When the subprime crisis turned nasty recently and there was talk that the American financial system and its economy may collapse, Israeli public opinion molders reacted with glee to the prospect of this impending doom — choosing apparently to forget what calamity such a crisis may be for Israel.

Even some of our top economic commentators, who usually understand economics enough to appreciate the benefits of the market economy, seem to have gotten cold feet. They began writing about the deep and innate problems of capitalism that inevitably produce repeated serious crises. This may make capitalism, which they fear destroys social cohesion, unsuitable for a vulnerable Israel, they concluded.

This firestorm of anti-capitalist propaganda generated many distressed calls from graduates of our pro-market university seminars. We had little trouble explaining to them that yes, even capitalism was far from perfect, that any human system reflects not only our strengths but, alas, also our weaknesses.

The same economic system that brought about the greatest advance in human welfare is, nevertheless, subject to serious flaws, some deriving from human imperfections, others from its internal dynamics and from the limitations of knowledge. A system that rewards risk taking will often reap a rich harvest, but it will also, inevitably, fail — and occasionally in a big way.

After two decades of unprecedented growth in market economies and their surrogates, problems were bound to accumulate. Some are due to the human proclivity to throw caution to the wind in periods of prolonged prosperity, some to simple greed and hubris. Others derived from the impossibility of predicting what unintended consequences and attendant risks are involved in the resort to those daring financial innovations which made this spectacular growth possible.

The extension of features of the market economy — like open trade to dictatorial or chaotic regimes that are not really committed to its disciplines and are only too eager to exploit the trust underlying market transactions — was perhaps the unavoidable price paid for the great benefits of this expansion. These regimes took advantage of loopholes in the system and dangerously manipulated trade flows, like the Chinese did with the manipulation of the yuan’s rate of exchange.

It will take time, we assured our students, but this very painful crisis will be resolved with less pain if governments are wise enough to limit their intervention to only the absolutely necessary prevention of sudden dramatic crises. Otherwise, as in the Great Depression, foolish or malicious government intervention may deepen the crisis and worsen the pain.

As for those pundits who prophesize that the American economy will go into a tail spin and will be overtaken by Europe and the Far East, recall that in the past there were those who prophesized that Japan will overtake America — and look what actually transpired. The more open an economy is, the better it will weather the storm. Market forces will hasten to mend flaws and discard dead wood.

Why are Israel elites, especially the chattering classes in the press and the academy and such, and also those in business, so hostile to capitalism?

Some hostility derives from Israel’s long socialist heritage. It has inculcated the belief that capitalism is a regime of “cutthroat” competition that encourages people to exploit each other. This becomes a self-fulfilling prophecy in the government and monopoly riddled Israeli economy where exploitative practices become the norm.

Our universities perpetuate this destructive anti-capitalist lore. Far more than in American universities, their social sciences and liberal arts departments are dominated by post-modernist (namely nihilist) and neo-Marxist professors. Given immunity by tenure they exploit their position for Marxist indoctrination, excluding any opposing ideas from class.

Their influence is such that the Hebrew University has just launched a school for Social Leadership sponsored and directed by an arm of the notoriously anti-Zionist and anti-capitalist New Israel Fund, Shatil. In the Bezalel Art School even art history is taught through the teaching of Marx and Engels.

Hostility toward capitalism has grave consequences. It is responsible for the fact that despite its world class human capital and huge foreign investments from abroad, non-competitive Israeli enterprises have less than half the productivity of American enterprises, and Israel cannot afford to pay its talented workers more than about $1,500 a month — and prices are often higher here than in New York because Israeli monopolies inflate the price of all consumer goods.

Yes, ideas do matter. They motivate behavior. Hostility to capitalism exacts a great price from the Israeli economy and from its hapless workers. The sooner we liberate ourselves from the grip of anti-capitalist propaganda, the better our chances of survival will be.

Mr. Doron is the founder and director of the Israel Center for Social and Economic Progress, an independent public policy think tank.