The Great Forgetting: How Modern Capitalism Lost Its Moral Compass
Adam Smith gave us a vision of free markets anchored in morality, justice, and public trust.
For a time, the world tried — imperfectly, unevenly — to walk that path.
But over the last two centuries, something changed.
Gradually at first. Then faster.
Until, today, we barely recognize the balance Smith worked so hard to describe.
We remembered the freedom.
We forgot the morality.
We celebrated self-interest.
We abandoned the impartial spectator.
In chasing the wealth of nations, we lost sight of the moral sentiments that made that wealth sustainable — and worth having.
The Selective Reading of Adam Smith
In the 19th and 20th centuries, as industrialization spread and new economic theories emerged, Adam Smith’s name became a banner for the champions of free markets.
But too often, people invoked Smith’s ideas selectively — quoting the invisible hand, while ignoring the moral hand Smith believed must guide it.
Self-interest was celebrated.
Moral restraint was treated as optional.
Competition was praised, but collusion and monopoly were quietly tolerated when profitable.
Smith’s vision was not of a marketplace free from responsibility. It was of a marketplace embedded in a society of conscience.
By forgetting that, we laid the groundwork for many of the challenges we face today.
Freedom Without Responsibility
In modern capitalist economies, freedom became the ultimate good — often at the expense of responsibility.
Markets were deregulated, justified by the belief that the invisible hand would naturally sort everything out. Corporations were granted more rights, with fewer obligations to the public. Finance grew increasingly detached from real goods, real services, and real communities.
But Smith never imagined a world where companies could become “too big to fail.” He never envisioned an economy where speculation could outpace production by orders of magnitude.
He warned of the very dangers that unchecked markets would create:
“The proposal of any new law or regulation of commerce which comes from this order [the merchants and manufacturers] ought always to be listened to with great precaution.”
— The Wealth of Nations, I.xi.p.10
Smith understood that those with wealth and power would often conspire against the public — not because they were evil, but because it was in their interest to do so.
That’s why strong institutions and a vigilant public were necessary.
Freedom alone was never enough.
The Rise of Rent-Seeking and Monopolies
Another forgotten part of Smith’s warning was his hatred of rent-seeking — the practice of extracting wealth without creating new value.
Today, rent-seeking dominates entire sectors:
Financial firms profiting from speculation rather than investment
Private equity stripping companies for parts rather than building them
Tech monopolies using their size to stifle competition rather than innovate
These behaviors do not serve the common good. They serve a narrow private interest, at society’s expense.
And yet, they are often defended in Smith’s name — a bitter irony, given that he would likely have opposed them fiercely.
The Human Cost of the Great Forgetting
The consequences of losing Smith’s moral compass are not just economic. They are deeply human.
Workers treated as disposable assets, not partners in production.
Communities hollowed out by waves of offshoring, consolidation, and financialization.
Public trust eroded, as people increasingly see the economy as rigged against them.
Politics captured by the very wealthy, creating policies that deepen inequality.
When the moral sentiments are stripped away from economic life, we are left with markets that serve the few, while asking the many to bear the cost.
Not What Smith Wanted — or Imagined
Smith’s dream was not a market that rewarded greed without restraint. It was a society where individual ambition was harmonized with public virtue, where free exchange and free conscience worked together to lift all.
We have lost that balance.
We have lost the heart of Smith’s vision.
But the good news is: We can find it again.
In the next post, we’ll look closely at one of the clearest betrayals of Smith’s ideals — how private equity, monopolies, and financial engineering have turned markets into tools of extraction rather than creation. And we’ll ask: What would Adam Smith say about the capitalism of today?
Tomorrow
When Markets Turn Predatory: Private Equity and the Broken Promises of Capitalism