The Future of Capitalism

Author: Paul Collier

I thought this was a really thought provoking book. The big takeaway for me was there is a lot deeper issues below the surface that are contributing to the economic anxieties we face today, and “capitalism” at its core is not causing them. In other words, we don’t need to come up with some new economic system to replace capitalism, we need to address several deeper issues, of which many are social, moral, and ethical issues. Many involve structures as well like our education system, or how we contain the growing divide between the metropolis and smaller towns. While the book doesn’t provide perfect solutions, or even solutions that seem like they would for sure work, it is hopeful to read something that actually addresses problems we all recognize like growing class divides, with something other than “burn it all down”.

It kind of reminds me of some commentary I read on Nietzsche and Dostoevsky’s critique of Marx. Marx thought that by simply changing our economic system, we could usher in a new utopia. Though Nietzsche and Dostoevsky disagreed on the “how”, they both concluded that Marx was wrong, and the problems, or to use Collier’s term – the anxieties, are symptoms of a lot deeper issues than simply how we organize our economy through economic systems.

The book is a useful antidote to idealogical thinking. I find myself occasionally drifting to the overly libertarian ideologies, and this book helped temper that, and showed some good pragmatic examples of taxation and government involvement that could actually be impactful. Collier frequently bashed the ideological extremes on the political spectrum and cautioned that centrists need to be careful not to give those ideas too much freedom to take control, and argues that we can improve things without resorting to the radical hopes of political extremes.

Collier talks a fair bit about Adam Smiths “The Wealth of Nations” and brings up how Smith has another lesser known book called “The Theory of Moral Sentiments”, which Collier argues needs to be read in context with The Wealth of Nations. He argues that Wealth of Nations paints the picture of the economic man, or someone who makes economic decisions purely with themselves in mind as if that is solely who we are as people. However, Smiths writing in the Theory of Moral Sentiments discusses how we are also social creatures who make decisions based on how it will be perceived by others, and we work hard to not destroy our social standing. So the purely economic and rational person discussed in wealth of nations does not paint the whole picture, and when thinking about how we organize our societies we need to consider the social aspect as well.

This book began with ethics and that is where it will end. I have tried to sketch the foundations for a moral politics that can replace the weird and divisive tenets of Utilitarian ethics with one that is both better grounded in human nature and leads to better outcomes.

In contrast to the Utilitarian vision of autonomous individuals, each generating utility from their own consumption, and counting equally in the great moral arithmetic of total utility, the atoms of a real society are relationships. In contrast to the psychopathic selfishness of economic man restrained by the Platonic guardians of social paternalism, normal people recognize that relationships bring obligations, and that meeting them is central to our sense of purpose in life. The toxic combination of Platonic Guardians and economic man that has dominated public policy has inexorably stripped people of moral responsibility, shifting obligations to the paternalist state. In a bizarre parody of medieval religion, ordinary people are cast as sinners who need to be ruled by exceptional people – the moral meritocracy. With the rise of the Utilitarian vanguard, the saints came marching in. As obligations have floated up to the state, rights and entitlements to consumption have showered down: we are all children now.

Collier raises several damaging malfunctions that have created the “new anxieties” around capitalism, such as the erosion of our reciprocal obligations to each other, the way we view and organize family, or issues with education for example. There are several other examples in the book. One I found particularly interesting was his discussion around the large metropolis vs smaller cities and how those owning homes in large cities have benefitted enormously from increased property value without necessarily doing anything to earn it. He proposes some pretty radical ideas to counter this that I am sure would come with sharp backlash.

I won’t get into all of the anxieties or some of his suggestions for improving them, but I will add the last two pages of the book, which sum up the overall theme of the entire book, without getting into the details of class divides, the structure of education system issues, social/moral issues, and the rest that the book discusses.

…This may send shivers down the spine of those on the right, because of the prospect of redistributive outcomes superficially analogous to those envisaged in Marxist ideology. Similarly, it may send shivers down the spines of those on the left, because it recognizes distinctive obligations within families and nations that offend Rawlsian and Utilitarian norms. Each of these concerns is misplaced.

What I advocate is not a variant of Marxism. Marxist ideology relies on a hate-filled narrative that replaces shared identity with extreme divisions of class identity. It replaces mutual obligations with the assertion of the rights of one class to expropriate what belongs to the other. Like radical Islam, its version of enlightened self-interest invokes a distant paradise in which the state “withers away”. The actual outcome of Marxist ideology, which has been invariably proved, is social conflict, economic collapse and a state that, instead of withering away, imposes overweening and brutal power. It is currently playing out in the flight of refugees from Venezuela, there to see for anyone who bothers to look. The difference between a society that pragmatically steers capitalism on a foundation of rational reciprocity, and one run by Marxist ideologues, is that between one at peace with itself, and one that is lacerated by mounting hatreds.

As to Rawlsian and Utilitarian dreams, discrediting family obligations in favour of obligations to all children, or national obligations in favour of obligations to global “victims”, would no build Eden. It would bequeath to the next generation a society sliding into the pit of entitled individualism. 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.

Faced with the new anxieties, it should be evident that the pertinent economic menace is the new and virulent divergence in geographic and class fortunes. Faced with the rise of extremist religious and ideological identities, it should be evident that the pertinent social menace is the fragmentation into oppositional identities sustained by the echo-chambers of social media. After Brexit and the rise of Donald Trump it should be evident that the pertinent political menace is exclusionary nationalism. By eschewing shared belonging, and the benign patriotism that it can support, liberals have abandoned the only force capable of uniting our societies behind remedies. Inadvertently, recklessly, they have handed it to the charlatan extremes, which are gleefully twisting it to their own warped purposes.

We can do better: we once did so, and we can do it again.

I do have some unresolved questions after reading.

Question 1

Collier brings up various taxation proposals as solutions for some of the large scale problems we are experiencing today. Amazingly, I found myself not disagreeing with many of them. I say amazingly because if you know me, you know I do not like or trust large governments to use and disburse our money and resources efficiently, which means I’m an opponent of most tax initiatives.

While I think that some of his proposals make sense, why should I trust our government to disburse the funds as intended in the book? Will they do it efficiently, and without corruption? Will they keep themselves untethered to the many lobbyists that would spring up?

Question 2

Do we think that we could implement these solutions on a global scale? If one country tried it, I imagine the big corporations would simply exit to another country. The other country would have no incentive to change to a similar system because of all the tax income it would have incoming from all these businesses moving there.