I've just starting writing for, and am probably going to become a
regular contributor to, the Adam Smith Institute (ASI) - an excellent
think tank and vehicle of market research which, according to Global Go-To Think Tank
Rankings published this week, is rated the 16th best think
tank in Western Europe, the 5th best out of all the International Economic
Policy think tanks, and 3rd best in the UK.
So I'm in good company, amongst regular social commentators who you'll often see on
TV, putting people straight on Newsnight, The Daily Politics, Sky News and so
forth. But even though the general ethos of the ASI creates a libertarian milieu
in which I'd usually feel fully ingratiated, there is always that big caveat
with me - I am, at heart, a solitary worker, unbound by political parties,
ideologies, inner rings, and group identity.
As I've said before, in domestic pet terms, I'm far more feline
than canine, preferring my projects to remain within the body of my overall
life's work, rather than being engulfed into the practices of an organisation
or institution. In short, I'm bound not to consent to or fully concord with
every tenet of an organisation's views, so any work I do for anyone is always
going to be secondary to what I'm trying to accomplish in my own life's work.
What I will try to bring to the ASI is a balance that looks at
present to be missing in some parts, where free market qualities are sometimes exaggerated
to the extent that too much emphasis is placed on the market economy and too little
consideration is given to what I call socio-personal factors.
Or to put it another way, which Adam Smith fans will recognise
straight away, the ASI is probably about an 85% "Wealth of Nations" kind of group, and a 15% "Theory
of Moral Sentiments" kind of group, when, in my view, a 50% of each mentality would be
best. Those are Adam Smith's two great works - both thoroughly excellent, but
while the majority of people associate Smith with the "Wealth of Nations"
approach to humankind, where market develops
by virtue of our self-serving instincts, his "Theory of Moral
Sentiments" is much more concerned with our propensity to be kind,
generous and altruistic (see altruism footnote*) towards each other.
Putting to bed the market myth
Before I
get to the main point, let me just put to bed a myth about the market economy. The
free market isn't an overarching sentience that confers conscience, ethicality
and will over the proceedings - it is a descriptive term that describes the
mutually voluntary allocations of value (be it money, goods, services or
labour) between everyone in society. That does not, however, mean that the
system is unconscionable or incorrigible, as some claim. If the free market is
the mutually voluntary allocations of value between everyone in society (with
mutually voluntary being the operative words) then there is nothing immoral
going on in libertarian economics.
By
definition the problems we see in the world cannot be caused by the mutually
voluntary allocations of value between everyone in society - they can only be
caused by an impediment to those freedoms - usually in the shape of bad
government policies, poor regulatory protocols, or an oppressive State regime.
In other words, and this is a point that even Adam Smith couldn't have foresaw
to the extent that we do, it's a lack of free market qualities that besieges
them, not the opposite.
It's
true that most people in the free market don't have the breadth and depth to
consider the complex strategic high level perspective associated with the wider
market, but as Adam Smith showed in his Wealth of Nations, in market economics
competition brings about self-interest for the good of everyone, where value is
created because prices near-perfectly match supply and demand.
The market economy and the
socio-personal economy
Now for
the balance. The market system (no system, in fact) is a panacea to cure our
human ills - but this is where Smith's other great work, The Theory of Moral
Sentiments, comes in, because although Smith didn't have a forward notion of
the kind of interconnected nexus of social activity we see in the modern age,
he did understand that the selfish habits that drive the market economy (and create
virtue and accountability actually) have to be balanced by kindness and consternation
for one another.
So, what
I will try to contribute to the ASI is more awareness that there is a good
balance to be struck between a market economy and a socio-personal economy. We could
easily speak at length about the differences between the market economy and the
socio-personal economy, but the principal distinction is that the market
economy has exchanges that are precisely recorded in terms of cash exchanged or
increases/decreases in 1s and 0s on banks' computers, and the socio-personal
economy has exchanges that are less-precisely recorded in terms of voluntary
transactions for the good of one another.
The difference
between their operations is notable too. In the financial economy the demand almost
always exceeds the supply (of a limited range of labour, goods and services),
because suppliers maintain their status differential (principally income) by
increasing their prices or their supplies (or a combination of both), and
endeavour to become top of the supplier tree by out-competing their
competitors.
Conversely,
in the case of a socio-personal economy, the supply (of a nigh-on unbounded
range of actions) almost always exceeds the demand, and suppliers who care enough
about others maintain their status differential (primarily their character and
reputation) by trying to summon up new ways to be a better person. Of course, a
financial economy has a necessary social economy woven into it, because it’s
hard to be successful in business without good character and reputation.
If one
is going to have any assent towards the brilliance and prescience of Adam
Smith, at the forefront of economic thinking should always be the mindfulness
that society doesn't just function through Smithian economic transactions, it
functions through social mindfulness too, which involves doing our bit at a
cost to ourselves to help society.
Where it
goes wrong is in many people's failure to target the right enemy. Poverty,
unfairness, exploitation and injustice are certainly human ills - but the
natural response from the economic left is to blame capitalism, when capitalism
is the wrong target for their opprobrium. The balance that needs to be struck
is an economic one that frees up the global market so everyone can partake in
those mutually voluntary allocations of value, and a moral one that can better
feed into the areas the market cannot, or has not, yet reached.
Too many
libertarians think too highly in terms of market economics, and as a
consequence they pay too little regard to socio-personal qualities that are
woven into economic behaviour. And too many on the economic left think too
highly in terms of socio-personal qualities by using them as tools for
condemning market economics, and as a consequence they pay too little regard
to, or harbour unawareness of, just what those mutually voluntary allocations
of value (money, goods, services or labour) between everyone in society over
the past 200 years have done for human prosperity and well-being (alongside
science). Unless that proper balance is struck, any analyses brought to the
table will be woefully inadequate and detrimentally one-sided.
** I have three pieces so
far for the ASI - you can view them through the following hyperlinks if you
wish:
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