<>St Andrew’s Trust for the Study of Religion & Society, 23 July, 1992. (There was a companion lecture in which Richard Randerson looked at the challenge of economics to religion.)
Keywords: History of Ideas, Methodology & Philosophy;
Adam Smith, often described as the founder of economics, never held a position in economics. He was a professor of moral philosophy, a subject which he divided into natural theology (religion based on reason), together with ethics, jurisprudence, and expediency, which today we would call political economy. He later became a commissioner of customs, on a salary some four times that of a professor, which infrequently involved ‘interruptions to [his] literary pursuits, which the duties of … office necessarily occasion’.
He led, a simple life, did not marry, and his absent-minded ness was notorious. On one occasion he put buttered bread in a teapot, and complained about the taste of the tea. But he read and traveled widely, and exhibited a great curiosity about the world, ranging from the Roman empire to new industrial processes. Smith wrote two major books: The Theory of Moral Sentiment, based on his ethics lectures, and An Inquiry into the Nature and Causes of the Wealth of Nations.
This brief biographical sketch suggests a paradox. Here is a man who was deeply interested in moral issues, and yet is widely associated with the pursuit of self-interest. He is said to oppose government intervention, yet took up a government sinecure in the last 12 years of his life. But he was no hypocrite. Rather, some modern commentators have chosen to interpret him in a manner which could not have been his intention. You can hear this in the most famous quotation from The Wealth of Nations: the individual ‘by pursuing his own interest … frequently promotes that of society more effectually than when he really intends to promote it’. The key word here is ‘frequently’. Smith did not say that pursuing your own economic interest ‘always’ promotes that of society, nor even ‘almost always’. Rather he said that ‘sometimes’ or ‘often’ it did.
With the benefit of 200 years’ hindsight, that seems to be a pretty trivial conclusion, hardly the incisive thought to revolutionise society. In fact Smith was more innovative in his time, for he observed the old economic regime breaking up, and foreshadowed the new one in which manufacturing, specialisation, market capitalism, and a less oppressive government would dominate.
Adam Smith was rejecting the mercantilism of the 18th century. But he was no supporter of the brutal individualism of the 19th century. While he believed there was an important role for enlightened self-interest, he saw the need for a fundamental link between individual freedom and such moral obligations as kindness, sympathy and justice. That is why we call it ‘enlightened self-interest’. And he did not eschew government intervention. He wrote about how canals could be left in private hands because the owner would maintain them, but roads would need public ownership. In such delicate discrimination we see a practical approach to the ‘expediencies’ of politics and economy.
Beneath this pragmatism was a morality described in The Theory of Moral Sentiment. The key notion was ‘sympathy’. He saw each of us equipped with a fellow feeling which makes us share the sentiments of others. From that he developed a notion of an inner conscience which judges the worth of our own actions. I tell you Adam Smith’s story, albeit briefly, to emphasise he had an elaborated morality which he never abandoned, and which pervades The Wealth of Nations.
If the founder of economics had a morality underpinning his economic analysis, what happened in the subsequent two centuries? If you said to today’s economists ‘What do you actually stand for?’, what answer might you expect? Without any forewarning, I fear many economists would mutter about free trade, competition, fiscal prudence, and monetary control. But that is the material of The Wealth of Nations. Ask them what is in their Theory of Moral Sentiment, and you would be likely to get a blank, or perhaps a statement that economics was value-free and the first book was unnecessary.
Of course it is not. If economists seek value-free conclusions, they rarely attain them. Those conclusions which are value-free, or involve relatively easily accepted values, do not cover most of those matters on which economists wish to pronounce.
And certainly economists are anxious to be involved in many matters. If the moral underpinnings of their recommendations are doubtful, there is no question of the zeal invoked in the pronouncements. There is an extraordinary willingness in the majority of the profession to sacrifice, on the altar of free trade, any worker into the unemployment queue. It would be a passion reminiscent of that which drove the Inquisition, except that heaven and hell are more likely to exist than the conditions necessary to rigorously justify free trade.
Zeal without morality is a central tension in the economics profession, especially as it is very recent. Adam Smith’s concern with moral issues continues throughout the following 150 years of the economics profession. It was a passion – and compassion – fired by the agonies of the industrialisation of the 19th century. Karl Marx naturally comes to mind, but it also occurs in economists with staider reputations.
Alfred Marshall, the greatest English-speaking economist before John Maynard Keynes, wrote a standard textbook which was still recommended reading when I was an undergraduate economist, 40 years after Marshall’s death. Its opening includes:
‘The dignity of man was proclaimed by the Christian religion: it has been asserted with increasing vehemence during the last hundred years: but only with the spread of education during quite recent times are we beginning to feel the full import of the phrase. Now at last we are setting ourselves seriously to inquire … whether there need be large numbers of persons doomed from birth to hard work in order to provide for others the requisites of a refined and cultured life; while they themselves are pre-vented by their poverty and toil from having any share or part of that life.’
Yes, Marshall mentions religion as a relevant part of the totality of mankind. A few paragraphs earlier he had written
‘ … man’s character has been molded by his everyday work, and the two great forming agencies of the world’s history have been the religious and the economic.’
It would be an odd economics textbook today which opened with references to religion and to poverty. Add that Marshall’s book is rich with practical illustrations of industry and agriculture, and here is a man who belonged to the same tradition as Adam Smith, even though he is closer to us in time than to Smith.
But do today’s economists belong to that same tradition? Rex Fairburn did not think so:
The army of the unliving, the cells of cancer;
small sleek men rubbing their hands in vestibules,
re-lighting their cigar butts, changing their religions;
dabblers ill expertise, licensed to experiment
on the vile body of the State; promoters of companies;
efficiency experts (unearned excrement
of older lands, oranges sucked in;),
scourges of a kindly and credulous race;
economists, masters of a dead language; men
with dry palms and a sense of humour;
hagglers, hucksters,
buyers and sellers, retchings
of commerce, spawn of greed …
There is a passion in this extract from Utopia in Fairburn’s The Dominion which Adam Smith
and Alfred Marshall would have respected, even sympathised with, given the Great Depression Fairburn was writing about. His views would not be so readily accepted by today’s business and economists.
Yet the fracturing in the profession with that past tradition of moral sentiment began earlier than the 1930s, earlier even than Alfred Marshall. It occurred as a part of a wider process, of which economic change was an integral part. The roots are before the Industrial Revolution. Some involve the rise of natural science, especially with Galileo, who used observation to challenge the literal truth of the Bible, and with Isaac Newton, who provided an order to the universe with a few simple propositions.
Newtonian mechanics was crucial to the development of economics. It heavily influenced Adam Smith, and economists still seek the Holy Grail of a few universal propositions which will similarly enlighten economic behaviour. Alfred Marshall was sceptical, writing:
‘The Mecca of the economist lies in economic biology) rather than economic dynamics. But biological conceptions are more complex than those of mechanics … ‘
This is not the place to trace the internal change in economics, how it went down the easy path of mechanics rather than the complicated path of biology, but the social milieu in which economics existed was also changing. The title of the musical Fiddler on the Roof comes from the Jewish proverb that without tradition, life would have as much meaning as a fiddler on the roof. While its opening song is Tradition, the most moving is Sunrise, Sunset, where the rabbi at a wedding recalls the growing up of the couple as children in the Russian village, illustrating a degree of social solidarity which is destroyed at the drama’s end as the village migrates to America. It is that long-lost social cohesion of the village we look back at with nostalgia.
With that loss came a loss of the traditional role of religion, both in social life and in national political life as the state and Church separated. This secularisation of society was one of the great transformations in intellectual, social, and political life in 19th century Europe and its offshoot settlements elsewhere.
New Zealand could not escape. There is no established Church, but we argued about such issues, most evidently in the debate over religious education in schools. There is one significant area in New Zealand life which has not yet secularised, and which secular society tolerates in public life in a way which – I think – is more than a formality. The Maori, while heavily influenced by the dominant European culture, has his or her own indigenous holistic roots which have not been totally torn out. Thus we have the irony that almost all Maori events – even those the European would judge as secular – are likely to begin and end with a karakia, while a Pakeha event with a much greater apparent religious content – say a lecture on religion in a church – will not.
Economics could not avoid this secularisation, so it sought to describe a universe, as did the post-Newtonians, without reference to religion. And yet modern economics has become a religion of its own, with high priests with marked social status, orders of professionals, a liturgy, and most of all a series of injunctions about appropriate actions which involve making sacrifices – although, as was true in the older religions, it is never the priests or their patrons who suffer the sacrifice.
The sacrifices which economics invokes involve precepts presented with the flavour of natural law: inflation is bad, low taxation is good, budget deficits are bad, privatisation is good, government intervention is bad, user pays is good. Observe the pseudo-ethicality of each. If economists have abandoned the passion for social justice, they have not abandoned the temptation to moralise. But what are the foundations of that morality?
Economists are likely to start off with some notion such as ‘efficiency’, as if it were some universally valid goal worth pursuing. Just think how many times you have been told that some reform was necessary in the pursuit of efficiency. The usual criticism of the proposition is that the reform does not generate efficiency. That is often true, but there is an even deeper point. Efficiency in economics is not a value-free notion. It is not directly derivable from the laws of dynamics. Rather it is has an underlying social value which, to summarise, is ‘pro-rich’, that is favours the rich over the poor. Next time someone says that ‘a reform is necessary to improve efficiency’, replace the phrase with ‘the reform is necessary in the interests of the rich’. You would be surprised how often a reform proposal, unintelligible in social justice terms, makes sense with a pro-rich ethical standard.
Yes, I am saying that subtly over the years economics has shifted from compassion and commitment to the betterment of the poor, and the passion for social justice and prosperity, to the other extreme of supporting the rich.
Who then is to speak for the poor, if economists have abandoned them? Almost by definition, those on the margins of society do not speak effectively for themselves, for they lack the necessary resources and political power. That vacuum has been most filled in recent years by the Churches.
There is perhaps an irony here, for typically we associate the Churches with the centres of power. Much of European political history, and that of other cultures and nations, is about the relation between Church and state, with the two intimately linked. Even after the secularisation of the 19th century, with Britain at the forefront, it is well to remember that the British and New Zealand Head of State is also the head of a Church. For in so far as religion has any power, the powerful and the rich will colonise it. Christianity began as a religion of the underclasses – the slaves – and yet became the official religion of the Roman empire, and of many more nations beside.
Yet, as Marshall acknowledges, the religious message has been so powerful that it has never been possible to suppress it entirely, even when the message creates tensions with the ruling elite. Perhaps the religious message is so complicated that one can select what one needs to justify a
pre-ordained position, just as Adam Smith’s writing is used to justify unregulated capitalism, although it is clear he never had that in mind.
Admittedly, the Churches have been sucked into the current debate through their involvement in social services. That function is partly of religious origin, for there are numerous scriptural injunctions to support the poor. As the Churches grew powerful in their symbiotic role with the state, tending the poor was a responsibility they took over. With secularisation and industrialisation the state began to replace the Church, evolving what today we call the ‘welfare state’. But the Churches never fully gave up that role of caring for the poor and needy, and in some areas they remain a major provider.
The New Zealand welfare state was undermined as unemployment rose. There has been a consequent withdrawal of the state in provision for the poor. The so-called ‘redesigning of the
welfare state’ appears to be a shift to a minimalist American-style residual welfare state. The voluntary social services have found themselves increasingly under pressures which are pushing them back towards their 19th century role. In both a prophetic and a practical sense it has become necessary for the Churches to speak out against the pressures which govern-ment actions are imposing on the poor and needy whom the Churches serve.
Commendable as that action may be, it is only part of the path of the Churches’ concerns. If thus far the religious have been mainly reactive, concerned about the pressures being imposed on their care, they are moving towards the proactive. Already they are mutely calling for a change or reversal in policy directions. But there is an even more fundamental issue which they are approaching.
The May 1991 Catholic bishops’ letter on the Employment Contracts Bill may be a bellwether. The message is not primarily about the poor, though it is the poor who have been hardest hit by the industrial relations reform. Rather the complaint was against the theoretical underpinnings – the way the employment law wanted society to be organised, its underlying vision of society.
The bill, now an act, was not even about economic efficiency. That may be a side-effect of the legislation; it may not. When the Treasury advocated the measure in its Briefing to the Incoming Government: 1990 it focused on the principle of individual freedom. There was surprising little economics in that chapter, even for the Treasury. In taking this approach it was following a Business Roundtable sponsored study Freedom at Work, by Penelope Brook, which again was short on economic analysis and long on ideology – the ideology of the New Right.
My reading of the various papal encyclicals, with which the bishops’ letter is consistent, suggests that the Catholic Church finds this ideology an anathema because by focusing solely on individual freedom the ideology ignores social responsibility. While the Vatican has been railing against the ideology of communism for over a century, it has been as critical of what it calls ‘liberalism’. Today we call it capitalist libertarianism or the New Right. I would expect other Christian Churches to be as profoundly uneasy with this ideology. I would think that the Maori would also be uncomfortable, given their communal traditions.
This New Right emphasis on self-service without social service has come to underpin the justification for efficiency in the following way. Suppose each of us seeks individual freedom and our own selfish ends. That leads to economic efficiency and the best outcome for the society as a whole, or so the theory goes. Most economists would deny a commitment to this weird miscellany of logical inconsistencies, which appears to echo Adam Smith. But fewer have resisted the policy conclusions that it generates, while the New Zealand New Right proclaims it is in the mainstream, with hardly any contention from the majority of the economics profession.
The Prime Minister went deeper into these treacherous waters when he called us to give hero status to the rich. Heroism was once a matter of self-sacrifice for a wider purpose. The philosophies of the New Right argue that successful self-seeking is rewarded by wealth. Why then should we reward the rich further? It is time to recall Jesus’ remark that it is easier for a camel to go through the eye of a needle than for a rich man to enter the kingdom of God. It is thought the ‘eye’ was a small postern gate in the city wall, which involved unloading the baggage from the camel to get it through. What Jesus was saying was that in a similar way a rich man would get to heaven on his personal merits, unloaded of his riches. We recognise the heroism of
those who assist society without material reward or, in the case of the rich, those who assist society above what their wealth allows.
And so, in the process of secularisation, economics abandoned morality and spirituality. Without anchors or a map, the discipline has drifted around, becoming stranded on the rock of selfishness, of individual freedom without social responsibility. The misinterpretation of Adam Smith allows the fiction that selfishness is socially responsible. Two hundred years of careful economic analysis show it is a nonsense.
It is time to proclaim that the New Right economic emperor has no clothes, that black is not white, that selfishness is not socially responsible. But who will say it? Economics has not been able to reform within, for those who have criticised it have been marginalised by the powerful, whose interests so many of today’s economists uncritically serve.
As with medicine, it will be outside forces which precipitate the change. For medicine it was a group of women, suffering from the slackness of the medical ethics of the time. Today Otago University has a professor of medical ethics, who is also a theologian, and ethics is an integral part of each medical undergraduate’s training.
What will be the outside stimulus which will reform economics? My best guess is that it will be religious. While religion is at present reactive and on the margins, we should see the religious drawn more into the centre of the drama. If I had to predict the next battleground, I would say it will be in health. The current reforms are being promoted by the same officials, the same Business Roundtable, the same consultants, and the same extreme politicians who promoted the industrial relations reform. Underlying those changes is the same ideology, which praises individual freedom and ignores the social responsibility that has been an integral part of our health system. At bottom the health debate, stripped of the technicalities, is whether we are a community, or merely a collection of selfish economic men.
Religion must be in that battle. It will be there not because these changes will ultimately be most damaging to the poor and may even benefit the rich, though we cannot rule out that the reforms may well make just about everyone worse off. Nor will religion be there simply because the Churches have a long tradition of care of the sick, and the proposed new system will make heavy demands on its care. Religion will be there because there is a vacuum in Adam Smith’s ‘expediency’, the economic and political arena: a vacuum of morality, and of spirituality.
The expedient cannot even identify the issue, and will profess bewilderment as to what it is all about. The religious can, and as long as they still have passion, compassion, and commitment, they must. Slowly, reluctantly, they will be drawn into the arena to fill the vacuum, challenging economics, asking what are its intellectual foundations, forcing it to reform.
There is a certain nakedness in admitting that one’s chosen profession is in a certain state of intellectual corruption. But to ignore the deep problems of a profession which has abandoned ethical precept and the humanity of the people is to join in that corruption.