Are we witnessing the end of "capitalism"? The current global crisis has brought together the ancient and traditional coalition of anti-capitalists around the world, they all keep calling for the "end of free markets", and the preeminence of government intervention. Interestingly, in his recent article for the New York Review of Books, Amartya Sen gives some worth-reading insights about the invisible hand and the welfare state, and their main advocates of course.
Adam Smith was wrong and Keynes was right! Discussions on the current crisis and the future of capitalism are usually full of conceptual confusions; for instance, some economists and political scientists are all of a sudden disciples of John Maynard Keynes, calling for government intervention in order to promote growth. Some of them even cite Keynes when advocating for policies to fight poverty and to promote equality. However, if we read Keynes carefully, he actually never advocated nor wrote about government policies to help the poor; surprisingly for some, it was Adam Smith who wrote about the "welfare state", his overwhelming concern about the fate of the poor and the disadvantaged are strikingly prominent. Smith recognized that "the most immediate failure of the market mechanism lies in the things that the market leaves undone". Smith's economic analysis went well beyond leaving everything to the invisible hand of the market mechanism. He was a defender of the role of the state in providing public services, such as education, and in poverty relief.
Carefully re-reading the classics may be a good way to avoid the conceptual confusion of our times -and to engage in more informed and relevant policy discussions; it is also necessary in order to give true credit -or criticism- to the works of Adam Smith, John M. Keynes, Arthur Cecil Pigou, and others.
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