Credited as the father of modern economics, Adam Smith was a man of broad ranging interests. The Scot was born in Kirkcaldy and grew up in proximity to a port where goods were imported and exported thus shaping a lifelong fascination with trade. Following an education that took in the universities of Glasgow, Oxford and Edinburgh, he toured Europe as a tutor before returning to life in Scotland. This international perspective led influenced his writing and he moved to Edinburgh in 1778 where he took up residence at Panmure House, his last and only remaining home. Edinburgh at that time boasted a range of sparkling intellects that helped shape his thinking and writing about individual entrepreneurs and their collective behaviour in national economies.
Having restored Panmure House, the Edinburgh Business School (at Heriot-Watt University) in conjunction with the Haas School of Business (at UC Berkley) hosted a conference of contemporary scholars to discuss the challenges facing entrepreneurs and economies today. Gathered at what Professor David Teece called “hallowed ground”, a collection of academics whose writings have been cited over a million times discussed the challenge of reshaping capitalism?
Three interlinked themes arose over two days of discussion. The first relates to the importance of economic growth. The impact of inequality, be it in health, education or income, is something that concerns many democracies. The disparity between the haves and have nots has grown in many countries. In addressing inequality, the Group Chairman and CEO of private equity firm PAG Group, Weijan Shan, spoke powerfully of his formative experience during large scale attempts to achieve equality. Growing up in China, Shan lived through the abolition of education for a decade and spent his formative years working 16 hours a day in the Gobi desert, harvesting reeds for a local paper mill. His book Out of the Gobi tells his remarkable journey via San Francisco, and a PhD under the guidance of David Teece at UC Berkley, to managing a large private equity fund from his current base in Hong Kong. He is perhaps uniquely well positioned to suggest that the end game of the new enlightenment should be growth not equality. In his own words, tens of millions died of starvation whilst hundreds of millions lived in abject poverty. Equality of itself is therefore not necessarily a positive aspiration. As Shan argues, he would probably have no concerns if Warren Buffett or Jeff Bezos were earning a few extra trillion dollars, if his own income was going up. Unrest and indignation are the products of a stagnating economy whilst growth is the most compelling route to inclusion.
A second theme was introduced by the historian and Stanford Professor Niall Ferguson who pointed to the enabling importance of the rule of law, especially in relation to trade. Ferguson noted that the fundamental ideals of socialism and capitalism, which have shaped political discourse for more than a century, are poorly understood by today’s electorate with the result that traditional labels of left and right are increasingly being usurped by a new politics. With adherence to the rule of law in place, the key decision facing entrepreneurs and the economies in which they sit is one’s attitude to redistribution. A generation of entrepreneurs, regulators and voters, who have grown up with the pervasive presence of information and communication, are beginning to make their way into the workforce. The high school and university curricula offered to the so-called i-Generation have not routinely offered a thorough grounding in our traditional political and economic labels. Worse, this same generation appear to have lost faith and interest in our political process and institutions. Rather than pledging allegiance to particular political parties, they are more likely to connect to issues and individuals. Greta Thunberg is not aligned to traditional political groupings of left or right, rather she is an example of challenge or issue based campaigning that are replicated in the #metoo phenomenon and many others. Modern entrepreneurs and economies face concerns of sustainability and responsibility that not in the forefront of Smith’s mind and a new focus on redistribution is required.
Finally, this all led to a third theme from the Panmure House conference, namely that of community. Having started with moral sentiments, Smith’s later work focused on The Wealth of Nations. Yet today, some of our global corporations are sometimes bigger than the nation states he would have had in the foreground of his attention. These new corporate actors are in part responsible for an unprecedented boom in global, social connectivity. Thus it makes sense to shift from a focus exclusively on the Wealth of Nations to one which encompasses the wealth of communities. Those communities may by constructed of surprising strata that don’t fit our conventional units of analysis such as young and old or left and right but they are the very communities that will mobilise and reshape capitalism.
As the gathering of great economic, commercial, organisational and political minds drew to a close, 80 scholars signed the Panmure House Declaration. It urges “international leaders to base their policies and decision-making on a set of common principles, as espoused and formulated by Adam Smith, which cherish the required values of an ethically-based liberal democratic system, a moral commitment to the well-being of our communities and affirm responsibility to protect economic, political and social freedoms, use resources wisely, avoid unintentional consequences, follow the rule of law, favour markets and prices as guides to resource allocation and take a long term view of private and public investments, to support inclusive economic growth and prosperity for all.
Will this declaration help reshape capitalism ? Only time will tell.