The Future of Capitalism

Capitalism can work for everyone, but only if we design it to balance prosperity with ethics.

1. The Decline of Social Democracy

Social democracy once ensured a sense of shared prosperity after World War II. It fostered nationwide solidarity, with policies like the New Deal in the US and the creation of the NHS in Britain. These systems worked because they merged economic growth with communitarian values, reminding people of their national identity.

However, by the 1970s, a shift began to prioritize intellectual labor, individualism, and ideologies like Utilitarianism, which reframed societal goals. Workers in these low-skill jobs were left without dignity or respect, causing them to feel increasingly alienated. These divisions have only grown, leaving disillusionment and polarization in their wake.

This fracture empowered populist movements, including Donald Trump’s rise, as well as the fading relevance of traditional social democratic parties. Capitalism started benefiting a minority at the expense of the majority, creating resentment and prompting calls for a return to communitarian values.

Examples

• Postwar social policies offered universal benefits and high taxes on the rich.
• The shift to individualism in the 1970s marginalized unskilled workers.
• Political polarization led to gains for populists and extremist ideologies.

2. A Moral Capitalism Driven by Pragmatism

To fix capitalism, Collier argues against extreme responses like communism or libertarianism, as they can lack the nuance to address real-world challenges. Instead, we need policies grounded in pragmatism, not ideology. Social maternalism—a concept emphasizing collective responsibilities—represents this approach.

Social maternalism doesn’t dictate moral values to people; it enables families and communities to foster those values through mutual support. A guiding example is Singapore under Lee Kuan Yew, where pragmatic governance and anti-corruption reforms turned a struggling nation into a prosperous one.

Pragmatic policies crafted for specific problems, rather than sweeping ideological solutions, can help unify society. This approach could create a form of capitalism where workers, entrepreneurs, and policymakers work toward common goals.

Examples

• Lee Kuan Yew’s pragmatic leadership revitalized Singapore.
• Social maternalism emphasizes empowering families and communities.
• Policies that rise above political left-right divides could promote fairness.

3. Reimagining Companies with Ethics

The 20th century saw businesses focus increasingly on shareholder profits, an idea championed by economist Milton Friedman. This profit-first mentality stripped responsibility from companies toward employees, customers, and society.

Historically, businesses like Britain’s mutual companies adopted a different model—one where employees and customers collectively owned profits. Even today, the John Lewis Partnership in Britain offers a model of ethical business as its employees share ownership and receive equal bonuses.

Policies encouraging companies to embrace shared ownership and ethical responsibilities could reshape corporate capitalism. Measures like taxation to prevent loopholes exploited by global firms, or requiring public-interest board members, ensure firms serve society too.

Examples

• Milton Friedman’s profit-maximization theory influenced decades of corporate strategy.
• John Lewis Partnership demonstrates how ethical ownership models can be successful.
• Taxation reforms could address profit hoarding by global monopolies like Amazon.

4. Strengthening Families for a Healthier Society

The disintegration of lower-income families has left children in unstable environments, creating barriers to their future prospects. Collier shares a personal story: his academic success contrasted sharply with his less fortunate cousin, who faced disruptions after her father passed.

Broken families lead to children being raised without any parental figures or being placed in foster care. In Britain, foster care numbers are rising, but support systems often fail to offer sustainable solutions. Instead of removing children, the focus should be on supporting struggling families with non-threatening, trust-building initiatives.

Experiments like the Dundee Project in the UK show the potential of practical support programs aimed at keeping families intact. Maintaining family cohesion reduces long-term societal issues and ensures children grow into capable adults.

Examples

• Collier’s cousin’s disrupted upbringing highlights systemic challenges.
• Britain’s foster system leaves 70,000 children without permanent families.
• The Dundee Project in the UK offered mentoring and trust-based support for parents.

5. From Nations to the World: Ethical Global Cooperation

Global crises such as refugee movements and climate change demand international solidarity. Collier argues for affluent nations to support nations struggling under crises. For example, helping regional governments assist refugees is more sustainable than expecting one nation to absorb all burdens.

The post-WWII order foresaw this kind of unity through organizations like NATO. But today’s global organizations often underperform. Collier suggests creating smaller, more focused diplomatic groups, such as a modern equivalent of the G7, that address major issues like water resources and climate mitigation.

Such efforts would require major powers like the US, China, and India to work together, using shared ethical frameworks. This cooperation could help prevent new generations of global crises.

Examples

• Postwar organizations like NATO once aimed for cross-country solidarity.
• The growing frequency of crises like famines calls for shared responsibilities.
• A focused G7-style group could tackle challenges like climate change proactively.

6. Revitalizing Provincial Cities

Manufacturing regions like Sheffield and Detroit declined as globalization shifted jobs elsewhere. Large cities like London and New York advanced, leaving once-thriving provincial areas in economic ruin. This imbalance has deepened geographic divides.

Collier suggests taxing the “agglomeration” gains of wealthy workers in metropolitan cities to redistribute wealth fairly. For instance, lawyers in London have far greater earning potential than equally skilled ones in smaller cities, simply because of location advantages.

Additionally, we must revive a sense of purpose in these regions. Expanding vocational training could help align unskilled workers with jobs that genuinely add value in modern industries.

Examples

• Sheffield and Detroit saw industries collapse, leaving communities in poverty.
• Agglomeration taxes could spread metropolitan wealth to struggling regions.
• Germany’s vocational schools integrate workforce training into education.

7. The Need for Purposeful Jobs

A major part of social discontent stems from a lack of meaningful, well-paid jobs for many citizens. This undermines both economic productivity and personal fulfillment. Collier argues we need targeted investments in vocational education to provide this sense of purpose.

Germany provides an effective blueprint, where schools and apprenticeships train students for careers that match market demand. This system enables a smoother transition into skilled work and builds a dignified, motivated workforce.

Reviving such programs in countries like the US and UK could profoundly improve workers’ satisfaction and contribute to narrowing class divides, helping society function more cohesively.

Examples

• Programs like Germany’s dual vocational system produce highly skilled workers.
• Many young people today graduate without practical or employable skills.
• Reintroducing practical job-ready education can align workers with industry needs.

8. Tax Fixes for Global Giants

Tax systems worldwide fail to hold tech and retail giants like Amazon accountable. Governments often allow these firms to avoid contributing back to the societies where they profit.

Collier calls for closing tax loopholes and enforcing fairer rates. This would force companies to invest more ethically in their local and global communities. Additionally, governments should explore taxing the digital economy in ways that reflect its outsized influence.

These steps would align corporations with Collier’s moral capitalism model, reducing inequality. While it won't eliminate corporate resistance completely, public support could hold companies accountable over time.

Examples

• Amazon has famously avoided paying significant taxes despite astronomical profits.
• New digital economy taxes could ensure companies contribute their share.
• Public demand for ethical firm behavior could influence business practices.

9. Ethical Clubs for a Sustainable Future

Global organizations have become sprawling and ineffective. Collier’s solution is forming focused “clubs” of leading nations, designed to share ethical values and tackle core issues like climate change and social inequality.

One such club could include major global players like China, the US, and the EU. By working together, these nations could set fair global standards while minimizing self-serving agendas.

Shared problems like water shortages will make global cooperation increasingly necessary. Smaller, cooperation-driven groups could help solve tomorrow’s problems more effectively.

Examples

• NATO’s original 12 mission-driven members contrast sharply with today’s inefficiency.
• Collier envisions an expanded G7-like structure including India and Russia.
• Tackling shared crises like water scarcity could unite disparate nations.

Takeaways

1. Advocate for ethical capitalism by supporting policies that align with social maternalism and shared prosperity.
2. Hold local and global businesses accountable for ethical practices through informed consumer choices and collective action.
3. Encourage vocational training and community-focused education to bridge class and skill divides, creating purpose-driven societies.