Have opinions on the Future of Capitalism? Join me on Monday Aug 23rd (Oz) and share your perspectives.
We all know that capitalism is broken. What this book – The Future of Capitalism by Oxford professor Paul Collier – tells us is why, and how to fix it. It doesn’t just skewer the easy target of neoliberal dogma, it also pummels the left. In recognizing that both sides have failed it makes a convincing case for the lost art of pragmatism. This book is mostly targeted at the US and UK; the good news is that much of what it advocates for already exists in Northern Europe.
First, what went wrong with capitalism? Most people agree that capitalism had its heyday in the 20-30 years after the Second World War. The common purpose and identity of the War bound nations together, with populations trusting the governments to deliver services and spend the high taxes wisely. Then polarization started and the consensus evaporated: the hard work option offered by pragmatism couldn’t compete with the lure of ideologues and populism as the memory of the War faded and common identities frayed. The rich started to resent paying high taxes and the poor resented being bossed around. The right had embraced Friedman’s profit-uber-alles thinking while the communitarian roots of the social democrats on the left were replaced by a patronizing interventionist state, run by ‘experts’ guided by Utilitarianism (‘consumption = happiness’) and Rawlsians (‘a society should be run based on the most disadvantaged and excluded’).
“In a bizarre parody of medieval religion, ordinary people are cast as sinners who need to be ruled by exceptional people – the moral meritocracy.”
Effective tax rates plunged and society fissured along three main cleavages: city vs rural, educated vs less so, and rich vs poor countries. Esteem started to come from self fulfilment and the well educated started to get their esteem from their jobs rather than their nations. It seems that a citizen of the world was indeed a citizen of nowhere.
What do we need to do to fix it? We need to reintroduce a new sense of mutual responsibility and obligations, at the level of the family, the company and the state. The unit of the family has been unambiguously the best way to raise kids, and the vanguard’s paternalist takeover has given people rights but not obligations, for example incentivising single families through benefits and housing. Companies have been taught profits are the only things that count, and instead need to reconnect with their societal and stakeholder obligations. And states need to develop reciprocal networks of mutual obligations – not doling out aid whilst requiring funders to adhere to impossibly strict and arbitrary environmental and human rights’ standards that don’t even apply in the West.
A robust critique of the left. This book has been a wake up call, and helped me understand many of the criticisms of the left. It shows how both left and right seem to be different from each other but they both elevate the needs of the individual over the community and an unerring belief in the power of meritocracy (Michael Sandel bursts this bubble). The book blasts the left for smug overreach, installing a phalanx of ‘smart’ bureaucrats who have taken over what families and communities used to do. For example, there are 70,000 children in the UK awaiting adoption but only 60 kids adopted a year, because of a system that makes it easier to remove the kids into the arms of the state than it trusts citizens to take them back..
A grim menu: Vegan or Veal. As citizens and voters we’re left with an unpalatable repast of patronizing left wingers and rapid right wingers.
“Currently, the political battlefield is seemingly characterized by alarmed and indignant Utilitarian and Rawlsian vanguards under assault from populist ideologues. This is the political menu from hell.”
A call to arms – localism, voter education and tax. Three main actionable strategies for action emerge. First, localism. Local public private partnerships are required to work at systems level and help reset and regenerate failing cities, such as Sheffield, the town of the author’s birth. The agglomeration economics that have made landowners wealthy in retrospect can also work proactively. Groups like Upward Labs bring an innovation community into a city and partner with the land owners who benefit from the buzz that arises. This book introduced me to the person who figured this out a century ago – Henry George, my new favorite economist.
Second, educating voters. An “informed electorate is the ultimate public good”. This is why what they’re doing in Taiwan is so interesting, and why the Murdoch press and unfettered social media is more corrosive than just invective; it is corroding democracy itself.
Third, tax. Collier proposes taxing large companies, adding ‘public interest’ requirements to boards, and introducing clawbacks and ‘bankslaughter’ provisions. The benefits of agglomeration accrue to the most skilled people in the biggest cities (though alas these are those most skilled at bending the rules to their benefit).
“In retrospect, the period of Utilitarian and Rawlsian dominance of the centre-left will come to be recognized for what it was: arrogant, over-confident and destructive. The centre-left will recover as it returns to its communitarian roots, and to the task of reconstructing the web of trust-based reciprocal obligations that address the anxieties of working families. Similarly, the period of domination of the centre-right by assertive individualism will come to be recognized as the seduction of a great tradition by economic man. As it recovers its ethical bearings, it will return to ‘one nation’ politics. The new anxieties are too serious to be abandoned to the far left. Belonging to place is a force too potent, and potentially too constructive, to be abandoned to the far right.“
Given how on-point this book is it’s surprising that it’s not received the attention it deserves. But then again, given the way it unloads on today’s powerbrokers on both the left and right, perhaps that’s not surprising.
I’ll be discussing this book on Monday with a few curious souls at the Moais book club, and would welcome others for whom this book resonates to join for a discussion. Some framing questions for me to start things off:
- The book was written before Covid. What’s changed with Covid? Could we benefit from a community boost similar to WW2? How about the Climate crisis? How long will it last?
- Does the democratization and ubiquitousness of digital technology help quash, or exacerbate, the anxieties? How does the rise and fall of Arab spring relate to this?
- How do we: support regional cities? Educate voters? Raise taxes?
- What are the most feasible ways to build ethical citizens?
- Is this missing a ‘layer’ for local community or city?
