All ideologies practise periods of convenient amnesia.

In the same way that a woman's evident ability to forget the pain of childbirth ensures the continuity of the species, schools of political thought must obscure the memory of certain events in order to ensure their survival as credible philosophies.

The political left prefers to ignore the massive failures of communism in the last century as well as, in the here and now, the apparent unravelling of Europe's treasured, unaffordable nanny-state.

Similarly, direct job creation — New Deal-style pump-priming — now also appears to have been erased from the left's vocabulary.

For the political right, particularly in America, the rhinoceros that must be ignored is the catastrophic failure of the free market.

It has been only two years since unshackled free enterprise very nearly ruined this country's economy, as well as the rest of the world's. Two years since entire branches of the securities and derivatives markets were exposed as almost industrial-scale fraud.

But most shamefully, it's been two years since Wall Street's champions of rugged individualism, whose market-making entrepreneurship supposedly sets this nation apart, had to be rescued and wet-nursed by the big, paternal government that hardline conservatives abhor.

The new culture war

The right is doing its best right now to forget that inconvenient truth. Actually, it's apparently decided that the whole mess was the fault of big paternal government in the first place.

Victory night for Rand Paul. The Tea Party-backed opthamologist wins the Republican nomination in Kentucky as his father, Ron Paul, the Republican congressman for Texas and former Libertarian party presidential candidate, looks on. (Associated Press)

From the libertarian Tea Party to the lobbyists for the banks, to hardline conservatives eager to retake control of Congress, that is exactly the case being made here now.

Arthur C. Brooks, president of the American Enterprise Institute, was the latest to do so, in a sweeping essay published by the Washington Post on the weekend.

On one side of the "new culture war," argued Brooks, are the forces that make America great — those who believe this country is "an exceptional nation organized around the principles of free enterprise, limited government and rewards determined by market forces."

On the other are what he calls the statists, those "determined to impose expanding bureaucracies, a managed economy and large-scale income redistribution."

"These visions," writes Brooks, "are not reconcilable. We must choose."

Don't regulate

This is a theme repeated across America nowadays, most recently at the polls in Kentucky a week ago.

Fuelled by the populist power of the Tea Party, ophthalmologist Rand Paul captured the Republican nomination for the mid-term Senate race in November.

Paul is a libertarian who shares the views of his more famous father, Texas congressman Ron Paul, who once ran for president under the Libertarian banner. Basically, he believes the less government the better.

Libertarians oppose the regulation of the financial sector, including the mammoth bill just passed by both houses of Congress.

Rand Paul would, in fact, abolish the Federal Reserve, the financial sector's ultimate overseer. In his worldview, government is a drag on the dynamism of the market and should just get out of its way.

Similarly, conservative hardliners argue that government bailouts simply reward incompetence and malfeasance at the expense of ordinary citizens.

Actually, that is not just a conservative argument. If there is one point of near-total consensus in this country, it is No More Bailouts.

Not Wall Street's fault

But what Paul, and the Tea Partiers, and conservative hardliners, and Mr. Brooks's weekend manifesto would rather forget is why George W. Bush, a self-described "market guy," had to suppress his principles and open Washington's bailout vaults for Wall Street two years ago.

Brooks now argues that the economic freefall at the time wasn't really Wall Street's fault.

"In truth," he wrote, "it was government housing policy that was at the root of the crisis."

Yes, there is some truth in that. Successive administrations in Washington, pushing for greater access to credit for underprivileged minorities, did actively encourage lending to people who couldn't pay back what they borrowed.

But saying the economic crisis would never have happened had it not been for U.S. government housing policy is like saying the Holocaust was a hoax because the gas chambers at Dachau were never actually used for mass killing, as they were elsewhere.

In other words, a gross concealment of reality based on an isolated truth.

The fact is, millions of American consumers were encouraged to lie about their incomes and take on ridiculous mortgages with the full complicity of the nation's banks and credit rating agencies as government stood by, trusting the "self-regulating wisdom" of the markets.

Meanwhile, the country's biggest financial institutions were promoting bundles of rotten mortgages, in many cases knowing full well the worthlessness of what they were selling.

The richest investment bank on Wall Street, it turns out, was actually betting against the stuff it was selling investors.

Swallowing hard

When this all collapsed, the so-called statists, argues Brooks, recognized a golden opportunity for offering big government as the solution.

"For a lot of panicky Americans, the prospect of a paternalistic government rescuing the nation from crisis seemed appealing as stock markets and home prices spiralled downward."

Well, um, yes. For the vast majority of Americans at the time, as I recall.

But Brooks, like most of the revisionists, just stops there. It's part of the convenient amnesia.

Here's the question they ignore: What if the government had done nothing? What if Bush had let the biggest financial institutions in the country sink under the weight of their own garbage?

What if Obama, the leader of Brooks's statist forces, had chosen not to continue Bush's bailout, and had let GM and Chrysler go out of business?

There isn't much doubt among economists what would have happened.

"The recession would have been a depression," says Prof. Peter Morici, a macroeconomist at the University of Maryland and a starchy critic of what he nonetheless considers the Obama administration's "welfare for Wall Street."

The Tea Partiers as well as probably Rand Paul and everybody else with a retirement plan would have seen their life savings evaporate by half, or worse. Some ATM machines would have stopped delivering cash.

Some economists say unemployment would have hit 30 per cent or higher, rather than peaking at about 17.

That is why market-guy Bush swallowed hard and ordered his officials to start bailing. And that is why Democrats and Republicans joined together last week to pass the regulatory reform bill.

Rand Paul and his fellow libertarians may not have liked it, but as Republican Senator Jon Kyl put it, lawmakers have to separate "the theoretical and the interesting and the hypothetical questions that college students debate until 2 a.m. from the actual votes we have to cast based on real legislation here."

Should he actually make it all the way to the U.S. Senate later this year, Rand Paul will probably discover the truth of that.