Category Archives: Politics

Arts, Britain, Economic, History, Philosophy, Politics, Scotland, Society

Quantum Leaps: Adam Smith (1723-1790)…

‘UNINTENDED CONSEQUENCES OF INTENDED ACTION’

Scottish philosopher of morals, politics and economics, Adam Smith was a contemporary of the Empiricist, David Hume (1711-1776), and is very close to him in outlook and philosophic temperament. His lectures on ethics and logic were published under the title Theory of the Moral Sentiments but he is most famous for his work of political economics, The Wealth of Nations.

Favoured philosopher of Margaret Thatcher and darling of Conservative economists, Smith is famous for his views on private property, the free market economy and the doctrine that ‘unintended consequences of intended action’ will be to the benefit of society at large. The idea behind this most fortunate if true of principles is that in intentionally serving one’s interests one unintentionally serves the interests of society as a whole.

'The Wealth of Nations' is one of the most important and deservedly read works of economic and political philosophy in the history of Western thought.

‘The Wealth of Nations’ is one of the most important and deservedly read works of economic and political philosophy in the history of Western thought.

A simple example will illustrate the essence of Smith’s idea. Suppose that Jones, in seeking his own fortune, decides to set up and run his own business, manufacturing some common item of everyday need. In seeking to provide for his own fortune, Jones’ entrepreneurial enterprise has a number of unintentional benefits to others. First, he provides a livelihood for the people in his employ, thus benefiting them directly. Second, he makes more readily available some common item which previously had been more difficult or more expensive to obtain for his customers, thus easing one, if only minor, aspect of their lives. The forces of market economy ensure that these unintentional benefits occur, for if Jones’ workers could find more profitable employ elsewhere they would either cease to work for him or he would have to raise their salaries in order to secure a workforce. Likewise, if Jones’ product was available more readily or less expensively from some other source, Jones would either go out of business or be forced to lower his prices to a competitive rate. The model assumes the absence of a monopoly, both in the labour and economic markets.

The belief that ‘unintended consequences of intended action’ will be of benefit to society held great imaginative power over the industrial philanthropists of the 18th and 19th Centuries and provided the philosophical groundwork for the later ethical theories of Bentham and Mill. However, criticism is not hard to come by. It is surely a blinkered view, if comforting for the entrepreneurial capitalist, to suppose that pursuing one’s own self-interest constitutes a magnanimous and philanthropic act towards society at large. One has only to review the social history of industrial Britain, to witness the treacherous and exploitative working practices of the industrial age, the extreme poverty and degrading social conditions of the suffering working classes, to realise Smith’s idealistic model has far more serious ‘unintended’ consequences. What has largely brought an end to such conditions in the industrialised West is not a triumphant adherence to Smith’s principles in Western economics, but a shifting of the poverty and exploitative working practices from one part of the world to another. In other words, the living conditions of those in the West has improved to the detriment of other countries just insofar as the labour required to support Smith’s economic philosophy has been removed from Western societies and transferred to those of the Third World.

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Regardless of one’s political views on Smith, The Wealth of Nations is one of the most important and deservedly read works of economic and political philosophy in the history of Western thought. It needs to be read and understood by its detractors as much as it does by its supporters.

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Economic, Financial Markets, Government, Politics, Society, United States

Surprise at the Fed’s decision to maintain an economic stimulatory programme…

ECONOMIC RECOVERY

…The Federal Reserve maintains its quantitative easing programme, but the implications of a taper were felt around the world

The spectacle and irony of the world’s financial markets shooting upwards in response to reports that the global economy is in less than rude health than had been thought appears paradoxical.

The surprise decision this week by the Federal Reserve to maintain its monthly $85 billion quantitative easing programme – the process by which money is artificially printed – indicates that U.S. monetary policymakers are far from convinced by the incipient American recovery. Whilst Washington has reported a much improved unemployment rate of 7.3 per cent, that is still considered to be too high, and more needs to be done before the recovery can be deemed sustainable. The uncertainty of rate-setters on the Fed’s Open Market Committee is undeniable as evidenced through their downgraded growth forecasts up until the end of 2014. Yet, from baulking at the downbeat assessment, investors from Tokyo to London have remained in bullish mood.

Their relief is perhaps not entirely irrational. The implications of Ben Bernanke’s suggestion in June that the Federal Reserve would start ‘tapering’ its Q.E. programme and stimulatory bond-buying some time before the end of the year were felt around the world. Emerging economies, for instance, particularly in Asia, saw their currencies plummet as money was pulled out in favour of newly rising, and much safer, US markets. Nor was the developed world any more insulated. Even though the Fed has not yet done anything, just the prospect of a U.S. taper has sharply sent long-term interest rates upwards in anticipation.

There are two lessons to be taken here. First, for all the new-found economic optimism, whatever green shoots there are (either here or elsewhere in the world), remain about as fragile as they can be. And secondly, the route from where we are now back to (unstimulated) pre-crisis normality will be an uneven and bumpy journey.

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Government, Middle East, Politics, Russia, Syria, United Nations, United States

The agreement between the United States and Russia on Syria’s chemical weapons…

SYRIA: US/RUSSIAN AGREEMENT

The agreement between the United States and Russia on chemical weapons in Syria is an important piece of political diplomacy. The idea that Bashar al-Assad could avoid military action by giving up his chemical stockpiles was much more than an ‘off-the cuff’ remark by John Kerry, US Secretary of State, who expressed that view in London last Monday.

The notion that has been circulating that Vladimir Putin has outsmarted the United States, his country’s historical adversary, by somehow exploiting Mr Kerry’s blunder must surely be a mistake. The U.S. has wanted this deal, proved by its tireless efforts to get it, and the world should welcome it too.

The agreement is a step in the right direction. The deal provides for the destruction of Assad’s chemical arsenal under United Nations supervision by the middle of next year. The prospects of the deal being met must be weighed against the risk of Syria’s chemical weapons being seized upon by Iran, or even Russia itself, as potential complicity creeps in.

While Mr Kerry has talked up the prospect of the UN authorising military action if Assad failed to comply, those words are not in the text of the agreement, and Russia would have to agree that the terms of the deal had been breached.

The mere fact that an agreement has been reached, however, has two consequences. First, it does make it less probable that Assad or his commanders will use chemical weapons again, because to do so would politically embarrass Mr Putin. This has pertinence because the need to deter the Assad regime from using gas again was the strongest argument in favour of the limited punitive action proposed by President Obama. Second, it means that Russia is now engaged in a process that could lead to an eventual end to the bloodshed.

The parochial argument that the delay in air strikes sought by British MPs in the House of Commons by providing the time for a deal to be made does have substance. Globally, the return of Russia to the international stage is one of the more important changes in geopolitics in recent years. That may be a response to the winding down of American interventions in Iraq and Afghanistan, though Russia stepping forward was far from inevitable. Yet, again, if the U.S. had not taken the initiative in the region, no one else would have done so, particularly with Britain baulking at the prospect of becoming embroiled in another war. That Russia is now engaged in the search for an end to the brutality and carnage in Syria is a hopeful change.

For there to be a settlement in Syria, Iran will also need to be consulted as it too is also a patron of the Assad regime. We should not naively assume that the recent election of the ‘reform-minded’ Hassan Rouhani as Iranian president – with recent expressions of goodwill to Israel – mean that Iran is now a force for peace in the region.

But the agreement could bring the Iranian leadership to accept that its interests are best served by following the Russian lead and sharing some of the responsibility for ending a conflict in Syria that has claimed the lives of more than 100,000 people.

The deal between the United States and Russia deserves a cautious approval, even though the prospects for a settlement in Syria still remain particularly distant.

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