Anything government can do, the free market can do better
When it comes to creating prosperity and promoting true peace (as opposed to military stalemates), the free market does it just fine on its own, because it works purely according to what individuals want and their subsequent voluntary exchanges to attain their own individual happiness. The alternative, government, works purely by forcing people against their will: decisions are made arbitrarily, and whether they are done with caprice or careful calculations, whether they are based on politics or intentions of the greatest benevolence, they are ultimately immoral for forcing the individual against his will.
Over at Three Sources, a commenter going by "Silence Dogood" defended government as able to provide the infrastructure that makes the free market possible. This is not so, and I refuted his arguments one by one, demonstrating that everything he credited to government could be supplied and supplied better by a free market.
Old Ben must be rolling in his grave at someone using his pseudonym. Like most people, "Silence" doesn't believe that it's possible for a free market to provide things like roads and other infrastructure. He outrightly refuses to believe it, not even giving the free market a chance. Now, you don't have to be Paul Krugman to worship the state; it only requires a belief that certain things -- good things -- can result only from government's direction. As Bastiat put it:
Do those worshippers of government believe that free persons will cease to act? Does it follow that if we receive no energy from the law, we shall receive no energy at all? Does it follow that if the law is restricted to the function of protecting the free use of our faculties, we will be unable to use our faculties? Suppose that the law does not force us to follow certain forms of religion, or systems of association, or methods of education, or regulations of labor, or regulations of trade, or plans for charity; does it then follow that we shall eagerly plunge into atheism, hermitary, ignorance, misery, and greed? If we are free, does it follow that we shall no longer recognize the power and goodness of God? Does it follow that we shall then cease to associate with each other, to help each other, to love and succor our unfortunate brothers, to study the secrets of nature, and to strive to improve ourselves to the best of our abilities?And then over at Karol's, one of her guest bloggers was, shall I say, unfortunate enough to talk about credit default swaps when he doesn't really know how they work. He was even more unfortunate to talk about "reforms" and creating "transparency" in financial exchanges -- via government, so I had to set him straight. Let me just say that I know a thing or two about CDS: they're not the maligned financial instruments so many people think they are, nor are they traded with very little information. A specific CDS implicitly requires the buyer to know what he's getting into. Now, there have been cases of fraudulent misrepresentation with some Collateralized Debt Objects, but that's entirely different.
Re-read what Bastiat said above, and think of how Wall Street began. There was no law to tell certain stock traders what to do, so how did those individuals know to congregate and formalize their association? Or was it, in fact, that God has given us the ability to think, to reason, and that humans for thousands of years have been able to trade and associate voluntarily without needing overlords to direct us?
Government's record is that of the anti-Midas touch, continually ruining everything it meddles with, from charity to the financial system. In the event it ever "fixes" something, look for how it created the problem in the first place. Even then, the solution will never be as effective as keeping government at bay and letting the free market clean up the mess that the state created.