Separating Sense from Nonsense in the US Debate on the Financial Meltdown

Abstract

The US debate on the causes of the financial meltdown and the policies appropriate for its resolution have a different center of gravity to that prevalent in Western Europe. Free-market solutions continue to be canvassed by conservative and libertarian politicians and political commentators with an intensity that is rarely found elsewhere, reflecting the extent to which a significant minority of American voters and policy makers remain wedded to a principled anti-statism. This article surveys those views, and the rebuttals to them now coming from more center-left elements of the US political class. It argues for the superiority of the latter, while noting that one serious adverse consequence of this positioning of the US debate is its capacity to distract attention from important underlying structural causes of the housing crisis and associated credit crunch.