Much of economics is built on the assumption of individuals being driven by self-interest and economic development as an outcome of the free play of such individuals. On the few occasions that economics recognizes the role of altruism and trust, the tendency is to build these from the axiom of individually selfishness. The aim of this paper is to break away from this individualistic tradition and to treat as a primitive that individuals have hard-wired in them the `cooperative spirit', which allows them often to work in their collective interest, even when that may not be in their self-interest. The main objective of the paper is to track the interface between altruism and group identity. By using the basic structure of a Prisoner's Dilemma game among randomly picked individuals and building into it assumptions of general or in-group altruism, the paper demonstrates how our selfish rationality interacts with our innate sense of cooperation. The model is used to outline circumstances under which cooperation will occur and circumstances where it will break down. The paper also studies how sub-groups of a society can form cooperative blocks, whether to simply do better for themselves or exploit others.