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Capitalism Did Not Cause the Financial Crisis

Posted on March 23 2009 6:15 pm
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While the Obama administration continues to depict free-market capitalism as the disease and government intervention as the cure, Americans would do well to maintain some sense of perspective rather than succumb to the Obama-Rahm Emanuel mentality which views any crisis, real or exaggerated, as “a terrible thing to waste.”


Nobel Prize-winning economist Gary Becker and economics professor Kevin Murphy report today (in the Financial Times) that between 1980 and 2007, the world’s real Gross Domestic Product (GDP) grew by about 145 per cent, or 3.4 per cent annually. During that span of time, hundreds of millions of people around the globe climbed out of poverty and achieved a standard of living entirely unknown outside of free-market economies. Becker and Murphy explain:


“The role of capitalism in creating wealth is seen in the sharp rise in Chinese and Indian incomes after they introduced market-based reforms (China in the late 1970s and India in 1991). Global health, as measured by life expectancy at different ages, has also risen rapidly, especially in lower-income countries.”


The authors further point out:


“Even if the recession is entirely blamed on capitalism,… the [current] recession-induced losses pale in comparison with the great accomplishments of prior decades. Suppose, for example, that the recession turns into a depression, where world GDP falls in 2008-10 by 10 per cent, a pessimistic assumption. Then the net growth in world GDP from 1980 to 2010 would amount to 120 per cent, or about 2.7 per cent a year over this 30-year period.”


Before we willingly let Obama transform mankind’s greatest economic success-story into an experimental laboratory for his collectivist, redistributionist vision of “social justice,” let’s remember the big picture.

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