WEBVTT

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- I believe that open markets
and free enterprise are the best

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imaginable force for improving
human wealth and happiness.

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- (Protesters): Who protects
the bankers?

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Police protect the bankers!

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- Did you ever have a moment
of doubt about capitalism?

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- Is there some society you know
that doesn\'t run on greed?

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- How would Smith see the
economic world around us?

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- I think Keynes would have said
the problem is the hole

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in the economy.

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- Hayek really wrote
\"The Road to Serfdom\"

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as a warning.
- You always have to be careful

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with Marx about the one-liners.

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- Polanyi, for me, was
an intellectual earthquake.

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- I mean, if I had to stereotype
Ricardo, I would say he would

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look like George Soros.

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- (Narrator): We were told
that capitalism is the product

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of big thinkers and big ideas,
but is it true? How did ideas

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shape our lives? What is
their relation to reality?

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Can they help us understand
today\'s economic crisis,

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let alone the future
of capitalism?

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- Smith moved to this house
in 1778, that\'s two years

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after the publication
of \"The Wealth of Nations\".

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It\'s quite likely that this was
the fireplace of the room

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in which Smith staged the most
disastrous moment in his

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intellectual career.

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He did not want any
of his unpolished, unfinished

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manuscripts to survive him
and he laid down in his will

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that his two executors were
to burn these papers after

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his death.

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But that wasn\'t enough,
and really almost days before

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his death, he summoned
his executors and said:

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\"I want you to do it now!\"
And they sat there in front

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of the fire and systematically
burned all of his unpublished

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manuscripts.

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What had survived was simply
two highly polished works:

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his great \"Theory
of Moral Sentiments\"

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and his even greater
\"The Wealth of Nations\".

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- \"The Wealth of Nations\", which
survived the fire has been

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presented over the centuries
as the founding book of the
free

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market system.

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Many of Adam Smith\'s notes were
destroyed in the fire,

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leaving us with only this book
and the interpretations of
those

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who have used it to promote
the very narrow view

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of the market as a science.

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- The history of \"The Wealth
of Nations\" as a book

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is actually quite interesting.

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If you look at the first
edition, it\'s an expensive

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production and looks to me
as though this was a book

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destined for a specialist
market, a market

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of philosophers,
a market of politicians.

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But what\'s interesting is by
the time you get to the later

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part of Smith\'s life to the
edition of 1784, it\'s now become

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a cheap edition. It\'s now
become a mass produced edition.

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In other words, once intended
for a specialist market is now

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becoming something like
a best-seller.

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And it\'s going to stay like
that. The book has never been

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out of print. It\'s always
been a best-seller.

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It does raise questions
about what turns a specialist

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book like that into
a best-seller.

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I think part of it is that
it looked as though Smith had

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actually done what Newton did
for the natural sciences.

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That he\'d actually discovered
a principal, a law of movement,

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a law of motion.

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- It\'s hard to imagine how
this primitive smelter

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in Kolkata, India, has anything
to do with \"The Wealth

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of Nations.\" But work here is
following the first principal

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of Adam Smith\'s book; division
of labour, a principal which

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after Smith\'s death has been
elevated to a scientific law.

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- One of the characteristics
of the society you know

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that I know is the intense
degree of specialization,

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which takes place in employments
raging from the most skilled

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and complicated employments
to the most simple.

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(Quote): To take an example,
the trade of a pin maker,

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could perhaps with his utmost
industry make one pin a day.

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But in the way this business is
now being carried on: one draws

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out the wire, another
straightens it, another cuts it,

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a forth points it. I have seen
a small manufactory of this kind

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where 10 men make among
themselves 12 pounds of pins

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a day. Adam Smith:
The Wealth of Nations.

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- So he comes to the conclusion
that progress, economic

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progress, has got everything to
do with the division of labour.

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- No wonder the division
of labour has been treated

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as the equivalent
of a Newtonian law.

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After all, it has been
the engine of wealth creation

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used in the manufacture
of almost every product we
know,

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from a sophisticated iPad
to a single pencil.

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For Smith\'s followers,
the division of labour has

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become a pillar
of the free market economy.

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- To enable millions of people
to cooperate peacefully

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together, we need to understand
how it is that a free market

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works. I know no better way
to bring this out than by

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a very simple example,
called I the pencil.

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This is the only prop I have
for this TV show. As you can see

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it\'s a plain yellow pencil.
There\'s nobody in the world

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who knows how to make a pencil.
Now that seems like a silly

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thing to say, isn\'t it?
This is just the most obvious

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thing, it\'s only a piece
of wood with something black

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in the middle and a little red
tip at the end. What do

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you mean, nobody knows
how to make a pencil?

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Well suppose, you were to start
to set out to make a pencil.

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First of all, you have to get
some wood. Where do you get

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the wood? You have to go to
the Pacific North West probably

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and cut down some trees.

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How do you cut down some trees?
You have to have some saws

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to cut them with. Where do you
get the saws? You have to have

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some steel. Where do you get
the steel? You have to have

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a steel mill. In order to have
the steel mill, you have to get

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the iron ore and you can add
all the rest. But that\'s only

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the beginning. This black stuff
in the middle that we call lead

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isn\'t lead, it\'s graphite,
I think, I\'m not absolutely

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sure. And I am told it comes
from some mines in South

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America.

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Now this little red tip
at the top, that\'s rubber.

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Where does it come from? Well,
the major source of natural

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rubber is Malaya. But
the miracle of this pencil

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isn\'t that nobody knows
how to make it, the miracle

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of the pencil is how did it get
made? What is it that has

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enabled this little elementary
transaction to take place?

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Now how is that brought about?
Is there some commissar sitting

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in some central office who is
sending out orders to these

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people in Malaya, to these
people in South America,

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to the people in Washington?
How is it that they are led to

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cooperate with one another?
These thousands of people who

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have been led to engage
in this simple transaction

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not one of them has been forced
to do it, nobody has had a gun

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to his head, they\'ve all
done it, why? Because each one

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of them thinks he\'s better
off in this transaction.

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- An iPad factory in Shenzhen,
China. A global assembly line

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for parts that come
from all over the world.

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The 21st century global version
of Adam Smith\'s pin factory.

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There are 250 000 workers
nin this factory producing close

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to 10 000 iPads a day.
But can we call the workers

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who manufacture them free?

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- So this is the moral dilemma
at the heart of \"The Wealth

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of Nations\": the economic
logic of division of labour

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versus the human cost to
achieve
it. But was Adam Smith blind

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to this dilemma?

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- Adam Smith is very rarely read.
He is worshiped, but not read.

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I mean everyone who went
to college learned the fist

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paragraph
of \"Wealth of Nations\".

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- (Quote): The greatest
improvements in the productive

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power of labour and the greater
part of the skill, dexterity

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and judgement seem to have been
the effects for the division

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of labour. Adam Smith:
The Wealth of Nations.

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- Not very many people got
to page, whatever it is,

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page 400 in which he points out
that division of labour is

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monstrous.

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- (Quote): In the progress of the
division of labour, a great body

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of people comes to be confined
to a few very simple operations.

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The worker has no occasion
to exert his understanding.

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Adam Smith:
The Wealth of Nations.

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- It turns people into creatures
as stupid and ignorant as

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a person can possibly be. The
person just becomes a machine.

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That\'s a terrible attack
on fundamental human rights.

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And therefore he says that
in any civilized society,

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the government is going
to have to intervene to prevent

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the division of labour.
How many people get that far?

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- The Industrial Revolution was
founded upon the creation

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of the factory system with large
scale machinery and, of course,

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a labour process.

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It was very different from
that which artisans making

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their cabinets or so on, engaged
in. It was completely different

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machine technology,
which then was dominating.

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The machine controls
the labourer rather

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than the labourer controlling
the tool, which is true

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of artisan production and
of course social relations do

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indeed change. The labourer
in the factory has a very

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different set of social
relations with the other

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labourers and a very different
set of relations with the tools,

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a very different relation
to nature than the artisan

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in a workshop making
a cabinet or whatever.

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-For centuries, economists and
politicians ignored Adam
Smith\'s

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own recognition of the moral
dilemma at the heart of
division

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of labour. Self-interest,
his second most quoted

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principle suffered
a similar fate.

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- Please welcome the Nobel
Laureate in Economics,

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Milton Friedman.
(applause)

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Let\'s share with the people at
home just one of the statements

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of Adam Smith that you refer
to in your book, which

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of course when I want it, I\'m
not going to be able to...

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Oh, it\'s on page 2, alright,
thank you! \"By pursuing

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his own interest\", that is to
say, his, meaning the person

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engaged in free enterprise,
Adam Smith says, \"he frequently

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promotes that of the society
more effectively than when

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he really intends
to promote it\".

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- Adam Smith considered
self-interest as the driving

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force of the economy. But do
we know what he actually meant

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by it? To find out, we must
first explore the times

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in which he lived.

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- Adam Smith had this
famous passage in his

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\"Wealth of nations\".

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It is because the, well I\'m
paraphrasing him, but it is

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because the bakers and
the butchers want to make

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money that we can
have our dinner.

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He started all this myth
about the selfish individual,

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self-seeking being
the predominant and almost

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exclusive human motivation.
Now, one has to grant that

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Adam Smith was actually
a bit more sophisticated than

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his followers.

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He actually understood that
humans are more complex,

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but his position was that
you could actually separate

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these things and in the realm
of the economy, selfishness is

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basically
the exclusive motivation.

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- So you know Adam Smith wrote
\"The Wealth of Nations\".

00:20:15.999 --> 00:20:18.333
You know self-interest, greed is
good, the invisible hand

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and free enterprise, free
markets, etc, and all that.

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He\'s the father of capitalism.
But it turns out there\'s another

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Adam Smith. How many people
here have read the \"Theory

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of Moral Sentiments\"?
And according to Adam Smith,

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it was his important book,
his magnum opus, in some ways,

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that was his magnum opus and
\"The Wealth of Nations\" paid

00:20:36.167 --> 00:20:41.249
the bills. He never imagined
capitalism, that he wrote about

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in \"The Wealth of Nations\"
could actually succeed without

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the moral underpinnings,
what he calls sentiments,

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we would call them virtues,
without the virtues of a society

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and virtues of individuals,
that would actually create

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the base of a healthy
capitalism. All we could do is

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look here and see that
\"The Wealth of Nations\"

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and the \"Theory of Moral
Sentiments\", Adam Smith 1,

00:21:04.667 --> 00:21:08.709
Adam Smith 2, had been
disconnected.

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- When you see around the globe
that maldistribution of wealth,

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the desperate plight of millions
of people in underdeveloped

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countries, when you see so few
haves and so many have nots,

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when you see the greed and
the concentration of power,

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did you ever have a moment
of doubt about capitalism?

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- Tell me, is there some society
you know that doesn\'t run

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on greed? You think Russia
doesn\'t run on greed?

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You think China doesn\'t run
on greed? What is greed?

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Of course none of us are greedy,
it\'s only the other fellow

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who\'s greedy. The world runs
on individuals pursuing their

00:21:48.375 --> 00:21:52.083
separate interests.
- We\'ll be back in just a moment.

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- Of course we are all
to an extent selfish, some

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people more, some people less.
But we also have many other

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motivations. I mean, we have
solidarity, we have loyalty,

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we have sympathy. I mean all
these motivations are real.

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And we really need to design
a system that exploits all

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these complex human motivations
because if you begin to assume

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that everyone is selfish or only
out to promote his or her own

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self-interest, and than you have
to suspect everyone, you have

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to monitor everyone all the time
and the system will actually

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grind to a halt.

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- The great achievements
of civilization have not come

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from government bureaus.
Einstein did not construct

00:22:42.999 --> 00:22:47.998
his theory under order
from a bureaucrat.

00:22:47.999 --> 00:22:51.500
Henry Ford didn\'t revolutionize
the automobile industry

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that way.

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- But Henry Ford is a perfect
example that self-interest

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is far more complex
than greed or individualism.

00:23:06.042 --> 00:23:09.750
In 1914, he single-handedly
almost doubled the salaries

00:23:09.751 --> 00:23:14.500
of his workers and reduced
their
nworking hours from 9 to 8 hours

00:23:14.501 --> 00:23:16.709
a day.

00:23:17.167 --> 00:23:19.500
Increasing their salaries,
he claimed, will turn workers

00:23:19.501 --> 00:23:25.458
into consumers. It will help
to expand the economy

00:23:25.459 --> 00:23:27.709
and his car sales.

00:23:28.751 --> 00:23:33.292
He dreamed that every worker
could one day own a Ford car.

00:23:37.375 --> 00:23:41.416
- Though selfish motivations are
important and good managers

00:23:41.417 --> 00:23:45.791
know it, they\'ll talk about
persuading people, connecting

00:23:45.792 --> 00:23:52.083
to people, providing a vision,
creating an \"esprit de corps\".

00:23:56.999 --> 00:24:00.998
- Tonight, we focus on an apple.
Apple, the computer, not

00:24:00.999 --> 00:24:02.333
the fruit.
- It is Jobs that provides

00:24:02.334 --> 00:24:05.458
the main inspiration
and philosophical direction

00:24:05.459 --> 00:24:06.417
for Apple.

00:24:06.418 --> 00:24:08.998
- What Apple is, it\'s
an environment where we can

00:24:08.999 --> 00:24:11.208
attract the best and
the brightest people to come

00:24:11.209 --> 00:24:15.999
together and sort of have
a common vision about how

00:24:16.000 --> 00:24:16.999
we can change the world.

00:24:17.000 --> 00:24:19.998
- This is how real managers
manage the economy. But

00:24:19.999 --> 00:24:22.583
of course, economists do not
understand this and they keep

00:24:22.584 --> 00:24:25.416
saying that everyone is selfish
and we have to design

00:24:25.417 --> 00:24:30.500
a system accordingly, which
means you give maximum freedom

00:24:30.501 --> 00:24:36.998
to everyone and basically
believe that this will somehow

00:24:36.999 --> 00:24:40.292
amount to optimal
social outcome.

00:24:41.999 --> 00:24:45.958
-So how did Adam Smith\'s
nuanced
nconcept of self-interest become

00:24:45.959 --> 00:24:49.708
transformed over more than 200
years into a global economic

00:24:49.709 --> 00:24:56.458
system driven by greed?
It begins with a separation

00:24:56.459 --> 00:25:00.998
of Adam Smith 1
from Adam Smith 2

00:25:00.999 --> 00:25:03.998
and the transformation
of \"The Wealth of Nations\"

00:25:03.999 --> 00:25:06.292
into a science.

00:25:15.417 --> 00:25:20.998
- The doctrine of self-interest
was the economic equivalent

00:25:20.999 --> 00:25:25.999
to the law of gravity.
It insured equilibrium.

00:25:30.334 --> 00:25:34.374
If everyone was free to pursue
their self-interest in markets,

00:25:34.375 --> 00:25:39.166
you would get an equilibrium,
optimal equilibrium, which was

00:25:39.167 --> 00:25:43.833
equivalent to the equilibrium
of natural bodies when they were

00:25:43.834 --> 00:25:49.541
free to move as well. So I think
the analogy with physics was

00:25:49.542 --> 00:25:53.833
very, very strong. What
they ignored completely was

00:25:53.834 --> 00:25:56.501
how human beings
actually behave.

00:26:17.876 --> 00:26:22.082
Sociology and psychology have
been very well aware that a lot

00:26:22.083 --> 00:26:26.625
of behaviour is what economists
would call irrational.

00:26:26.626 --> 00:26:29.998
But in fact, I don\'t think
that is the right way

00:26:29.999 --> 00:26:33.918
of describing it.
I think it\'s human.

00:26:36.292 --> 00:26:39.082
- University of Michigan
Television presents an interview

00:26:39.083 --> 00:26:42.500
with Ayn Rand, noted
American novelist, author

00:26:42.501 --> 00:26:45.041
of \"The Fountainhead\"
and \"Atlas Shrugged\",

00:26:45.042 --> 00:26:49.501
and philosopher-spokesman
for America\'s New Intellectual.

00:26:51.876 --> 00:26:54.541
- Self-interest had been
enshrined as a law of physics

00:26:54.542 --> 00:26:59.041
in the 19th century. In the
nfirst part of the 20th century,

00:26:59.042 --> 00:27:04.501
it evolved in the US
into a moral philosophy.

00:27:06.042 --> 00:27:09.666
- I\'m challenging the moral
code of altruism, the precept

00:27:09.667 --> 00:27:14.082
that man\'s moral duty is
to live for others, that,

00:27:14.083 --> 00:27:18.833
in fact, makes man a sacrificial
animal. I say that man is

00:27:18.834 --> 00:27:22.917
entitled to his own happiness
and that he must achieve it

00:27:22.918 --> 00:27:27.998
himself. Now what can be more
important than happiness?

00:27:27.999 --> 00:27:31.998
But happiness doesn\'t not mean
simply momentary pleasures

00:27:31.999 --> 00:27:34.998
or any kind of mindless
self-indulgence. Happiness

00:27:34.999 --> 00:27:41.458
means a profound guiltless,
rational feeling of self-esteem

00:27:41.459 --> 00:27:43.998
and a pride in one\'s
own achievements.

00:27:43.999 --> 00:27:48.292
-Join me in welcoming Paul Ryan!

00:27:51.375 --> 00:27:55.416
-In the 21st century, Ayn
Rand\'s
philosophy of self-interest

00:27:55.417 --> 00:27:58.999
became part
of a political campaign.

00:28:00.999 --> 00:28:03.750
- I grew up reading Ayn Rand
and it thought me quite a bit

00:28:03.751 --> 00:28:07.041
about who I am and what my value
systems are and what my beliefs

00:28:07.042 --> 00:28:13.541
are. The issues that are
under assault, the attack

00:28:13.542 --> 00:28:16.041
on democratic capitalism,
on individualism and freedom

00:28:16.042 --> 00:28:20.541
in America is an attack on
the moral foundation of America.

00:28:20.542 --> 00:28:23.998
And Ayn Rand more than anyone
else did a fantastic job

00:28:23.999 --> 00:28:27.917
of explaining the morality
of capitalism, the morality

00:28:27.918 --> 00:28:31.666
of individualism.
Our rights come from nature

00:28:31.667 --> 00:28:34.999
and God, not from governments.

00:28:35.792 --> 00:28:39.541
- This kind of approaches have
been so destructive especially

00:28:39.542 --> 00:28:43.999
in the last 20-30 years.
We have come to almost glorify

00:28:44.000 --> 00:28:49.998
self-interest. We have come
to believe that all the other

00:28:49.999 --> 00:28:53.208
motivations, all the other
emotions, all the other

00:28:53.209 --> 00:28:56.958
moral values, they are somehow
secondary, they are somehow

00:28:56.959 --> 00:29:03.501
for stupid people. They are
somehow for lower beings.

00:29:18.751 --> 00:29:22.958
That has created this system
where people are actually

00:29:22.959 --> 00:29:28.666
expected to be ignorant
of the broader social frame.

00:29:28.667 --> 00:29:33.541
They are encouraged actually
just to look after their own

00:29:33.542 --> 00:29:38.292
interests and we are living
the consequences today.

00:29:39.167 --> 00:29:41.833
- There are two words which over
the centuries immortalized

00:29:41.834 --> 00:29:46.666
Adam Smith and \"The Wealth
of Nations\". They\'ve become

00:29:46.667 --> 00:29:49.958
a shorthand for global economic
activities, transforming

00:29:49.959 --> 00:29:54.999
self-interest into a magical
mechanism, an engine

00:29:55.000 --> 00:29:58.292
for a global economic system.

00:30:19.918 --> 00:30:22.041
- The invisible hand is
a phrase that was introduced

00:30:22.042 --> 00:30:25.750
by Adam Smith in his great
book \"The Wealth of Nations\".

00:30:25.751 --> 00:30:29.998
In which he talked about the way
in which individuals who

00:30:29.999 --> 00:30:32.750
intended only to pursue
their own interests were led

00:30:32.751 --> 00:30:36.917
by an invisible hand to promote
the public welfare, which was

00:30:36.918 --> 00:30:38.166
no part of their intention.

00:30:38.167 --> 00:30:41.875
- 60 Second Adventures
in Economics. Number 1,

00:30:41.876 --> 00:30:43.166
The Invisible Hand.

00:30:43.167 --> 00:30:46.041
An economy is a tricky thing
to control and governments are

00:30:46.042 --> 00:30:49.875
always trying to figure out
how to do it. Back in 1776,

00:30:49.876 --> 00:30:52.875
economist Adam Smith shocked
everyone by saying that what

00:30:52.876 --> 00:30:55.791
governments should actually do
is just leave people alone

00:30:55.792 --> 00:30:58.998
to buy and sell freely among
themselves. He suggested

00:30:58.999 --> 00:31:00.998
that if they just leave
self-interested traders

00:31:00.999 --> 00:31:04.708
to compete with one another,
markets are guided for positive

00:31:04.709 --> 00:31:07.998
outcomes as if by
an invisible hand.

00:31:07.999 --> 00:31:12.291
- The invisible hand has long
been a staple of any economics

00:31:12.292 --> 00:31:14.292
course.

00:31:28.542 --> 00:31:34.041
- Yet Adam Smith never
wrote it in this context.

00:31:34.042 --> 00:31:37.998
- Adam Smith was concerned that
if there was free movement

00:31:37.999 --> 00:31:42.998
of capital and free import
of goods, he said England will

00:31:42.999 --> 00:31:47.166
suffer because British
capitalists will invest abroad

00:31:47.167 --> 00:31:51.998
and they\'ll import from abroad
and that will harm the English

00:31:51.999 --> 00:31:55.708
economy. And then Adam Smith
gave an argument, not a very

00:31:55.709 --> 00:32:00.041
good argument, but his argument
was that English investors will

00:32:00.042 --> 00:32:05.666
prefer to invest in England
because of what some called

00:32:05.667 --> 00:32:08.583
the \"home bias\". They\'ll have
a preference for investing

00:32:08.584 --> 00:32:12.124
close by and therefore
as if by an invisible hand,

00:32:12.125 --> 00:32:15.999
England will be saved from
the menace of free capital

00:32:16.000 --> 00:32:21.291
movement and free imports.
That\'s invisible hand.

00:32:21.292 --> 00:32:25.998
What\'s that got to do with
the institute or the modern

00:32:25.999 --> 00:32:33.583
enthusiasm about free capital
flow and having US corporations

00:32:33.584 --> 00:32:37.583
invest in China so they can send
stuff back here to sell cheap,

00:32:37.584 --> 00:32:41.501
exploiting Chinese workers?
That\'s not Adam Smith.

00:33:22.751 --> 00:33:25.292
- The committee will
please come to order.

00:33:27.792 --> 00:33:34.917
Today is our fourth hearing
into the ongoing financial

00:33:34.918 --> 00:33:35.751
crisis...

00:33:35.752 --> 00:33:38.166
- In 2009, in the wake
of the financial collapse,

00:33:38.167 --> 00:33:41.998
Alan Greenspan, the former head
of America\'s central bank,

00:33:41.999 --> 00:33:45.998
the Federal Reserve Board, was
invited back to Washington

00:33:45.999 --> 00:33:48.999
as the man who more than
others promoted deregulation

00:33:49.000 --> 00:33:52.501
in the name
of the invisible hand.

00:33:53.876 --> 00:33:57.416
- Dr. Greenspan, I want to start
with you. You have been

00:33:57.417 --> 00:34:00.998
a staunch advocate for letting
markets regulate themselves.

00:34:00.999 --> 00:34:06.291
And my question for you is
simple: were you wrong?

00:34:06.292 --> 00:34:09.416
- I found a flaw...
- You found a flaw?

00:34:09.417 --> 00:34:12.500
- In the model that defines how
the world works so to speak.

00:34:12.501 --> 00:34:15.999
- In other words, you found
that your view of the world,

00:34:16.000 --> 00:34:19.791
your ideology was not right,
it was not working?

00:34:19.792 --> 00:34:23.500
- Precisely. That\'s precisely
the reason I was shocked

00:34:23.501 --> 00:34:27.541
because I\'ve been going for
40 years or more with very

00:34:27.542 --> 00:34:30.917
considerable evidence that it
was working exceptionally well.

00:34:30.918 --> 00:34:34.998
- Which model was he referring
to? Alan Greenspan\'s

00:34:34.999 --> 00:34:38.041
intellectual career began
with Ayn Rand, he was among

00:34:38.042 --> 00:34:41.998
her disciples. An enthusiastic
believer in her theory

00:34:41.999 --> 00:34:44.999
of the supremacy of rationality.

00:34:46.792 --> 00:34:50.124
- It is only since the Industrial
Revolution, a burst of a free

00:34:50.125 --> 00:34:54.998
society, a society of
capitalism, that there was a new

00:34:54.999 --> 00:34:57.998
class of men, which is the free
producers of material goods,

00:34:57.999 --> 00:35:00.583
the businessmen,
the industrialists.

00:35:00.584 --> 00:35:02.875
That is the man that lives
by means of reason.

00:35:02.876 --> 00:35:07.082
That is the man who in his
psycho-epistemology is not

00:35:07.083 --> 00:35:10.124
guided by his immediate
perception nor by his emotions

00:35:10.125 --> 00:35:16.249
but by logic, by his concept,
by reason. That is the man whom

00:35:16.250 --> 00:35:18.501
I call the producer.

00:35:21.042 --> 00:35:23.666
- When Alan Greenspan was
nominated years later by then

00:35:23.667 --> 00:35:26.666
president Gerald Ford, to head
his Council of economic

00:35:26.667 --> 00:35:31.291
advisors, Greenspan paid
tribute
to his old master and invited

00:35:31.292 --> 00:35:33.709
her to meet the President.

00:35:40.042 --> 00:35:44.041
Three years before the
financial
meltdown, Alan Greenspan
visited

00:35:44.042 --> 00:35:47.998
Kirkcaldy, Adam Smith\'s birth
place in commemoration

00:35:47.999 --> 00:35:50.709
of the great thinker.

00:35:53.542 --> 00:35:56.583
\"One could hardly imagine\",
Greenspan said, \"that today\'s

00:35:56.584 --> 00:36:00.166
awesome array of international
transactions would produce

00:36:00.167 --> 00:36:03.458
the relative economic stability
that we experience daily,

00:36:03.459 --> 00:36:07.333
if they were not led by some
international version of
Smith\'s

00:36:07.334 --> 00:36:09.999
invisible hand.

00:36:13.918 --> 00:36:17.708
- In recent decades, a vast
risk-management and pricing

00:36:17.709 --> 00:36:20.750
system has evolved combining
the best insights

00:36:20.751 --> 00:36:25.541
of mathematicians and finance
experts. The whole intellectual

00:36:25.542 --> 00:36:31.709
edifice however collapsed
in the summer of last year.

00:36:35.125 --> 00:36:37.249
- And so with magical
and mystical words

00:36:37.250 --> 00:36:41.625
like \'invisible hand\", words
which were taken out of
context,

00:36:41.626 --> 00:36:46.292
the intellectual structure
of free market was created.

00:36:50.999 --> 00:36:57.249
- People of course have different
views on whether a free market

00:36:57.250 --> 00:37:01.666
is desirable, so some people
believe that we should leave

00:37:01.667 --> 00:37:04.709
the markets free...

00:37:09.667 --> 00:37:13.124
other people say the free
markets are not very good.

00:37:13.125 --> 00:37:17.998
We have to intervene in
it to insure social justice

00:37:17.999 --> 00:37:22.541
and equity, and so on, but most
people would actually accept

00:37:22.542 --> 00:37:27.374
that that there is such a thing
as a free market. You may or may

00:37:27.375 --> 00:37:32.249
not like the free market, but
you will know it when you see

00:37:32.250 --> 00:37:40.250
it. But that\'s the biggest myth
about capitalism. Because

00:37:42.542 --> 00:37:46.500
my question is: \"What do you
actually mean by the free

00:37:46.501 --> 00:37:50.082
market?\" And then to illustrate
this point, I bring in

00:37:50.083 --> 00:37:53.709
the example of child labour.

00:38:05.918 --> 00:38:08.999
Today, in all the rich
countries, there\'s restrictions

00:38:09.000 --> 00:38:14.998
on child labour. But there was
a time when child labour was

00:38:14.999 --> 00:38:17.083
a very widespread thing.

00:38:26.167 --> 00:38:31.998
The famous author Daniel Defoe
in the 1720\'s famously praised

00:38:31.999 --> 00:38:36.875
certain regions of England
that were producing textile

00:38:36.876 --> 00:38:41.999
for being able to offer
employment to children

00:38:42.000 --> 00:38:47.292
from the age of 4 or 5 and
allowing them to make a living.

00:38:53.334 --> 00:38:56.458
In the early 19th century,
in the British Parliament,

00:38:56.459 --> 00:39:01.374
a group of social reformers
made the very first attempt

00:39:01.375 --> 00:39:06.124
to actually officially regulate
child labour. Now, even then

00:39:06.125 --> 00:39:10.666
a lot of people were against
this regulation because

00:39:10.667 --> 00:39:14.374
they said this regulation is
trying to undermine the very

00:39:14.375 --> 00:39:20.541
foundation of a free market,
namely the freedom of contract.

00:39:20.542 --> 00:39:24.249
So they said, you know,
these children want to work,

00:39:24.250 --> 00:39:29.709
these people want to employ
them, what is your problem?

00:39:32.042 --> 00:39:35.291
Now, today a lot a people will
find this argument absurd,

00:39:35.292 --> 00:39:38.917
because people accept that
there are certain contracts

00:39:38.918 --> 00:39:42.998
that society should override
in the interest of general

00:39:42.999 --> 00:39:48.374
welfare. So the example of child
labour beautifully illustrates

00:39:48.375 --> 00:39:53.501
how markets are essentially
a political construct.

00:40:07.000 --> 00:40:13.958
All markets are propped up by
a huge range of regulations.

00:40:13.959 --> 00:40:18.500
I mean I liken it to piano wires
that these Kung Fu masters

00:40:18.501 --> 00:40:23.292
use in Hong Kong
martial arts movies.

00:40:25.999 --> 00:40:28.625
Markets are like that. I mean,
once you accept the underlying

00:40:28.626 --> 00:40:33.208
political values of certain
regulations. These regulations

00:40:33.209 --> 00:40:37.709
become invisible
like those piano wires.

00:40:40.999 --> 00:40:44.833
- Do we remember slavery? A true
free market without those

00:40:44.834 --> 00:40:48.082
piano wires, where the only
consideration were profit

00:40:48.083 --> 00:40:52.791
and losses. A market
which was once widely accepted

00:40:52.792 --> 00:40:55.292
as the norm.

00:41:14.375 --> 00:41:17.082
One of the first to identify
the intellectual foundations

00:41:17.083 --> 00:41:20.333
on which slavery was built,
the ability to separate

00:41:20.334 --> 00:41:24.666
economic logic from social and
human reality was a
contemporary

00:41:24.667 --> 00:41:30.292
of Adam Smith. A former slave,
and a philosopher too.

00:41:34.999 --> 00:41:38.291
He\'s buried here in Shama,
Ghana, in the shadow

00:41:38.292 --> 00:41:40.918
of a former slave castle.

00:41:41.918 --> 00:41:46.666
- We have gathered around
his tomb to give glory

00:41:46.667 --> 00:41:54.667
to God who gave us
this wonderful philosopher.

00:41:57.999 --> 00:42:01.458
- Anton Wilhelm Amo set out
to criticize the very

00:42:01.459 --> 00:42:04.249
contradiction of creating
a science as separate from

00:42:04.250 --> 00:42:07.709
the human reality of capitalism.

00:42:10.792 --> 00:42:14.998
Amo\'s journey began as do
those of so many before him,

00:42:14.999 --> 00:42:18.501
on a slave ship out of Africa.

00:42:20.042 --> 00:42:23.333
- Among the enslaved who came in,
among the people who were being

00:42:23.334 --> 00:42:27.166
made into commodities, were
people who were from some

00:42:27.167 --> 00:42:29.292
of the courts.

00:42:36.834 --> 00:42:40.416
Some of them when they were
brought in immediately showed

00:42:40.417 --> 00:42:46.583
their precocity. Amo was brought
as a blackamoor to Holland.

00:42:46.584 --> 00:42:50.166
He was manumitted and
educated and adopted within

00:42:50.167 --> 00:42:55.166
the aristocracy. He was educated
to the point where he achieved

00:42:55.167 --> 00:42:58.583
two doctorates, a doctorate
in law and a doctorate

00:42:58.584 --> 00:43:04.292
in philosophy. And he thaught
in the German University system.

00:43:46.999 --> 00:43:49.708
- Amo was brought to Europe as
na child by the Dutch East India

00:43:49.709 --> 00:43:53.998
Company and was given as
a present to a German duke.

00:43:53.999 --> 00:43:57.625
The liberal duke freed him
and provided him with a free

00:43:57.626 --> 00:43:59.833
education.

00:43:59.834 --> 00:44:04.082
- The thing that begins to emerge
when these commodities began

00:44:04.083 --> 00:44:08.833
to speak is they began
to articulate the double

00:44:08.834 --> 00:44:12.416
standards and some
of the problems in the processes

00:44:12.417 --> 00:44:18.999
of rationalization that were
going on in modern capitalism.

00:44:21.834 --> 00:44:23.958
- (Quote): I am apt to suspect
the negroes to be naturally

00:44:23.959 --> 00:44:27.374
inferior to the whites. Such a
uniform and constant difference

00:44:27.375 --> 00:44:31.500
could not happen if nature had
not made an original distinction

00:44:31.501 --> 00:44:33.833
between these breeds of men.

00:44:33.834 --> 00:44:38.541
David Hume, philosopher.
Adam Smith\'s intellectual

00:44:38.542 --> 00:44:40.333
partner.

00:44:40.334 --> 00:44:44.998
- With Amo, you have
first the question of

00:44:44.999 --> 00:44:48.166
the anthropological
rationalization.

00:44:48.167 --> 00:44:51.166
Amo wrote on the equalities
of the Moors in Europe

00:44:51.167 --> 00:44:54.625
and the very act of writing it,
the very act of articulating

00:44:54.626 --> 00:44:59.249
was to unsettle the view that
something about him racially

00:44:59.250 --> 00:45:04.501
necessitated his being a tool.

00:45:09.000 --> 00:45:11.998
As we know, René Descartes,
the famous French philosopher,

00:45:11.999 --> 00:45:17.583
articulated reality as being
dual, having mind and body.

00:45:17.584 --> 00:45:20.998
Well, Amo basically said that
if mind were really separated

00:45:20.999 --> 00:45:24.292
from body, mind couldn\'t
feel anything.

00:45:30.292 --> 00:45:34.708
Amo began to deal with this
problem of how rationality

00:45:34.709 --> 00:45:40.208
and reason was being used
by ironically against reality

00:45:40.209 --> 00:45:42.791
and reason.

00:45:42.792 --> 00:45:48.124
If we look at the way Adam Smith
would argue, he was articulating

00:45:48.125 --> 00:45:52.998
a system that sets up as
an ideal world, paradoxically

00:45:52.999 --> 00:45:55.709
a world without people.

00:46:03.584 --> 00:46:06.917
People tend to want to be free,
people tend to have values,

00:46:06.918 --> 00:46:12.292
people tend to be not
as neatly predictable.

00:46:17.999 --> 00:46:20.998
- In 18th century Europe,
a warning from an African

00:46:20.999 --> 00:46:25.374
philosopher was doomed
to be ignored. Amo had to flee

00:46:25.375 --> 00:46:28.501
and died here in Shama.

00:46:30.542 --> 00:46:32.998
While \"The Wealth of Nations\"
pioneered modern economics,

00:46:32.999 --> 00:46:38.918
Amo\'s books were burned and
his work is all but forgotten.

00:47:52.042 --> 00:47:54.917
- The footage you\'re about to see
was recorded with a hidden

00:47:54.918 --> 00:47:58.625
camera at Hy-Line hatchery
in Iowa, the world\'s largest

00:47:58.626 --> 00:48:00.875
hatchery for egg-laying
breed chicks.

00:48:00.876 --> 00:48:02.917
- Nothing in \"The Wealth
of Nations\" condones slavery.

00:48:02.918 --> 00:48:05.998
And of course it has nothing
to do with the meat industry

00:48:05.999 --> 00:48:10.750
of today. Yet this is how
Adam Smith\'s vision

00:48:10.751 --> 00:48:13.500
of the market evolved once
his followers regarded

00:48:13.501 --> 00:48:17.918
it as a science and divorced
it from all social ties.

00:48:19.334 --> 00:48:22.041
- These male chicks are killed
by being dropped into

00:48:22.042 --> 00:48:25.709
a grinding machine
while still alive.

00:48:47.876 --> 00:48:51.541
- Here a worker uses a hot
cautery device to painfully

00:48:51.542 --> 00:48:54.501
burn off the calf\'s horns.

00:48:54.999 --> 00:48:58.999
A common dairy industry
practice known as disbudding.

00:48:59.999 --> 00:49:02.958
No anaesthesia was used
to reduce the calf\'s pain

00:49:02.959 --> 00:49:06.918
during this harsh
and invasive mutilation.

00:50:12.876 --> 00:50:17.208
- Smith was very sceptical about
whether in fact a science

00:50:17.209 --> 00:50:21.917
of society or a science
of economics was actually

00:50:21.918 --> 00:50:23.918
possible.

00:50:26.792 --> 00:50:33.208
Smith was always deeply cautious
about how free markets should be

00:50:33.209 --> 00:50:35.501
implemented.

00:50:41.876 --> 00:50:44.541
The questions which Smith
thought were exceedingly

00:50:44.542 --> 00:50:47.998
difficult to address
about social justice,

00:50:47.999 --> 00:50:50.333
about fairness and about
maintaining the fabric

00:50:50.334 --> 00:50:56.999
of society itself might actually
be impossible to address.

00:50:59.083 --> 00:51:01.500
In the course of history,
we have lost all that thinking

00:51:01.501 --> 00:51:05.750
about the political dimensions,
the ethical dimensions

00:51:05.751 --> 00:51:11.918
of progress towards
a full market economy.

00:51:59.334 --> 00:52:02.625
- So how and why, in the process
of trying to convert

00:52:02.626 --> 00:52:05.875
\"The Wealth of Nations\" into
reality where Adam Smith\'s

00:52:05.876 --> 00:52:09.249
ethical and political
concerns lost?

00:52:09.250 --> 00:52:13.374
Greed won and societies were
restructured along the logic

00:52:13.375 --> 00:52:15.292
of the market.