The Future of Capitalism, Paul Collier’s new book, is not a small subject. In fact, the first half of the book is largely retrospective, looking at how capitalism got into today’s mess. There is a particular focus on the loss of moral compass in the organising structures of collective life – the family, the firm, the state. This echoes a number of authors identifying growing individualism, fed by the ideology of ‘the market’, as a corrosive force progressively undermining the conditions that enable it – Bell’s phrase ‘the cultural contradictions of capitalism‘ encapsulates it neatly.
Collier – a distinguished economist whose career has centred on developing economies – expresses this critique with eloquence and conviction. He has a particular focus on the role of economic theory in validating self-serving behaviours such as bosses paying themselves hundreds of times more than their workers, and sketches an alternative approach to economics which embeds social norms and social influences on preferences. He blames the utilitarian and Rawlsian approaches to ethics, and advocates the communitarian alternative. I’m not persuaded by communitarianism, but surely you have to be pretty obtuse – a banker, maybe – to disagree with the diagnosis. Nobody thinks capitalism is doing just great at the moment.
It is of course harder to address the challenges than to diagnose them, and in a short book like this you can’t expect a detailed policy agenda. The book identifies three divides to be tackled: between successful global cities and ‘left behind’ places (although he deoesn’t use this term); between the skilled, well-paid, globe-trotting elite and the rest; between the rich and poor countries. It ends with the observation that capitalism is the only economic order capable of creating mass prosperity, but that it has not worked to do so since the 1945-70 period. This skates over the evident failings of postwar capitalism, which created the conditions for the ideological turn of the 1970s: inflation, shoddy nationalised industries, insider-outside labour markets and so on. Still, the suggestion here is that what’s needed is a combination of a rediscovery of ethics by political leaders (I’m not holding my breath on this front) and the shaping of identity around a shared sense of belonging to a place (rather than the more abstract ‘nation’ or identity-politics groupings).
This left me feeling a bit depressed. I can’t shake the feeling, despite only listening to the news while hiding behind the sofa these days, that it will take some cataclysmic event to reset current political dynamics. Another aspect of the turn to individualism in the 1970s was the existence of an intellectual framework on which to hang the political transformation, and I don’t see as yet a sufficiently broad and consistent alternative to the isolated individual, self-interested, rational choice model. Something for us economists to work on – as indeed Collier and others have started to do.