The future of capitalism

Paul Collier and Jose Ignacio Torreblanca

On 20 November 2019, the Rafael del Pino Foundation organised the dialogue "The future of capitalism. How to face the new anxieties" in which Paul Collier and Jose Ignacio Torreblanca took part.

Sir Paul Collier is Professor of Economics and Public Policy at the Blavatnik School of Management and Public Administration and Associate Professor at St. Antony's College (University of Oxford). He is currently Visiting Professor at Sciences Po, the Institut d'Etudes Politiques in Paris, and Director of the International Growth Centre (IGC), based at the London School of Economics and Political Science (LSE). He has been a senior manager at the World Bank and an advisor to the UK government. His research covers the causes and consequences of civil war; the effects of aid and problems of democracy in low-income, resource-rich countries; urbanisation in low-income countries and private investment in infrastructure in Africa; and changing organisational cultures. In 2008, following the publication of The Misery Club, he received the Gelber Prize for best essay of the year, and was made a Commander of the Order of the British Empire.

José Ignacio Torreblanca is Director of the Madrid Office and Senior Researcher at ECFR. He is Professor of Political Science at the Universidad Nacional de Educación a Distancia (UNED) in Madrid, where he teaches Fundamentals of Political Science, Political System of the European Union and Democracy and Legitimacy in the European Union. He is also a Doctor Member of the Juan March Institute of Studies and Research. He has been a Fulbright Scholar, a Professor at George Washington University in Washington D.C., as well as a researcher at the European University Institute in Florence. Since 2008 he has written a weekly column on international relations and foreign policy for the newspaper El País and is also the author of a blog for the same newspaper, Café Steiner. In May 2014, he joined the Editorial Board of El País.


On 20 November 2019, the Rafael del Pino Foundation hosted a dialogue with Paul Collier, Professor of Economics and Public Policy at the Blavatnik School of Government at Oxford University and Associate Fellow at St. Anthony's College, on the occasion of the presentation of his book "The Future of Capitalism". According to Collier, the book speaks of two social divisions that began to take shape in the 1980s and have deepened in recent years, especially in most advanced economies. One of these divisions is spatial, between the very rich metropolitan areas, such as Madrid or Barcelona, and the provincial cities. The other division that has emerged very recently is between highly educated people, who have developed advanced skills that are very valuable, and people who have not had the opportunity to receive such an education. The latter are people who know how to work with their hands, but those skills are becoming less and less valuable. So there is a spatial divide and there is an educational divide and the two feed each other because if you are a rural-born child you try to go to a metropolis. This exacerbates the problems in the regions that are left behind. This book is very timely, Collier said, because it is his own life. He straddles these two divides. He now lives in Oxford, a very wealthy city, but he was born in Sheffield, a city torn apart. It's a dying area. Sheffield was a very rich and advanced city, but as the steel industry went to South Korea, the city went into decline. On the educational divide, Collier was lucky enough to go to university, but his family was not. His parents had to leave school when they were twelve. So Collier experienced this bitter divide and the sad thing is that nothing has been done to prevent it, so it has deepened and caused people who have been left behind to riot, for example through Brexit, or the yellow waistcoat revolt in France. The problem is that riots do not lead to solutions; they are just an expression of anger. Therefore, what may happen with Brexit is that the British will be left on an island in the middle of nowhere. Brexit is not a strategy against Brussels, but an expression of anger against the disdain and attitude of the elites in the metropolises. Is capitalism responsible? Capitalism has been around for two hundred and fifty years and in ten thousand years of human history, it is the only system we have found capable of raising people's standard of living and well-being. Capitalism is a combination of the ability to exploit economies of scale and specialisation. Business is therefore an essential element of capitalism. The genius of this system is that it combines a certain discipline resulting from competition with a decentralised system of decision-making, but also allows for a lot of collaboration between firms. The other system that combined economies of scale with specialisation was communism, but it did not work because there was no decentralised system of decision-making, nor was there the discipline of competition. Capitalism, therefore, is a very valuable system, but it does not work on autopilot. It derails from time to time, and in the two hundred and fifty years of capitalism it has derailed dangerously at least three times. The first derailment was in the industrial cities of northern England, in the area that was the cradle of capitalism. The second time was the Great Depression. The third time is the one we are living through now, with these divisions that started in the 1980s. The most successful city in the whole of Europe in the 19th century was Bradford. It was a very productive city, but, in 1840, the living conditions of the people were terrible, because they lived in overcrowded conditions, with no public infrastructure. In 1849, there were outbreaks of cholera, people began to die and life expectancy plummeted to 19 years. This experience of the mayor totally transformed him. He was a very wealthy industrialist and gave away his entire fortune, partly to his employees. He built a whole new city for them. The rest of his fortune he devoted to improving the infrastructure. The people responded to this very well: the workers were loyal to him and the people worshipped him as a hero. If we go to Westley, the birthplace of the corporate movement, in 1840, we find the same anxieties. The families decided that something had to be done and what they did was to build a system of mutual societies. That corporate mutual movement became the largest funeral parlour in the country. So they were solving the new anxieties brought about by capitalism. If we go now to Halifax, also in the 1840s, there we see that a cooperative savings bank was created, where people could borrow and also deposit their savings. That co-operative became the largest bank in the UK. So, in those days, there was a deep-rooted sense of moral responsibility in businessmen, politicians and society in general, in the face of the new anxieties of capitalism. But there was no utopianism, just pragmatism in the face of things that could go wrong. That is the nature of capitalism: things go wrong, solutions are studied, implemented and those that work are persisted with. The peculiarity of the current derailment is that nothing has been done. Things have been left to rot for forty years. In the past, especially after the Second World War, there was an idea of community, of talking about us, and the rich were therefore seen as people who accepted their obligations, even if it meant high taxes. What we have seen recently, however, is that metropolitan environments turned their backs on the most disadvantaged people. They showed tremendous disdain for people who feel abandoned. To achieve ethical capitalism we need many levels of moral collaboration, involving governments, businesses, families and local communities. Human beings have evolved to become naturally cooperative groups in which trusting relationships are built. We are now far more social than any other species - it is the distinguishing characteristic of homo sapiens. Economics has not interpreted this evolution correctly. It seems to believe that we have evolved to become lazy people, or greedy people, but this is not the case. This is the view that has prevailed in economic and business theories. This led to a system of contracts and supervision, both in the private and public sector, which was a catastrophe, because trust is lacking. The same has happened with families and we have the state, which believes that it is the only one capable of bearing obligations, to which all of them have been handed over. Modern politics is therefore shaped by the tension between the state, which is overburdened with obligations, and the individual, who demands freedom. This structure cannot work. The genius of the mutualist movement is that the rights that were obtained matched the obligations that were assumed. Now the obligations have gone to the state and the rights have collapsed. By undervaluing trust and mutuality, capitalism ends up threatening businesses, families and states. Capitalism needs democracy, but it can thrive without it, as the example of China shows. The tragedy is that our democracy has become polarised into two rival ideologies. It has ceased to be driven by the pragmatism of trying to solve the anxieties of ordinary people. That has been the great failure. The right says that markets work on autopilot and therefore the only thing to do is to deregulate. That is what happened in the 1980s. For its part, the left turned to social paternalism. The right and the left have been talking about ideologies, while the only current that has addressed people's new anxieties has been populism that has talked about the things that people care about. Populists, however, do not provide any solutions. What we need to do is for the traditional parties to talk about people's real problems and offer some solutions. The problem is that politicians don't like to experiment, to see what works, and to evaluate the results. What the populists are doing is creating an enemy within, by saying that immigrants are abominable. Now, not all the consequences of migration are positive. It is important that immigration does not jeopardise the system of reciprocal obligations. Moreover, people have a very strong sense of geographical belonging. The European Union is an impressive asset, but European integration has two potential meanings: is it a complement or a substitute for national identity? If it is a complement, it is fantastic. It is an extension of a sense of moral obligation. But if it is a substitute for national identity, it is potentially very dangerous, because if people have no nationality, but are citizens of the world, what they are saying is that they have no obligations to other members of society.

The Rafael del Pino Foundation is not responsible for the comments, opinions or statements made by the people who participate in its activities and which are expressed as a result of their inalienable right to freedom of expression and under their sole responsibility. The contents included in the summary of this conference, written for the Rafael del Pino Foundation by Professor Emilio González, are the result of the debates held at the meeting held for this purpose at the Foundation and are the responsibility of the authors.

The Rafael del Pino Foundation is not responsible for any comments, opinions or statements made by third parties. In this respect, the FRP is not obliged to monitor the views expressed by such third parties who participate in its activities and which are expressed as a result of their inalienable right to freedom of expression and under their own responsibility. The contents included in the summary of this conference, written for the Rafael del Pino Foundation by Professor Emilio J. González, are the result of the discussions that took place during the conference organised for this purpose at the Foundation and are the sole responsibility of its authors.