Around the same year that the American colonies declared their independence, Adam Smith launched one of the most enduring and influential metaphors in all of social thought. That metaphor is the "invisible hand," the deft limb that is said to convert individual greed or self-interest into public good. During a visit to Edinburgh I made a little pilgrimage to Adam Smith's grave in the Canongate Kirkyard.
Like so many others, I was charmed by the apparent simplicity of Smith's argument, and wanted the invisible hand to work universally, with no fraud, no hypocritical praising of free markets while seeking government support, no cynicism replacing moral sentiments, no concealment disguised as "self-regulation." However, the metaphor did not seem applicable to much of the economic system as it had developed in the last 236 years.
After crossing the North Sea, I was riding in an Amsterdam trolley and translating a warning, in Dutch, to beware of pickpockets (zakkenroller). It suddenly occurred to me to wonder whether the benign invisible hand of Adam Smith could ever morph into fingers that stole one's wallet, whether the magical and elusive hand could become a clever thief.
Under certain conditions, competition could produce the automatic and socially beneficial result that Smith imagined, but it was in the interest of the most successful competitors to alter those conditions in their favor -- to game them. While praising a "free market," they would thus learn to privatize the profits, and, with the help of people in government who shared their ideology or perhaps a little of their prosperity, or both, to socialize the losses -- to make the public pay for huge bad bets made by bankers. In that case, the invisible hand would be picking our pockets.
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