Wednesday, April 19, 2006

In the Right Direction but Straying

"The Twilight of Capitalism" by Natylie Baldwin in Peace Journalism (New Jersey, USA) April 2006:

The market was not originally intended to be organized as the money-worshipping corporate nightmare it has become. Adam Smith, widely credited as the godfather of market economics, also wrote and lectured extensively on human ethics. His Theory of Moral Sentiments opens with the recognition that humans have an inclination toward concern for their neighbors as well as self-interest.

Contrary to popular mythology, “the invisible hand” is only mentioned once in the 900-page Wealth of Nations. The term “capitalism” does not appear at all. Furthermore, Smith made it clear that his ideas about market economics and their consequent benefit to society could only be realized if certain prerequisites were met.

These prerequisites include favorability of small human-scale enterprises over large monopolies, a responsibility of each economic player to avoid harming others, and restraint of those who disregard such principles.”

Natylie Baldwin’s references are all secondary sources; she would benefit from reading the originals, though she is almost correct in her account of Smith on ‘sympathy’ for others (Moral Sentiments) and the much touted, so called, invisible hand.

However, she misses and important thing about markets – they were not and are not ‘intended’ to do something, beneficial or otherwise. Markets emerged long before Adam Smith in the 18th century. He did not ‘invent’ them or produce a ‘plan’ for them. He was not a ‘godfather’ or ’high priest’ of markets or capitalism.

Factually, many others wrote about markets before Adam Smith. He certainly provided an analysis of how markets work, but was not the first to do so, though he provided some useful insights. Markets evolved gradually and continued to develop in human societies because they worked, much like languages developed and were adopted by individuals not by a sort of 'tribal' vote in pre-history (any more than teenage slang is today) because they were found to work for individuals (see Smith on 'Languages').

He didn’t favour large monopolies because they worked against the interests of consumers, who do better if there is competition among producers (who also do better if there is competition among consumers). He pointed to the benefits of competition in a system of Natural Liberty, but did not require from this a programme to change the way the world (i.e., society) was evolving. Indeed, he remained pessimistic about prospects for free trade and shied away from becoming a ‘man of system’, fanatically insisting that everything changed immediately, if not sooner.

Natylie Baldwin falls into the trap of the ‘change-now-propagandist’; she sees disaster on the horizon awaiting to swallow up the world unless it changes her way soon. Capitalism, of which Smith knew nothing in the mid-18th century, is not in a ‘twilight’ zone, terminal decline or a state of impending catastrophic collapse.

Smith never saw upwards-only progress ahead; he was too much of an historian to ignore history. The first human experiments in markets in the age of commerce (Smith's ‘Fourth Age of Man’) were followed by the collapse of Rome and the thousand-year interregnum, known as the ‘Dark Ages’, in which Europe relapsed into barbarism. All his writings are imbued with the shadow of that millennium and the ghosts of the classical scholars of ancient Greece and Rome (they provide the largest source of quotations and references in ‘Moral Sentiments’ and ‘Wealth of Nations’).

Just as the revival of markets in Western Europe from the 16th century, restored the lapsed Commercial Age from the 18th century in Britain, a ‘collapse’ of the unique era of capitalism that began in the 19th century, should it occur, would be followed some centuries ahead by a revival of markets and of capitalism out of the barbarism that would takes it place. Adam Smith would have taken a stoical view of such a prospect. We should too. The task for philosophers is not to change the world, but to understand it.


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