[FOUNTAIN]More invisible hands

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[FOUNTAIN]More invisible hands

Adam Smith explained his idea of an "invisible hand" in economics as follows in his 1776 book, "The Wealth of Nations."

"It is not from the benevolence of the butcher, the brewer or the baker that we expect our dinner, but from their regard to their own self-interest... [Every individual] intends only his own security, only his own gain. And he is in this led by an invisible hand to promote an end which was no part of his intention. By pursuing his own interest, he frequently promotes that of society more effectually than when he really intends to promote it."

In a word, demand and supply are automatically controlled and jobs are created by a market, and government's intervention is unnecessary. Smith's laissez-faire doctrine, noninterference in the affairs of others, was the basic logic that dominated Western economics until the beginning of the 20th century.

During the Great Depression that began in 1929, the invisible hand seemed to have stopped working. Every individual tried his best, but the result was a catastrophe for all. Then, John Maynard Keynes developed another theory, asserting in his 1936 book, "The General Theory of Employment, Interest and Money," that lack of effective demand was the cause of the depression and government should step in. The U.S. government overcame the depression by implementing Keynesian "New Deal" policies. Keynes' macroeconomic theory reigned as the mainstream of economics until the end of the 1970s.

In the 1980s, as a number of countries started cutting public spending and companies began downsizing, neoliberalism started regaining momentum. One byproduct of neoliberalism was the birth of the World Trade Organization. A new term, "invisible fist," was recently coined. Because of relentless global competition, companies are forced to serve the interests of society (product quality, low prices) whether they want to or not.

The invisible hand, originally an economic term, spread into other disciplines, such as Darwin's evolutionary theory. The term has also been used to describe political assassins of South American military juntas in the '70s and '80s.

The Millennium Democratic Party's presidential primary is in turmoil because of charges of an "invisible hand." Some say hidden forces are manipulating the primary to one candidate's benefit; no one seems to know for certain. Is there an invisible hand, or is this another excuse to overturn the primary results?

The writer is a Berlin correspondent of the JoongAng Ilbo.

by Yoo Jae-sik

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