In an article for Slate (another version appears in Newsweek) entitled “The End of Libertarianism,” Jacob Weisberg mocks libertarians and other free-market supporters for arguing that interventionist government policies contributed to the financial crisis. In italicized exasperation he cries, “Haven’t you people done enough harm already?” According to Weisberg, it’s already clear that, when it comes to what caused the meltdown, “any competent forensic work has to put the libertarian theory of self-regulating financial markets at the scene of the crime.” Consequently, he argues, libertarians in general have now been utterly discredited. “They are bankrupt,” he concludes, “and this time, there will be no bailout.”
In firing this broadside, Weisberg poses as the pragmatic, empirically minded anti-ideologue. In fact, he is engaging in the lowest and most intellectually trivial form of ideological hack work.
As every good hack does, he bulls ahead with completely unjustified certainty. We’ve just experienced a global disruption of financial markets on a scale not seen in seven decades. And we’re still in the middle of it: the ultimate extent, severity, and consequences of this crisis remain unknown. Yet Weisberg can already sum up the story in a single sentence: the libertarians did it!
But consider the fact that it wasn’t until Milton Friedman and Anna Schwartz’s Monetary History of the United States — published in 1963, three decades after the event — that our contemporary understanding of the causes of the Great Depression began to take shape. That understanding has been further refined by contributions from, among others, Ben Bernanke and Barry Eichengreen during the 1980s and ’90s.
So serious people will be debating what triggered the current crisis for a long time to come. I’ve been reading voraciously in recent weeks, trying to get some handle on what’s going on, and I can tell you that there is nothing like a consensus among scholars yet — and certainly not a consensus in favor of some simple, monocausal explanation.
With regard to government interventionism as a cause of the crisis, Charles Calomiris and Peter Wallison have marshalled strong evidence that Fannie and Freddie played a major role in inflating the real estate bubble. Despite the fact that these two gentlemen have forgotten more about financial markets than Weisberg will ever know, Weisberg dismisses their analysis as not only wrong, but risible.
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