Paul, a well-known Tea Party supporter and Libertarian, believes no. I disagree whole-heartedly with this stance. Paul argues that if the government would step out of the way, the free market system would correct and punish itself and the reason all these bankers and hedge fund managers were allowed to escape scott free is because the government stepped in and bailed them out. Had the Bush and Obama administration not stepped in, capitalism would have punished these people apporpriately and they wouldn't be allowed to continue making millions.
But let's pretend Paul is right. That, somehow magically, the markets would have corrected themselves, what would that look like? Luckily we have a prime example just in a smaller scale.
First, some background information. In 2008, because of rampant deregulation of Wall St. by the Bush Adminstration, banks and mortgage companies were allowed to take greater and greater risks in betting on the exploding housing market and speculated that prices would only go up, not down. This speculation led to an over-extension of credit. When prices began to drop the banks didn't have the assets to cover their losses and went under. Billions of dollars in retirement funds, savings account, and home values went up in smoke. But we did have a warning sign.
For much of the 1990s, Enron had discovered a way to trade energy futures as a commodity. They traded oil, natural gas, coal, and electricity and always bet that the price of these would go up, not down. The reason? Deregulation.
The Republican Senator from California had managed to deregulate California's power grid there by allowing Enron to manipulate the prices through a series of rolling blackouts. In 2001, when their scheme was revealed through an accounting scandal, the price of Enron stock collapsed. Millions of dollars in pension funds, retirement funds, health care funds, went straight down the drain. And what did the new Bush Adminstration do? Nothing. They didn't bail them out, they didn't prevent the collapse, they didn't protect Enron's employees. So, did the market somehow "correct" itself? Had it done so, I doubt the 2008 collapse would have been as severe. But even the smartest men in the room can't tell for sure.
That's not to say justice wasn't served. Many on the board of directors including the CEO were tried and sent to prison. But is that justice? The people who worked for Enron lost everything with no way to get it back while many of the top traders escaped prosecution and retired with hundreds of millions of dollars.
The free market system failed. It failed to protect the workers and it failed to deliver the right kind of justice.
Let's go back even further, pre-1920s. Capitalism in that day was nothing but the Wild Wild West. Companies and banks could do whatever they wanted. This country went through a series of boom and bust cycles where the rich got richer, the poor lost everything, and the free market only seemed to punish those people who had nothing, right up until 1929.
And since then? The government has taken steps to protect people, to lessen the blow of the boom/bust cycles and for much of the 20th century this country prospered like none other. But whenever government regulation fails, companies and corporations are their to take advantage of everything they can: employees, the environment, and the rules. And without regulation, those responsible for polluting, for stealing, for cheating, would never get caught or held accountable and would just pull up and move somewhere else and do it all over again.
The government has a place in our free market, capitalist system. Is government strangling growth? No. In fact, everything points to the exact opposite. The rich continue to get richer and the poor get poorer because we don't have enough regulation, enough taxation, enough rules to keep the wealthy in balance with everyone else. The key to the future, Mr. Paul, is not less government, but more government in the right places. We tried it your way for nearly 3 decades, and it has failed to deliver the kind of prosperity we had in the 40s, 50s, and 60s. And you couldn't handle our way for 2 years without complaining we should "go back."