Saturday, April 24, 2010

A free society means a fair one

Classical liberalism states that markets under perfect liberty will lead to perfect equality. Adam Smith observed, however, that the 'invisible hand ' would not warrant this end and should not be understood as a pure self-regulating mechanism. The metaphor was used in his Theory of Moral Sentiments, to explain the distribution of wealth (1759, p. 350) : 'The rich ... consume little more than the poor, and in spite of their natural selfishness ... They are led by an invisible hand to make nearly the same distribution of the necessaries of life, which would have been made, had the earth been divided into equal portions among all its inhabitants, and ... advance the interest of the society, and afford means to the multiplication of the species"
Contrary to common misconceptions, Smith did not assert that self interest necessarily brings benefits to the whole society, or that all public goods are produced through self-interested labour. His proposal is merely that in a free market, people usually tend to produce goods desired by their neighbours. The 'tragedy of the commons', applied for example to world natural resources,' is an example where self-interest tends to bring an unwanted result.

Moreover, a free market arguably provides numerous opportunities for maximizing one’s own profit at the expense (rather than for the benefit) of others. The tobacco industry is often cited as an example of this: the sale of cigarettes and other tobacco products certainly brings a very good revenue, but the industry’s critics deny that the social benefits (the pleasures associated with smoking, etc.) can possibly outbalance the social costs.

Adam Smith observed that throughout history we find "the vile maxim of the masters of mankind": "All for ourselves, and nothing for other People." He explains that the unproductive class prefers to devote part of the rent to luxury goods rather than provide 'subsistence to a thousand during a year'.

Free societies call for justice. A.Sen explained that freedom is not merely being left to our own device. It also requires that people have the necessary resources to live a decent life. In his recent book**, A.Sen develops a new idea of justice in opposition with the institutionalist vision of John Rawls, Kant and J.J. Rousseau who are engaged in a “long-range search for perfectly just institutions”, and a hunt for “spotless justice”. For Sen, these philosophies are ultimately regressive, because societies full of actual human beings will never agree on a final, perfect set of institutions and rules. More immediately, the search for a perfect set of arrangements for society can distract us from tackling real-life, immediate injustices such as poverty and malnutrition, access to education for women in the developing world or action on climate change. The perfect becomes the enemy of the good.

The competing vision of justice Sen prefers is a “comparative” one, which examines “what kind of lives people can actually lead". For him, as for Condorcet and Stuart Mill, abolishing slavery or giving women the vote would free people to lead lives of their own choosing, even without creating a perfectly just society. The keystone of judging the lives people can actually lead is an assessment of what Sen has labelled their “capabilities” — or, as he explains, “the power to do something”.

The book deserves careful consideration and analysis. The key question is, however, that liberty and fairness are mutually reinforcing and lead to a more egalitarian society. But, we should not overlook what A.Smith said about the masters of mankind, the "merchants and manufacturers," using their power to bring "dreadful misfortunes" and in our day the big transnational l corporations and financial institutions that dominate the world economy, that control today trade, investment and finance above the power of the nation-states. It is the arrogance of these 'masters of mankind' that has led us to the current crisis and its awful consequences for the poor in terms of job losses and wages cuts.

I would like to quote here the great poem by Percy Bysshe Shelley, Ozymandias, which is an ode against tiranny and the course of time:

I met a traveller from an antique land

Who said: ‘Two vast and trunkless legs of stone
Stand in the desert. Near them on the sand,
Half sunk, a shattered visage lies, whose frown
And wrinkled lip and sneer of cold command
Tell that its sculptor well those passions read
Which yet survive, stamped on these lifeless things,
The hand that mocked them and the heart that fed.
And on the pedestal these words appear:
‘My name is Ozymandias, King of Kings:
Look on my works, ye mighty, and despair!’
Nothing beside remains. Round the decay
Of that colossal wreck, boundless and bare,
The lone and level sands stretch far away.

*An Inquiry into the Nature and Causes of the Wealth of Nations: A Selected Edition Adam Smith (Author), Kathryn Sutherland (Editor), 2008, Oxford Paperbacks, Oxford, UK

**The Idea of Justice by Amartya Sen
Allen Lane £25 pp496

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