by Paul Collier
specialization, 17–18, 36, 126–8, 130, 144–5, 192
Spence, Michael, 41, 53, 95
Sperber, Dan, 29
St Andrews University, 189
Stanford University, 145, 152
Starbucks, 193
the state, 19
ethical capacities of, 11, 20–21, 48–9
failures in 1930s, 47, 48
ideologies hostile to, 37–8
and pre-school education, 163–4
and prosperity, 37
public policy and job shocks, 177–8
public policy on the family, 21, 154–5, 157–70, 171–3, 177, 209
public-sector and co-ordination problem, 147–8
social maternalism policies, 21, 157, 190
Utilitarian takeover of public policy, 10–12, 13–14, 15–17, 18, 49–50, 113, 201
Stiglitz, Joseph, 56
Stoke-on-Trent, 129
Stonehenge, 64
Sudan, 8
Summers, Larry, 187
Sure Start programme, 164
Sutton, John, 151*
Sweden, 178
Switzerland, 175, 206
Tanzania, 193
taxation
and corporate globalization, 193, 194
of economic rents, 91–2, 187–8
ethics and efficiency, 132–43
on financial transactions, 187
generational differences in attitudes, 59
Henry George’s Theorem, 133–6, 141
heyday of the ethical state, 49
issues of desert, 132–3, 134–9
and the metropolis, 131, 132–43, 187, 207
and migration, 197
of natural monopolies, 91–2
‘optimal’, 10
of private litigation in courts, 187–8
and reciprocity, 54, 55, 59
redesign of needed, 19
redistributive, 10, 11, 14, 49, 54, 55, 60, 197
of rents of agglomeration, 19, 132–44, 207
social maternalism policies, 21, 157
substantial decline in top rates, 55
tax havens, 62
Venables-Collier theory, 136–9
Teach First programme, 165–6
technical vocational education and training (TVET), 171–6
technological change, 4
robotics revolution, 178–9
and withering of spatial community, 61–2
see also digital networks
telomeres, 155–6
Tepperman, Jonathan, The Fix, 22
Thatcher, Margaret, 15, 26
Thirty Years War, 56–7
Tirole, Jean, 177, 178
Toyota, 72–3, 74, 94, 172
trade unions, 173, 174, 176
Troubled Families Programme (TFP), 162
Trudeau, Pierre, 22
Trump, Donald, 5, 9, 63, 64, 86, 125, 136, 202, 204, 206, 215
Uber, 87
unemployment
in 1930s, 47
and collapse of industry, 7, 103, 129, 192
impact on children, 160–61
older workers, 4, 103, 213
retraining schemes, 178
in USA, 160
young people, 4
Unilever, 70, 71
United Kingdom
collapse of heavy industry, 7, 103, 129, 192
extreme politics in, 5
and falling life expectancy, 4
financial sector, 80, 83, 84–5
IMF bail-out (1976), 115
local banks in past, 146
northern England, 3, 7, 8, 84, 126, 128–9, 131, 151, 168, 192
shareholder control of firms, 76–7, 79, 80, 82–3
statistics on firms in, 37
universities in, 170, 172, 175*
vocational education in, 172, 175†
widening of geographic divide, 125
United Nations, 65, 112
‘Club of 77’, 116
Security Council, 116
UNHCR, 115
United States
breakdown of ethical family, 104–5
broken cities in, 129, 130
extreme politics in, 5, 63
and falling life expectancy, 4
financial sector, 83–4, 186
and global e-utilities, 89–90
growth in inequality since 1980, 125
heyday of the ethical state, 49
and knowledge industries, 192
labour market in, 176, 178
local banks in past, 146
oversight of firms in, 76
pessimism in, 5, 45–6
presidential election (2016), 5, 9, 203–4
Public Interest Companies, 93
public policy as predominantly national, 212
‘rights of the child’ concept in, 103–4
Roosevelt’s New Deal, 47
statistics on firms in, 37
taxation in, 143–4, 144*
unemployment in, 160
universities in, 170, 172, 173
weakening of NATO commitment, 117
universities
in broken cities, 151–2
in EU countries, 170
expansion of, 99–100, 127
knowledge clusters at, 127, 151–2
low quality vocational courses, 172–3
in UK, 170, 172, 175*
in US, 170, 172, 173
urban planning, post-war, 11–12
Utilitarianism, 19, 30, 49–50, 55, 108, 112, 121, 210–11
backlash against, 11–13, 201, 202
belonging as absent from discourse, 16, 59, 66–7, 210–11
care as key value, 12
and consumption, 10, 11, 16, 19–20, 209
equality as key value, 12, 13, 14, 15, 116, 132–3, 214
incorporated into economics, 10–11, 13–14, 16
influence on social democrats, 9, 10, 14, 16, 18, 49–50, 201, 203, 214
origins of, 9–10
paternalistic guardians, 9–10, 11–13, 66–7, 210
takeover of public policy, 10–12, 13–14, 15–17, 18, 49–50, 113, 201
and taxation, 10, 132*, 133
vanguard’s switch of identity salience, 52, 53, 59
Valls, Manuel, 204
Venables, Tony, 18, 136, 191*
Venezuela, 120, 214
vested interests, 85–6, 135–6, 165, 166, 207
Volkswagen, 74–5
Walmart, 87
Warsi, Baroness Sayeeda, 65
Wedgwood, Josiah, 129
welfare state, 9, 48–9
unlinked from contributions, 14
well-being and happiness
belonging and esteem, 16, 25, 27, 29, 31–3, 34, 42, 51–6, 97–8, 174
entitled individual vs family obligation, 108–9
and financial success, 26, 94
‘ladder of life’, 25*
poverty in Africa, 37
reciprocity as decisive for, 31
Westminster, Duke of, 136
white working class
‘elite’ attitudes to, 4, 5, 16
falling life expectancy, 4, 16
pessimism of, 5
William, Prince, 188–9
Williams, Bernard, 55*
Wittgenstein, 62, 63
Wolf, Alison, 52–3, 155
World Bank, 115, 117, 118, 118*, 122
World Food Programme, 115
World Health Organization, 115
World Trade Organization (WTO), 116–17
Yugoslavia, 58
Zingales, Luigi, 178
Zuma, Jacob, 85
Copyright
THE FUTURE OF CAPITALISM. Copyright © 2018 by Paul Collier. All rights reserved under International and Pan-American Copyright Conventions. By payment of the required fees, you have been granted the nonexclusive, nontransferable right to access and read the text of this e-book on-screen. No part of this text may be reproduced, transmitted, downloaded, decompiled, reverse-engineered, or stored in or introduced into any information
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Digital Edition DECEMBER 2018 ISBN: 978-0-06-274866-9
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Print ISBN: 978-0-06-274865-2
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* Like me, the famous British playwright Alan Bennett was the son of Yorkshire parents with little education. The History Boys recounts his story, so similar to mine, of social mobility from humble origins to Oxford. But he grew up in more fashionable Leeds. In order to emphasize the social gulf that he had crossed, he set his play not in his home town, but in mine. The first Act closes with the protagonist itemizing his disadvantages in a mounting crescendo: ‘I’m short; I’m gay; and I’m from Sheffield!’ He isn’t, but I am. Indeed, Bennett set the play in my school: I am more authentically a ‘History Boy’ than Bennett himself.
* Pinker (2011) has a brilliant account of how the spread of mass literacy in the mid-nineteenth century created a mass market in novels. By reading novels people learned to see a situation from the perspective of someone else – a training in empathy, and Pinker explains the demise in the previously popular spectacle of public hangings as a consequence.
* This being the common political strategy of fascism and Marxism.
* Correspondingly, the anomalous individuals who were both very good and very rich, such as my old friend George Soros, became super-villains, distrusted by both sides.
* ‘Creative destruction’ is the process by which efficient firms drive out less efficient through competition in the market. It accounts for much of the gradual increase in average incomes. The term was coined by Joseph Schumpeter (1942), who described it as ‘the essential fact about capitalism’. It is why all the other ‘isms’, however romantically appealing, are at best irrelevant. The future of our societies will depend upon reforming capitalism, not overthrowing it.
* The building blocks – pragmatism, prosperity, community, ethics and social psychology – all cohere. This is because they all go back to David Hume and his friend Adam Smith. As Smith’s biographer Jesse Norman (2018) says, he was a pragmatist. Conversely, the origins of pragmatism are to be found in Smith: ‘The implications of his Newtonian philosophy of science receives its greatest modern exploration in the work of Peirce,’ the founder of pragmatism. The ethics of Smith and Hume was explicitly communitarian: as Norman is careful to make clear, they were not proto-Utilitarians.
* Currently, the best practical measurement of well-being is by means of a ten-step scale depicting a ‘ladder of life’, from worst- to best-imagined circumstances. This turns out to be a more stable measure than direct questions about happiness, which are influenced by the mood of the moment. Results for the ladder of life are reported in the World Happiness Report, 2017.
* An example is the introduction of the bonus culture into public service.
* Here is one of its founders, William James: ‘A social organism of any sort whatever, large or small, is what it is because each member proceeds to his own duty with a trust that the other members will simultaneously do theirs. Whenever a desired result is achieved by this cooperation of many independent persons, its existence as a fact is a pure consequence of the precursive faith in one another of those immediately concerned. A government, an army, a commercial system, a ship, a college, an athletic team, all exist on this condition, without which not only is nothing achieved, but nothing is even attempted.’ (James, 1896) This chapter shows how such trust is built.
* Not to be confused with the eclectic moral abominations implied by those who use conservative as a term of abuse.
* Not to be confused with the eclectic moral abominations implied by those who use liberal as a term of abuse.
* I do not discount an alternative explanation that sheep are pretty stupid.
* Sheep can say ‘baa’, and many other animals are able to use rudimentary language, but only humans have mastered the complex grammar needed to craft narratives. See Feldman Barrett (2017), Chapter 5.
* For a while socio-biologists thought that natural selection among groups might itself lead to innate pro-social values such as reciprocity, but the weight of research now suggests that this cannot explain our pro-social values. Bees can do it with only sign language, but that is because they have a different mode of reproduction. See Martin (2018) for a clear recent discussion.
* The nearest analogy in natural selection is the phenomenon of ‘niche construction’, as when beavers adapt their physical environment.
* Sometimes – as in niche construction – the habitat also evolves to fit the characteristics. Blue birds do not paint cliffs blue, but beavers alter the flow of a stream. But the way humans adjust norms is not analogous to niche construction: the habitat is nothing more than the norms of others.
* These figures are underestimates because many people who are self-employed (the residual category) actually work for a firm, self-employment being a legal device to reduce liabilities.
* A few societies have achieved happiness without prosperity, the most striking example being Bhutan. But Bhutan is decidedly not an example of a stateless society. Rather, it is an unusual instance of a state that has prioritized purpose and belonging over income, notably through its emphasis upon the preservation of national culture. Its people are the happiest in Asia.
* Nor is this recent: it was the celebrated punchline of the political scientist Richard Neustadt in his analysis of the power of the US President, formulated in 1960.
* The Johnson & Johnson belief system breaks down into three components: a shared identity built around a common moral purpose, defined in the Credo as providing high quality and affordable health products to customers; reciprocal obligations of employees to strive towards this purpose; and a causal chain leading to enlightened self-interest that this model underpins the sustainability of the business and the jobs of its workforce – as noted on its website, the company is one of the very few that has survived for a century. I am indebted to John Kay for this example.
* Specifically, the period is the past thirty-five years, during which they have been asked whether they agreed with the statement ‘most people can be trusted’.
* The term ‘Butskellism’ was used to characterize the essential equivalence of the leading thinker in the Conservative Party, Rab Butler, and the leader of the Labour Party, Hugh Gaitskell, in the 1950s.
* Of course, we also take decisions about how to meet our ‘wants’, but we can keep this off-stage.
* A subsequent Cambridge professor, Bernard Williams, subjected this proposition to a withering critique, calling it ‘Government House’ Utilitarianism.
* The European Schools were supposed to build a new European identity, at least among elite students. But new research suggests that students are so indoctrinated with the ideology that European identity is synonymous with liberal cosmopolitanism that they have come to think that those who disagree are not proper Europeans. Far from building shared identity, it is another process of elite divergence from the identities of their own societies.
* Anecdotes sometimes strike home. In January 2018, I gave the annual public lecture at the central bank of Pakistan and used ICI as an example of a company that lost its sense of purpose. At the end of my talk a distinguished-looking gentleman approached; it turned out that he had been a senior executive with the company. I prepared to apologize for the limitations of my knowledge, but on the contrary he shook my hand and confirmed that shareholder value had become the management obsession in meeting after meeting. In his judgement, that loss of true purpose had destroyed the company.
* This was the image used to critique Goldman Sachs. Whether this was a travesty of Goldman Sachs, recent research suggests that it is not a travesty of squids. They transpire to have the intelligent, asocial, greedy malevolence that economists have wrongly attributed to humans.
* Bear Stearns itself was rescued by JP Morgan at the behest of the US Treasury, but the knowledge that it was bankrupt triggered a run on a far larger bank, Lehman Brothers, which was seen to be too-big-to-bail, but turned out to be too-big-to-fail without consequences that proved to be disastrous.
