And in response, "Lord_Voldemort":
We have trusted in “the invisible hand” to make everything turn out all right, believing that it wasn’t necessary for us to bring virtue to bear on our decisions. But things haven’t turned out all right and the invisible hand has let go of some things, such as “the common good.” The common good hasn’t been very common in our economic decision-making for some time now. And things have spun out of control. Gandhi’s seven deadly social sins seem an accurate diagnosis for some of the causes of this crisis: “politics without principle, wealth without work, commerce without morality, pleasure without conscience, education without character, science without humanity, and worship without sacrifice.”
If we learn nothing from this crisis, all the pain and suffering it is causing will be in vain. But we can learn new habits of the heart, perhaps that suffering can even turn out to be redemptive. If we can regain a moral compass and find new metrics by which to evaluate our success, this crisis could become our opportunity to change.
That's just a wee bit of an oversimplification. Actually, we've trusted in a mixed economy of private business overseen by an often burdensome regulatory state, backed by a substantial welfare state. That's especially true in Europe, which hasn't escaped any of the difficulties of this recession, and largely true in the US, although the welfare state aspect is much less substantial here.
I think Jim's reference to Gandhi's "Seven Deadly Social Sins" was quite apt, but I think a strong case can be made that much of what has gone wrong is more a failure of the regulatory and welfare state than of markets. For years governments have been inclined to see the goods that private enterprises actually provide, however imperfectly, as secondary to their value as a source of tax revenue or as tools that they can redirect toward their favored ends. In the process, they have created many of the things that Gandhi rightfully scorns: wealth (redistributed) without work, education (in public schools) without character. Not to mention politics without principle. (See: HR 1, the "Stimulus Bill" Heh heh.)
A free-market advocate will not go for very long without acknowledging that markets are to some extent a deal with the devil; much of what we propose to do is harness self-interest. But the same self interest is present in all persons, in the market or in government. Advocates of activist government seldom acknowledge that self-interest affects government as well. If we have romanticized anything in this age, it is the state. And now, I suspect, we are paying for that mistake.