The New Enlightenment: Major Themes

At the end of the Cold War, the global economy seemed to have passed an inflection point beyond which it would become more open, more democratic, and more integrated. It has become apparent that the expectation was misguided. The capitalist, market–oriented system, which Adam Smith was the first to observe and understand holistically, is being challenged with a new, potent form of quasi-market capitalism coupled to an autocratic system of government and political control. The liberal democracies of Europe, the US, and Asia are open and not structurally ready to compete. They face a number of challenges, including:

  • The rules-based global economic system has been undermined because it failed to appreciate, identify, and police many predatory technology transfer and cybertheft issues. As a consequence, the global system is in the process of losing its backing from the US, where the innovation system is especially critical, and vulnerable to external exploitation.

  • New technologies are creating societywide changes far more quickly than policymakers can come to grips with them.

  • Productivity growth has slowed relative to the decades following World War II.

  • Progress toward open democracy has halted, and perhaps even reversed, as autocratic and illiberal models have taken hold and appear durable in many nations.

  • Inequality within societies has increased, particularly with regard to wealth at the top that, in the eyes of some, does not seem to be linked to underlying contributions.

Each issue has received considerable attention, with serious thought and effort directed toward diagnosing problems and devising solutions. But there is a dearth of analysis looking at these challenges holistically, as Adam Smith would have done. And the problems are, arguably, interlinked at a fundamental level.

Part of the difficulty in taking a more integrated approach is the segmentation of disciplinary thinking. Economists peer into one issue, political scientists peer into another, legal scholars yet another—and no group sees its issue holistically or through an ethical filter. Disciplinary silos have become so narrow that a group of economists specializing in antitrust might not understand the work of those studying technology policy.

The work of Adam Smith has endured in part because he had a magisterial and integrated understanding of human behavior, of the economy, and of society. His breadth of understanding of the motives of merchants and the foibles of government is found in few, if any, scholars and observers of the economy and society today.

Smith stressed that we are all social creatures, with empathy toward others. He believed that an unwritten moral code allowed notions of justice and beneficence to shape commercial as well as interpersonal dealings. The health of society depends on empathy and the voluntary unselfishness that it engenders.

We must ask, however, whether Smith’s unwritten codes are now strong and universal enough to guide Smith’s invisible hand in the twenty-first century. In a nation, if there are no shared norms of right and wrong, then the market and the state will be at odds. Globally, a lack of common norms adds misunderstanding to mistrust.

For Smith, his two great works (The Theory of Moral Sentiments and The Wealth of Nations) were not separate universes; he taught their concepts together as part of the same class. With several varieties of capitalism now competing for primacy, and with disparate global views of right and wrong, examining the intersection of morality and economics takes on a new urgency.

The New Enlightenment conference is designed to bring together thought leaders and practitioners in an effort to break out of disciplinary boundaries and bring together a wide range of knowledge and perspectives to explore today’s challenges in a manner not dissimilar to the far-ranging approach used by Adam Smith and his circle in Panmure House 250 years ago. Our two opening plenary speakers, like many of the attendees, adopt broad, eclectic approaches in their own work. Topics for panel discussion have purposely been couched in relatively broad or ambiguous terms to allow the panelists and audience to engage more generally.

The steering committee’s consensus opinion is that the thread most important at Panmure is strengthening a deep understanding of how firm-level competitive advantage is shaped by internal and external factors. A clearer understanding of how firms innovate and compete in today’s environment—in which the global economic commons has been deeply disturbed by the erosion of the rule of law—can lead to productive changes in regulations and policies, managerial horizons, and capital market behavior. Investors—especially institutional investors and asset managers, who control more than 75 percent of the voting rights of most public corporations—need to adopt a long-term stewardship stance and require boards of directors to support long-term investment strategies. Otherwise, the robustness of business enterprises will be undermined and our collective prosperity diminished.

If a nation designs and implements the right investment incentives, its companies will generate the new resources needed for addressing complex domestic and global issues. Failing to adopt a long-term stewardship orientation and fix the other problems in the interface between regulators and firms will exacerbate existing problems, from income and wealth inequality to the decline of global competitiveness.

Participants at the New Enlightenment conference must bring their own ideas and imperatives to the table. Together, we will engage in a broad conversation that helps to redefine problems and identify holistic solutions that break new ground.

David J. Teece
June 2019