The Future of Capitalism

How can you rebuild cohesion in societies scarred by inequality, mistrust and moral fragmentation? In his major work, economist Paul Collier argues that the modern West has fractured along three axes — geographical, educational, and global — producing divisions that have weakened reciprocity and hollowed out the moral bases of capitalism and democracy. His central claim is that the remedies lie not in ideology, but in pragmatism grounded in ethics — a revival of shared obligations within families, firms, states and an interdependent world.

Across this book, Collier redefines economics as moral craftsmanship. He insists that humans are not isolated utility-maximizers (“economic man”) but “social man,” motivated by esteem, belonging, and obligation — concepts long emphasized by Adam Smith and David Hume. From this foundation, he charts how the post-war moral order collapsed, why populism surged, and what practical steps can rebuild ethical institutions fit for a globalized age.

Understanding the Three Divides

Collier begins with the social fractures that destabilize modern democracies: the gulf between metropolises and provinces, the rift between the educated elite and the less-educated majority, and the polarization between globalization’s winners and those left behind. London, Paris, and New York thrive with agglomerated talent and soaring rents, while Sheffield, Detroit and Stoke stagnate. Those left behind not only lose work but dignity, as their moral status and sense of belonging erode. These divides manifest politically in Brexit, Trump and the rise of populist movements across Europe.

The roots are technological and demographic. Globalization shifted semi-skilled jobs abroad, and technology rewarded specialization concentrated in large cities. The well-educated clustered together, built distinct moral vocabularies, and lost touch with provincial values. Collier warns that ignorance of this tension fuels cultural resentment as much as economic grievance.

The Collapse of Social Democracy and the WEIRD Vanguard

Post-war social democracy worked because it balanced individual rights with mutual obligation. But by the late twentieth century, that ethic was displaced by what Collier calls the WEIRD elite — Western, Educated, Industrialized, Rich, Developed professionals — who replaced communal reciprocity with technocratic utilitarianism and rights‑based individualism. Philosophers like Bentham and Rawls supplied the intellectual architecture for paternalist governance: economists optimized welfare by formula, and lawyers multiplied rights divorced from duties. The old moral glue of shared identity fractured.

When educated people came to identify more with global professions than with their nations, reciprocal obligations faded. The result: public goods eroded, redistribution weakened, and populists filled the vacuum of trust. Collier calls for restoring the pragmatic spirit of mid-century social democracy — humility about expertise, moral pluralism, and balance between rights and obligations.

The Moral Core: From ‘Economic Man’ to ‘Social Man’

Every effective institution, Collier argues, must rest on an accurate moral psychology. Humans crave esteem, fairness, loyalty, and liberty — a plural moral grammar identified by social psychologist Jonathan Haidt. Narratives bind these instincts into collective action: stories define “who we are,” what duties we owe, and why cooperation matters. Whether mythic (the nation at war), corporate (Johnson & Johnson’s Credo), or civic, compelling narratives align self-interest with communal ethics. You cannot sustain complex societies solely by incentives or law — they require esteem and shame, embedded in culture.

Restoring Ethical Institutions

From this moral base, Collier proposes a program of ethical restoration. The post-war ethical state embodied duty through welfare and full employment, but its legitimacy depended on patriotic reciprocity. As identity shifted from nation to profession, that cohesion collapsed. To rebuild it, Collier advocates a civic patriotism rooted in place and shared purpose, not xenophobia. Similar ethical renewal is needed in firms (to restore purpose beyond profit), families (to stabilize child‑rearing across classes), and the global order (to balance rescue duties with reciprocal clubs). Each institution must re‑embed moral obligations that markets and ideologies have stripped away.

A Framework for Renewal

Collier’s model is ultimately pragmatic. Like the moral scientists of the Scottish Enlightenment, he values reciprocity over righteousness and obligation over ideology. The reforms he sketches — taxing metropolitan rents, rebuilding provincial clusters, supporting families through “social maternalism”, and restoring political pragmatism — are practical applications of this vision. Each reform re‑ties the social fabric that capitalism has loosened.

Core Thesis

“The moral renewal of capitalism depends on reciprocity — rebuilding shared obligations in families, firms, states and global institutions. Without belonging and duty, wealth and rights lose legitimacy.”

In the chapters that follow, you’ll see Collier apply this ethic systematically: to cities divided by opportunity, to firms hollowed by greed, to families fractured by class, and to a politics drifting toward extremes. His message is urgent yet practical — that economics must rediscover its moral roots if societies are to survive their present discontent.

You live amid three interlocking ruptures shaping contemporary anxiety: the geographic, educational, and global divides. Collier insists that these cleavages reinforce each other — where you live, how you’re educated, and how you fit into globalization together determine both material fortunes and moral outlooks. Understanding their dynamics is essential for political renewal.

Metropolis and Province

The geographic divide is stark. Global cities like London, New York, and Tokyo absorb talent and capital through “agglomeration” — the dense interactions that boost productivity and wages. Meanwhile, once‑proud industrial towns such as Sheffield or Detroit decay as industries flee. High rents, cultural clustering, and global connectivity deepen the gulf, leaving provincial citizens feeling humiliated and voters turning toward populists who promise recognition rather than efficiency.

Credential Clans and Cultural Distance

Education now shapes class and moral vocabulary. The globally mobile, degree‑holding elite often clusters in the metropole and develops new languages of virtue emphasizing equality, care, and rights. Those outside that circle privilege loyalty, fairness, and duty. When elites signal moral superiority through derision of traditional values, resentment blooms; it is not simply economic but existential — a sense of being disdained by one’s own countrymen.

Winners and Losers of Globalization

The global divide mirrors this tension. Trade liberalization and technology created ‘superstar’ winners — firms, cities, and individuals whose earnings soared — while semi‑skilled workers faced obsolescence. Losers of globalization experience moral as well as material loss: when communities collapse, addiction, family breakdown, and hopelessness follow (as in rising U.S. mortality among non‑college whites). These trends forge loops of decline that markets alone cannot repair.

Key Idea

Economic geography has become moral geography: place, education, and globalization interact to generate both income inequality and mutual contempt. Repairing them requires rebuilding shared identity and reciprocal obligation.

For Collier, these divides are not transient shocks but structural transformations. Only a moral and institutional reconstruction — not market self‑correction — can reconnect the metropolis to its nation and bridge the moral distance between the privileged and the left‑behind.

Collier’s concept of the ethical state captures how post‑war governments fused capitalism with moral purpose. The welfare state from 1945 to 1970 balanced efficiency with reciprocity: citizens contributed through work and taxes because a shared national story connected duties and rights. But as identities globalized and professions replaced nationality as the source of esteem, reciprocity collapsed.

From Shared Mission to Fragmented Esteem

After the Second World War, Western citizens shared a vivid moral narrative — rebuilding nations after collective sacrifice. Patriotism was open, civic, and cooperative. By contrast, late‑century globalization shifted esteem to mobile professionals; national reciprocity felt parochial. Collier models this as an identity‑switch process: as elites prioritize occupational pride, others double down on national identity, producing resentment and populism.

Patriotism, Not Nationalism

Collier differentiates xenophobic nationalism from civic patriotism. The latter binds diverse citizens by shared public projects and territory, not ethnic exclusivity. Leaders like Emmanuel Macron articulate this distinction — patriotism fosters cooperation; nationalism feeds antagonism. The ethical state must restore place‑based belonging through visible, purposive public commitments that prove reciprocity still works.

Policy and Trust

To manifest ethics in policy, states should design institutions that remind citizens they are collaborators, not clients. Such reciprocity can sustain redistributive taxation, welfare legitimacy, and collective projects. Without this moral foundation, policy technocracy becomes alienating and populism thrives.

Moral Principle

“The state’s ethical legitimacy rests on narratives of belonging and policies of reciprocity — without both, it loses authority and citizens retreat into tribes.”

Collier thus urges governments to champion inclusive patriotism — grounded in place and purpose — as the only stable moral anchor for modern democracy and redistribution.

To rebuild trust in capitalism, firms must rediscover purpose. Collier contrasts mid‑century industrial companies, which proclaimed missions of service and innovation, with today’s shareholder‑value ideology that displaces long‑term stewardship. When companies pursue only quarterly profits, they destroy the reciprocal bonds that make markets moral.

Why Purpose Matters

Corporations like Johnson & Johnson or Toyota show how shared purpose aligns incentives and builds trust. Employees act ethically because they belong to a moral community, not because they are policed. By contrast, financial manipulation and rent‑seeking scandals (Enron, Bear Stearns, Cadbury’s takeover) reveal the cost of hollow governance systems that reward short‑termism.

Governance and Stakeholders

Collier advocates for legal re‑engineering: require directors to consider the public interest, expand stakeholder voice, and promote mutual ownership models (as in John Lewis Partnership). Tax policy should capture the unearned monopoly rents of “superstar” firms without stifling genuine scale. Both law and culture must reward stewardship rather than extraction.

Citizen Policing of Purpose

Ethical renewal also depends on reputation and internal norms. When citizens value firms that serve communities, activism, whistleblowing, and ethical investing reinforce good behaviour. Corporate purpose thus becomes self‑enforcing through esteem rather than coercion.

Key Lesson

“Profit is a reward for service, not an entitlement for extraction. Purposeful firms create loyalty, productivity and legitimacy that mere regulations cannot manufacture.”

When firms treat communities as partners rather than costs, capitalism regains its ethical mandate and competitive edge simultaneously.

Family life is the seedbed of reciprocity. Collier argues that class divergence now begins at home: the well‑educated build stable, two‑parent households investing heavily in child‑rearing, while less‑educated families face instability, single‑parenthood and state substitution. These diverging family models entrench inequality across generations.

The Shock Divide

Since the 1960s, contraception, feminism and education have empowered professional couples to delay and plan parenting, producing smaller, resource‑rich families. By contrast, economic shocks like deindustrialization deprived working‑class men of stable roles, triggering family breakdowns and alarming numbers of children in state care — around 70,000 in Britain alone. As extended families weaken, the welfare state becomes a fragile surrogate.

Social Maternalism: Early, Empathetic Intervention

Collier proposes replacing ‘social paternalism’ — punishment after failure — with ‘social maternalism’: empathetic, practical support that preserves family bonds before collapse. Projects like Pause (mentoring women who lost children to care) and Dundee’s early‑help experiments show striking success when support is separated from scrutiny. Intervening early saves lives and money by preventing trauma and dependency cycles.

Scaling Human Support

The model relies on in‑kind, relational help: kindergartens that integrate families, mentors drawn from retired volunteers, and unconditional early‑childhood assistance. Such support builds trust, self‑esteem and stability. Universal early education, as in France’s écoles maternelles, exemplifies humane, cost‑effective design.

Human Lesson

“Families flourish when help is personal, practical, and trusted — not when the state oscillates between neglect and coercion.”

Restoring ethical families is not nostalgia; it is preventive social policy. Without stable homes, neither schools nor welfare systems can sustain equal opportunity or moral cohesion.

If place now determines destiny, policy must make geography fair again. Collier shows how agglomeration rents in booming cities can and should finance the regeneration of provincial economies. This is pragmatic localism built on ethical grounds — those who benefit collectively owe something back to those left behind.

Taxing Metropolitan Rents

Urban prosperity produces “rents of agglomeration” — collective productivity gains arising from density, infrastructure, and public order. Ethically, these belong to society, not solely to landlords or high‑earning residents. Economically, they are pure rents that can be taxed without distorting incentives. Collier and Venables redesign Henry George’s land‑value tax to capture both land appreciation and the urban wage premium enjoyed by skilled workers. The proceeds should fund national-scale place regeneration, not local enrichment of metropolises already thriving.

Reviving Provincial Cities

Collier insists that markets alone cannot “reseed” clusters once decline sets in. Reviving cities like Sheffield or Detroit requires coordinated action: development banks that finance pioneering firms, publicly prepared business zones, investment promotion agencies to attract anchors, and universities as training partners. Private firms face coordination failure; only a credible public commitment can reboot confidence. He calls for a Draghi‑style “whatever it takes” pledge to narrow spatial inequality, signaling political resolve that attracts private follow‑through.

Housing and Belonging

Housing policy has also shifted from home to asset, worsening divides. Collier urges reforms that promote ownership for residents — not speculative landlords — through controlled buy‑to‑let curbs, build‑to‑buy programs, and even one‑off tenant purchase rights. Owning one’s home transforms citizens from renters of space into stakeholders in society, reviving the spirit of belonging necessary for reciprocity.

Design Principle

“Place-based policies must pool metropolitan rents, coordinate public and private investment, and restore home ownership — turning geography from a source of resentment into a platform for dignity.”

By capturing urban gains and investing them to revive lagging regions, societies can transform divisive geography into inclusive prosperity.

Collier exposes two related distortions that corrode modern capitalism: rent‑seeking professions that absorb talent into zero‑sum games, and a failing training system that leaves millions under‑skilled for decent work. Both problems waste human potential and inflame inequality.

The Problem of Rent‑Seeking

In sectors like finance and law, competition takes the form of tournaments — costly races for marginal advantage, such as high‑frequency trading or litigious tactics. Winners gain vast incomes; no new value is created. Deutsche Bank, for instance, once paid €71 billion in bonuses versus €19 billion to shareholders, while ordinary savers footed the bill. Collier proposes targeted transaction taxes to deter speculative turnover and litigation surcharges to discourage wasteful lawsuits. The moral goal: to redirect talent toward productive innovation, where society truly gains.

Restoring Esteem for Creation

Culture must complement regulation. Publicly celebrating innovators and social entrepreneurs can shift esteem away from predatory winners toward creators. Since people crave recognition, praise and shame can powerfully redirect ambition where legal codes fail.

Rebuilding Skills and Vocations

Collier’s companion reform is for vocational education. He praises Germany and Switzerland’s dual systems linking firms and apprenticeships that integrate non‑cognitive skills like teamwork and discipline. By contrast, mass university expansion in the UK has displaced and devalued practical careers, leaving “graduate underemployment” and regional mismatch. He proposes firm‑linked training levies, lifetime learning credits, and redirection of elite teaching programs like Teach First toward provincial schools. True fairness, he argues, lies in esteem for craftsmanship as much as cognition.

Key Idea

“When talent competes to create rather than to capture, economies flourish and societies heal.”

Curbing rent extraction and elevating vocational pride restore moral symmetry between reward and contribution — the essence of ethical capitalism.

The final step in Collier’s moral reconstruction scales reciprocity outward — to a global and political order capable of sustaining practical solutions over ideology. His insights here connect foreign policy, governance, and citizenship into a coherent philosophy of ethical realism.

Clubs and Duties of Rescue

The ethical world that followed 1945 succeeded because it was pragmatic. Institutions like NATO, GATT and the IMF worked as clubs with limited membership, clear reciprocity, and credible enforcement. Later expansions diluted coherence and bred moral hazard. Collier’s proposal: form a compact “G6” club (USA, EU, China, India, Russia, Japan) strong enough to address climate change, pandemics and fragile states. Rescue duties — toward refugees, the sick, or the poor — should align with comparative advantage: nearby nations host, richer nations fund.

Restoring Pragmatic Politics

Domestically, politics must recover from ideological capture. Collier traces how party democratization empowered activist fringes, producing polarization. To re‑center politics, he advocates restoring leadership selection to elected representatives or introducing proportional representation. Pragmatic coalitions, as in Scandinavia or Switzerland, force negotiation and curb extremism.

Rebuilding Civic Narratives

No technocratic fix works without shared stories. Leaders must rekindle patriotism based on contribution, not exclusion — through civic institutions, community clubs, and collective achievements that generate “common knowledge” of reciprocity. In an age of echo chambers, this task requires moral imagination as much as media regulation.

Essential Message

“Effective international clubs and pragmatic domestic politics both rely on the same moral logic: reciprocity, realism, and restraint — the ethics of cooperation over ideology.”

From families to the global system, Collier’s blueprint ends where it began: moral realism enabling pragmatic reform. Societies rebuild only when people once again act for ‘us’ as well as for themselves.