The happy coincidence of self-interest as a source of benefit to society is deeply embedded in narratives of how markets function. Adam Smith argued, in 1776, that “It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own self-interest”. His work laid the foundations for the belief that individuals acting in their own interest would be beneficial for all.
Smith’s philosophy was more nuanced; he grasped the roles of morality and sympathy as sources of social order. This nuance was lost in most subsequent interpretations of his thinking. Self-interest morphed into the deification, by some, of greed. Tragically, this spilled into the framework for regulating financial markets. The market, it was assumed, always knew best about everything.
Michael Douglas, acting as the slick Wall Street predator Gordon Gekko, proclaimed in 1987 that “Greed is right. Greed works. Greed, in all of its forms...has marked the upward surge of mankind.”
John Kay and Paul Collier have, during their prestigious careers, been at the forefront of a more nuanced and far more accurate understanding of the nature of markets. Radical Uncertainty, Kay’s most recent book, pointed to the limitations of attempting to predict a future with models that pretend to offer certainty where uncertainty abounds. In The Future of Capitalism, Collier created a map for a more inclusive form of capitalism.
So the pooling of their collective their wisdom into Greed Is Dead: Politics After Individualism is an exciting prospect. The theme is evident from the title: Gekko is wrong. Greed is bad and it is dead.
They begin with a proposition that is simple, powerful and entirely correct: “In the complex modern world we could not thrive without an exceptional capacity for mutuality: more fundamentally, without that capacity we could not have created the complexity that has enabled modernity.”
Their view of the relationship between the state and markets reflects the complexity of modern economies and the vast array of human motivations beyond the crude caricature of our intentions as always being consumed by a narrow definition of self-interest.
Free markets do not “produce the best of all possible worlds, but we are sure that the State direction of economic activity does not do so either”. Improvements in living standards and increases in employment are caused by markets and governments harnessing the best that each has to offer.
Entrepreneurship depends on the rule of law and on the benefits of education. In turn, the risks of wealth creation and rewards of work must be recognised, as both create the resources to fund public services. The authors argue that “property rights are social constructs rather than entitlements derived from a state of nature, and need to be justified as well as upheld”.
Their rigour asks demanding questions of the left and right. They savage the market fundamentalism that reduces all relationships to transactions and where there is no role for cooperative behaviour. They are equally critical of the influence of the “expressive individualism” associated with social activism. Does a discourse that is always based on the fulfilment of individual rights also subtly undermine the bonds of social solidarity?
This is followed by an analysis of how conventional politics has struggled with economic and social change since the second World War.
Economic factors have challenged, and severely fractured the consensus of comfortable centrism. These factors included declining growth in living standards and the greater role of finance in global trade and economic policies.
Social democracy has also struggled; age and education have taken the place of social class as determinants of voting behaviour.
The concluding chapters argue for a communitarian politics, which is based on the recognition that individuals seek fulfilment in their engagement with others through community and society. That engagement then leads to civil society and to institutions that have a deep and intrinsic value.
This vision may not be visionary enough for some. Some of the policy suggestions may appear too conventional and not, well, new enough. Their familiarity, though, should not be a cause for instant dismissal.
There is much that is also familiar in this book to readers of Kay and Collier. As a timely summary of their common beliefs, this book is recommended. But it does lack the easy accessibility associated with their individual writings; their collaboration occasionally yields a density of reference and argument.
Their concluding pages warn that Pericles celebrated Athens as the world’s first civic community in 430BC. It was subsequently struck by a plague, weakened and defeated at war. The warning is clear. The centre is vital, but for too long associated with the status quo.
How politics can be both constant and the source of change will be a demanding journey. This book is a helpful guide for that vital and uncertain passage.
Paschal Donohoe is the Minister for Finance