The October 18 issue of the Economist. Photo: The Economist

The credit and financial crisis that has engulfed the world has created a firestorm of comment about capitalism and free markets.

The cover of the October 18th issue of the Economist proclaims, "Capitalism at Bay." The lead editorial quotes French President Nicolas Sarkozy declaring: "Laissez-faire is finished."

If he is correct, what does that mean to Global Envision? We are founded on the belief that markets provide an important way for the poor to work their way out of poverty. Mercy Corps, our parent organization, is similarly oriented, boasting "community-led and market-driven" programs. The fate of capitalism impacts the world — especially its poorest residents.

Sarkozy tends to make conflicting statements — in the same speech that he declared laissez-faire was finished he also said “capitalism is the system that has enabled the extraordinary development of western civilization” — so I suggest we not take the current European Union president too literally.

Markets, in fact, have impacted the entire world, not just in the West. As the Economist points out, "In fact, far from failing, the overall lowering of 'barriers to intercourse' over the past 25 years has delivered wealth and freedom on a dramatic scale. Hundreds of millions of people have been dragged out of absolute poverty. "

If the result of the credit crisis is a retreat from the market economy, it will be a very sad result. “This is a difficult time to defend free markets," opines the Financial Times. "Nevertheless they must be defended, not only on their matchless record when it comes to raising living standards, but on the maxim that it is wise to let adults exercise their own judgment.”

On this last point: Some of the judgment exercised in the credit crisis has been so poor that even those of us who favor free markets are ready to consider some degree of credit-market oversight going forward.

To what extent the U.S. is willing to fight for freer markets will depend largely on the policies of President-elect Barack Obama.

His campaign position on trade, at least, is a worry. His emphasis has varied over the last 20 months, but a protectionist position — as some of his supporters will undoubtedly push for — it would be sad not only for America but for the world's poor. My guess — and my hope — is that he'll focus on making trade more friendly to the environment and to workers, but not create barriers to trade. He's also likely to create programs to retrain those whose jobs are shipped overseas. This is important. People do lose jobs because of trade agreements (although more new jobs are created by them than are lost).

Companies like General Electric and Caterpillar are already lobbying the yet-to-be formed Obama administration to resist calls for greater protectionism.

"When people are afraid, they want to create barriers to trade,'' GE Chief Executive Officer Jeffrey Immelt said in an Oct. 27 speech at Columbia University in New York. "It would be a real crime, I think, if we allowed the current economic volatility to make us move backward in globalization.''