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John Fullerton ... Capital Institute

The Pope’s Message on Ecology and Economy ... How to reconcile the “invisible hand” with the “Golden Rule?”

Burgess COMMENTARY

Peter Burgess

The Pope’s Message on Ecology and Economy

Obama Pope Image courtesy of Slate.com

How to reconcile the “invisible hand” with the “Golden Rule?”

That question first preoccupied my mind while I was a Managing Director at (the old) JPMorgan in the late 1990’s and inspired the creation of Capital Institute in 2010.

Too often, discussion around this question devolves into the same shallow debate (Capitalism versus Communism or Socialism) we see now in response to Pope Francis’ encyclical on the environment, Laudato Si’: On Care For Our Common Home, in anticipation of his visit to the United States this week.

While social outcomes across economic systems are rightly the subject of continuous debate, the truth is, no system of political economy that has operated in modern times is sustainable from an ecological perspective: not present day Capitalism; not the Social Democracies of Scandinavia; and certainly not our experiences with Communism in the Soviet Union or China.

Marxist scholars will correctly argue that true Marxism has yet to be tried on a large scale. I would say the same is true for the free enterprise system Adam Smith imagined when he coined the phrase “invisible hand” in his Wealth of Nations, where he explained the critical role self-interest plays in a free market economy:

“It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.”

But Smith’s “self-interest” should not be confused with Gordon Gekko’s “greed is good” that permeates modern finance-driven capitalism. Students of Smith are aware that the philosophical underpinnings of his thinking appear in his earlier work, The Theory of Moral Sentiments. It is there that Smith laid out his central idea that individual selfish acts would be self-regulated in our human nature by what he called “sympathy” (what today translates better as “empathy”). The book begins:

“How selfish soever man may be supposed, there are evidently some principles in his nature, which interest him in the fortunes of others, and render their happiness necessary to him, though he derives nothing from it, except the pleasure of seeing it…That we often derive sorrow from the sorrows of others, is a matter of fact too obvious to require any instances to prove it; for this sentiment, like all the other original passions of human nature, is by no means confined to the virtuous or the humane…The greatest ruffian, the most hardened violator of the laws of society, is not altogether without it.”

In other words, Smith believed that the invisible hand would be constrained by an ethic of reciprocity, what is generally referred to as the “Golden Rule” (i.e. do unto others as you would have them do unto you). Such a humanistic ethic of empathy and compassion is universal, uniting virtually all great religions and wisdom traditions across cultures throughout the ages. No government intervention required.

It’s certainly difficult to reconcile certain aspects of modern day capitalism with a free enterprise system guided by a humanistic invisible hand built on an ethic of reciprocity that Adam Smith envisioned a quarter century earlier. So where did we get lost?

First, we must embrace intelligently designed-market based solutions that will be essential for the energy system transition ahead. And while we can justifiably rant about lost morals, there is a systemic answer to where modern capitalism has lost its way that is subtler, and lies in the encyclical itself when Francis refers to the “reductionism which affects every aspect of human and social life.”

Reductionism of course is the useful method of analysis dating back to the Enlightenment in which we break down what’s complicated into its component parts. But in doing so, we too often lose sight of the whole – always greater than the sum of the parts – sometimes with disastrous consequences. Silos in academia and companies, the primacy of shareholder value still taught in most business schools, the 2008 financial collapse, and our failure to manage complex challenges like climate change via special interest delegations are well-known manifestations of our over-reliance on reductionist thinking.

Smith was part of the Enlightenment thinkers ushering in the Age of Reason and individualism with its forces of logic and analysis over the traditional lines of authority, most notably the overbearing authority of the Catholic Church itself. It would no doubt surprise him to learn that economics had become separated from the humanist impulse underlying his thinking, and that the reductionist method would become conflated with “science” and “technological progress” affecting (and at times overwhelming) “every aspect of human and social life” at the dawn of the 21st century.

Modern science (quantum physics, the web of life) understands that everything is connected to everything. So too do all major religions and virtually all wisdom traditions understand this core principle, often summarized by the concept of “oneness.” Our challenge now, after 500 years of amazing progress in many respects, rooted in Enlightenment derived-reductionist thinking, is to usher in what the Pope calls an “integral and integrating vision” in alignment with what Adam Smith himself intuited.

Such integral, or holistic thinking lies at the heart of our collaborative journey to a vision for Regenerative Economies at Capital Institute based on illuminating the universal patterns and principles (including reciprocity) that govern all systems that survive in the cosmos, re-uniting once again Ecology, Economy, and a humanist Spirit in harmonious right relationship. The regenerative framework is grounded in the rigor of our latest scientific understanding of all energy flow systems (everything is energy) ranging from how water boils in a pot all the way to complex living systems including human beings, human consciousness, and, we assert, human economies. We can therefore develop the practical metrics needed to monitor and manage regenerative economies effectively, and discover the true path to a broadly shared prosperity in the process.

At the heart of the Pope’s important message is a call for a new way to think, not a preference of one ideology over another, much less one religion over another. It is really a call to rediscover what we already know: the beauty of our essential long-standing humanist values and traditions. The reductionist logic of the “progress” of modernity must be subordinated to these core values. Nothing more. Nothing less.

How many in our polarized Congress on the right or the left will get it?

Maria Pereira • 3 hours ago

It is good, John, to see you expand the pope’s humanist message on your blog. He is indeed no ideologue, nor does he have a political agenda. His message is steeped in the humanist tradition. Antonio Genovesi, a contemporary of Adam Smith, described the traits of a civil economy as friendship and reciprocity. Today we call it compassion and collaboration. Through this prism, contemporary Italian economists write that markets need not be purely instrumental, but incorporate virtue.

Smith, the father of markets, would have agreed, for he wrote not only of sympathy but self-command (today called responsibility). In this way we arrive at enlightened self-interest; only so can the invisible hand truly function.

We see that by using such an approach to the economy and ecology, all can benefit, for as Pope Francis repeatedly writes in Laudato Si, everything is interconnected. Yes, his message is indeed an integral one. And he infuses it with love, for the human being and for nature, of which we are all part of the living whole. Through integration of the economy, ecology, love and virtue, we arrive at humanism.

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Avatar Paul Brooks • 5 hours ago

The response to your last question is, I think: very few, but some. There is likely a handful who understand and act accordingly now. (Kentucky actually has one.) Perhaps there are more, on both sides, who are muzzled by party ideology but share the core belief of invisible-hand-Golden-Rule connection. The sum of both groups is still a minority, but encouraging and growing that group may be the surest method of gaining traction for the Regenerative Economy.

Tax policy to steer inequality convergence, regulation to arrest greed, election and redistricting rules to stem gerrymandering, and energy policies to accelerate transition to renewables all begin in Congress. Progress toward these and other milestones on the Regenerative Economy path requires the understanding, courage, and work of Congress men and women.

Perhaps Capital Institute's message can be refined and targeted toward policymakers. Then it could be delivered along multiple communication pathways: direct meetings, speeches at conferences their staff are likely to attend, newspaper editorials, etc. Of course there is a cost for their listening: direct contributions and alignment with like-minded contributors; unpleasant but necessary investments.

Education, encouragement, and support can start to move the policymakers who will catalyze the growth of the Regenerative Economy.