Free market dynamics can fix many problems, but all. Milton Friedman called the combined process whereby 1) businesses fail due to not meeting customer needs and 2) when these failed businesses are replaced by businesses that did meet the customer needs as “creative desctruction”. This “creative destruction” was powered by the “invisible hand” of free markets. Friedman never believed that this hand was “infallible” AND “invisible”. This latter silliness most recently came into fashion during the reign of Ronald Regan.
In case it is not obvious, allowing the domino-like effect of several businesses failing and the world economy collapsing is not “creative destruction”. It is just plain “destruction”. Milton Friedman was crtical of the U.S. Federal government for not acting sooner when banks started failing in a domino-like manner in 1931. [FDR did not take office until 1933.]
Over our history, our economonic policies have been influenced by times of greater reliance on government intervention alternating with periods of greater reliance on free-market strategies. This mixture, in my belief is better than either free market or government regulation being the sole strategy.
NPR is featuring a series of articles on the tinkering that is going on with our economy – here is the first.