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Was Adam Smith Wrong?

Has the “invisible hand” failed? A central theory of classical economics is that self-interest is the engine of a healthy economy and the most efficient means of distributing goods throughout a society. According to the theory, consumers need certain goods. But how does one produce the right goods for consumers? Adam Smith theorized that there is a natural incentive for companies who wish to earn a profit to produce the goods that are most needed. Successful companies produce these goods at affordable prices; they flourish and hire new employees. Workers seek out companies that pay the best wages. Thus, according to the theory, goods are distributed “efficiently,” workers are paid “fair market wages,” and companies that meet society’s economic needs are rewarded. Shareholders are rewarded for their stewardship of these companies. That is the theory.

In the recent financial crisis, however, an essential element was missing from this model: information. For companies to be well run, shareholders must know the financial health of the company in order to make sound decisions. But financial management failed to bother to understand the investments they were making or, if they did, to inform others. This is where consideration of the common good should have entered.


In a prescient essay in the periodical Communio in 1985, Cardinal Joseph Ratzinger wrote that business ethics rang like a “hollow bell” when the goal of efficiency crowded out morality. Had financial managers been concerned with morality as well, they would have been less likely to make foolish, short-sighted decisions. Cardinal Ratzinger wrote, referring to morality, “The decline of such discipline can actually cause the market to collapse.” Would that the heads of the American Insurance Group, Fannie Mae and Citigroup had been reading Communio as well as Forbes.

A Wave of Hate

While the incidence of hate crimes overall is down, a recent report by the Federal Bureau of Investigation notes a rise in crimes against Latinos, reflecting a nationwide anti-immigrant backlash. A particularly vicious hate crime occurred last month in Suffolk County, N.Y., an area where anti-immigrant tensions have increased over the past two decades. On Nov. 18 a group of seven teenagers calling themselves the Caucasian Crew attacked Marcelo Lucero and a friend. Lucero, employed at a dry cleaner’s to help support his ailing mother in his native Ecuador, had been in the United States for 16 years. The crew members periodically went out “beaner jumping,” their term for harrassing Latinos. The teenagers surrounded the two men near the train station in Patchogue, Long Island. The friend escaped, but when Lucero tried to defend himself with his belt, one attacker stabbed him. The 17-year-old killer, Jeffrey Conroy, was charged with a hate crime and second-degree murder.

Attacks have been frequent elsewhere in the country too. Last year, a Latino immigrant in Wright City, Mo., was attacked and robbed by three men who broke into his mobile home yelling “immigration enforcement!”

At a press conference in the wake of the Lucero murder, Janet Murguia, president of the National Council of La Raza, expressed alarm at the “wave of hate” that has been exacerbated by the inflammatory rhetoric of radio and cable show hosts and even of some elected officials. Anti-immigrant hatred has no place in a nation built on the work of immigrants.

Reason’s Greetings

“Why believe in a God? Just be good for goodness’ sake.” The statement sounds like a take-off on the Christmas favorite “Santa Claus Is Comin’ to Town.” In fact, it is appearing in advertisements on buses in our nation’s capital. Across the ocean in London, posters on buses say: “There is probably no God. Now stop worrying and enjoy your life.” In Colorado, a coalition of groups called the Coalition of Reason uses billboards to stress the community aspect of atheism: “Don’t Believe in God? You Are Not Alone.” In Australia, on the other hand, proposed ads reading, “Celebrate Reason—Sleep in on Sunday Mornings,” have been rejected by ad companies.

Secular humanists are aggressively campaigning during this holy season, when Christians look forward to celebrating the birth of Jesus. A British Web site has been surprisingly successful in online fundraising efforts to support the secular humanist advertising campaign.

Reactions to this campaign of atheistic evangelizers are twofold. Most believers seemed very annoyed at the timing—the Christmas season. As one person put it, “Why can’t atheists come up with their own holiday season and day of celebration?” Others look more positively upon the ads and contend that in the midst of busy city life, the ads may push theists and atheists alike to pause and think about the deeper questions of life. That would be valuable during any season of the year.

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John Walton
10 years ago
Adam Smith postulated that government sponsored religion would be a "good thing" (yes, there was a "good thing" prior to Martha Stewart.) Were the government to sponsor religion the zeal of the practitioners would fall to the lowest possible level of energy and intellectual curiousity. Instead, we have government sponsored education which neatly demonstrates the wisdom of his proposition.
10 years ago
Actually, there was plenty of information to avoid the recent financial crisis. Everyone, certainly the banks, knew that providing mortgages to people who could not afford them was imprudent and risky. But Fannie Mae and Freddie Mac, at the behest of Congress, guaranteed the loans to encourage them. So the banks failed to act in their best interests because the government intervened, and perverted the process. And what was the government's interest? Perhaps some truly wanted to help the people who couldn't afford to own their own home, however ill-advised their approach. But given the risks, and the results, it is hard not to accuse the members of Congress who pushed this reckless behavior of simply trying to buy votes. If the financial crisis has been fueled by the lust for money on Wall Street, it was ignited by a lust for power in Congress. They knew, but they didn't care.
Sues Krebs
9 years 10 months ago
Hatred and hate groups promote hate by the reconstruction of Faith into poorly written generalizations about communities. If we accept this point, it doesn't make hatred acceptable but understandable. People who have been deeply hurt are most likely to cause hurt in retailation. That's how hatred begins: pain, hardship, and poverty of positives.


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