Paradoxes of Prosperity, by Diane Coyle.
Texere, 2001

Harnessing Cultural and Intellectual Creativity
A bespectacled young girl with laptop in tow eagerly raises her hand in class. An infant in rags bellows a loud wail as the medic in military gear tries to examine him. An aerial view of Manhattan stands proudly next to the photo of a dilapidated shantytown. These juxtapositions on the cover of Diane Coyle's book, Paradoxes of Prosperity, set the stage for her argument that the New Capitalism ultimately benefits all.

Although Coyle focuses her work mainly on Western economies, she argues that the tenets of New Capitalism – use of technology and governments that rely on human and social capital – are effective for improving the lots of even the poorest of nations.

The tenets of New Capitalism – use of technology and governments that rely on human and social capital – are effective for improving the conditions in even the poorest of nations.

An economist by training, Coyle's great faith lies in the human individual's capacity to create. Economic growth depends on cultural and intellectual activity, on the exchange of ideas, and the creative human spirit, she writes. Future economic success will depend not on scarce land, nor on capital, but on intelligence, creativity, empathy, or what Coyle calls "human capital" (p. xiv).

This belief is seen most clearly in the technological advances we have today. The easier it is to see injustices occurring around the globe or to ship a product instantly from one side of the world to the other, the more interdependent we will become, which can have positive outcomes for all involved. This openness is more important as economies grow more dependent on the flow of ideas and on new technologies, which are more complex than before, she states (p. 70).

Embracing Fairer Capitalism
However, technical progress alone does not guarantee social progress, but, rather, creates the conditions to make it possible, Coyle writes (p. 91). In advocating political structures that are more representative, she argues that "twentieth-century capitalism is ripe for replacement by a fairer and more democratic version in the twenty-first century" and that this can be achieved largely through new information and communications technologies (p. 93).

By supporting a "fairer" capitalism, Coyle straddles the traditional ideals of conservative versus liberal economics and politics. Although she advocates a true free market with little government intervention, she insists that a more pluralistic society fuels advanced economies. Government's role in the New Capitalism, she says, is not to be in charge but to coordinate the preferences of citizens in order to sustain and build social capital and to maintain the exchange of ideas (p. 202). And if poor countries want to improve their lot on the economic playing field, then they need to also advocate "a liberal political regime, a commitment to more equality for women and members of ethnic minorities, and a concern for the environment" (p. 222).

Coyle sees irony in the views of Seattle and Prague protesters, however, who derided the work of the World Trade Organization (WTO), and who would probably be the first to say they want more equality for people and a cleaner environment. In what may make those speaking out against the WTO cringe, Coyle believes that global capitalism actually supports the values that those very protesters hold -- values such as justice, fairness, and freedom (p. 69). "The protests of the global anarchists are as much a protest against rule by a managerial elite, and in favor of citizen involvement, as they are a protest against globalization," she says (p. 86). If governments are more pluralistic, such demonstrations may not be necessary.

She is currently Managing Director of Enlightenment Economics, which seems appropriate to her economic philosophy. Her thinking parallels that of the actual British Enlightenment of the 18th century – give more education and freedoms to the common folk, and they may create ideas that will stabilize society and benefit its members.

Finding an Answer
However, just as with that historical era, not everyone has improved their lives -- economically, socially, or politically. Coyle acknowledges world-wide poverty, but her theoretical approach to improving the lives of those 80 percent of the world's population who share only 20 percent of its income is far from pragmatic (p. 151). Certainly, some base in theory is necessary, but can these people wait for theory to run its course when they are concerned with feeding themselves today? She says that though conditions in city slums are atrocious, the informal economy generated by newcomers pouring into the city from elsewhere is the main source of growth in a number of poor and middle-income countries, which is beneficial (p. 112). Yet, informal economies confine them, she continues, so experiments and pilot projects are needed to reconnect these people with the formal economy. Coyle leaves the particulars of these experiments and pilot projects up to the reader.

Government's role in the New Capitalism is not to be in charge but to coordinate the preferences of citizens in order to sustain and build social capital and to maintain the exchange of ideas.

Although 1.2 billion people live on less than one dollar a day, Coyle argues that the world's economic problems stem from too little capitalism, not too much (p. 2). She does, however, acknowledge that capitalism can get out of hand if it continues to be structured as it is today. "It matters far more that our prosperous societies cannot eliminate poverty than that a small number of individuals are able to make unimaginable fortunes … But the success of global capitalism since 1945 and especially since 1989 makes it apparent that it is the solution, and not, as those protesters in Prague claimed, the problem" (p. 78).

Paradoxes of Prosperity comes to terms with current capitalist economies that aren't working as well as they could. In that light, Coyle effectively challenges traditional paradigms. Yet, a more detailed approach to achieving increased parity would have been helpful, especially to those people directly affected by such inequities.

About the Author (from Texere)
Diane Coyle, who holds a Ph.D. from Harvard, is a consultant and columnist for The Independent. She is currently Managing Director of Enlightenment Economics, a consultancy, and a Visiting Research Fellow at the London School of Economics' Centre for Economic Performance. She has written two other books, The Weightless World and Governing the World Economy.


Contributed by Lisa Hatfield, a graduate student at Portland State University.

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