Amartya Sen’s fantastic historical grounding in the New York Review of Books is a great lens through which to see the search for “new capitalism” that has recently infected international dialogue. In particular, he makes an excellent case for the farsightedness and candor present in the reasoning and writings of capitalism’s forefather.
“The present economic crisis is partly generated by a huge overestimation of the wisdom of market processes,” says Sen. He makes clear that Adam Smith knew of these limitations of unfettered capitalism, limitations that are now playing out some 250 years hence. “Smith rejects interventions that exclude the market — but not interventions that include the market while aiming to do those important things that the market may leave undone.”
“Smith viewed markets and capital as doing good work within their own sphere, but first, they required support from other institutions — including public services such as schools — and values other than pure profit seeking, and second, they needed restraint and correction by still other institutions — e.g., well-devised financial regulations and state assistance to the poor — for preventing instability, inequity, and injustice. If we were to look for a new approach to the organization of economic activity that included a pragmatic choice of a variety of public services and well-considered regulations, we would be following rather than departing from the agenda of reform that Smith outlined as he both defended and criticized capitalism.”