The Free Market Myth is the Underlying Cause of Our Current Economic Crisis

... "There is a direct challenge under way to the paradigms that America has been trying to sell to the rest of the world," said Eswar S. Prasad, a former China division chief at the International Monetary Fund. The American banking collapse, which precipitated the global meltdown, has led to a fundamental rethinking of the American way as a model for the rest of the world.

... Robert D. Hormats, vice chairman of Goldman Sachs International, said the president "must demonstrate to the world that he understands that it's not just about saving ourselves."

And Mr. Obama must try to do all of that in the middle of a global recession for which most of the world blames the United States. "The U.S. brand name has clearly suffered from this crisis, and the rest of the world is no longer willing to sit quietly and be lectured by the United States on how they should conduct economic policy," Mr. Rogoff said.

In the past, American officials traveled to India, Brazil, China and South Africa and lectured government officials on the need for open markets, free trade and deregulation. But now some of those very policies - particularly deregulation - are viewed as the culprits for the recent economic collapse.

"Emerging markets now think they can do what they want without hectoring from the United States," said Mr. Prasad, the former monetary fund official.

"... As chancellor of the exchequer, Mr. Brown (the British Prime Minister) celebrated the "light touch" regulation of the City of London under which American banks and investment houses flocked to build up their London operations. He appeared, to his critics on Labor's left, to have accepted a Faustian deal under which the unbridled excesses of the City were tolerated because they generated windfall tax revenues that allowed Labor to splurge on public sector spending.

But in Strasbourg, France, the prime minister seemed to fall back on his roots as the son of a Scottish preacher, and as a student politician of the radical left, focusing on the demons that detractors believe are inherent in the capitalist system. Europe, he told the legislators, had learned the truth that "riches are of value only when they enrich not just some communities, but all." He added: "As we have discovered to our cost, the problem of unbridled free markets in an unsupervised marketplace is that they can reduce all relationships to transactions, all motivations to self-interest, all sense of value to consumer choice and all sense of worth to a price tag."

If the implication was that Gordon Gekko-style greed was an American contagion, Mr. Brown is far from alone in Europe. Among some of those who worked through the boom years in the City of London, the moment when matters began to get out of hand under the international financial architecture that began to take shape at Bretton Woods can be dated to the collapse of the Soviet Union. One result, these people now say, was an American triumphalism that translated, in the financial world, to the kind of free-for-all Mr. Brown spoke about in Strasbourg.