IT is hard to pin down a description of a man who has shaped critical thinking in areas as diverse as social morality, economics and politics. Adam Smith was Scottish and lived more than 200 years ago. He wrote two books—The Theory of Moral Sentiments (1759) and An Inquiry into the Nature and Causes of the Wealth of Nations (1776)—that shaped modern economics and the politics of economics.
Smith wrote about what he called the “invisible hand” that helps move the world in which we live. He writes of a selfish and greedy landlord that views the world through his wealth without any genuine regard for the people around him—most specifically his workers.
Although the landlord desires to consume all the fruits of his wealth because he cannot realistically eat all that his lands produce, he is forced by the invisible hand to distribute to others the necessities of life through wages, charity and other means almost in the same proportion, as Smith writes, “which would have been made, had the earth been divided into equal portions among all its inhabitants.”
Therefore, the greedy and selfish landlord “without intending it, without knowing it, advance[s] the interest of the society.”
Of course, like all other ideas that seem to make sense but are puzzling in application, the invisible hand concept has been used to support everything, from total free markets and trade to protectionism and total government economic control.
On one hand, the business owner that is only interested in his or her own financial gains by building a business, helps create other people’s wealth as they benefit from the business. Society, as a whole, benefits through, perhaps, the taxes the business pays to fund government programs and even the products that the business creates that may increase everyone else’s standard of living. Smith writes: “He [the business owner] intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention.”
This brings us to the idea that a major problem with the Philippine economy is that economic growth has not been inclusive that certain sectors in the social-economic structure have not benefited.
Can we rely on the invisible hand to make sure everyone gets an increasing share of the pie as it is increasing in size, or is there something that the government in particular, and society, in general, can do to make life better for everyone?
Politicians speak in general terms and when they do get specific, rarely do we hear something like, “If we do this, then in 10 years, this will be the result.”
For this coming election we must force the politicians to go beyond normal candidate rhetoric and show us their reasonable and realistically achievable economic goals. It is time to stop relying on the invisible hand.
Image credits: Jimbo Albano