Wednesday, March 22, 2006

Adam Smith's Moral Markets

"Creating a Moral Economy" by Fred Block, The Nation 21 March, published on line: ‘The Mix is the Message’

Market fundamentalism -- a dogmatic belief in the power of Adam Smith's "invisible hand" to create prosperity -- survived the Republicans' electoral defeat.”

At first glance thought it was going to be another one of those nonsense assertions about Smith, but it got better:

In "The Lost Art of Democratic Narrative," published by The New Republic in March 2005, Reich argues that differences over economic policy have been fought out in American politics over the past century by appropriating four specific story lines -- the rot at the top, the mob at the gates, the triumphant individual and the benevolent community. The party that tells these stories most persuasively wins, he observes, and in recent years the prize has gone to the Republicans.”

Sounds good – a sound bite about politics, US style.

This opened the way for the Republicans to invoke Adam Smith's mysterious mechanism of the "invisible hand" as the critical element that binds the other Republican stories together. Since the market can be relied on to coordinate all economic activity, the triumphant individual can be set free of government restrictions, and liberal elites can be dismantled.

This suggests that we could make the phrase "moral economy" serve as the organizing narrative for a revival of progressive ideas. The term has a long and rich history, but it is also shorthand for the argument that sustainable prosperity must be built on strong moral foundations. This is something that Adam Smith, one of the patron saints of market fundamentalism, understood, but it is a lesson that his contemporary followers have completely forgotten. Smith recognized that the pursuit of self-interest can only serve the common good if individuals are systematically constrained by moral sentiments.

See what I mean? Worth reading on to the rest of it before reacting.

The essential idea was brilliantly expressed in the title of a 1980s bestseller, "All I Really Need to Know I Learned in Kindergarten." The guiding principles of a moral economy are familiar rules such as don't hit, take turns, play by the rules, listen to the teacher, don't waste food and art supplies, and be prepared to share. These principles produce order in the elementary school classroom, and they can also assure order and prosperity in our nation's economy.”

Yes, would fit in with Smith’s ‘Moral Sentiments’. How it will play in US politics is another matter.

Read the article (a worthwhile ten minutes):


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