That’s libertarians for you – anarchists who want police protection from their slaves” – Kim Stanley Robinson

Libertarian economics praises the market above all, to the extent where it is venerated like a god. The market is praised for its ability to self-regulate, with the result that the more freedom you give to the market the better the long-term economic results will be (or so the theory goes). Libertarians blame governments and public regulators for innumerable crises in the history of economics. The market, they contend, is not to blame.

This theory has much in common with the case of a gardener seeking to keep a vast plot of land in check. He is the regulator in this metaphor, and can do a certain amount in terms of pruning and planting, but even he is powerless to intervene in a very hot summer of a very cold winter. Nature must take its course on his garden. To blame the gardener for any damage done and fire him for his efforts is what the libertarians would have us do, but it will have little effect on the garden at the end of the day.

However, if you were to return to the garden after an absence of several years, the difference would be noticeable. It would look wild and dishevelled. Eventually, there would be no trace of what was once a beautifully balanced garden. This is because, while subtle and barely noticeable on the surface, beneath the surface, nature is relentlessly taking its course. The longer the garden is left, the more difficult it becomes to restore its equilibrium. If left too long, it simply runs to seed and one will pretty well have to start from scratch in creating a new order in the wilderness.

This is precisely what took place with the deregulation of the financial system. Bit by bit, it began to shift. Practices became steadily more and more aggressive and dodgy. The bubble it created drove up the house prices, which helped to keep it all hidden from view. Eventually, gravity kicked in and the artificially stimulated, housing bubble burst. Without deregulation, the bubbles can form from time to time, but of a much smaller duration and magnitude. The sheer size of this bubble was enough to destabilize, not only the local economy, but sent the entire world financial system into a tailspin.

Now, the libertarians might seek to blame the dubious individuals who exploited the system while the housing market continued to grow, and to some extent they would be right to do so. But any anarchic system gives rise to criminal activity, and deregulation was just the signal the con men needed to move in on the financial services sector. Of course it is right that we should pursue and prosecute these wheeler-dealers, but does not some blame also lie with the economists who championed the system?

There is a balance to be struck, of course, between micromanaging the economy and leaving it entirely free from regulation. But what we have seen in recent years surely represents the most extreme form of freeing up market forces to act without regulation of any kind. It is worth remembering that those who advocated these policies did so knowing that they would either benefit personally from the highs or be immune from the lows because of the state of their own financial successes.