On “Utopian”

by John O'Sullivan

Since I think I introduced this particular dispute–Jonah is again right. In a sense there cannot be a free-market utopian since free market economics is positively infatuated with reality. But there are people of a utopian disposition who take up a worshipful attitude to the free market. They are doomed to disillusionment.
In the first Gulf War, for instance, some libertarians opposed the war on the grounds that the free market would solve any problem raised by Saddam’s controlling all the Gulf oil and setting an astronomical price for it. They were, of course, right. But how would the market solve it? By sucking vast amounts of investible capital into Saddam’s treasury, by depressing demand worldwide, by encouraging investment in alternative sources of oil and alternative energy sources, and so on. A decade letter the world would be awash in cheap oil, energy use would be much more economical, and Saddam’s vast civil engineering projects would be abandoned only half-completed as his oil revenues slumped dramatically.

Problem solved by the market? Sure. But in the intervening decade we would have suffered world stagflation on a large scale with a misery index at Jimmy Carter levels.

How do I know all this? Because that is what happened when the free market solved the crisis caused by OPEC’s two oil price hikes in the 1970-80s. (Actually, “The Economist” and I predicted all that.)

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