The Future of Capitalism

by Paul Collier

  We need large shared identities, but nationalism is not the way to build them. Instead, it is being used by political populists to build a support base through narratives of hatred of other people who live in the same country. The entire strategy is to build cohesion within one part of society by creating rifts with other parts of society. The resulting oppositional identities are lethal for generosity, trust and co-operation. This is what educated people reject and they are right to do so. But, currently, they are not offering any alternative basis for shared identity. In effect, the educated are saying that they no longer identify with less-educated citizens. Instead, applying Utilitarian principles, they make no distinction between their less-educated fellow-citizens and foreigners. Since the powerful obligations – those that are reciprocal – follow only from shared identity, the implication is that they have no greater obligation to non-elite fellow-citizens than to foreigners living anywhere.

  New survey evidence enables us to see this process of erosion underway. In Britain, the current media presumption is that younger people are more generously disposed to poor people within society than their parents. In a large random survey conducted in 2017, people were asked to choose between two opposing propositions. One was: ‘People’s obligation to pay their taxes is more important than their personal wealth’. This was juxtaposed against: ‘People are rewarded for working hard by keeping more of what they earn’. Contrary to the media myth – but entirely consistent with the theory of shared identity as a wasting asset – the age group of the over-35s backed the obligation to pay taxes, whereas the 18–34s were more drawn to the individualistic ethics of keeping what you earn.6

  As compliance erodes, rights become unmet and trust in government declines. This is the fierce trend sweeping across Western societies. Practically, the change in the structure of obligations, from reciprocity within the society to unreciprocated global obligations – or from national citizen to ‘citizen of the world’ – could mean one of three radically different things. Perhaps you might ask yourself which of them applies to you.

  One possibility is that you remain no less generous towards poorer people than the generation who, between 1945 and 1970, built your national tax system on the presumption of shared national identity, but you now want to define the poor globally rather than nationally. This would have dramatic implications. On average, across the advanced modern economies, somewhere around 40 per cent of income is scooped up in tax and redistributed in various forms, such as direct transfers to poorer people, social spending that benefits poorer people disproportionately, and infrastructure spending that benefits almost everyone. So, you remain happy to have 40 per cent of the country’s income scooped up in tax, but now want it to be distributed globally rather than nationally: you do not see anything special about your obligations to your fellow-nationals. Given global inequalities, this would produce a massive increase in aid flows to poor countries; a large proportion of the 40 per cent of income captured in tax would be sent to them. A corollary of this redirection of taxation towards the global poor would be that poor people within the nation would be radically worse off. You may dismiss that as morally irrelevant – their needs are less than those of the people you are now meeting – but they would be right to be alarmed.

  A second possibility is that you remain as generous towards your fellow-nationals as the previous generations, but now want to extend the same degree of generosity globally. Now the implication is more dramatic: taxation will need to rise massively. The post-tax income of the skilled will need to fall very substantially to maintain the level of generosity to fellow-nationals while extending the same largesse to the global population. This is not something that one country could do alone, since much of its skilled population would emigrate, leaving their poorer citizens worse off. This is a policy of the headless heart.

  The third possibility is that what you really mean by your change of salient identity is not that you have significantly increased your sense of obligation to people all over the world, but that you have reduced your sense of obligation towards your fellow-nationals. In this case you are in the happy position of being off the hook. Taxation can be reduced because that inconvenient ‘ought’ that nagged you into generosity has been silenced: ‘you can keep what you earn’. They – your poorer fellow citizens – will be worse off. This is a policy of the heartless head.

  The contempt of the educated for national identity muscles its way on to the moral high ground: we care about everyone; you are deplorable. But is this claim to the moral high ground really justified? Roll on a generation and imagine that the new identity of ‘citizen of the world’ has become sufficiently embedded that public policy fully reflects it.7 The tax policies based on national identity have been supplanted. Which of these three interpretations of ‘citizen of the world’ above seems most likely to have prevailed? I suggest that it is likely to be some compromise between the first and the third: somewhat greater generosity towards the global poor will be more than offset by substantially reduced generosity towards the national poor.

  THE CONUNDRUM

  There is a conundrum currently facing modern, prosperous societies. The brute fact is that the domain of public policy is inevitably spatial. The political processes that authorize public policy are spatial: national and local elections generate representatives with authority over a territory. And the policies themselves ultimately have a spatial application: schooling and health care have catchment areas; infrastructure is spatially specific; taxes and benefits are administered spatially. We cannot get away from this fact: our polities are spatial. Indeed, they are predominantly national. But our identities, and the social networks that underpin them, are becoming ever less so.

  The social-democratic era from 1945 to 1970 was built on the exceptional history that expanded our sense of community to embrace entire countries. Our spatial identities and social networks have already withered as a result of the skill divide that came as a consequence of rising complexity. Now what we are beginning to experience is a further wave of assault on shared spatial identity as the behavioural changes consequent upon smart phones and social media take hold. Smart phones are at the extremity of individualism – the selfie indiscriminately posted to ‘friends’ in the hope of attracting an impressive tally of ‘likes’. We see the withering of spatial community, and indeed we live it as we sit in public spaces, such as cafes and trains, surrounded by people who are proximate yet invisible as we peer at our screens. Space binds us through public policies, but it is no longer binding us socially. It is under assault both from substitute communities of digital echo-chambers, and by a more radical withdrawal from face-to-face interaction into the isolation of anxious narcissism. My prediction is that unless this divergence between our polities and our bonds is reversed our societies will degenerate, becoming less generous, less trusting and less co-operative. These trends are already underway.

  In principle, we could re-engineer our political units to be non-spatial. Presumably some of the techno-geeks of Silicon Valley have such a future as a gleam in the eye: the opt-in, opt-out polity with each individual free to choose regardless of where they happen to be living. Each could have its own currency – to each its own bitcoin. Each could have its own tax rates, welfare benefits, health scheme; there are schemes for floating islands outside any national jurisdiction. Does this sound attractive? If so, try to think what would be likely to happen. Rich people would be likely to opt into those artificial political entities that offered low tax rates. The billionaires are already doing this, detaching the legal location of their companies from where they earn their revenues, and themselves to Monaco. Conversely, sick people would opt into entities with generous health care, which would duly default upon their unviable liabilities.

  The non-spatial political unit is a fantasy, so the only real option is to revive spatial bonds. Unfortunately, given that the most practical unit for most polities is national, we need a sense of shared national identity. But
we know that national identities can be toxic. Is it possible to forge bonds that are sufficient for a viable polity yet not dangerous? This is the central question that has to be addressed in social science. On its answer rests the future of our societies.

  The nationalists have come close to capturing the notion of national identity as their own intellectual property. Indeed, they appear to think that they are part of a continuous tradition of national identity, but they are not. In many societies, traditional national identity was genuinely inclusive of everyone in the society. Wittgenstein, an Austrian Jew living in Britain, recognized his clear obligation to return to Austria to fight for his country in the First World War. In contrast to this traditional form of nationalism, the new nationalists want to define national identity on criteria such as ethnicity or religion. This variant of nationalism is relatively recent, the heir to fascism, and this new definition of national identity would exclude millions of people who are citizens living in the society. Not only do the new nationalists quite explicitly intend to divide society into an ‘us’ and a ‘them’, they trigger a further division within their self-defined ‘us’ due to the many people who are offended by them. Their rise bitterly divides the society. Marine Le Pen did not unite France: she divided it two-to-one against her; Donald Trump has polarized American society down the middle. Hence, such nationalism is not even a feasible means of restoring the loss of shared identity which is giving it momentum; on the contrary, it would destroy any prospect of it. In turn, this would undermine trust and the co-operation that it facilitates, and mutual regard and the generosity that it facilitates.

  The other group, the educated ‘citizens of the world’, are abandoning their national identity. They engage in the pleasures of signalling their social superiority while persuading themselves that this selfish behaviour is morally elevating. The stark conclusion is that both of these newly prominent groups of citizens threaten to undermine the shared identity built at such enormous cost.

  We need a way out of this conundrum. In the potent image of Wittgenstein, who saw people trapped in confusing ideas, we need to let the fly out of the fly-bottle.

  Enter patriotism.

  BELONGING, PLACE AND PATRIOTISM

  To function in a way that enables everyone to flourish, a society needs a strong sense of shared identity. The pertinent issue is not whether this is true, the cohesion-deniers are as foolish as the climate-deniers. It is demonstrated by the success of Denmark, Norway, Iceland and Finland, the happiest countries in the world; and by Bhutan, the happiest country in Asia. But, unfortunately, these five all build social cohesion by a strategy that is not available to most other societies. They have built shared identity around a distinctive common culture. I doubt whether the actual content of that culture is particularly important: hygge and Buddhist monasteries have little in common. But most societies either always were too culturally diverse for that to be a viable option, or have now become so. Rather than lamenting this aspect of our societies, we need to devise a workable strategy for rebuilding shared identity that is compatible with modernity.

  The past methods that succeeded in building shared identity across an entire country are no longer useful. In prehistoric Britain, the shared identity may have been built by the vast common endeavour of Stonehenge – ‘a unifying enterprise that reflected the vision of a single island culture’.8 In fourteenth-century England it was built by war with France, binding together a radically unlikely amalgam: Normans; Anglo-Saxons, whose leaders had been slaughtered by Normans; Vikings, who had slaughtered the Anglo-Saxons; and Britons, whose culture had been eviscerated by Anglo-Saxon takeover. Across nineteenth-century Europe it was built by the myth of ethnic purity. In the mid-twentieth century it was built by war, and sustained by cultural idiosyncrasies; the Americans had baseball, the British had tea, the Germans pork-and-beer. As our societies have become multicultural, even baseball, tea and pork-and-beer are fading distinctions: none of these approaches is likely to give us a robust strategy.

  One attractive-sounding strategy is to build shared identity around shared values. This approach is popular because everyone believes in their own values and assumes that they are the right ones on which to build shared identity. The problem is that an astonishingly diverse range of values can be found within any modern society; it is one of the defining features of modernity. If we require shared values, we end up with something powerfully exclusionary: ‘if you don’t share our values, get out.’ Donald Trump and Bernie Sanders are both Americans, but I defy you to find any values that they both hold, but which differentiate America from other nations. The challenge could be repeated – with appropriate substitutions of political leaders – in most Western societies. The only values that everyone in a society adheres to are so minimal that they fail to distinguish a particular country from many others, and so do not define a viable domain within which reciprocal obligations might be built.

  As national identity has become unfashionable value identity has intensified, and the result is ugly. It has been reinforced by the greater ease of restricting your social interaction to those with whom you agree – the ‘echo-chamber’ phenomenon. Far from being a route to social cohesion, these value-based echo-chambers are tearing Western societies apart. The level of insults, vilification and threats of violence – in short, of hatred – found in value-based networks now probably exceeds ethnic and religious abuse.

  So, if values as the criterion for shared identity hit the same rock as ethnicity and religion, is there anything else? Should we instead try to make the citizens-of-the-world agenda viable by dissolving nations and shifting political power up to the United Nations? In reality, as the name United Nations implies, the organization presupposes that nations, not individuals, are the building blocks of political authority, for the evident reason that in most societies the nation is the largest feasible effective entity of shared identity. Were political power to become concentrated at the global level, people would not willingly comply with its decisions: power would not turn into authority. World government would come to approximate a global version of Somalia.

  The answer to a viable and inclusive identity is staring us all in the face. It is a sense of belonging to place. Why, for example, do I regard myself as a Yorkshireman? Yes, I like the values: blunt speaking and a lack of pretension. But that really isn’t it. Recently I was on a breakfast radio programme with Baroness Sayeeda Warsi, who was the first Muslim woman to become a British cabinet minister. It was the first time we had met, and a radio chat show where we were each supposed to talk about our new books is not a naturally bonding occasion. Yet I rapidly felt at ease with her: she had grown up in Bradford and spoke with the glorious accent into which I, too, had been reared, and which in me has been chipped away by half a century in Oxford. So, I suspect that I felt more at ease with her than she did with me. But essentially, we shared that sense of belonging to the same place, with its little markers of accent and vocabulary; I noticed that we both asked for our BBC tea to be ‘mashed’, not ‘brewed’.

  We can set such anecdotes into a framework of considerable generality. People have a fundamental need to belong. The key dimensions of belonging are who? and where? Both of these are set in childhood and usually endure for life. We answer who? by identifying with some group – this is what Identity Economics has focused on to date; we answer where? by identifying with some place as home. Ask yourself what you mean by home. For most people, it means the place where they grew up.

  The most viable concept of nationality available to modernity is to bind people together with a sense of belonging to the same place. Place is layered like an onion. The inner core is our home; but much of the identity we bestow on our home is the region or city in which it is set. Similarly, the city gets much of its meaning from the country, and in Europe some of the sense of belonging extends to the European Union. The population of the typical country will look diverse, and hold diverse values: but they will share the location of thei
r homes. Is that enough?

  One reason to be hopeful is that place-based identity is one of the traits that are hardwired deep in our psyche by evolution. It is not one of the relatively recent softwired values added by language. Not only is place-based identity deeply ingrained, it is powerful. A standard concept in conflict studies is the ratio of attackers to defenders needed for attackers to win. Obviously this is affected by military technology, but in general, over the history of human conflict defenders fight harder than attackers, and so the ratio is around 3:1. Astonishingly, this ratio is the same across many species. Tracing these species back up the evolutionary tree, territoriality looks to have been hardwired for around the past 4 million years.9 The instinct to defend territory has very deep roots; we are bonded to a sense of home.