THROUGHOUT October, my new place of work will be hosting a series of discussions on the great financial questions of the day. Some of the most important economists and commentators of our generation will come to pick through the rubble of the current crisis. Now, more than ever, we need to be clear what responsible capitalism looks like.
With all this in mind, I have been thinking a great deal about Adam Smith and his famous invisible hand. Smith’s contention was that the merchant “by pursuing his own interest frequently promotes that of the society more effectually than when he really intends to promote it”.
It is as if the merchant is “led by an invisible hand to promote an end which was no part of his intention”. In other words, the unintended consequence of self-interested business is the good of society as a whole.
The argument goes thus: capitalism generates wealth, which, when spread around, is good news for all, including the poor. Look at the way capitalism has brought so much new wealth to a place such as India, for example.
Set against this argument is the continued reality of endemic poverty, where millions starve and die of preventable disease. Smith had it only partially right. In many places of the world, the hand is not only invisible but imperceptible.
Of course, Christianity also understands the logic of the invisible hand, but has the whole thing entirely the other way round. To translate Jesus’s teaching into the same sort of language as Smith uses in his The Theory of Moral Sentiments, Christians are led by an invisible hand to promote an end that is no part of their intention. They are to live for the good of others and not for themselves and, by so doing, find that they have saved themselves as well. Salvation is an epiphenomenon of other-centredness.
This is all very well for, say, social entrepreneurs, but it is hardly realistic as any sort of general business credo. But business can be expected to recognise that, in this increasingly interconnected world, my own interests and the interests of others can no longer be simply divided. We are profoundly interdependent, and rely more and more on each other.
If the financial crisis has shown one thing, it is that, economically, we are becoming symbiotic. House prices in Florida affect share prices in London, which affect coffee prices in Ghana. In such a world, the need to work for the common good is enlightened self-interest. A helping hand may be more effective than an invisible one.
The Revd Dr Giles Fraser is Canon Chancellor of St Paul’s Cathedral.