With our newfound wealth, occasioned by the oil-find off our Atlantic coast, fuelling our rapid development, we should take heed of Fredrick Douglas’s pithy observation: that crops can never be produced without first breaking apart the earth. He was reminding us that very few, if any, improvement in the collective human condition ever arrives without breakdowns, upheavals and struggle. With the benefit of hindsight, we should appreciate that while the capitalist free enterprise system which we have adopted as our “engine of growth” has delivered undreamed-of wealth and improvements in living conditions, debilitating by-products such as the exploitation of others and the ravaging of the social and physical environments were also unleashed.
While its early analyst Adam Smith identified “self-interest” as the “invisible hand” for the success of the free market system, most ignore that he had earlier clearly defined self-interest not as selfishness or greed, as some would have it, but as a moral sentiment to earn that ultimately seeks to earn favour with others in society. Entrepreneurs provide goods and services that others need.
It is a subtle point that bears development at this time, when we are witnessing in the developed nations that serve as our model the unleashing of untempered greed which might bring down the whole edifice. But we cannot ignore the reality that, even here, our methods of socialisation keep on throwing up individuals who are only driven by their id and greed. As Madison noted, not long after Smith, in an analogous context (politics): “If men were angels, we would not need governments.” In addition to the demons of the id, we recognise also that none of the institutions that we design around our values would ever work perfectly (hence imperfect socialisations, to begin with), so macro-institutions must be created to deal with these exigencies. In matters economic, from early in the day, markets have been regulated so as to mitigate the inevitable excesses precipitated by greed and “imperfect markets”.
Part of the problem is that there has been a stubborn insistence in some quarters that Adam Smith’s “invisible hand” means “no hand” in the workings of the much-abused term “free markets”. But they speak from both sides of their mouths. Take, for instance, the creation and issuance of money, which is regarded as the sine qua non for the creation of markets in the modern sense of the term. These have been regulated, by definition, from the earliest days, either by the institutions that issued them in the first place, or later by governments. One can’t very well have everyone creating money and expect markets to function. The problem is that those who ritually invoke the ethereal “free market” do so only when the regulation in question hinders their efforts to make excess profits over what other regulations allow them to make in the first place.
Take banking, for instance. Government regulations the world over allow banks to create money out of thin air by a multiple over and above the amount that is deposited. Thus, they make money coming and going – once by paying lower interests to depositors than borrowers, and then by lending the excess money created through the magic of regulation. Today there is talk of “modernization” to mean further deregulation in Guyana. But let us heed the experience from up north, when they were allowed to invest depositors’ money and securitized mortgages in speculative vehicles, which when they went bust, had to be bailed out by the state. In a perfect demonstration of the workings of the id-greed imperative, bankers expected profits to be privatised but losses socialised.
Karl Marx’s early critique of Capitalism (“Das Kapital” 1867) was remarkable for its prescience in highlighting several of its inherent contradictions, but the attempts to institutionalise his insights failed miserably in our own lifetime. It would appear that, ironically, Marx was too idealistic about man and his greed. To paraphrase Churchill’s aphorism about democracy, capitalism/free enterprise is evidently the worst type of economic system – excepting for all others that have been tried and failed. We cannot give up on socialising ourselves into becoming more sensitive and responsive to the overall societal good – if for nothing else than that society is simply a collection of us, the individuals.
But in the meantime, we must insist that the government get back to regulating the institutions of the market that will always be prone to subversion through greed.
