The publication of yet another left of centre book asking “What has gone wrong with American capitalism and what should be done to fix it?” may provoke a sigh or a yawn. However, in the case of The Wolf at the Door such a reaction would be misplaced. It is a constructive and engaging book that has things to say that are worth considering.

Its starting point is that there is a serious economic and consequent social problem in the USA that is giving rise to dangerous populism both of the right (Donald Trump) and of the left (Bernie Sanders). Those on the right of American politics are denying that there is a problem whilst those on the left are focusing on the wrong issue: taking their cue from Thomas Piketty, they focus on inequality and, in particular, the wealth of the top one per cent.  This, Graetz and Shapiro suggest, is a serious mistake since “Obsessing about the very top is a distraction from the more pressing problems of economic stagnation and insecurity among increasing numbers of the middle class as well as the poor” (page 28).  They acknowledge that “fighting insecurity might involve attending to some aspects of the growth of inequality” but insist that “the primary focus must be on mitigating the sources of economic insecurity” (page 7). They are surely right about this and their book thus gets off on a sound footing.

The authors aim to identify the various elements of economic insecurity and come up with a feasible agenda for addressing these. This result in a basket of proposals: a substantial expansion of the US Earned Income Tax Credit system (which provides a refundable tax credit for low to moderate income workers); the merger of the US Trade Adjustment Assistance and Unemployment Insurance programmes into one national programme (which the authors call “Universal Adjustment Assistance); major investment in infrastructure; the progressive expansion of Medicare starting by extending it to the youngest working age people, such that, over a generation, it becomes available to all; and the establishment of a system of universally available “pre-K” child care for young children under the age of five.

The authors recognise that many on the left will regard their proposed programme as unambitious, but they defend it on the basis that it addresses the right issue (i.e. economic insecurity) and is politically, economically and socially feasible. They are realists and pragmatists: they recognise that many on the left wish to return to what is seen as the utopia of the decades following the Second World War but, in the context of comments about the steel industry, warn that “this nostalgic yearning ignores the realities of lower-cost production abroad and of the technological transformations that now enable steel to be produced with a fraction of the workers once required” (page 18); they bluntly assert that the “unavoidable fact is that the good old days of well-paying, long-lasting employment are behind us, and they are not coming back” (page 115); they recognise that US politics is dysfunctional but seek to identify ways of achieving their goals despite this, in particular, by identifying “six features of successful distributive politics” (page 35) including building coalitions and pragmatically pursuing proximate goals; and on this basis they dismiss many policies favoured by the left both in the US and elsewhere including the establishment of universal basis income and a dramatic increase in the minimum wage.

This pragmatism results in a commendable absence of ideological shibboleths and the recognition of fundamental economic realities. Graetz and Shapiro are prepared to contemplate privatisation, they strongly favour free trade and they recognise the essential role of business both in the creation of prosperity and in the building of the coalitions that they recognise are essential for the implementation of their reform programme. They also refuse to take positions on a number of economic issues that divide left from right including the impact of statutory minimum wages and, perhaps most significantly, whether or not Piketty’s analysis and predictions are right. They dismiss Piketty’s suggestions of a global wealth tax and a trans-national European assembly with taxing and re-distributive powers as “so utterly deaf to anything that is feasible politically that it is hard to take them seriously” (page 261).

The book is wholly focused on the USA and non-Americans may fear that it will not be of interest to them. However, it is addressing issues that exist in many developed nations and, whilst much of the detail is likely to be relevant only to the USA, the analysis of the problems, the core elements of the proposals for solving them and the authors’ reflections on what is necessary to effect change should be of wide applicability. Furthermore, the insight that the book provides into the Byzantine complexities of the US legislative and governmental processes is of considerable interest in itself.

Of course, the biggest question to which the book gives rise is whether its proposals would work. Would they have the dramatic net positive effect that the authors’ hope for, even in the longer term? Unfortunately, this is open to serious doubt.

Graetz and Shapiro draw their inspiration from Roosevelt’s New Deal, which they mention on numerous occasions and which they credit with significant achievements. However, whilst unquestionably, there was much to applaud in the New Deal, it is far from clear that it dealt with economic insecurity. As Graetz and Shapiro admit, US unemployment remained above 20 per cent. through the 1930s and it was the Second World War that paradoxically transformed the US economy.

Some of the proposals are also vulnerable to other, more specific, criticism. In particular the authors never adequately deal with the economic issues associated with the subsidisation of wages that has been recognised ever since the Speenhamland magistrates tried this in late eighteenth century Britain. More fundamentally, they do not address issues associated with the control of mushrooming costs that have bedevilled social security systems around the world.

Leaving aside the economics, there must also be doubt over the US political feasibility of some of the proposals. In some cases, the authors give good reasons for believing that the coalitions necessary to secure the enactment of appropriate legislation could be assembled (e.g. in relation to the expansion of earned income tax credits). In other cases, however, they do not. Indeed, in relation to their proposed establishment of Universal Adjustment Assistance, they admit that “there is no obvious coalition to step in to the breach” (page 168) and their emphasis on infrastructure investment is somewhat undermined by their frank recognition that the apparent support for investment from across the US political spectrum has not prevented the visible decay of US infrastructure over a long period of time.

Those on the right of the political spectrum will also wonder how the proposals are to be paid for. Graetz and Shapiro are not classic “tax and spend” liberals. Indeed, they fear that left-wing populism could lead to “pressure for tax regimes that hamper competitiveness” (page 273). Furthermore, they acknowledge that the level of US government debt is already unsustainable yet raising income tax is politically impossible, having been rejected by both major parties in the US, and they dismiss wealth taxes as a solution on the basis that experience in other countries shows that their promise has been “oversold” (page 246). Hence they fall back on a basket of proposals that they suggest would, collectively, raise the necessary funds. Of these, the most dramatic would be the introduction of value added tax in the USA. Less dramatic proposals include the introduction of a gifts tax and the elimination of tax breaks for specific industries (although they do not generally favour raising business taxes.

British readers will probably recognise echoes of Tony Blair’s approach to taxation in these proposals. Indeed, the whole of Graetz and Shapiro’s programme has overtones of New Labour (which, it will be remembered, drew inspiration from the centre-left in the USA). This should give pause for thought. Some may argue that the rejection of New Labour by both the left and the right following the Global Financial Crisis resulted in us being unable to evaluate the long-term impact of Blairite policies. However, it is clearly arguable that those policies only worked because the economy was expanding at the time and they ultimately failed to address the underlying issues that Graetz and Shapiro identify and also stored up both economic and political problems for the future.

There are thus many challenges that can fairly be addressed to Graetz and Shapiro. However, this does not diminish the importance of what they have written. The Wolf at the Door represents a challenge to those on the left to reconsider priorities and to focus on policies that are both capable of implementation and will make a real difference to people’s lives. It is also a challenge to those on the right to recognise the reality of economic insecurity and, if Graetz and Shapiro’s proposals are considered unacceptable, to come up with an alternative. Whatever one’s political starting point, The Wolf at the Door is worth reading.

“The Wolf at the Door” by Michael J. Graetz and Ian Shapiro was published in 2020 by Harvard University Press (ISBN 9780674980884). 285pp including glossary.

Richard Godden is a Lawyer and has been a Partner with Linklaters for over 25 years during which time he has advised on a wide range of transactions and issues in various parts of the world. 

Richard’s experience includes his time as Secretary at the UK Takeover Panel and a secondment to Linklaters’ Hong Kong office. He also served as Global Head of Client Sectors, responsible for Linklaters’ industry sector groups, and was a member of the Global Executive Committee.

The Future of Capitalism tackles one of the big issues of our time. Its impressive author, Sir Paul Collier, CBE, FBA is a distinguished member of the Blavatnik School of Government at the University of Oxford and a seasoned practitioner in development economics for which he received a knighthood. He is convinced that capitalism is the only economic system which can generate mass prosperity. Regrettably it has also divided societies, created dysfunctional democracies and posed risks to the planet. More than that he claims it is morally bankrupt. The challenge he set himself in this book is how to restore ethics within capitalism to prevent it drifting into either a totalitarian state (China) or populist nationalism (East European countries). In doing so, he eschews ideology claiming that all his policy prescriptions are based on evidence, analysis and pragmatism.

The inspiration for the book was Anthony Crosland’s The Future of Socialism, published in the 1950s, which set an agenda for the social democracy of the post war years in the UK. (To some readers Anthony Crosland might seem a minor figure out of a history book, but in his heyday he was the leading UK intellectual of the centre left and a Cabinet minister in the Wilson and Callaghan Labour Governments attempting to put his ideas into practice). Collier claims that the Crosland agenda worked well between 1945-70, even at one point describing it as the “miracle period”. It failed however because it neglected its roots in the ethical foundations of the nineteenth century cooperative movement.

 It was replaced by a combination of Utilitarian technocrats (mainly economists) intent on redistributing income to those below the poverty line (however defined) and lawyers committed to John Rawls philosophy which promoted the rights of disadvantaged groups based on race, gender, sexual preference and so on, which has become the basis for identity politics.

Both of these philosophical approaches emphasise the individual not the collective and differences between groups based on either income or disadvantage rather than the needs of persons and families. Each elevates a single moral prescription, “the greatest happiness of the greatest number” and “laws in a society must be designed for the most disadvantaged groups”. However, they neglect the normal moral instincts and values of people such as loyalty, fairness, obligation and desert which were central to the cooperative movement.

The philosophical foundation which Collier builds on is found in the writings of David Hume and Adam Smith (especially The Theory of Modern Sentiments) and the Pragmatism of nineteenth century American philosophers such as William James and Charles Peirce. After laying this down he devotes four chapters to restoring ethics within the state, firm, family and world. Then, in the final section he presents a plethora of ideas for restoring an inclusive society.

To tackle the geographical divide, he proposes taxing the metropolis and regenerating broken cities and regions through establishing local banks, local universities and business zones. Families can be strengthened by preventing them   from falling apart in the first place, supporting children in the early years, from pregnancy to the first day of school, raising standards of teaching in schools, offering improved post-school vocational education and extending home ownership. Tackling the negative effects of globalisation requires redistribution of resources to those areas which have lost out through free trade and technology.

In putting forward all these proposals he is not afraid to be controversial. He is scathing about the greed of investment banks. He argues for taxes on financial transactions and raise taxes on the incomes of highly skilled workers especially in finance and law. He wishes to see a new criminal law comparable to manslaughter which he calls bankslaughter. He backs immigration controls, strengthening traditional two parent families from whom they are genetically descended and having less state intervention through social policy dealing with the needs of children.

Although it is not fundamental to the main theme of the book I question Collier’s judgement that the period 1945-70 was as successful as he claims. It is certainly true that the new social contract devised by Beveridge, Temple and others which produced the post war Welfare State and mixed economy lasted the course. However, by the 1960s inflation was back accompanied by rising unemployment, prices and incomes policy were a failure and the nationalised industries were mired in the red, while by the end of the 50s the social infrastructure began to show signs of fraying through increased violent crime, illegitimacy and addiction. Meanwhile, some of Crosland’s policies were proving destructive; “If it’s the last thing I do, I’m going destroy every fucking grammar school in England. And Wales. And Northern Ireland”. By the time of his early death (58 years old) he became so disillusioned with the crisis of capitalism that he thought the creation of a ‘serious revolutionary socialist party’ was worth thinking about.

One question which needs to be asked is whether he has succeeded in the task he set himself, namely restoring ethics to firms, families and states. In the case of firms he devotes an interesting chapter to the way in which ethical firms of the past which he mentions – Imperial Chemical Industries (ICI), Cadbury, The Halifax Building Society – have given way to the vampire squids of today which are held in contempt as greedy, selfish and corrupt.

In order to achieve change he believes competition is an important discipline on business but increasingly limited because of the power of networks (electricity, water, railways) and the role of technology in creating unregulated natural private monopolies (Facebook, Amazon, Google, eBay and Uber). The conventional responses to these problems are regulation and public ownership, but both have severe limitations. As an alternative he suggests taxing economic rent, which by definition does not discourage productive activity or risk taking; reforming corporate law so that concern for the public interest should be mandatory for all board members, such as Public Interest Companies in the US; and introducing the new criminal offence of bankslaughter.

The problem with all these, which he recognises is that regulations can be got around by talented management, taxes reduced by clever accounting and laws fudged by legal argument.  After acknowledging that the cupboard is fairly bare he puts forward the novel suggestion that society needs to build a critical mass of ethical citizens who can judge the behaviour of companies, favourably or not. This is less than a specialised sub-police force and more a form of neighbourhood watch strengthened to have teeth. This may seem fanciful but the achievement of the women’s movement and climate change protests, based on evidence of discrimination or degradation show that great oaks grow from acorns. Post COVID-19 many questions will be asked about the future of our society, so his proposals may not be so fanciful.

To restore ethics to the state he rejects ethnicity, religion and shared values as a way to create shared identity because they are incompatible with modernity, despite the showing of how popular Judeo-Christian based ethics still remain. He plumps for a sense of belonging to place, something which is hard-wired in our psyche, especially the place in which we grew up and which we call home. Unlike Nationalism, Patriotism is an inspiring concept and he claims a good example of it is found in the politics of President Macron. A major raison d’etre of politicians should be to create narratives of shared belonging. To restore the ethical family, he suggests a greater acceptance of mutual obligations by parents in raising children rather than one focused on their own individual, personal success in work.

The one surprising weakness of the book is its treatment of religion. The book contains four references to religion and six to religious fundamentalism. All are wholly negative: religion leads to cultural separation, marriage is tainted by its religious association, it is the basis of a new nationalism, heir to fascism. Religion is almost always qualified by the adjective “extreme”. Jihad pogroms and other cultic, barbaric practices deserve the treatment he delivers and the Christian religion has many shameful episodes in its history. However, if restoring ethical behaviour in business, politics and society requires ethical citizens, ethical politicians and ethical family members, a rejection of self-aggrandisement, ‘freedom is not bound in servitude to the self but in escape from the self’ (p. 108), and strengthening a sense of obligation, surely a religion based on transcendence and true humanism must be a help to the cause.

On the evidence of nineteenth century history in the work of Gertrude Himmelfarb and Christie Davies, the irony is that ICI, Cadbury and The Halifax Building Society were deeply rooted in a late nineteenth century Christian culture, especially non-conformist, which was also an inspiration for the cooperative movement, friendly societies and the social reforms of the period. Non-conformity would also at this time have been a major force in Collier’s beloved Sheffield.

I enjoyed book but at the end it left me with a nagging question. It certainly respects the evidence, applies analysis to good effect and makes a number of interesting practical proposals. However, its conclusion is that religion has no place in the future of capitalism. In its neglect of the positive contribution of the Christian faith on British life and culture I fear it has strayed across the boundary of social science into ideology.

“The Future of Capitalism: Facing the New Anxieties” by Sir Paul Collier was published in 2018 by Harper Collins (ISBN 978-0062748652). 256pp.

Lord Griffiths is the Founding Chairman of CEME. For more information please click here.

This book is a concise attempt to grapple with the subject of the global economy, especially in the light of events such as the Brexit decision and the election of Donald Trump. Written by two business practitioners, it has a clear and slightly breathless style – one might almost say, an executive summary stretched over 150 pages.

The book is set out in four parts: (1) The World Today; (2) The Changing Worldview; (3) The Tumultuous World; (4) The World Tomorrow. While there are connections and overlaps in terms of the content throughout, there is certainly not any sense of a carefully developing argument as one moves through the different chapters. Instead, stand-alone insights are offered in a descriptive rather than an analytical manner.

In the opening chapter, I particularly noted statements along the following lines, many of which did not seem to me to be especially startling or fresh, but which none-the-less were of interest and value:

• – There has been a recent and massive growth in connectivity, population numbers, trade, GDP, and mobility of talent (page 5)
• – Disruption in global trade would have catastrophic effects (page 6)
• – Restoring trust after any major trade disruption could take decades (page 7)
• – A leading challenge to globalisation is rising inequality (page 8)

The chapter ends by including this statement: “When politics becomes the dominant feature in an economic domain the situation quickly becomes dangerous.” For me, this betrayed the methodological core of the book as understanding economics in a technical way rather than as a question for public debate and reflection.

I was therefore not surprised that chapter 2, which addresses local business, did not seem to have a deep sense of geography or engage with the political and philosophical questions surrounding the relationships between people and places. Modern economic and business theory (if not practice) famously has a weak sense of place. Chapter 3, which addresses inclusive capitalism and social purpose, also takes a rather instrumental vision of society and business, rather than feeling for an organic relationship.

Chapter 4 looks at global finance, and rightly sees this as a critical element within the globalisation of the economy. There is some interesting analysis here, but stating that “money is a commodity” (page 27) is, in my mind, to miss the unique property of the financial sector. Chapter 5 has some rich and helpful thoughts about diversity and kinship, and brings out the importance leaders have in helping others find meaning. Chapter 6, on NGOs, seemed to me to underplay the differences between these organisations and businesses, but it was helpful to see them included.

Part 2 takes the reader through the oil and gas sector, the emerging economies, China, India, Africa, and finally Australia. There are some good historical vignettes here, although I suspect the history is at times fairly superficial, and my overall impression was that these chapters are very readable, full of common sense, but somewhat lightweight on any deep or critical thinking and interpretation.

Part 3 begins with a chapter focused specifically on Brexit and Trump. There is some good descriptive work here, and the reason why these two events happened is judged to have been some kind of failure of economic theory, the need for “more active states” (page 102), and a better ‘partnership of public and private finance’ (page 103).

The rest of Part 3 covers the important subjects of new and disruptive technologies, the “internet of things”, new and much more responsive production models, lifestyle innovations, big data and analytics. I found all of this very interesting, albeit descriptive rather than attempting any thoughtful or reflective interpretation of the modern global economy.

Part 4 sets out to look ahead into the future, and considers the themes of work, human workers (over and against robots and AI), entrepreneurship, and then finally the future of globalization. Again, there is much of interest here, but mainly in terms of a description of current trends with some extrapolation rather than any far-reaching or radical “future-thinking”. Many of the developments described resonated with my own experiences, and I was especially pleased and intrigued to read the following: “The need today… is for humans to be more human-like” (page 141). This would make a great theme for a follow-up book.

Having been published in 2018 there could not, of course, have been any descriptive reference in this book to the Covid-19 virus episode, which has arguably been responsible for a bigger shock to the global economy and the assumptions underlying it than any other occurrence within the past 50 years. A bigger weakness in my mind was the strange almost complete absence of any engagement with the eco-agenda, which asks huge questions of the global economy and has rapidly become mainstream. However, notwithstanding these lacunae this book sets out a great deal of material in a concise and readable way. Alongside other more evaluative and thoughtful discussions it makes for a potentially useful resource for theorists, policy-makers and practitioners as they wrestle with the puzzles of the global economy of today.

“Global Business” by Mahesh K Joshi and J R Klein was published in 2018 by Oxford University Press (ISBN 9780198827481 ). 158pp.

Edward Carter is Vicar of St Peter Mancroft Church in Norwich, having previously been the Canon Theologian at Chelmsford Cathedral, a parish priest in Oxfordshire, a Minor Canon at St George’s Windsor and a curate in Norwich. Prior to ordination he worked for small companies and ran his own business.

He chairs the Church Investors Group, an ecumenical body that represents over £10bn of church money, and which engages with a wide range of publicly listed companies on ethical issues. His research interests include the theology of enterprise and of competition, and his hobbies include board-games, volleyball and film-making. He is married to Sarah and they have two adult sons.

Dr Justin Thacker describes Global Poverty: A Theological Guide as “In essence … a systematic theology of global poverty” (page 2). He explains that, in terms of the public apologetic content of the book, he has two primary aims: first, to issue a “plea for a reformed capitalism” and, secondly, to suggest “on theological grounds” that aid is not a long-term solution and should rather be viewed as “an essential but temporary measure” (page 4). He states that global poverty is complex and that there are no quick fixes and, in the course of a wide ranging discussion of theological, ethical and economic issues, he endeavours to draw out the implications of the big themes of the Bible, critique the views of other writers, analyse different approaches to development and comment on practical matters. The result is a book that is deeper and more conceptual than many Christian books on poverty. Unfortunately, however, it does not live up to its promise.

The book is arranged around the Biblical themes of creation, fall, Israel and redemption (the inclusion of Israel reflecting Thacker’s adoption of Christopher Wright’s view of the paradigmatic role of ancient Israel and the Old Testament law). In relation to each of these, Thacker seeks to draw out the implications in relation to poverty and our response to it of core Biblical truths.

There is much in the theological analysis that is well founded and helpful but there is also much that is highly contentious. Some of the contentious statements are of little importance (e.g. the statement that the purpose of the Jubilee regulations in the Old Testament “is that the nation might be a holistic blessing to all the nations”, page 116) and some, while of greater theological importance, are not fundamental to Thacker’s argument (e.g. his adoption of the Christus Victor model of atonement, page 148). Others, however, are both important and fundamental (e.g. the statements that “spiritual liberation is one of the fruits of political liberation”, page 109, and that “perhaps sin is not an individual concept at all”, page 56). It is hard to see how such statements can be squared with the Bible. Indeed it is hard to square them with other things that Thacker says (e.g. his critique of liberation theology). The result is that the theological underpinning of his conclusions is shaky.

Thacker’s statements relating to economic issues are also confused. He accepts things that are often ignored by those in Church circles: he recognises that “this side of the new heaven and new earth, there is no perfect and just political and economic system” (page 180), the inherent dignity of work (page 25) and the fact that corruption has a devastating impact on many low income countries (page 89); he acknowledges that inequalities between countries are decreasing and that this decrease is not as a result of the giving of aid (page 240); and he warns against “a victim mentality that denies agency” (page 167). Yet he refers to “systemic issues that keep the poor, poor” (page 65), he appears to believe that the poverty in low income countries is linked to the consumer lifestyles of high income countries (page 83), he asserts that “The core, wealthier nations are not accidentally wealthy but wealthy precisely because the peripheral nations are poor” (page 165) and he devotes considerable space to the alleged impact of “the colonial legacy” (e.g. “at least part of the reason Britain is wealthy today is because we stole from India during the eighteenth and nineteenth centuries”, page 70, and “we enjoy the fruits of … slavery”, page 80). Hence, he comments “I wonder if Cynthia Moe-Lobeda actually speaks the truth when she says, ‘when I donate money to an agency working in Mozambique, dare I consider a gift what is frankly stolen goods?’” (page 76). It is hard to reconcile all these statements. Indeed, one gets the impression that Thacker has found himself compelled to accept some important economic truths yet cannot bring himself to accept their implications.

Despite Thacker’s acknowledgement of the complexity of his subject, much of his analysis is simplistic. He often asserts a particular view without adequately analysing the arguments for and against it, his comments relating to price controls being an obvious example of this (page 119). He also falls into the common trap of leaving people feeling guilty about their behaviour (e.g. for what they buy) on the basis of statements that fail to recognise the complexity of the situation or provide a practical and problem free alternative.

Thacker wants to present his analysis as a via media but it ends up well to the left of centre. He appears to have bought a lot of Thomas Piketty’s analysis and might do well to consider the fact that even left-leaning economists doubt much of what Piketty has said (see After Piketty, which is reviewed on this website). Conversely, he caricatures free market approaches, criticising extreme statements that few Christians would seriously believe (e.g. the suggestions that “individuals sin within a basic structure that is righteous”, page 62, and that it doesn’t matter that we engage in morally questionable behaviour since avoiding it “will make no difference because everyone else is engaging in it anyway”, page 103). He also appears to believe that the only Christian free market approach on offer is that advocated by Wayne Grudem and Barry Asmus in The Poverty of Nations, which he attacks obsessively throughout the book. As the review of The Poverty of Nations on this website makes clear, it is a flawed book and a number (but certainly not all) of Thacker’s criticisms of the views expressed in it are well deserved. However, attacking Grudem and Asmus, does not dispose of the arguments in favour of a free market approach and against some of the things that Thacker advocates.

It is one of his attacks that reveals most clearly Thacker’s defective economics. He summarily dismisses Grudem and Asmus’ view that enlarging a nation’s overall gross domestic product is ultimately the only way of eliminating poverty (page 120) and, later in the book, baldly asserts that “continual economic growth is simply not a sustainable solution for the whole planet; it is only a solution for the rich minority” (page 245). He presumably believes the earth’s resources to be limited and the environmental costs of their use to be unacceptable. What he appears not to have considered is the possibility that human ingenuity (and in particular, scientific and technological advances) will release more resources and satisfactorily mitigate the environmental costs of their use. To recognise this, one only needs to imagine the impact that the harnessing of nuclear fusion would have.

Of course, Thacker is right that there is much more to human flourishing than can be provided by economic growth but, as the past 200 years demonstrate, economic growth is an engine that drives, even a precondition for, many desirable human outcomes.

The above litany of criticisms may give the impression that there is nothing good about Global Poverty but this is not the case. It contains some worthwhile analysis of various issues, such as paternalism, the concept of a moral obligation existing when no moral responsibility for a particular situation exists and the manifestation of sin in societal structures. The final third of the book is also better argued and more insightful than what proceeds it.

Thacker’s critique of secular and theological theories of development is particularly worth reading. It includes a discussion of the theologies of Christian Aid and Tearfund, two high profile UK based Christian aid agencies. Thacker commends the practical work of both of them and has included them among the charities to which he is generously donating the royalties from his book. However, whilst he rightly commends the theological grounding of Tearfund, he is (again rightly) highly critical of that of Christian Aid. It is thus unsurprising that it is the Global Advocacy and Influencing Director of Tearfund, Ruth Valerio, who is quoted on Global Poverty’s cover, saying “This is a superb book and I encourage you to read it”.

It would be nice to be able to agree with Valerio or, at least, to say that the stronger parts of the book outweigh its defects. Sadly, however, this is not the case, those wishing to consider an economically and theologically sound approach to poverty would be well advised to look elsewhere, perhaps starting with some of the other books reviewed on this website.

“Global Poverty: A Theological Guide” by Justin Thacker, was published in 2017 by SCM Press (ISBN 978 0 334 05515 0). 257pp.

Richard Godden is a Lawyer and has been a Partner with Linklaters for over 25 years during which time he has advised on a wide range of transactions and issues in various parts of the world. 

Richard’s experience includes his time as Secretary at the UK Takeover Panel and a secondment to Linklaters’ Hong Kong office. He also served as Global Head of Client Sectors, responsible for Linklaters’ industry sector groups, and was a member of the Global Executive Committee.

Thomas Piketty’s Capital in The Twenty-First Century, published in 2013 (English edition, 2014), is the economics equivalent of Stephen Hawking’s A Brief History of Time: it is a technical book that has secured mass sales, over two and a quarter million copies having been sold worldwide. One may wonder how many of the purchasers have read and properly understood it but there is no doubt that it has achieved almost cult status among those on the left of the political spectrum.

Its reception amongst economists has been mixed with divisions along predictable lines. Few, however, deny that its arguments, and the wealth of data underlying them, require critical evaluation and After Piketty, edited by Heather Boushey, J. Bradford DeLong and Marshall Steinbaum, is a significant academic contribution to this process. It focusses on the issue of economic inequality and comprises 21 essays framed by an introduction from the editors and a response to the essays from Piketty himself. Most of the contributors are economists, although some come from other disciplines (e.g. Daina Ramey Berry is Professor of History and African Diaspora Studies at the University of Texas and Gareth Jones is Professor of Urban Geography at the London School of Economics).

It is not a book to be read quickly and non-economists will find some parts heavy going, especially those littered with mathematical formulae. However, most of the book is accessible to any intelligent reader and, since Piketty’s key arguments are clearly set out, a prior knowledge of these arguments is not essential.

Most of the contributors are left-leaning and share significant parts of Piketty’s political outlook and the editors pin their colours to the mast in their introduction: they ask whether Piketty’s arguments are right or, at least, if they are not definitely right, whether his “disturbing scenario” is plausible and state that “the answer strongly appears to us to be: yes” (page 9). However, the book as a whole is by no means uncritical of Piketty. In fact, parts of it attack the foundations of his arguments and leave his edifice tottering.

Some of the essays are poor. In particular, a few descend into tedious left-wing rants (e.g. the section of Suresh Naidu’s essay entitled “Spheres of Wealth-Dictated Injustice”) and a number contain flashes of imprecise polemic, of which the reference to “proto-fascist populism” in the editors’ introduction is the first example (page 4).

Sadly, the essays of two of the editors (Heather Boushey and Marshall Steinbaum) are among the weakest in the book: Heather Boushey’s “A Feminist Interpretation of Patrimonial Capitalism” contains a few important points but ultimately adds little to the debate whilst Marshall Steinbaum’s “Inequality and the Rise of Social Democracy: an Ideological History” comprises a whistle-stop 30 page economic history of the USA, UK, France and Germany which is packed with contentious and unsupported assertions (of which perhaps the most extraordinary is the statement that the American entry into the First World War “had the flavour of a fanciful, elite foreign adventure”, page 448) and simple factual inaccuracies (such as the assertion that the UK government ministers during the Second World War “were for the most part the Labourites who had long advocated for a planned economy”, page 456). Gareth Jones’s essay (subtitled “Inequality, Political Economy, and Space”) is likewise short on careful logic and long on aggressive attacks on standard left-wing targets.

Parts of the book focus on issues that most people would regard as peripheral to its main subject (e.g. the two chapters that focus on historic – not modern – slavery) and there are a number of points that are assumed rather than argued (e.g. the Fabian sounding belief, expressed by several of the authors, that education is a key to overcoming the equality gap, which needs to be examined in the light of the growing evidence of the existence in a number of countries of a significant number of university educated people who are unable to secure anything other than low paid jobs). Furthermore, there are significant omissions. In particular, despite the commendable desire of the editors to integrate economics and other social sciences, there is no discussion of the impact of the conclusions and policy prescriptions on individual freedom, an omission that is most notable in David Singh Grewal’s essay, “The Legal Constitution of Capitalism”, which chillingly attacks the rule of law on the basis that it upholds capitalism.

These failings unquestionably mar the book but it remains well worth reading. It contains a number of high quality essays and much that should be thought provoking for all readers, whatever their political persuasions. The high points include Devesh Raval’s essay critiquing Piketty’s model, Eric Nielsen’s essay on human capital and wealth, Laura Tyson and Michael Spence’s essay on the effects of technology on income and wealth inequality and Mark Zandi’s essay on the macro-economic implications of rising inequality. Christoph Lakner’s essay regarding the global perspective is also an important correction corrective to the unduly western (or US) perspectives of some of the other essays.

Devesh Raval attacks Piketty’s famous assertion that inequality will continue to rise because r > g (the rate of return on capital is greater than the rate of economic growth). He points out that Piketty’s estimates of the elasticity of capital-labour substitution are out of line with the available literature and suggests that, in fact, capital and labour are not substitutable enough to sustain Piketty’s argument. He goes on to put forward two other explanations for the rise in the capital share of the economy: globalisation and labour saving technical change. These themes are then developed in subsequent essays, notably by Tyson and Spence and by Lakner. The conclusion of the former is that, “Inequality in market-based wealth and incomes is likely to increase over the next several decades, not because of features inherent in the capitalist system, but because of the effects of the digital revolution …” (page 203).

Neilsen questions Piketty’s focus on capital as the market value of tradeable goods. He cogently argues that “the omission of human capital is a serious weakness for both the data and the theory presented by Piketty” (page 151). In particular, he points out that inherited endowments include not merely the financial endowments considered by Piketty but also “social networks, cultural attitudes, and much else” (page 165). He rightly suggests that the inclusion in human capital in the mix is likely to result in policy proposals dramatically different from those put forward by Piketty. Indeed, he is bold enough to point out that, “A possible effect of Piketty’s plan … would be the immiseration of everyone to achieve a reduction in inequality”.

Some of the other contributors are likewise willing to draw conclusions that are unlikely to be welcome to many of Piketty’s supporters. In particular, coming from a global perspective, Lakner asserts that “The available evidence suggests that the Gini index of the global distribution of income has fallen for the first time since the Industrial Revolution, a development that is likely to continue” (page 261) and Zandi suggests that the “hand wringing over the prospects of a further erosion in income and wealth inequality the implications for the economy’s performance”, although reasonable, is likely to be misplaced since “prospects are good that inequality has peaked” (pages 406/7).

Such comments and conclusions demonstrate that, taken as a whole, After Piketty is by no means a simple contribution to the left wing scriptures: it is a serious exploration of the issues raised by Piketty. In fact, perhaps its most valuable contribution to the ongoing debate about inequality is the honest admission in a number of the essays that, despite the wealth of data that is now available and despite Piketty’s analysis, there remains much that we don’t know or don’t understand. Zandi points to numerous methodological and modelling problems that limit our understanding and several of the other authors point to deficiencies in the available data. The result is that, as Mariacristina De Nardi, Giulio Fella and Fang Yang point out in their essay, “Macro Economic Models of Wealth Inequality”, the mechanisms that cause both overall wealth inequality and individual outcomes within that distribution of wealth remain uncertain. Zandi thus wisely concludes, “Macro-economists should … not be comfortable that they have a good grip on what inequality means for our economic prospects” (page 411).

“After Piketty”, edited by Heather Boushey, J. Bradford DeLong and Marshall Steinbaum, was published in 2017 by Harvard University Press (ISBN 9780674504776). 565pp, plus notes.

Richard Godden is a Lawyer and has been a Partner with Linklaters for over 25 years during which time he has advised on a wide range of transactions and issues in various parts of the world. 

Richard’s experience includes his time as Secretary at the UK Takeover Panel and a secondment to Linklaters’ Hong Kong office. He also served as Global Head of Client Sectors, responsible for Linklaters’ industry sector groups, and was a member of the Global Executive Committee.

As an economic system, unfettered capitalism in the post-recession era has come under considerable scrutiny. Reports of business scandals and misdealings, as well as serious social inequalities, are but a few of the most cited examples. In the face of these criticisms, proponents of capitalism have come to its defence. In “The Ethical Capitalist”, entrepreneur Julian Richer joins these proponents, arguing not only that capitalism is the only viable option but also that, when pursued responsibly, it is a force for good.

The founder and owner of the remarkably successful home entertainment retailer Richer Sounds, the author is five times winner of the Which? ‘retailer of the year’ award. He has been an active supporter of the National Living Wage and has taken up the mantel against tax avoidance and in relation to the housing crisis but he maintains that capitalism can be practiced ethically.

Building on over forty years of business experience, Richer begins his book by setting out his understanding of ‘ethics.’ At this point, the reader might be forgiven for any scepticism towards his somewhat simplistic definitions which often revert to rather superficial ideas of what it means to be ethical – as well as quoting mantras such as ‘what goes around comes around’ and you ‘get nowt for nowt’ (page 29).

However, as Richer really gets going with his practical applications, we start to realise that he may just have some valid points. In the first part of the book, he explains how the ethical business should treat its key players – employees, customers and suppliers. Chapter 1 draws into focus the importance of company culture, revealing how costly practices such as employee fraud, theft and absenteeism are often learnt behaviours from management. Being ethical, therefore, involves actively pursuing a positive work culture, starting at the beginning of the hiring process with honest job adverts, which attract the right candidates. Imploring businesses to follow through with prioritising internal promotions, paying a Living Wage and providing ongoing training opportunities, he makes it clear that this is not simply an optimistic vison for business altruism. By changing the way in which a business relates to its employees, it will minimise the cost of high staff turnover and this can only be positive for profitable success.

Chapters 2 and 3 make a similar case for a more ethical approach towards customers, suppliers and supporters. The overall message is that reputation is critical, in so much as it encourages repeat custom and builds crucial relationships. At times, the examples Richer includes from his own business can almost appear too saccharine, such as the time he delivered flowers to the home of a woman after a poor customer service experience.

Some may also challenge his assumption that customers are always concerned about a company’s conduct, more so than lower prices. Could it be that consumer consciousness of certain issues is only significant in periods of high media attention? Nevertheless, businesses are indeed playing a very short-sighted game when they prioritise crisis management over risk management, in a world of increasing consumer savviness and a ruthless social media scene.

In the second part of the book, Richer goes on to tackle capitalism itself, recommending points of reform and highlighting areas where limitation is both intentional and desirable. In chapter four he demonstrates the compatibility of capitalism and the principle of a National Living Wage. Using both national and international examples, Richer argues that higher wages have not automatically equated to fewer jobs. Instead, they improve a company’s reputation, which in turn boosts profitability. The wage-profitability relationship will no doubt be a contentious issue for many readers.

Richer further argues that we need to name and shame those companies which continue to resist it. Again, the assumption that reputation is a make or break factor in consumer decisions underpins his arguments, but he does provide empirical evidence to support his view.

In chapter 5, Richer critiques Thatcherite individualism, arguing that society is very much a reality. Often conveniently forgotten is that government is essential for business, not least because it provides the very environment required for it to thrive. He argues that nobody is entirely ‘self-made’ and we’re called to consider, who runs the banking system necessary for transactions, creates the laws under which businesses operate and maintains the infrastructure which holds everything together? Here too it is suggested that naming and shaming those who purposefully avoid paying their taxes would be effective, drawing on the Scandinavian model as an example. What exactly Richer views as ‘purposefully avoiding taxes’ could benefit from a more detailed discussion.

Taken from a simple game theory perspective, one might reason that it would require more than this to produce change. Businesses may very well take the view that they can ride out an unpopular image if their product or service is valued highly enough and therefore refuse to be the first in their industry to reform. Nevertheless, if we accept that consumers are becoming ever-more discerning, Richer is right to assert that capitalism doesn’t have to equal the eradication of civil society.

Finally, in chapter 6, we are cautioned that the principles of the free market cannot and should not be applied everywhere. Using privately run prisons as a key example, Richer instead focuses on the separation between ownership and management. Whilst this is perhaps the hardest of his arguments to follow, as it is unclear where exactly we should draw the line, separating complex social needs from simplistic market equations is a refreshing message from a believer in capitalism, who recognises that it need not be all or nothing.

Richer leaves business owners with the charge to get started somewhere in making a difference – and he’s provided plenty of examples and inspiration throughout his book to get them going. Despite possible criticism that his ideas rest upon certain assumptions about motivation for human behaviour, his argument that treating people well is not only admirable but also good for business, is compelling, well-evidenced and convincingly nuanced.

“The Ethical Capitalist” by Julian Richer was published in 2018 by Random House (ISBN-13: 978-1847942197). 192pp.

Georgina Bishop is Senior Editorial Assistant within the Social Sciences at Routledge. She obtained her BA in History and Politics from the University of Nottingham in 2016.

Neoclassical normative economics seeks to avoid state paternalism. On the assumption that human beings display “integrated preferences” (i.e. preferences that are stable, context-independent and internally consistent), this objective may be secured by public policy objectives being based on “preference-satisfaction”. However, psychological experiments over the past 30 years have demonstrated that the assumption is false: human preferences are highly context-dependent (e.g. people display loss aversion and thus value an item more when they possess it than when they do not). This finding challenges neoclassical economics and raises the question whether there is no alternative to centre-left paternalism.

Professor Robert Sugden of the University of East Anglia thinks that there is an alternative and in The Community of Advantage makes “an attempt to maintain the liberal tradition against … a challenge from behavioural economics” (page 4).

Sugden dismisses previous efforts to meet that challenge. In particular, he takes on those who argue that, whilst human decisions may be influenced by irrational factors, people have “latent preferences” which may be used as a plumb line for preference-satisfaction. He asserts that there is no experimental basis for believing that such preferences exist and thus they cannot form the foundation of welfare planning. He thus dismisses Sunstein and Thaler’s concept of welfare planners creating conditions in which people are “nudged” towards decisions that satisfy their latent preferences. In short, Sugden shares Hume’s scepticism about human rationality and believes that economics should proceed on the basis that such rationality does not exist.

Some might conclude that this leaves liberal economics nowhere to go. However, Sugden suggests that it can be saved by the substitution of what he calls the “Individual Opportunity Criterion” for the traditional preference-satisfaction criterion. He argues that, “as viewed by each citizen separately, more opportunity for that person is better than less” (page xi) and hence he attaches “normative significance to opportunity sets without explicit reference to individuals’ preferences” (page 115). He defends this approach on the basis that it treats humans as responsible agents and the concept of responsibility “provides philosophical underpinning for the claim that opportunity has value” (page 106).

Sugden sets this proposal in the context of “a contractarian perspective”. He points out that, whether expressly or impliedly, economists normally address “an impartially benevolent autocrat” (page 23) and argues that it is both more useful and more consistent with a liberal view of society, to adopt the point of view of individual participants in society: “the most fundamental characteristic of this perspective is that a recommendation is addressed to a set of individuals, showing those individuals how they can coordinate their behaviour to achieve mutual benefit” (page 37).

This is, of course, a liberal, market-based view and Sugden, therefore, examines and defends the moral status of market relationships. He recognises that the findings of behavioural experiments challenge the idea that the achievement of mutual benefit is generally well served by the free actions of self-interested agents in competitive markets. Such experiments have found situations in which self-interested agents would fail to realise opportunities for mutual benefit but ordinary human beings succeed in doing so. Sugden, however, argues that it is wrong to think that there is “a fundamental opposition between the attitudes that are expressed in market relationships and those that are expressed in genuinely social relationships” (page 207). His conclusion is that “it may be possible to think of market relationships as expressing cooperative attitudes that are complementary with kinds of pro-sociality that can help individuals to solve collective action problems” (page 208).

Underlying these ideas is a long history of philosophical thought. The “contractarian” viewpoint is expressly derived from the thinking of Hobbes and Hume and a nuanced view of human behaviour in a market context can be traced back to Adam Smith (see Humanomics by Vernon Smith and Bart Wilson, which is reviewed on this website). More fundamentally, as Sugden acknowledges, he is greatly indebted to John Stuart Mill’s concept of the market as a “community of advantage”, hence the title of his book.

Sugden’s approach is thus vulnerable to some of the charges levelled against his philosophical forebears. In particular, many will question the moral relativism inherent in it and point out that, despite his best efforts to eliminate absolute moral values, the statement that “the ultimate authority for judging what is in a person’s interests is that person himself” (page 83), which underlies the Individual Opportunity Criterion, appears to be an assertion of an absolute reference point.

The psychological foundations of Sugden’s approach are of more recent origin than its philosophical foundations and some caution is required in relation to them. The results of “trust games” and similar experiments are not in doubt but the interpretation of at least some of their findings is controversial, as Sugden himself acknowledges. Consequently, whilst his case for the consistency of his theory with human psychology is persuasive, it is not conclusive. In particular, whilst it is clear that people often do not display “integrated preferences”, it is not clear that the concept of rational preferences must be completely discarded. Sugden asserts that he does “not want to claim that individuals are never conscious of akrasia” (i.e. acting against their better judgement; page 81) and, once this concession has been made, one has to take seriously the possibility that individuals have some latent preferences (their “better selves”) even if this concept cannot bear the weight that has sometimes been placed on it by economists.

Many readers will thus take issue with much of what Sugden says. However, those who dislike his moral relativism may still accept that a “contractarian” viewpoint is useful and those who disagree with his view of human psychology should still take note of the fact that he is suggesting that a liberal approach to economics is justified even if one adopts this. Furthermore, the philosophy inherent in his defence of the market economy should not distract from the fact that his underlying position is one that can be endorsed by a wide spectrum of people. The final few lines of the book are worth quoting in full:

“I share Mills’ conviction that cooperation for mutual benefit is the fundamental organising principle of a well-ordered society. The market is not, or should not be, an arena of non-moral, instrumental motivation from which practices that are more genuinely or more intrinsically valuable need to be insulated. Market transactions are a crucial part of the network of cooperative relations that make up civil society” (page 281).

The Community of Advantage is not an easy read. Indeed, Chapter 6 (The Invisible Hand) is such heavy going that some readers may be tempted to give up at that point. However, the reader who leaves out some parts of the book will still benefit from other parts and the fact that large parts are stitched together sections of previously published papers is helpful since key concepts are considered on a number of occasions.

Those who persevere with the book will be rewarded. Whatever one’s philosophical starting point, it is worth reading.

“The Community of Advantage” by Robert Sugden was published in 2018 by Oxford University Press (ISBN 978-0-19-882514-2). 281 pp, plus notes.

Richard Godden is a Lawyer and has been a Partner with Linklaters for over 25 years during which time he has advised on a wide range of transactions and issues in various parts of the world. 

Richard’s experience includes his time as Secretary at the UK Takeover Panel and a secondment to Linklaters’ Hong Kong office. He also served as Global Head of Client Sectors, responsible for Linklaters’ industry sector groups, and was a member of the Global Executive Committee.

Economics is a social science. It relates to the behaviour of human beings and its success as a science turns to a considerable extent upon its ability credibly to model that behaviour in such a way as to enable reliable predictions to be made.

Neoclassical economists have focused on the concept of utility maximisation as a governing model (“Mr Maximise Utility” or “Max-U”). This approach has come under sustained attack in recent years and Nobel Prize winning economist Vernon Smith and his colleague at Chapman University, Bart Wilson have been at the forefront of these attacks. Humanomics is their latest salvo. It brings together in a concise form (the book being only 207 pages long) the research and thinking that they have undertaken over the past couple of decades.

Smith and Wilson accept that Max-U “served well-enough the observational demands of decision in market supply and demand experiments under perfect enforcement of property” (page 159) but they point to its failure to account for the results of two person trust game experiments of the past 30 years. They argue that a new theoretical model of the relevant human behaviour is necessary, and they seek this in Adam Smith’s first book, The Theory of Moral Sentiments (1759). They suggest the theory put forward in that work both explains modern experimental results and has predictive force.

Most prospective readers of Humanomics will have heard of Adam Smith’s later and more famous work “An Inquiry into the Nature and Causes of the Wealth of Nations” (1776) but it is likely that few will have read The Theory of Moral Sentiments and many will question whether a largely forgotten book written over 250 years ago is worthy of resurrection. However, few will have any doubts on this score once they have read what Smith and Wilson have to say about it.

The first half of Humanomics largely comprises an explanation of the perceived problem in the concept of utility maximisation, the dismissal of previous attempts to solve that problem and a detailed analysis of Adam Smith’s theory. It includes a close examination of Smith’s terminology, which is vital since some of his key concepts are no longer in everyday use (e.g. “beneficence”) and others of them are used in a sense that does not quite correspond to some modern usage (e.g. “sentiments”). Having done this, Smith and Wilson move on to extract various axioms, assumptions and principles from Smith’s work. Some of these may seem self-evident but the reader may have a sneaking suspicion that many economists have forgotten them (e.g. “Axiom 1: Human beings fellow feel with each other”, page 71). Others are less obvious but appear to correspond with everyday experience (e.g. “Axiom 4: As compared to a normal baseline condition, human beings experience an asymmetrical change between feeling something good (e.g. joy) and feeling something bad (e.g. sorrow)”, page 73 – an axiom which is evidenced by the disconcerting fact that vendettas tend to have rather longer lives than alliances).

Smith and Wilson particularly stress Adam Smith’s concepts of “fellow feeling” and “the impartial spectator”. Quoting Deirdre McCloskey’s Bourgeoise Equality (which is reviewed on this website), they point out that we misunderstand Adam Smith if we focus solely on his concept of the invisible economic hand of the market place: Smith saw two invisible hands, the second being the social hand of the impartial spectator (pages 5-6). We are social beings and, as Adam Smith put it, “we endeavour to examine our own conduct as we imagine any other fair and impartial spectator would examine it” (page 75).

Having set out their theoretical stall, in the second half of the book, Smith and Wilson move on to summarise the results of the trust game experiments of recent years and explain them by reference to the theory. They suggest that this provides a convincing explanation of a number of the experimental observations. For example, they suggest that it explains why many people are willing to take a financial risk by trusting another person (even an unknown stranger) to “do the right thing” and why a clear majority of people, having been trusted in this way, prove trustworthy even though they could benefit financially by being selfish and even though this selfishness would never be known to anyone other than themselves. It may even explain the counter intuitive fact that the addition to the trust game of a mechanism whereby the first person can financially punish the second if they are selfish increases rather than reduces the incidence of selfish behaviour

Humanomics is a dense book that requires detailed study. It also contains a significant amount of mathematical and quasi-mathematical propositions, which will put off some readers. However, it repays careful attention, most of the maths will be understood by those who have some experience of formal logic and, since all of the key arguments are explained verbally, other readers can skip the maths without thereby losing the thread of the argument (although, in a few places, they may worry that they have missed something).

Inevitably, the book has shortcomings. For example, in places, it betrays the fact that large parts of it comprise reworked papers published previously by the authors and other collaborators (e.g. there is a lot of repetition and the end of chapter 10 reads like the climax of the book even though three more chapters follow it). More seriously, many readers will find the explanations of the experiments so compressed as to be hard to follow, at least without reading on and then referring-back to earlier parts of the book. Furthermore, the book does not explore the economic or policy implications of the experimental results and theoretical explanations advanced in it, although it contains tantalising hints of some of these (e.g. the comment that some “features of good conduct cannot be extorted, coerced or legislated”, page xv).

More seriously, whilst the authors have done an excellent job in analysing Adam Smith’s theory of moral sentiments, they have barely scratched the surface of a critique of it. Of course, at a high level, they are arguing that its predictive power suggests that is passed the test of being a good theory. However, a close examination of their experimental results suggests that the predictive value may not be as great as they would like to believe. Furthermore, they don’t examine the origins of the sentiments that Smith finds in human beings: they accept Smith’s assertions that either “they seem to have been given us by nature” (page 46) or they arise inexorably from the process of socialisation (e.g. page 74).

For some purposes, this deficiency doesn’t matter but many Christians and other theists will wish to suggest that there is a deeper, more fundamental explanation of human nature. Furthermore, the failure to examine closely the origins of human sentiments leaves open the question whether and to what extent they may be culturally relative and thus less universal than Adam Smith believed. For example, it may be that, at the very high level of generality dealt with by the axioms, principles and assumptions identified by Smith and Wilson, human sentiments are universal. However, what humans perceive to be worthy of gratitude and resentment (to quote Axiom 3, page 71) and, more generally, what is perceived to “satisfy our social impulse” (Principle 1, page 74) may vary from time to time and place to place.

Deirdre McCloskey considers the impact of changes in ideas in works such as Bourgeoise Equality and articles such as Adam Smith Did Humanomics: So should we (2016) and Max U versus Humanomics: a critique of neo-institutionalism (2015). It is clear that her theories and those of Smith and Wilson are related but it would be interesting to explore further whether, ultimately, hers are more subtle and ultimately more persuasive than those of Smith and Wilson or, for that matter, those of the great Adam Smith himself.

That said, one should not criticise a book for not being the last word on a subject or for giving rise to questions that require further attention. Humanomics is deeply thought provoking and, although not an easy read for the non-specialist, should be read by those who want to think further about human economic behaviour.

“Humanomics: Moral Sentiments and the Wealth of Nations for the Twenty-First Century” by Vernon L. Smith and Bart J. Wilson, was published in 2019 by Cambridge University Press (ISBN 978-1-316-64881-0). 207pp.

Richard Godden is a Lawyer and has been a Partner with Linklaters for over 25 years during which time he has advised on a wide range of transactions and issues in various parts of the world. 

Richard’s experience includes his time as Secretary at the UK Takeover Panel and a secondment to Linklaters’ Hong Kong office. He also served as Global Head of Client Sectors, responsible for Linklaters’ industry sector groups, and was a member of the Global Executive Committee.

The Job has received rave reviews and it is easy to understand why. Its subject is an important one, the future of work in the digital age, and it is the kind of book that people like. Shell is a journalist who writes well, using eye-catching turns of phrase and telling innumerable stories to provide human interest. She taps in to the feeling that all is not well but, as the book progresses, shifts from heart-breaking stories to heart-warming stories, suggesting that we can do something about the problems that she has identified and that there is a bright future in front of us. Indeed, the book ends with a rallying cry: “Let’s shake off the dread and recalibrate our priorities. The Enlightenment ideal of human advance lifting us from a life of toil into a life of purpose and meaning is at our doorstep. We only need to muster the political will – and the trust – to answer the bell” (page 322).

In the course of this progression from worry to hope, Shell makes some important points and raises important issues, especially relating to the place of work in society and in individual lives. Her focus on the impact of work on people is to be applauded and represents a valuable corrective to those academic tomes that, intentionally or unintentionally, depersonalise economic activity.

Unfortunately, however, The Job is a deeply flawed book. It contains little by way of true economic analysis and, whilst most of the stories are interesting, Shell makes few attempts to analyse the extent to which each of them is typical or what lessons we may legitimately draw from them.

More fundamentally, it is hard to know precisely what Shell is advocating. In the introduction, she states that “In what follows, I make the case to squarely place the innovation of sustainable and worthy work on our public agenda” (page 14) and she constantly refers to “good work”. However, she never defines what she means by this. In some places, she appears to have a somewhat romantic view of work in factories in the twentieth century (e.g. “For many workers, factories can be a kind of second home, and fellow workers a second family”, page 100) but she recognises that there can be no return to the past; in other places, she appears to equate a “good” job with a reasonably paid job (e.g. when she quotes statistics about pay in the United States, page 58) and the subject of the book is largely paid work, although she also recognises the value of unpaid work. More fundamentally, she appears to agree with Michael Pratt that “the quest for meaning through work is among life’s most powerful drivers” (page 97), yet she also suggests that we should not be seeking meaning through work, (page 134).

It is hard to work out exactly what she believes the problem to be. Having apparently, in the early chapters, lamented and explained (at least to her satisfactory) the decline in “good” work and asserted that we need to respond “as good jobs grow scarcer” (page 134), towards the end of the book, she dramatically states that “our National Work Disorder is not really about scarce opportunities: there will always be more than enough good work to go around” (page 319).

Unsurprisingly in light of the confusion as to the nature of the problem, Shell’s “solutions” are unclear. She states that “For many if not most of us, the first step is to question the hard-held assumption that we must make ourselves a good fit for the job rather than create work that is right for us, work that we control rather than a job that controls us” (page 66). Yet later she quotes Michael Pratt as saying that “it’s a dangerous business to advise young people to ‘follow their passion’. Most of us never find one, at least not one that pays the bills” (page 106).

She is equally confused in relation to job stability. Having early in the book demonstrated the decline of the life-long job, one of the stories towards the end of the book illustrates the warmth generated by one particular initiative by quoting an employee who states that they “plan to spend 40 years with this company” (page 310). Shell gives no warning that this may be a pipedream.

The detailed “solutions” put forward in the second half of the book are a hotchpotch of ideas which Shell would doubtless defend on the basis that they illustrate the fact that there is no one over-arching “solution”. However, the solutions themselves are full of contradictions and lack adequate analysis. For example, she spends some pages talking about promoting arts and crafts and asserts that “for every hundred jobs created directly in the arts, sixty-two more jobs blossom in retail, information technology, manufacturing, hospitality, and food service” (page 201). However, she appears to have forgotten what she herself has said about the unreliability of craft production (page 99) and the far greater leveraging effect of heavy industry (page 177). Likewise, her feel-good stories about cooperatives, employee ownership, the use of wasteland and small manufacture, whilst illustrating initiatives that are commendable and doubtless enriching the variety of economic and societal activity, smack more of romanticism than serious proposals for economic change. One of the big problems with Shell’s proposals is that she gives no evidence that they are scalable.

Some of Shell’s other ideas leap from nowhere and are inadequately worked through or justified. These include the suggestion of modifications in the tax structure to incentify employers to create “not just more jobs but better jobs” (page 236) and the suggestion of a “Basic Income Guarantee” (page 315ff). Shell might respond that, in some cases, she is merely noting what others have suggested and, in others, she is merely putting forward ideas for further discussion. However, if this is the case then the book is saying little that is new, which is not its claim.

Following a deluge of stories towards the end of the book, Shell says, “Great stories, sure, but you have every right to ask, “What’s your point?”” (page 311). Indeed we do and this question may be applied not only to the stories in the chapter in which it appears but to the book as a whole. It may well be that one of the main reasons for the popularity of the book is that, by asserting so many different things (including things that are contradictory), by avoiding specificity and clarity and by not committing unequivocally to particular ideas, the book can be all things to all people (at least those of a mildly centre-left disposition). In any event, whilst many will enjoy reading The Job and will be stimulated by parts of it, those who are seeking careful analysis and clearly worked through proposals need to look elsewhere.

“The Job” by Ellen Shell, was published in 2018 by Currency, an imprint of Crown Publishing Group, a division of Penguin Random House (ISBN 978-0-4514-9725-3). 326pp, plus notes.

Richard Godden is a Lawyer and has been a Partner with Linklaters for over 25 years during which time he has advised on a wide range of transactions and issues in various parts of the world. 

Richard’s experience includes his time as Secretary at the UK Takeover Panel and a secondment to Linklaters’ Hong Kong office. He also served as Global Head of Client Sectors, responsible for Linklaters’ industry sector groups, and was a member of the Global Executive Committee.

The past 200 years have seen a huge increase in aggregate global wealth, which has benefited the vast majority of people around the world. Conservative estimates suggest that average real wages have increased ten-fold and the increase in wealth has probably been considerably greater than this (perhaps thirty-fold or even a hundred-fold). Why has this happened? Why are we now so rich? This is the fundamental question that Deirdre McCloskey seeks to address in Bourgeois Equality, the final volume in her trilogy relating to bourgeois values.

Those who have not read it may doubt that we needed yet another book about “the causes of the Industrial Revolution”. Those who have read it will disagree. Its scope is breath-taking: in which other book about economic development would you find 20 pages of analysis of the novels of Jane Austen, two chapters relating to the historical change in the meaning of the word “honest” and its equivalents in other languages, a discussion of the economic impact of post-millennialism and comments on subjects as diverse as the philosophy of the mind and the economics of the temple systems of the Ancient Middle East? McCloskey is Distinguished Professor of Economics, History, English and Communications at the University of Illinois in Chicago and her inter-disciplinary approach to her subject is anything but conventional.

She begins by attacking almost all of the widely accepted explanations of what she calls “The Great Enrichment”: trade and export lead growth (whether or not accompanied by political domination); the accumulation of capital; consumer lead demand; the scientific revolution; the growth in modern institutions; and much else. The role of some of these things is dismissed in summary terms, often with a quotable quote. Other factors (such as property rights, the accumulation of capital and trade) are recognised as being, to some extent at least, necessary for economic growth but dismissed on the ground that they are historically commonplace. As McCloskey puts it, “Oxygen is necessary for a fire but it would be at least unhelpful to explain the Chicago Fire of October 8-10, 1871 by the presence of oxygen in the earth’s atmosphere” (page (xiii)).

In place of the normal list of explanatory factors, McCloskey puts “ideas”. The book is subtitled, “How ideas, not capital or institutions enriched the world” and McCloskey asserts that the key thing that changed in the period leading up to the start of The Great Enrichment was “ideology” (page xxii). Her claim is “that the initiating change leading The Great Enrichment was in words” (page 235) and she spends hundreds of pages defending this thesis. She argues that aristocratic values were replaced by bourgeois values (“The new ethic was of betterment, novelty, risk taking, creativity, democracy, equality, liberty, dignity”, page 279) and this led to the wave of innovation that she calls, “trade-tested betterment”, which directly resulted in The Great Enrichment, first in the UK and then elsewhere.

So is McCloskey’s theory simply Max Weber revisited? Although, unsurprisingly, McCloskey dismisses Webber’s view of the role of anxiety caused by the doctrine of predestination, her approach is clearly related to that of Weber, probably more closely than she would admit. It is based on ideas rather than material causes and recognises the profound role of religion in the creation of the relevant ideas. However, there are important differences between Weber’s and McCloskey’s approaches including their opinions as to precisely which religious beliefs gave rise to the key ideas and the relationship between, on the one hand, these ideas and, on the other, psychology and sociology.

Speaking generally, it would be reasonable to assert that McCloskey believes that the crucial change between 1600 and 1800 was a cultural change. However, she vigorously objects to this characterisation of her view, saying that calling ideas “culture” is “the vague way people talk when they have not actually taken on board the exact and gigantic literature about ideas, rhetoric, ideology, ceremonies, metaphors, stories and the like since the Greeks or the Talmudists or the Sanskrit grammarians” (page 122). She also, and perhaps with more justification, is at pains to point out that she is not asserting that there was a psychological change but rather that there was a sociological change.

McCloskey writes passionately and this passion points to a key issue: deep down, this book is not about the causes of Industrial Revolution but about how we should behave today in order to ensure that The Great Enrichment does not stall. McCloskey says that she is an optimist but she is clearly worried that things could go badly wrong. As she puts it, “Modern politics is a four-way tug of war between liberalism in the sensible part of the elite, socialism in the rest of the elite, traditionalism in the peasantry, and populism in the proletariat” (page 136). She turns aside from her central thesis to attack the left’s focus on equality of outcomes (and specifically the Gini coefficient), the power of the state to secure economic betterment (which she contemptuously dismisses), the idea that mechanisation and betterment causes poverty rather than wealth, regulation in general and what she refers to as “well-intentioned but erroneous policies that make us feel helpful even when they in fact damage the people we intend to help” (page 73).

She reserves her most savage comments for what she calls “the clerisy”, a term that she uses to refer to academics and intellectuals who sneer at Bourgeois values and promote either socialism or, on the other side of the political spectrum, nostalgic paternalism or worse: “The liberty of the bourgeoisie to venture was matched by the liberty of the workers, when they got the vote, to adopt growth-killing regulations, with a socialist clerisy cheering them on. And the dignity of workers was overmatched by an arrogance amongst successful entrepreneurs and wealthy rentiers, with a fascist clerisy cheering them on. Such are the usual tensions of liberal democracy. And such are the often mischievous dogmas of the clerisy” (page 404).

A book written with such passion and having such a broad scope inevitably has its defects. McCloskey has a tendency to overstate things (e.g. her assertions regarding the ubiquity of the rule of law including, surprisingly, in the empire of Genghis Khan, page 111, cannot go unchallenged); many other academics could legitimately feel bruised by the strength of the language with which she attacks them; and the book is too long, the final 150 pages in particular containing much material that repeats earlier points. There are also less important issues: errors of fact (e.g. Rev John Newton was not a Quaker as it stated on page 306); ex-cathedra statements that many will dispute (e.g. “Ordinary Europeans in the Middle Ages were barely Christian”, page 333); and statements that will only be comprehensible to a minority of readers (e.g. the reference to Ian Botham hitting a six, page 126).

However, these defects should not put anyone off. The book is essential reading for those who want to broaden their perspective on the causes of our current prosperity and to consider possible solutions to current economic and societal issues in the light of the lessons of the past. McCloskey’s passion is justified by the importance for her subject for the modern world. The onus is now on those who disagree with her arguments to answer them and on those who agree with these arguments to refine them.

“Bourgeois Equality” by Deirdre McCloskey was published in 2016 by The University of Chicago Press (ISBN-13:978-0-26-52793-2). 650 pp.

Richard Godden is a Lawyer and has been a Partner with Linklaters for over 25 years during which time he has advised on a wide range of transactions and issues in various parts of the world. 

Richard’s experience includes his time as Secretary at the UK Takeover Panel and a secondment to Linklaters’ Hong Kong office. He also served as Global Head of Client Sectors, responsible for Linklaters’ industry sector groups, and was a member of the Global Executive Committee.

Kenneth Barnes currently holds the Chair in Work Place Theology and Business Ethics at Gordon-Conwell Theological Seminary. As might be expected, therefore, Redeeming Capitalism is about the theology and ethics of business. Its basic argument is simple: the capitalist economic system that now exists is not the same as that which has existed in the past and, specifically, is not that endorsed by Adam Smith; it suffers from serious flaws that derive from a “moral vacuum” (page 1), which is itself a product of post-modern thinking; yet no other economic system provides a better workable alternative, the thinking of writers such as Picketty and Poole is hopelessly Utopian (pages 81 and 86, respectively) and the solution does not lie in regulation (page 59); what is needed is, essentially, moral reformation and the replacement of “post-modern capitalism” (Chapter 6) with “virtuous capitalism”, being capitalism based on Aquinas’s cardinal virtues (Chapter 13).

There is little to criticise in this as an overall thesis. However, below this very high level, much of what Barnes says is superficial, questionable or simply wrong. Indeed, it is an example of the kind of thing that, a generation ago, Peter Bauer memorably described as “ecclesiastical economics”.

The book is littered with errors. Some of these are minor (e.g. the statement on page 23 that the lingua franca throughout most of the Roman empire was Greek). However, others are more serious. In particular, Barnes’ attack on the behaviour of investment banks in the run up to the Global Financial Crisis is undermined by mistakes such as his definition of derivatives as instruments predicated on the “anticipated performance, or cashflow” of the underlying assets (page 4, emphasis added) and his assertion that, whilst what people do with their own money is largely their business, the problem is that “investment banks deal with other people’s money, and the morality of gambling in the context, is at best, questionable” (page 7). The definition is only true of some derivatives; the assertion fails to recognise that it was proprietary business (i.e. banks dealing for their own account) that lay at the heart of the Global Financial Crisis, not agency business.

Overall, Barnes’ attack on modern capitalism is long on eye-catching statements and short on justification. His stark statement that “the cause of the Global Financial Crisis and the recession that followed was corporate greed and mismanagement” (page 71) is a case in point, as is his assertion that there is a “consensus that the financial services sector is rigged and that corruption and collusion between banks, central banks, regulators, and politicians is rampant” (page 75).

Furthermore, scattered through the book are remarks about particular issues that fail to engage with the underlying arguments. For example, his statement that “on average, women are paid about 20% less than men across the entire spectrum of the economy” (source unstated) followed by the assertion that “the numbers are simply too extreme not to be attributable, at least in part, to gender discrimination” (page 127) is inadequate. His statement (this time sourced) that “nearly eight per cent (7.8%) of Morgan Stanley’s employees went to Ivy League schools even though they represent less than one half of one per cent. (0.4%) of university students” (page 127) is not in itself problematic. However, he implies that the success of Ivy League students is the result of nepotism and is an “economic injustice” (page 128) but he never presents evidence to support these claims.

Barnes’ comments on the living wage are likewise superficial. He says that “Those who oppose this concept argue that it interferes with the free market and is therefore a fundamentally bad idea” (page 138) and later asserts that “It seems obvious to some … that the only real objection to the establishment of the living wage is the short-term effect it would have on company profits” (page 138). He has clearly not absorbed the writings of those like Thomas Sowell who presents cogent reasons for thinking that the living wage harms those it is supposed to protect.

A substantial part of the book is taken up by what Barnes concedes is “a very concise history” of economics (Chapter 2) and analyses of the views of Adam Smith, Karl Marx, Max Weber and some modern writers (Chapters 3 to 7). These chapters contain interesting material. Barnes highlights some points raised by Adam Smith that many today forget and rightly pinpoints some serious deficiencies in the views of others. However, the result of this is that Barnes doesn’t turn to his proposals until page 91 of his 207 pages. Rather less history would have left room for rather more precision in Barnes’ analysis of the current situation and his proposed remedies.

Unfortunately, the proposed remedies rarely go below a high level of generality and such specificity as he provides is unconvincing. For example, he mentions credit unions and micro finance initiatives but clearly they cannot constitute the solution to the macro problems of the world economic system. More seriously, his suggestion that we need to move from a system based on contract to a system based on covenant is bizarre. He suggests that “covenants are sacred oaths of mutual inter-dependents and fealty between two parties dedicated to a common cause” and that “Unlike contracts, which are based upon suspicion and anticipate violation, covenants are built upon mutual respect and trust and presume co-operation” (pp 164/5). Barnes never explains what he believes should happen in the commercial world in consequence of this but, in any event, what he says is not true. One can define words to mean anything but, in the commercial world, contracts are by no means always based on suspicion and by no means always anticipate violation. Indeed, normally, they simply define with precision the subject matter of the transaction, allocate risk and generally record the mutual understandings of the parties. Disputes are the exception not the rule.

The reader is provided with no ideas as to how in practice “virtuous capitalism” might be brought into being and, having finished the book, is likely to be left wondering whether he has simply been asked to favour moral good against immorality. Indeed, the reader might wonder whether, despite Barnes’ attacks on Utopianism, he has merely had his own dream of Utopia.

Barnes may have anticipated this criticism since, right at the end of the book he asserts that “This book is not the manifesto of a movement, but is the credo of a community that refuses to underestimate the power of God to do the impossible against great odds” and continues “Redeeming capitalism is not a project; it is a mission” (page 206). Giving people the desire to effect change and the hope that it can be achieved is worthwhile yet, after 200 pages, one might have hoped for more than simply “I believe in virtuous capitalism”!

“Redeeming Capitalism” by Kenneth J. Barnes, was published in 2018 by Wm. B. Eerdmans Publishing Co. (ISBN 978-0-8028-7557-0). 207pp.

Richard Godden is a Lawyer and has been a Partner with Linklaters for over 25 years during which time he has advised on a wide range of transactions and issues in various parts of the world. 

Richard’s experience includes his time as Secretary at the UK Takeover Panel and a secondment to Linklaters’ Hong Kong office. He also served as Global Head of Client Sectors, responsible for Linklaters’ industry sector groups, and was a member of the Global Executive Committee.