In Prospect

Anatole Kaletsky's intriguing cover story about the next phase of capitalism contends that the state will both advance (in finance and macro-economics) and retreat (in health, education and pensions). With even a Tory government planning new levies on the banking sector, the first part of the equation seems uncontroversial. The second part of the thesis is based on two different claims. The first is that modern electorates are suspicious of both too much market and too much state, so if the latter is advancing in one area it must be balanced by a retreat in another. The second, more concrete, proposition is that as societies grow richer, citizens want to spend more of their money on health, education and pensions, but do not want to pay ever-increasing slices of their income to the state to provide them. Moreover, with public finances looking awful for decades to come, the state simply cannot afford to provide these things in the way it used to. In countries like Britain, where the state dominates such services, it raises the question of how private and public funding can be mixed more equally without further entrenching inequality and class division. After 30 years of growing inequality, there is a widespread assumption, even on parts of the centre-right, that cutting and re-ordering the state should not be done at the expense of the least well off. That probably requires a big increase in means-tested payments for public services from those that can afford to pay more for them. But that, in turn, may drive the affluent into the arms of low-tax, anti-welfare state politicians. Kaletsky has not always made the right calls through the recent crisis in his newspaper columns, but he is one of Britain's most consistently stimulating political and economic analysts, so his new book (from which our essay is taken) could be a summer-reading antidote to all of those ideas-free new Labour memoirs. Our own top summer read, by Wendell Steavenson (p40), is also about money and how it should be spread around, but it is a delightful parable about a reclusive Georgian billionaire who has been a saviour to many of his impoverished fellow citizens. Bidzina Ivanishvili has only ever given one interview in his life but Steavenson pieces together the man's story and character and motives from talking to friends and beneficiaries of his generosity. The rich often argue against high levels of tax on their income on the grounds that they can spend it more wisely for social purposes than the state. That can be a rationalisation for private hoarding, but in Ivanishvili's case it really seems to be true.