The troubled aftermath of the great crisis has provoked a flood of books that aim to ‘fix’ the continuing malfunctions of Western capitalism. ‘The way our economic and political systems work must change, or they will perish’, the chief economics commentator of the Financial Times has proclaimed. Recommended reading for Martin Wolf’s reform agenda is Paul Collier’s The Future of Capitalism, a book that also featured on Bill Gates’s list (‘ambitious and thought-provoking’), while George Akerlof called it ‘the most revolutionary work of social science since Keynes’. Collier himself, who writes as a candid friend of capitalism, lamenting its deplorable fall from grace, sees his book as updating Anthony Crosland’s Future of Socialism—offering an ‘intellectual reset’ for a social democracy that may once again become the philosophy of the political centre. The Future of Capitalism claims to offer a new conceptual framework, as well as a range of practical proposals. Does it do so?

Collier is better known as a developmental economist than a saviour of the advanced-capitalist world. Born to a working-class family in Sheffield in 1949, in the book he describes his ascent to Oxford, Harvard and Sciences Po. His best-known work, The Bottom Billion (2007), praised the beneficial effects of globalization, which had set the vast majority of the world’s population—five billion, at least—on the road to mass prosperity. That book focused on the remaining billion, many of whom he detected in Africa, caught in the traps of civil war, bad government and resource dependence. Applying the binaries of individual rational-choice theory, driven by ‘greed’ or ‘grievance’—‘will I gain by rebelling against the government?’—Collier arrived at a set of brutally neo-imperialist solutions: globalization could work for Africa, but it would require long-term military occupations by the G8 governments to keep the peace and enforce the expansion of sezs to attract investment flows. The bottom billion was not ready for democracy, he explained in his next book, War, Guns and Votes (2008), as they were too likely to vote on ethnic lines. Collier duly acquired a cbe from Blair in 2008 and a knighthood for ‘services to policy change in Africa’ from Cameron.

A decade on and Collier is chastened—his heart ‘seared’—as he addresses the ‘moral bankruptcy’ of his native land. Over the past four decades, we now learn, capitalism’s economic performance has deteriorated; pessimism has been growing; new generations are worse off than their parents. A stark class divide has opened up between the ‘educated’—who meet and mate at university, and have forged themselves into a new ruling class, with a shared social identity in which esteem is based on skill—and the ‘less-well educated’, their jobs hard hit by globalization, who are prone to family breakdown, drug and alcohol abuse, and violence. Damaging ‘ideologies’ have emerged, ‘snake-oil cures’ peddled by demagogues such as the ‘Marxists’ who have taken over the British Labour Party, feeding on the fears and resentment of the ‘less-well educated’.

Collier harks back to the social democracy of his youth, based on the ‘practical reciprocity’ of the co-operative movement, rooted in communities, pride in one’s job and national identity, and upheld by political parties of both centre-left and centre-right. Alas, from the eighties on, the parties were captured by know-it-all intellectuals, who ascribed to themselves the moral superiority of Plato’s Guardians: on the one hand, rational-choice economists, who posited an amoral ‘economic man’; on the other, Rawlsian proponents of universal rights, who demanded legal privileges for the most disadvantaged groups. Both the economists and the lawyers discounted the ‘innate moral foundations’—the ‘normal instincts’ of reciprocity and desert, esteem and belonging—on which communitarian social democracy was based. ‘As the destructive side effects of new economic forces hit our societies, the inadequacies of these new ethics have been brutally revealed.’ The new political class had been ‘cavalier about globalization’ and had kept quiet about its costs. Yet it had led to deep socio-geographic divides between booming metropolitan cities, benefiting from cluster effects, and ‘broken’ provincial towns, in turn widening the rift between the prospering ‘educated’ and the despairing ‘less so’. Meanwhile global divisions were sharpened by the elite’s ‘unqualified enthusiasm’ for liberalization and ‘unqualified espousal’ of immigration.

Capitalism can be fixed, Collier assures us, but it requires a pragmatism ‘firmly and consistently grounded in moral values’, promoting markets harnessed to ‘a sense of purpose’. The first priority is political reform—‘breaking the extremes’. Foolishly, the mainstream political parties have empowered their rank-and-file members to elect their leaders. The parties need to be ‘driven back to the centre’, either by restricting leadership selection to elected representatives, or opening it to all voters—though that can be a risk—or, perhaps the safest option, introducing a carefully calculated modicum of proportional representation, to cement politicians of the ‘hard centre’ in power. Macron is the prime example of the type required, flanked by Lee Kuan Yew, Trudeau and Kagame (Collier’s claim that Kagame ‘denied his Tutsi team the customary spoils of military victory’ would come as news to the inhabitants of eastern Congo). Collier also hails the ‘remarkable’ Mette Frederiksen, leader of the Danish Social Democrats, for ‘vigorously returning the party to its communitarian origins’. (In fact Frederiksen’s main innovation was to court the far right by embracing its Islamophobic agenda, calling for Muslim schools to be shut down and backing a law that would allow police to confiscate asylum-seekers’ jewellery.)

To soothe the anxieties of the ‘less educated’, Collier would combine restricted immigration with affordable housing and flexicurity—benefits to compensate for irregular employment. The ‘ethical family’ would be bolstered by compulsory mentoring for young couples at risk of breaking up, while ngos comprised of volunteer grandparents would shore up the morals of school-age children. The state would be called upon to help generate narratives of patriotic belonging. Turning to the ‘ethical firm’, Collier laments the tax-avoidance skills of the giant banks and global corporations, adept at shifting their hqs and shopping for the jurisdictions with the lowest imposts. He now criticizes the cult of ‘shareholder value’ and the algorithms used by the pension and insurance-fund investors, which oblige firms to focus narrowly on quarterly returns: ‘nobody has much incentive to understand whether the long-run strategy of the management is smart’. He calls for a tough line on corporate malfeasance—dragging a few ceos off the golf course and throwing them in prison would send a strong signal to the rest. Strangely, Collier has nothing on ‘the ethical investor’, though there has been a lot of research on this topic; a number of pension funds now shun investments in arms trading, gambling, tobacco or child labour, and few omit to pay lip-service to esg—environmental, social and governance—criteria.

The most radical proposals in The Future of Capitalism target what Collier calls the new ‘educated’ class. Drawing on Anthony Venables’s work on spatial inequality, he sketches the surging growth of ‘global cities’ since the eighties as they gained access to not just national but world markets, reflected in huge increases in the rents and profits of ‘agglomeration’. The term refers not only to urban ‘returns to scale’, but to the rewards of specialization and location accruing to the aggregation of a large population of high earners, who in turn create a market for services to entertain them. Here, Collier does shed some light on aspects of the current capitalist malaise. Following Stiglitz, he picks up on Henry George’s insight in Progress and Poverty (1879) that the benefits of agglomeration are a collective achievement, generated by the millions who live and work in the city, yet—with rising urban rents—the gains accrue to the landlords; George therefore called for a heavy progressive tax on urban land values.