Professor David Halpern CBE
President Emeritus
BIT’s President Emeritus, David Halpern, shares reflections on a remarkable week in the UK, where two of the world’s greatest political scientists joined BIT and partners to share their insights. Their stories combined with the launch of a new study of social capital in the UK, the latest World Happiness Report, and the shifting tides of global geopolitics, made for an electrifying moment of learning and debate.
Pictured: Nobel Laureate James Robinson presenting at BIT this week, introduced by BIT’s Director of International Programmes, Monica Wills Silva.
At a packed BIT event, Nobel Prize winner James Robinson captivated the room with reflections on his works Why Nations Fail and The Narrow Corridor – and their implications for today’s tumultuous times. Like many, he was stunned by the speed and scale of the current changes in the USA. He noted the parallels, including to the history of Venice – once the wealthiest and most dominant power of the medieval world, its vast fleet ruling the Mediterranean and its trade shaping the West.
Venice’s wealth was built on the inclusiveness of its economic and political institutions. Unlike most nations, Venice offered a ladder of opportunity to the daring and talented. Its laws and institutions were such that an entrepreneur could put together a crew and the finance to trade and explore. It was the American dream, 500 years early.
As the wealth and power of Venice grew, there came a point when the elite decided to use its power to reshape its institutions to serve itself. The elite wanted to protect themselves from the next generation of entrepreneurs and challengers. They started to attack and undermine the institutions that made it possible for the ambitious and talented to succeed. The institutions shed the inclusiveness that drove Venice’s success, and instead became progressively more exclusive and extractive. These shifts protected its elite, but tipped the nation into a decline that it never escaped.
Of course there are differences. For example, James noted that in the US popular reforms still have traction. Similarly, some of Trump’s reforms, such as seeking to bolster the position of America’s working class from ‘China shock’ or address subsidies in other economies, have a legitimate basis that US Democrats could equally have pursued.
Yet the wider set of institutional changes in the US today, including the blurring of the lines between a wealthy elite and the executive, point towards a nation breaking out of the ‘narrow corridor’ that help make it the wealthiest on earth.
At the same time, Robinson stuck to his prediction, shared with co-author Daron Acemoglu, that China’s growth and prosperity remained vulnerable. While China had embraced relatively inclusive economic intuitions, James argued that the exclusiveness of its political institutions were its Achilles heel. He maintained the parallel to the Soviet economic miracle, which led many economists of the 1960s to predict it overtaking the US by the later decades of the 20th century. It seemed inevitable ‘until it wasn’t’. China would crack, he says, though ‘I don’t know when’.
Robinson’s reflections were given extra depth by talks earlier in the week by political science legend, Robert Putnam. (You wait for ages for a world-class political scientist, and then two arrive at once – isn’t it always the way?). Bob recapped and updated his mapping of the ‘Upswing‘ – the extraordinary rise of US on multiple outcomes of civil society from the end of the ‘gilded era’ – and then its equally remarkable fall on these measures from the mid-1960s. This includes economic equality, reduced political polarization and social capital – trust and social networks. To illustrate the extent of the change, he noted that in the mid-60s, the US had economic equality comparable to Sweden. That’s hard to believe today.
I’ve know and worked with Bob for nearly 30 years. He is a relentless and dedicated scholar. Across his many books, he has maintained a sense of optimism that the decline in American social capital over the last 60 years can be reversed once again. In particular, he thinks that a younger generation of social entrepreneurs can revitalize mutuality and connectedness in just the same way that an earlier generation of Americans did a century ago.
Will current changes in the US somehow restart this renewal? A key detail of Putnam’s analysis is that the driving force behind America’s original upswing was a shift in values, not economics. The essential pivot, he argues, was when Americans (and Britons in the Victorian era) decided that others around them mattered, and particularly the poor and downtrodden. They shifted from an ‘I mentality’ to a ‘we mentality’, as illustrated in this quote by Roosevelt:
The fundamental rule of our national life – the rule which underlies all the others – is that on the whole, and in the long run, we shall go up or down together. President Theodore Roosevelt, 1901
Bob contrasted this with a recent quote from Elon Musk: ‘the fundamental weakness of Western civilization is empathy‘. That is certainly not what the data shows with respect to economic growth, such as in the recent paper I wrote with Andy Haldane – social trust is a robust predictor of economic growth at national level.
The importance of values was a theme that James Robinson also picked up on. He noted that textbooks on political economy generally pointed to the importance of the three I’s: ideas, incentives and institutions. However, such textbooks then spent most of their time on the ‘incentives’. He saw his own work as plugging the gap on ‘institutions’. But Robinson felt, especially now he had his Nobel, that he could be honest about the shortcomings in his own work (he was refreshingly honest and humble). The key gap, he felt, was that he hadn’t spent enough time on the importance of ideas. He felt that Trump and Musk don’t make sense through an economic lens alone. It was also about ideology, just as John Locke’s work helped to shape Britain’s Glorious Revolution. The latter was all about shackling the leviathan and the king, combining power with restraint. Today’s ideology in Washington seems to be about going the other way – to cut the shackles of the executive and leviathan.
There a curious link to all this in the latest World Happiness Report. Satisfaction with life, as measured on the Cantril ladder continues to rise in many countries. This year’s report focused heavily on the importance of social capital and benevolence as a driver of well-being. As I have previously written, social capital rose during the Covid-19 years in many countries as citizens pulled together to support each other (regardless of what governments were doing). John Helliwell, and fellow report authors, show that despite a drop in benevolence and mutual support across the world in 2024, it remains around 10 percent higher than before Covid-19.
That said, inequality in happiness has also risen over the last 15 years and in some countries, such as the USA, life satisfaction has fallen despite economic growth.
In turns out these falls in life satisfaction are strongly predictive of shifts towards populism and ‘anti-system’ politics. Maybe that’s hardly surprising. You are unhappy with your life, be it because of economic shocks or other reasons, and that dissatisfaction turns to disillusionment with politics.
It turns out that changes in social capital play a major role in this shift too. This happens in two ways. First, falls in social capital – such as feeling that ‘other people can’t be trusted’ or ‘that you have no one to count on’ – are a major driver of falls in life satisfaction, independent of economics. Second, the extent of social trust you have left flips which way your radicalism goes. For unhappy people and places where a reasonable level of social trust still remains, they tilt to the extreme left. In contrast, those who are unhappy but have low trust in others, tilt to the right. In this respect, the graph below is especially striking.
A final twist comes from asking: are people right (not) to trust others? To answer this, the authors revisit objective studies of trustworthiness across countries, notably the so-called ‘lost wallet’ and ‘lost envelope’ studies, where researchers drop wallets and letters and see how many get returned.
The answer? Across countries, people tend to underestimate the probability that wallets will get returned – typically by about half. The gap is particularly large in the US: it ranks 52nd for the expectancy that a stranger would return a wallet. The researchers find that both objectively measured honesty and perceived honesty independently affect life satisfaction, though the effect of perceived honesty is roughly twice the size.
Across all this – Robinson, Putnam, and the World Happiness Report – a story emerges. Institutions and ideas matter – including what we think of each other. A century of American growth was powered by inclusive institutions and a strong sense of ‘we’, but their foundations have been crumbling for over half a century. That can’t all be blamed on Trump. At its heart, be it America or Europe, the strength and weakness of our institutions and nations rests on our feeling for our fellow citizens. Do we trust them?
Connection matters too. As Chetty’s remarkable studies of American social capital have shown, the extent to which we and our children are socially connected to those who are more wealthy – known as bridging social capital – is a breathtakingly powerful predictor of their life chances. And before we get complacent, in a study of six billion friendships by my colleagues at BIT with Meta, Stripe Partners, the RSA, Neighbourly Lab, and researchers from Stanford and Opportunity Insights, such economic connectedness has similarly huge effects in the UK (though fortunately the rich and poor remain more connected than in the USA).
As Bob Putnam once beautifully put it, when we talk about ‘our kids’ do we just mean just our own sons and daughters, or do we mean the kids in our community, our neighbourhood, our country, or even our world. That’s a choice we all have to make, but let’s do it with open eyes. Let’s not underrate our fellow citizens – be it lost wallets or global pandemics – they seem to be nicer than we expect (whether that misperception is the fault of our media or our self-made wariness).
A smaller sense of ‘we’ is the route to an extractive state, and certainly doesn’t seem to be a route to happiness. A bigger sense of ‘we’ is the route to an inclusive state. Which would you rather?
