I see free markets as very much the underdog going forward. But if there is no bailout, then at least markets have a fighting chance. I would want to defeat this particular revolt of the elites, realizing that larger battles probably lie ahead.
You have to admire that some are at least sticking with their principles in the free market, even in a clear case of massive market failure, but one historical quote comes clearly to mind:
'the best friend the profit system ever had'
- Franklin Delano Roosevelt, 1930's, speaking about himself.
Roosevelt was from a wealthy patrician family who detested communism and much of socialism with it. But he recognised that, however strong the principles of the free market were, the priority of the government was to maintain a strong, robust American economy and society. Only then could capitalism have a hope of operating anything like the textbooks and theorists suggested it could. Only where there is strong order, and popular support for the continuance of the republic can capitalism properly operate. (See Russia post Cold War, or Iraq esp in 2003-2004 for counter examples of real free market, no regulation capitalism. Only thieves and crooks prosper.)
Many who have drunk the Kool-aid on pure free markets are admirably standing by their principles of the free market, fearing some "larger battle" ahead such as great socialization of industry. But if the risk is even half as big as Paulson and others are suggesting from failing to act, the bailout is likely to be seen as a very, very, light change to the economy in comparison.
FDR saved the capitalist system by first restoring confidence to the economy and state. Maybe Obama (who in many ways reminds me of FDR) will have to do the same.
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