MODERN history might have turned out very differently had politicians and their economic advisers picked the right reading material.
That was the suggestion from Andy Haldane, the executive director for financial stability at the Bank of England.
“Economists read the wrong book by Adam Smith,” he said.
The Wealth of Nations, published in 1776, maintains that the best we can do for society is to have everyone pursue their own self-interest. With the added benefits of competition, the theory is that this results in prosperity for everyone.
Economists took the message to heart and built models founded on individual people seeking to do the best for themselves and individual firms trying to maximise profits on the assumption that if everyone did that, the collective outcome would be the best that could be achieved for society, said Mr Haldane, who was speaking at Sheffield University on Thursday night.
“Actually, what events have shown of the last five years is that leaving people to pursue their own individual self-interests in highly competitive markets might not lead always to the best outcomes for society,” he added.
“That is not a new lesson because 17 years prior to writing The Wealth of Nations, Adam Smith had produced a second book, called The Theory of Moral Sentiments, much less well known and largely unread by the economics profession but quite widely read outside of it.
“What that book put centre stage are a rather different set of lessons: the importance of cooperation in addition to competition. The importance of reciprocity, of fairness, of values plural as distinct from value singular. The 20th century was the century of The Wealth of Nations. In the light of the financial crisis, the 21st might be one in which Smith’s first book begins to take centre stage.”
I would certainly hope so. We all saw what happened when Britain’s most powerful industry was left to its own devices – it required a taxpayer bailout of £1.2 trillion.
Mr Haldane’s comments should be welcomed as businesses and politicians try to locate sustainable growth in a post-credit crunch world, characterised by labyrinthine global interconnectedness and rapid technological disruption.
Mr Haldane, who is from Guiseley, Leeds, appeared as a guest of Sheffield Political Economy Research Institute.
Well done to SPERI for putting on the event, which was hosted by Professor Andrew Gamble before a large audience in the magnificent Firth Hall.
• I had the pleasure of meeting Edwin Booth, the patriarchal chairman of Booths, a little while ago. We discussed his supermarket group’s experience of employing over-60s apprentices.
“They are great folk and I have spent some time with them,” he told me. “We have got some great characters, some people with great experience of life, who almost are developing a new life for themselves, by coming out to work, learning some new skills or relearning old skills.”
He described his workforce as being like a family: teenagers are coming in from university; others are working part-time as they bring up young families; some people are developing a career by becoming heads of department; others are on a fast-track into senior management; middle managers are akin to mums and dads; then there are the grandpas and grandmas.
Mr Booth said: “It is not beyond the wit of man to understand that in a balanced family scenario, each feeds off the other and supports the other and that engenders a very strong family dynamic within the workforce, where everybody is encouraged to support everybody else, with whatever experience they have of life. That promotes a very particular feel within the business.”
The family-owned supermarket group has 29 stores across the North of England, generating revenues of around £280m a year.
Mr Booth is predicting a decline in the power of global food and drink brands over the coming decades as locally produced food becomes more attractive in price, quality and provenance.
These are all powerful ideas and combined with Mr Haldane’s view that cooperation, reciprocity, fairness and values will hold greater sway in the economic models of the 21st century, it is difficult not to feel optimistic.