by Rushworth M. Kidder

In 1979, as a foreign correspondent assigned to London, I covered the first 20 months of British prime minister Margaret Thatcher’s government. It was a tempestuous time, as her free-market principles slammed up against Britain’s entrenched labor movement. My colleagues in the British press, using phrases like “the best man in her cabinet” and “somewhere to the right of Attila the Hun,” quickly tagged the prime minister as a take-no-prisoners arch-conservative. Relishing a good fight, they dug in for a right-versus-left argy-bargy.

As the months went by, however, I began noticing an anomaly: By U.S. standards, Prime Minister Thatcher was merely akin to a moderate Republican. True, she hit it off brilliantly with Ronald Reagan. But where he would have dismantled Britain’s social welfare state, she simply cranked it back a few notches to allow free enterprise to flourish. Ideologically, he deeply distrusted big government; she simply despised a left-wing takeover of big government.

The difference is instructive. European parliaments have nothing resembling the conservative sentiment of America’s religious right. The U.S. Congress, in turn, has not one member even remotely like a far-left European communist. Our center of gravity lies significantly to the right of theirs.

I was reminded of this distinction last week as news organizations covered two events that showcased public outrage over the economic crisis. On our side of the pond, the anger was directed at corporations: Bank of America shareholders rose in umbrage and stripped CEO Kenneth Lewis of his board chairmanship. In Europe, by contrast, the anger was directed at governments: On May Day, union protesters turned out in force in France, demanding that president Nicolas Sarkozy’s government provide more relief. True, European workers have recently “boss-knapped” corporate executives. And some Americans, updating Patrick Henry’s words to read “Give me liberty, not debt,” lambasted government during tax-day protests last month. As a default position, however, Europeans tend to seek redress from the state, while Americans demand private-sector reforms.

That difference helps explain why the idea of socialism is uttered with such fearsome effect these days. Case in point: U.S. senator Jim DeMint (R-S.C.), writing last week in the Wall Street Journal, warned his fellow Republicans that “if the American people want a European-style social democracy, the Democratic Party will give it to them.” His point: A lunge toward big government could sap the individualism, enterprise, and entrepreneurial spirit that powers the U.S. economy. While history may not bear him out — Mrs. Thatcher’s social democracy proved enormously supportive of business — his fear that government is, as he said, “too big, takes too much of our money, and makes too many of our decisions” is understandable.

But here, too, there’s an anomaly. Look more closely at U.S. public outrage. It’s not directed at either corporations or governments per se. Instead, it has a pervasive moral tone. Its target is not the institutions themselves, but the dishonesty, irresponsibility, corruption, and greed that infect them. Yes, the outrage is channeled toward the unethical behaviors that have coalesced to create the current recession. But the intent is not to destroy capitalism; it’s to allow it to survive.

How so? Because the greatest threat to capitalism arises when it becomes divorced from its moral roots. With nothing left but raw economic incentive, capitalism turns into a destructive force. Aiming at nothing higher than short-term selfish gain, it chews up the very resources of investment and labor that feed it. Unfettered by any higher motivation than material acquisitiveness, it ultimately leaves an economy in shambles — “consumed,” in Shakespeare’s words, “with that which it was nourished by.” Result? Capitalism plays right into the hands of its enemies. In the very act of casting itself loose from its moral moorings, it hands to its opponents — socialists, communists, Muslim extremists, or whomever — the most powerful argument imaginable for its abolition.

“But where,” the cynics will splutter, “do you get this crazy idea that the invisible hand of capitalism ever had a moral basis? Who said capitalism had any ethical impulse?” Surprisingly enough, there’s a simple two-word answer: Adam Smith.

Much is made in today’s conservative circles of this Scottish social philosopher’s 1776 masterwork, The Wealth of Nations, especially of its pragmatic elucidation of the famous “invisible hand” that operates best in unfettered markets without interference from the state. But few remember that, 17 years earlier, Smith wrote a book titled The Theory of Moral Sentiments, probing the origin of mankind’s ability to form moral judgments despite an overwhelming impulse for self-preservation. And fewer still remember that in this earlier work he first wrote about self-seeking individuals who are nevertheless “led by an invisible hand … without knowing it, without intending it, [to] advance the interest of the society.”

The point? Smith couldn’t have conceived of free enterprise divorced from “moral sentiments.” He knew that capitalism, like any -ism, could be described without reference to moral standards. But he also knew that those who practiced it had to be possessed of an ability to reason and a capacity for sympathy if they were to succeed.

Have Americans, by separating these two books, also confused history with philosophy? Maybe, in our minds, we’ve merged the twin events of 1776, seeing The Wealth of Nations as synonymous with the American Revolutionary War. Maybe it was a misreading of that book that led us, at the end of the twentieth century, to launch a bizarre and tragic experiment: to see whether we could deliberately create a form of capitalism absent any moral content.

That experiment has run its course. We now know that it indeed can be done, but only at grave risk to the economy and to free enterprise itself. The real danger of the ethics recession is not the current economic collapse. It is that unless we restore the moral underpinnings of capitalism, the very freedom that makes capitalism possible may be swept away on waves of public moral outrage. Reinserting ethics into business, then, is no mere luxury. It’s essential to our survival as a wealth-creating nation. But then, Adam Smith could have told us that.

©2009 Institute for Global Ethics

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