With the current debate going on in South Africa about nationalisation and the role of the state in the economy, a lot has been said about the evils of capitalism and the need for an alternative that guarantees the welfare of society as a whole. Of course, the current global economic position and the apparent failure of the neo-liberal economic paradigm has got those of us who have a vested interested in the progress of the developing world re-examining our assumptions and looking for fresh perspectives.
With that in mind, over the past week I spent some time reading some literature from the man identified as the “father of the Classical Economic School and hence capitalism”, Adam Smith. I began by reading through Smith’s Theory of Moral Sentiments and then ended up reading through his seminal work, titled An Inquiry into the Nature and Causes of the Wealth of Nations which was published seventeen years after the Theory of Moral Sentiments. Both of these books gave me great insight into the thinking of Adam Smith and are relevant to us in our search for fresh solutions to the problems the world is faced with.
In order to get a proper understanding of Smith’s writings it is important to get an understanding of Smith’s background as an academic and a thinker. Adam Smith studied moral and political science and languages at Balliol College in Oxford and he taught moral philosophy at Glasgow College for twelve years. After publishing the Theory of Moral Sentiments his lectures where less concentrated on ethical doctrines and more on jurisprudence and political economy.
Smith’s Theory of Moral Sentiments and Wealth of Nations presented different but complementary facets of his thinking. Moral sentiments discussed the moral forces that restrain selfishness and bind people together in a workable society whilst the Wealth of Nations assumed the existence of a just society and showed how the individual is guided and limited by economic forces.
What really struck me about Smith’s writings was the emphasis on personal morality and the assumption of a just society. It would seem that Smith’s contemporary disciples and their neo-liberal economic assumptions have completely forgotten to highlight the importance of morality and virtue in Smith’s economic thinking. They emphasise the principle of the “invisible hand”, the natural liberty of the individual and laissez faire economics at the expense of other values such as: sympathy, benevolence in order to restrain selfishness and the right to justice which were very important to Smith as his Theory of Moral Sentiments reveals.
Smith’s “invisible hand” was not as impersonal and completely ignorant of the importance of virtue and morality as the neo-liberal school would like us to believe. Smith’s version of capitalism was as concerned about social justice as it was about the pursuit of profit. Neo-liberal economic thinking with its emphasis on profit even to the detriment of morality, virtue and social justice is as far-removed from Smith’s thinking as Marxism is in my books, after having read through some of his works.
Maybe we need to revisit some of Adam Smith’s thinking and rework some of his ideas if we want to come up with better solutions for some of the economic problems the world is faced with. The global economic crisis was caused by neo-liberal economic thinking, which claims to have its roots in Adam Smith’s writings but has completely departed from some of his core assumptions. It is important to remember that Smith was a moral philosopher and political economist, not an economist per se. It is the impersonal capitalism of the neo-liberal school that has given capitalism such a bad name in most of the developing world. After having read two of Smith’s most important works I must confess that I am sold on his version of capitalism, with a few tweaks and have renewed confidence that a market-based economy need not be impersonal, driven only by greed and selfishness, without any regard for virtue, morality and ethical conduct.
Smith highlighted the importance of the conscience and morality in our application of his capitalist principles and in my view it is about high time that we did the same in order to save the world from its current malaise, caused by greedy capitalism. In Smith’s eyes, our moral faculties prescribe rules of conduct that restrain our acts of selfishness. These rules can be regarded as commands and laws of the deity. This is not the kind of capitalism based on crass materialism, secularism and humanism which we see today. It is capitalism with a conscience. It is the kind of capitalism which we haven’t yet seen and is the hope for the world as we look for ways to reconstruct the global economy and build a more just society in the twenty first century.