The great free-market revolution that began with the coming to power of Margaret Thatcher and Ronald Reagan at the close of the 1970s has finally reached its Thermidor, or point of reversal. Like the French Revolution, it derived its energy from a simple idea of liberty, to wit, that the modern welfare state had grown too large, and that individuals were excessively regulated. The truth of this idea was vindicated by the sudden and unexpected collapse of Communism in 1989, as well as by the performance of the American and British economies in the 1990s.

Yet...