Money for Nothing
The road to you-know-where is paved with good intentions.
Sep 24, 2007, Vol. 13, No. 02 • By RYAN T. ANDERSON
The Commercial Society
"For God's sake, please stop the aid!" The Kenyan economist James Shikwati made headlines a year ago when he pleaded with the West to stop sending relief to Africa. Foreign aid led to political corruption, he said, drove native industries out of business, sent faulty market signals, and encouraged perpetual dependency.
Samuel Gregg agrees, and in this new book the Oxford-trained moral philosopher and economic thinker reflects on the history of commercial societies and the key figures who have studied and developed their principles. With guides from Adam Smith to Pierre Manent, Gregg presents a synthesis of the moral-cultural, economic, and legal foundations required for commercial societies to flourish, and of the temptations that cause them to founder.
With clear prose and abundant references, The Commercial Society provides a concise summary for students of political economy and a solid introduction for novices. Most important, though, it offers policymakers indispensable scholarly reflection on what economic success requires. Those working to alleviate the destitution in Latin America and Africa should heed Gregg's advice about the necessary institutions and laws--for nothing but commercial society "provides greater wealth to increasing numbers of people and progressively diminishes poverty at an unprecedented rate." And anyone concerned about stagnating European economies should look to Gregg on the importance, even primacy, of moral-cultural values--for nothing can make a commercial society tick if its people lack motivation, imagination, and concern for the future.
Indeed, Gregg identifies cultural-moral foundations as central. Citizens of vibrant societies must have certain "values and habits of action," especially personal responsibility, liberty, and self-interest rightly understood (what Aristotle and Aquinas would describe as a reasonable self-love). They must understand themselves as the primary actors in their lives, assume ownership for their futures, and make long-term plans for their own well-being.
Yet to understand self-interest correctly, they must agree with Tocqueville that "by serving his fellows man serves himself, and that doing good is to his private advantage." Other vital virtues include creativity (to find new ways to meet needs), economic prudence (to plan for the future), thrift (to save for the future), trust (in commercial partners), and civility and tolerance (toward those we must do business with despite conflicts).
Yet these personal virtues will flourish only within the proper economic structures. To the central economic question--how to deal with a scarcity of resources--there are three possible answers: force, altruism, or exchange. Because men ought not be beasts, and are not angels, scarcity is best resolved by exchange in the market economy. Against the mistaken notion that "one person's commercial gain is another person's loss," Gregg argues that exchange is mutually beneficial because economic value is subjective. I love music but have baseball tickets; you love sports but have opera tickets. Since we value our goods differently, trade would leave us both better off. So the market reflects the nature of humans and their ability to be self-directing, free choosers.
What is true of consumers is also true of producers, so vibrant entrepreneurship and private commerce are crucial for human liberty. And production, consumption, and exchange will succeed only if the market is truly free to allow for fair competition (to let the best producers prevail) and properly functioning price signals (to let consumers indicate their preferences, especially important to investors). All of this will require a standard of worth--money--and, for exponential growth, a system of banking and credit.
Beyond strong public character and the right economic institutions, robust legal protections are indispensable, especially "the right of private property, freedom of association, freedom of contract, the rule of law, and constitutional guarantees against arbitrary government." What would commercial life be like if you couldn't count on retaining the capital investments you made to your business, had no copyright on your research, or were left defenseless against state meddling? Wherever properties are seized by the state, bank accounts frozen, ideas stolen, and capricious rulers left to reign, commercial activity is impossible. As Americans with a relatively stable government, we often overlook the importance of good law. Gregg's reminders are particularly helpful for anyone thinking about the developing world, where Hernando de Soto's observations apply: "They have houses but not titles, crops but not deeds, businesses but not statutes of incorporation."