Without conscience, without the ‘invisible hand’ of divine providence, it seems that untamed capitalism too easily leads to corruption, greed, dishonesty and a loss of common humanity. Another take on Adam Smith.

Never has a financial crisis had such a potential to affect so many people so quickly. As stock markets fell like dominoes around the world, the crisis has affected every one of us. As governments poured billions of dollars, deutschmarks, pounds, euros and other currencies into supporting ailing banks, at taxpayers’ expense, public sector borrowing has risen. Taxes will also rise, without which there will be diminished resources to invest in hospitals, schools, public infrastructure, development aid, environmental and energy saving projects. And unemployment will rise, hitting families and communities.

Investors – from individuals and pension holders to charities – have suffered. Even the world’s fastest growing economies, China and India, despite huge trade surpluses and financial reserves, are affected. Growth in the world economy is taking a big hit and the IMF predicts a global recession. As Dominique Moisi, author of the forthcoming book The Geopolitics of Emotion, writes in The Financial Times: ‘When the rich become less rich, the poor tend to become even poorer.’

And never before has a financial crisis focussed so starkly on fundamental moral, ethical and spiritual issues. Words used by commentators include gambling and greed, dishonesty and fear, panic replacing confidence, risk and hubris versus prudence, and faith in the banking system or lack of it. Never have the values of trust and integrity been more needed in the global economy.

The whole edifice of bank lending was built on maximizing profit, and a dishonest assessment of individual borrowers’ creditworthiness. It was bound to end in tears.

Despite the pain, it may all be healthy in the long run. For the financial crisis is a chance to re-examine fundamental motives; and to ask how the capitalist system at its best is supposed to work. Where is our faith placed? In markets and maximizing profit? Or in something deeper? Of course we all want our finances, including our pensions, to be in safe havens. We try to find the best returns on our assets. We move money around. But those who are driven solely by the profit motive and ‘the love of money’, described Biblically as ‘the root of all evil’, are now discovering that security placed in material wealth is an illusion. A curious weakness of human nature says that the more we have the more we seem to want that little bit more. When Rockefeller was asked ‘How much is enough?’ he is said to have replied, ‘Just a little more’. Yet the roots of security and satisfaction lie elsewhere, certainly not in maximizing wealth so much as in the search for the divine purpose for our lives.

Entrepreneurs and others who have won vast fortunes and then lost them, whether through their own misjudgments or that of others, know what it is like to have to recover and rebuild. My father and his generation of our family lost their wool textile business through an opportunistic takeover – and some unwise investment decisions. He had to create a new life. The vast majority of us, in less dramatic circumstances, can know that there is security in the knowledge of a divine plan that shapes our days, ‘rough-hew them how we will’. We may not escape downturns, even disasters. But we can also live in the knowledge that we are all loved by the divine Creator – even if he sometimes despairs at our folly granted by our free will. My father found serenity in his latter years despite reduced family circumstances. As Augustine, the North African saint who had lived a wild life in his youth, stated: ‘Our hearts are restless till they rest in Thee.’

And now the excesses of the market have called into question the whole capitalist system itself. Karl Marx’s Das Capital has been flying off bookshelves. So how can capitalism be rescued from itself? To answer that question, we can turn to the father of capitalism himself. Adam Smith was a professor of moral philosophy at Glasgow University. As Ambassador Archie Mackenzie reminds us in his book, Faith in Diplomacy, Adam Smith wrote The Theory of Moral Sentiments in 1759, 17 years before he published his seminal tome on capitalism, The Wealth of Nations.

In the first he referred to ‘the Impartial Spectator’ inside each of us which acted like ‘a demi-god within the breast’. It was ‘there to speak for itself and for others’. And ‘in the race for wealth, if injustice is done, the Impartial Spectator changes sides’. In other words, greed and the profit motive could not be condoned if they led to injustice. There were fundamental moral principles at stake. Moreover, Adam Smith described the ‘man within us’ – in today’s language the conscience – as ‘the Vice-Regent of the Deity’ and we needed to ‘co-operate with the Deity and advance, as far as in our power, the plan of Providence’.

As Stephen Young, Executive Director of the Caux Round Table group of business executives, argues in his book Moral Capitalism, the separation of Smith’s two texts has given us a distorted notion of how capitalism should work.

Capitalism, in Smith’s view, could not be separated from conscience and even a divine providence, a guiding hand. For without conscience, without the ‘invisible hand’ of divine grace, untamed capitalism too easily leads to corruption and greed, a loss of common sense and common humanity. To rescue capitalism and the banking system, we need to revisit Adam Smith’s moral philosophy—and our own consciences.

NOTE: Individuals of many cultures, nationalities, religions, and beliefs are actively involved with Initiatives of Change. These commentaries represent the views of the writer and not necessarily those of Initiatives of Change as a whole.