But now that we have the equivalent of an economic 9/11, much of the same crowd sees its chance to lock in ideas that would be unthinkable during saner times, this time in the name of "economic security." As Rahm Emanuel, President-elect Barack Obama's incoming chief of staff, said last month, "You never want a serious crisis to go to waste; it's an opportunity to do important things that you would otherwise avoid."
So much for "the only thing we have to fear is fear itself."
Contrary as it might seem these days, economic knowledge is cumulative. We know things today that we didn't know 50 or 100 years ago. As Christopher DeMuth, outgoing president of the American Enterprise Institute, noted in a recent speech, we know that tightening the money supply at a moment like this is among the worst things you can do. The United States tightened money at the dawn of the Great Depression, and that's one of the reasons it was "Great." Today, based on that knowledge, we're doing the opposite. And that know-how is more valuable than the all the cash in the Treasury.
And the more we know, the richer we get. If you plotted a trend line of Western prosperity since the dawn of capitalism, you'd see a line moving reliably upward over centuries. Zoom in close on any given period and the more jagged the line appears, zigging up and zagging down like a stock that's volatile on a given day, but trending steadily upward over the year.
Look at that line from, say, 1929 to 1939, and sure, there was a lot more zagging down than zigging up. But in part that's because policymakers thought the crisis was proof that capitalism itself had been discredited.
Today you can hear similar talk from a chorus of progressives, convinced that laissez-faire is dead and we must now rethink everything, reinvent our economic order or return to what New York Times columnist Paul Krugman calls "New Deal economics."
By all means let the nation do what it must to keep the downward dip as short and shallow as possible. But let's not, in a quest for security, abandon good habits and forget the hard-learned lessons that have given us so much.