Many leftist commentators have gleefully interpreted the financial crisis as proof of the failure of free-market capitalism. Libertarianism and laissez-faire will be out; regulatory command-and-control will be in. Everyone agrees that targeted regulation is needed in the domains of finance that brought us to this disaster, where a mad incentive structure and poorly understood dynamics combined to produce a catastrophic outcome. It is less clear that a general philosophy that "regulation is good" will be helpful across the board. The past decade has shown us that unplanned, bottom-up, productive activity can lead to huge advances in social well-being, such as Linux, Wikipedia, YouTube, and the rest of Web 2.0. And many segments of the old-fashioned economy are still distorted by excessive regulation, like the artificial scarcity created by government-rationed taxi medallions. But the winds of change are clearly blowing in the direction of increased regulation, and I suspect that not all of the effects will be good.
If so, libertarians and economic conservatives will have themselves to blame. In recent decades they have turned the benefits of deregulation and tax-cutting into a religious dogma--less is always better--rather than a consideration that has to be weighed against other goods and submitted to evidence-based evaluation. Worse, they have allied themselves with (or at least failed to distance themselves from) the know-nothing conservatism represented by Dan Quayle, George W. Bush, and Sarah Palin. Libertarianism and moderate intellectual conservatism have discredited themselves with this disastrous alliance, and whatever contributions they have to offer the national conversation will be blown off. There's some rough justice in this, but it would be a shame if the result is a pro-regulation monoculture.
I'd say that the blame is less with turning "the benefits of deregulation and tax-cutting into a religious dogma" and more with a failure to distance those benefits firmly, at every turn, from corrupt and regressive corporatism. "Deregulation" and "letting the corporations write the regulations" are not synonyms. Neither are "cutting spending" and "increasing spending on wealthy special interests." There's been a thoroughly baleful and stupid path that went something like this:
The apparently morally- and intellectually-powerful cases for regulation or greater spending come from the left.
We wish to resist regulation and greater spending.
Therefore obviously-indefensible regulation and spending coming from the right is the lesser of two evils (even if greater in magnitude!), because it's unprincipled and so can be written off as a temporary aberration.
The fact that *any* libertarians or market-oriented conservatives supported George W. Bush for re-election, after his first term had made clear what his governance was like, is an embarrassment. And now it's not just a personal embarrassment; it's a damaging embarrassment to market-liberal ideas.