Tuesday, 17 March 2009

Capitalism Beyond the Crisis

Last summer, the Adam Smith Institute, a self-declared free-market think-tank organized a debate on Adam Smith's legacy with the motion ‘This House would prefer to be led by the Invisible Hand’. After a very heated and good humoured discussion, the motion was (loudly) approved. There were many "suits," many businessmen and people from "The City" in the audience that evening in The Caves. No wonder the result of the vote was the one it was. However, after all that has happened in the global economy since then, one is now left to wonder where those who voted "yes" are standing now. Are they still cheering and applauding the divine interventions of the Invisible Hand? But even more importantly, that debate, and even the name of the ASI itself, proved how Adam Smith's legacy has been appropriated by free-market fundamentalists, much to the dismay of those who hold other views.

In a recent article in The New York Review of Books, Nobel Prize Laureate Amartya Sen has made a much more impartial assessment of Smith's theories. In Capitalism Beyond the Crisis, Professor Sen reminds fundamentalists that Adam Smith did not see the free market functioning without the assistance of "moral sentiments". Trust is fundamental for the well-functioning of markets. In passing, Sen also rescues Pigou from the relative oblivion in which his contributions live these days. And also more remarkably, he puts John Maynard Keynes in his right place. Keynes is increasingly seen among non-economists and other carefree people as a rebel, as some sort of Luke Skywalker, the only hope against the evil dark forces of standard Economics. And although it is true that Keynes is ASI's favourite ghost, it is also true that he was not specially concerned by distributional issues nor with the welfare of the worst-off people in society.

One could argue that Sen does not contribute to the current debate on the "New Capitalism" with new ideas. He rather wants us to stop and think more carefully about our own arguments. But in this article, he shows once more his deep knwoledge of Economics and his relentless committment to create a more decent economic world.

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