By the 1980s, the state-led plans had clearly failed. The wreckage of unsuccessful state enterprises, bankrupt state banks, and inefficient hothouse industries behind protectionist walls—all of which culminated in African and Latin American debt crises that destroyed growth—became too obvious to ignore. These factors, plus East Asia’s rise to power in global markets, finally fueled a counterrevolution in development thinking that favored free markets and individual liberty. By the new millennium, the long record of failure of the top-down development experts triggered a well-deserved collapse of confidence in top-down planning. It had taken nearly 50 years for the world to recognize the damage that the state-led, expert-directed, antifreedom agenda had done to the world’s poor. Today, the only remaining holdouts among the top-down experts are so utopian that they are safely insulated from reality.

A 5(0)-YEAR PLAN

Today, just when we were getting over the long, toxic legacy of the Depression and its misguided emphasis on statist plans to fight poverty, this financial crash threatens to take us back to the bad old days. To avoid such a return, we must keep some principles in mind.

First, we must not fall into the trap of protectionism—neither unilaterally nor multilaterally, neither in rich countries nor poor. Protectionism will just make the recession spread further and deeper, as it did during the Depression.

Second, when changing financial regulations to repair the excesses of the past several years, don’t strangle the financial system altogether. You can’t have a Revolution from Below without it. This lesson is especially salient as Washington bails out Wall Street banks and failing industries and intervenes in the U.S. financial sector to an unprecedented degree. This bailout might turn out to be the bitter medicine that saves “finance capitalism” from a stronger form of anticapitalism, but in developing countries, open economies are still an open question.

Third, keep slashing away at the enormous red tape that is left over from previous harebrained attempts at state direction of the economy. Learn from the combined dismal track record of state-owned enterprises but also from the unexpected success stories: Private entrepreneurs are far better than the government at picking industries that can be winners in the global economy. Although fierce opposition will be inevitable, to adopt these policies would be to turn the bad hand we’ve been dealt into an outright losing one.

Fourth, don’t look to economists to create “development strategies,” and don’t back up such experts with external coercion like IMF and World Bank conditions on loans. Such efforts will be either a waste of local politicians’ time or positively harmful. Jeffrey Sachs alone can take partial credit for the rise of two xenophobic rulers hostile to individual liberty—Evo Morales and Vladimir Putin—after his expert advice backfired in Bolivia and Russia. If like-minded experts couldn’t get it done in the 50 years after the Great Depression, they can’t do it in the next 50 years. Nothing in the current crash changes these common-sense principles.

DRIVING THE RIGHT WAY

In the coming months and years, the world’s economists, politicians, and average consumers could find it incredibly easy to fall again for the wrongheaded policies of the past century. But if we are truly to continue the miraculous exodus from poverty that was under way before this traumatic crash, we ought to keep in mind stories like that of Chung Ju-yung.

The son of North Korean peasant farmers, Chung had to leave school at 14 to support his family. He held jobs as a railway construction laborer, a dockworker, a bookkeeper, and a deliveryman for a rice shop in Seoul. At 22, he took over the rice shop, but it failed. He then started A-Do Service garage, but that failed, too. In 1946, at age 31, Chung tried once again to start an auto repair service in Seoul. At last, his enterprise succeeded, largely through the contracts he won to repair U.S. Army vehicles. As his success continued, Chung diversified into construction, and his company kept growing rapidly. In 1968, he started manufacturing cars.

He named his company Hyundai. It became one of the largest companies contributing to South Korea’s rise. His first effort to export cars to the United States in 1986 brought ridicule because of the cars’ poor quality. The Asian crisis of 1997-98 led to a partial breakup of the Hyundai Group, but the Hyundai Motor Company continues to thrive. Chung died in 2001, but his dreams for the U.S. market came true. By 2008, Hyundai cars had received awards in the United States for the highest level of quality from Consumer Reports.

However terrifying the latest crash may be, let’s never forget that it is the Chungs of the world that will end poverty—not the Depression-inspired regression into statism.