How far will government go?

Charles Zola

is the executive director of the Ethics Institute of Northeastern Pennsylvania at

Misericordia University

There is no shortage of viewpoints about how best to resolve the current economic crisis, and one nagging point of contention is the extent of the federal government's role. Will the stimulus package and industry bailouts move us closer to European democratic socialism, or are they temporary necessities to shore up U.S. capitalism?

The debate over the role a central government should play in a capitalistic economy goes back to Adam Smith's masterwork, The Wealth of Nations, and has yet to be resolved. I venture that whatever actions are taken today, they must safeguard those moral principles that underlie capitalism itself. Capitalism is not merely about money. It is premised on certain moral values that dictate the direction an economic system should take.

In The Theory of Moral Sentiments, Smith identified two chief characteristics of human psychology: self-interest and sympathy, or "fellow-feeling."

Smith correctly reasoned that human beings are interested in having and utilizing resources that serve their own egoistic tendencies. However, they do so in a way that is keenly sensitive to the feelings of their fellow human beings. Our wants are more easily satisfied when we are responsive to the concerns of our fellow human beings and we appeal to their own egoistic tendencies.

In short, "I get what I want when I give you what you want." This is the basic formula of every business transaction. As Smith observed, we don't eat our dinner on account of the charity of others. Rather, our meat, bread, and beer are obtained by giving the butcher, the baker, and the brewer what they want. Given the right social conditions, this interplay of personal inclinations results in a situation where all parties concerned eventually benefit.

Smith's The Wealth of Nations was published in England only months before the American Continental Congress signed the Declaration of Independence, and his ideas exercised great influence on our Founding Fathers. In a very real sense, the United States became the proving ground for Smith's ideas.

Smith's capitalistic theory entails such ethical principles as autonomy, property rights, honesty, fairness, and lawfulness. Any stimulus plan should play on our egoistic tendencies by stimulating people to take ownership of their own economic lives, not depend upon a central government. Doing so affirms our essential American values of self-determination and economic freedom, thereby empowering citizens to be more productive members of the economy.

Government intervention should create more incentives for private investment that encourage job creation and promote the free exchange of goods and services. Private property must not be understood as a sign of greed. Rather, it is a sign of the hard work and self-determination of the human spirit.

But this free exchange can transpire only when it is fair to all parties concerned. In this sense, egoistic tendencies must be carefully balanced with our natural sympathy for the needs of others who might be exploited or marginalized by unethical business practices or unfair markets.

Government intervention must hold accountable those members of the business community who cheat, take advantage of others, or misuse public funds. Moreover, it must also address those issues of social injustice that prevent citizens from reaching full economic empowerment, such as mounting education and health-care costs.

It is difficult to say how any one economic plan can perfectly balance our egoistic and sympathetic tendencies. Even Smith would not deny that the government has a role to play in the market. However, to what extent? A justifiable criticism of the war in Iraq was the lack of a clear strategy for occupation and exit. It seems that history is repeating itself in the economic war.

The continual use of taxpayer money for bailouts and increasing government interference in the private sectors of banking, insurance, and the auto industry is alarming. Is there a clear and comprehensive idea of where the government will cease and desist and let the free market work for itself?

Both the American republic and Smith's economic theory were born in the same year, generated by strong moral convictions about human character and moral actions. In some sense, both are works in progress. We must not lose sight of those fundamental ethical principles if we are to remain an American, capitalist economy.