With his latest book, the British economist Paul Collier attempts to unmask the existential crisis of modern capitalism. According to the author, social democracy has failed to deliver on its promise to create a cooperative and morally reciprocal society. “The Future of Capitalism” is Collier’s appeal to reset the mindset of modern social democracy, to reshape the foundation of capitalist societies and to make future capitalism more ethical and prosperous. What does he propose?
“Deep rifts are tearing apart the fabric of our society”
For Collier the problem of modern capitalism has a geographic, educational and moral base. Place itself has become a source of social and economic divergence. Across the globe, metropolitan areas are “surging ahead the rest of the nation”. They have not only become richer and more prosperous, but also socially detached from the rest of their countries. Education adds another dimension to the problem. According to Collier, the “newly successful” are neither capitalists nor normal workers but rather well educated people. This new social class has developed its own sense of morality that elevates minorities into victim groups and lets them therefore claim moral superiority over the less educated. These divergences have awakened new anxieties, frustration and anger in our societies. More importantly, they have been the “pulse of energy” for “charismatic” populists” and “seductive” ideologues.
“The triumph and erosion of social democracy”
According to Collier, cooperation was the foundation of social democracy. He explains that in the post-war period cooperative policies and organizations were a pragmatic way of solving the anxieties of that time – health care, pensions, education, international organizations, etc. Over the years, the efficacy of such policies determined the political center, both of the right and the left across Europe. However, around the 1980’s the political center “drifted away from their origin of practical reciprocity of communities” and was captured by a group of people “disproportionately influential” – the middle-class intellectuals. The new ruling class was no longer driven by the collective belief of reciprocity but by an academic-anchored self-centeredness.
“Human beings need a sense of purpose, and capitalism is not providing it”
The self-centered intellectuals believe that society functions as the accumulation of self-centered individuals, all acting according to what the author calls a “selfish gene”. Collier states that this is fundamentally wrong, as human beings are morally motivated. Our shared values are the backbone of our belief systems, our actions and hence, of the narratives in our societies. In Collier’s opinion, the main problem of capitalism is its lack of moral acknowledgment. Society needs an ethical capitalism that meets standards built on our shared values, is supported by practical reasoning, and is reproduced by the central social units: the family, the firms and the state.
“Pragmatism tells us that this process will need to be guided by context and evidenced-based reasoning”
The author advocates for pragmatism as the tool to transform capitalism into an ethical capitalism. Pragmatism allows us to redefine values that at first sight could conflict, letting the context reveal their compromise. Additionally, the origin of pragmatism is communitarian, “seeing the task of morality as doing our best to fit our actions to the values of our community and the specifics of context”. Combining both morality and pragmatism, a purposive and ethical capitalism could be achieved.
The Future of capitalism: The capitalism of tomorrow
The first step towards achieving an ethical capitalism is restoring the ethics of the state, the firms, the families and the world.
To construct an ethical state the author proposes patriotism. Patriotism as a place-based shared identity that could give people a sense of belonging and mutual obligation. To create ethical firms, he suggests changing the power of the firm and giving workers’ interests representation on the boards of companies. He also proposes progressive taxation schemes; regulating firms by public interest principles; and changing the narrative of corporations to rebuild their reciprocal obligation with society. To restore the ethical family he advocates for the reinstatement of reciprocity values that profit from the longevity of the modern family. To reach the ethical world he proposes a new club of nations composed of China, India, USA, the EU, Russia and Japan. “A group that encompasses enough of the global economy and military capacity of the world to fix global problems even if non-members free-ride”.
The second step is making societies more inclusive by bridging the gap between the metropolis and the “broken city”, and by helping families in distress.
The author proposes a high-income tax on agglomeration to close the gap between metropolitan areas and neglected cities. This could counteract geographic divergences especially if the tax revenue is used to restore “broken cities” by the creation of new clusters.Additionally,this could also be achieved by cooperative efforts from the public sector (compensating pioneers in new clusters, creating business zones, investment promotion agencies, etc.) and the private sector (returning to firm localization, mega-firms moving to “broken cities”, etc.).
Moreover, Collier states that social maternalistic policies are the key to support families in distress and making societies more inclusive. These policies follow a system that recognizes its supportive role but does not imposes itself. It specially provides continuous support for young families; redirects public spending to diminish geographical differences in education; and encourages mentoringfor children and adolescents.
The final step is acknowledging the downsides of globalization.
For Collier, recognizing the negative aspects of globalizing, globalized companies, and migration is also fundamental for the process of achieving an ethical capitalism. Hence, certain questions need to be asked:
- “What happens with the losers of globalization?” (see also our post: “Globalization Report 2018: Who Benefits Most from Globalization?)
- “How can globalized companies be better regulated?” and
- “How much migration benefits a society?”
How questions like these are answered in the process will help determine the path of the future of capitalism.
The Future of Capitalism. Paul Collier. Allen Lane. 2018