CAPITALISM'S ACHILLES HEEL Dirty Money and How to

292 CAPITALISM’S ACHILLES HEEL
hand could conceivably work: Available information is perfect or unimportant,
information is equally known to all, competition is perfect, and insurance
can be bought against any risks. These are not conditions that have
ever existed and most assuredly were not present in the 1990s. The “principal
agents” who were supposed to be stewards of our welfare—the Ken
Lays, Bernie Ebberses, Arthur Andersen auditors, Citi and Chase bankers,
and maybe a few million others—were not acting as our agents and were
functioning without heed to good principles of ethics and management.
Stiglitz skewers both the hypothesis and its consequence: “[O]ne of the reasons
that the invisible hand may be invisible is that it is simply not there.
. . . [The] theory was a great relief to CEOs, for it told them that by doing
well (for themselves) they were doing good (for society). Not only should
they feel no guilt in greed; they should feel pride.” 30 Stiglitz laments that in
the course of the 1990s, “essential pieces of the social contract were torn to
pieces.” 31 Would that many more could be so forthright.
I offer an alternative explanation of Smith’s use of these two words. In
the passage of Wealth of Nations where Smith speaks of the invisible hand,
he is talking specifically about “domestic industry.” In Moral Sentiments he
is comparing the rich to the “thousands whom they employ.” Both settings
are local, rather closely relational. In such limited environments it is possible—not
automatic, but possible—for a bounteous spirit to spread the
benefits of shared good fortune among all participants, not equally, but so
that none is left in comparative poverty. In Smith’s view local opprobrium
arising from field hands, factory workers, or villagers can have a restraining
influence on overbearing ostentation by the rich and can moderate the excesses
of the wealthy lording it over the poor. In other words, Smith may
have meant what he said about the invisible hand, but, if he did, he meant
it as a potential force in a small community. He did not envision the Industrial
Revolution, world wars, population explosion, and global corporations,
and most of all he did not envision the staggering levels of
widespread fraud and dishonesty that would come to pervade the affairs of
supposedly gentle men and women. Nor did he envision that out of his two
thoughtful books, so many people would fasten upon just two words in
summation of his meticulously drawn analyses of moral philosophy and
political economy.
If Smith were writing today, rest assured you would read nothing about
some disembodied, munificent hand flitting between rich and poor spread-