that the failure is not the market—nor, indeed, even in the most significant way, government regulation—but rather the incredibly confused “mixed economy” model that now dominates America and to a lesser degree Europe.
We’ve created a chimera: firms encouraged to explore the economic frontier and to play the “destructive creative” functions so well described by Schumpeter, but that have implicit or explicit government guarantees to hold them harmless if their decisions go astray. Congress encouraging people to sail out on stormy waters without life vests and failing to encourage them to learn how to swim has been criminally foolish (a fact that we at CEI pointed out for Freddie and Fannie in our testimony in 2000). Yet the world and the people will bear much of the pain.