Until a few months ago, market liberals disposed to Cobdenite wishful thinking believed that ever-freer markets and trade were inexorable following globalisation. The present global economic crisis has proved them wrong. They should recall Adam Smith's sober realism: "To expect, indeed, that the freedom of trade should ever be entirely restored...is as absurd as to expect that an Oceana or Utopia should ever be established."
The intellectual climate has now shifted decisively against free markets and for greater government intervention. Massive policy shifts are taking place, probably heralding the end of a 30-year free-market revolution. Have market liberals mounted any defence? Hardly. They have been brushed aside, dismissed as theological quacks, huddled in dwindling sects. How did this happen?
Harold Macmillan's "events, dear boy, events" is part of the answer. The free-market victories of the 1980s and 1990s bred complacency. That was heightened by a Goldilocks global economy, which ended in 2007/8. Then the global crisis seemingly appeared from nowhere, and quickly battered the "real" economy. Escalating government intervention has followed-bank bailouts and indiscriminate subsidies to manufacturers, now spilling over into protectionism against foreign competition. Fiscal-stimulus packages are providing cover for industrial-policy activism at home and protectionism abroad.
There have been parallel, but subtle, changes in the market for ideas. These have been brewing for about a decade. Anti-market NGOs are more visible. In developing countries, sceptics say that liberalisation and globalisation have not delivered. They argue for Northern liberalisation while preserving Southern "policy space" (for protectionism, that is). They extol the virtues of infant-industry protection. In the West, "fear of globalisation" has broadened from a blue-collar rump of outdated manufacturing to the white-collar middle classes in the services economy. That has fed calls for "harmonising" developing - country labour, environmental and tax standards - and now for tighter carbon-emission standards to combat global warming. Such advocacy is backed by the threat of trade sanctions, much of which is directed at China.