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Capitalism, Alone: The Future of the System That Rules the World Hardcover – September 24, 2019
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“Branko Milanovic, a master economic statistician, here divides modern capitalism broadly into two versions: the ‘liberal’ one found in the West, and the ‘political’ one that has emerged in China. In this searching and richly argued work he weighs the choices we face and discusses whether the future may lie with one version, alone.”―James K. Galbraith, author of The End of Normal
“Leaves little doubt that the social contract no longer holds. Whether you live in Beijing or New York, the time for renegotiation is approaching.”―Edward Luce, Financial Times
“Countries with larger tax cuts experienced bigger increases in inequality… [The consequences] are richly detailed in Capitalism, Alone… Builds on Milanovic’s previous book, Global Inequality… Ideally the two should be read together… [Milanovic] belongs to a new generation of data-driven economists who have helped track what has happened to income distribution in recent years.”―Liaquat Ahamed, New Yorker
“Milanovic outlines a taxonomy of capitalisms and traces their evolution from classical capitalism before 1914, through the social-democratic capitalism of the mid-20th century, to ‘liberal meritocratic capitalism’ in much of the rich world, in particular America. He contrasts this with the ‘political capitalism’ found in many emerging countries, with China as the exemplar. These two capitalistic forms now dominate the global landscape. Their co-evolution will shape world history for decades to come.”―The Economist
“Few economists can compete with [Milanovic’s] stunning erudition, or with his skill in weaving together seemingly disparate figures with complex philosophical ideas to produce a coherent thesis that feels highly relevant to our troubled times. Capitalism, Alone is one of the most ambitious economics books published this year, in terms of its breadth and scope, and definitely one of the most fascinating.”―ProMarket
“A remarkable book, possibly the author’s most comprehensive opus so far…I highly recommend Capitalism, Alone to all readers and scholars interested in challenging their understanding of the (supposed) sole socio-economic system we live in.”―Roberto Iacono, LSE Review of Books
“An extraordinarily valuable book for anyone who wants to gain an understanding of current topics in economic research and their bearing on policy debates.”―Matt Mazewski, Commonweal
“May turn out to be a seminal work on the fin de siècle de capitalisme…His conclusions and concepts, make extraordinary contributions to considerations of the state of capitalism.”―Business Day
“A scholar of inequality warns that while capitalism may have seen off rival economic systems, the survival of liberal democracies is anything but assured. The amoral pursuit of profit in more liberal capitalist societies has eroded the ethical norms that help sustain openness and democracy, he argues; now that tendency threatens to push such places in the direction of more authoritarian capitalist societies, such as China.”―The Economist
About the Author
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Liberal Meritocratic Capitalism (LMC) is represented by the U.S. (Chapter 2) while Political Capitalism (PC) is, par excellence, represented by China (Chapter 3).
In chapter 2, the point is made that LMC is the current form of western capitalism stemming from Classical Capitalism (CC) represented by the United Kingdom before 1914 and Social Democratic Capitalism (SDC) represented by Western Europe & U.S. 1946 - 1980. There is of course a discussion regarding inequality. This includes high concentration of capital ownership, higher rates of return on the assets of the rich, and more marriages between people with the same income level.
Four pillars helped reduce inequality during SDC. These are 1) trade unions, 2) mass education, 3) high taxes and government transfers. Globalization makes it harder to use taxes and transfers to reduce inequality in the West and trade unions, for similar reasons have less power. Education is interesting to look at since the point is made that it is not just the number of years but the perceived or real quality of the education that matters.
In Chapter 3 PC is discussed. The point is made that in the third world, communist or quasi-communist regimes post colonialism helped pave the way to Political Capitalism. This is because, unlike in Eastern Europe, third world countries were underdeveloped and still feudal. China and Vietnam are the prime examples. It is interesting to note that Malaysia and Singapore are also included in a table of countries under political capitalism but of course the author does not claim that they had a communist regime but rather one party in power for a long time.
A characteristic of PC that is discussed is the systemic corruption. An interesting point is that globalization itself has made corruption more likely under PC as there are more opportunities for corruption's wealth to be kept overseas. But corruption is a tough nut to crack and has been around at least since Rome. According to Salluts, Jugurtha famously described Rome as "urbem venalem et mature perituram, si emptorem invenerit" ("a city for sale and doomed to quick destruction, if it should find a buyer," However, while he Republic would be lost, Imperial Rome would continue for quite a long time. The author delves into this at the end of chapter 4 as well.
At any rate, the question is will other countries seek to emulate China's Political Capitalism? How many countries can achieve the level of economic growth if they try to do so?
Chapter 4 looks at the interaction between capitalism and globalization. The author puts forth a proposal regarding immigration given the current prevailing mood against migration in the west. Essentially, the proposal would allow for migrants to come and work and pay taxes, but not to become citizens, vote, and stay permanently. The U.S. green card system is this already, but implied is that this would not lead to citizenship as it currently can. Historically, metics in Athens were foreign residents who did not have citizen rights but did share in the burden. The point is that this would allow migrants to earn money and would lessen the fear citizens have that migrants will have the same citizenship rights that they currently do. This reduce opposition to this type of limited immigration and reduce global inequality. While it might seem controversial, the proposal must be seen from the vantage point of what is possible and not what is some perfect truth.
In chapter 5, the author looks at the future of global capitalism. Most interesting is the likely convergence of incomes between Europe, North America, and Asia and what role China might play in Africa going forward.
What I enjoyed most was the author going beyond inequality in this book. An excellent book that builds on the author's previous works. I hope future books will continue to do so as well. Personally, I would enjoy more on Pareto and Schumpeter.
Predictions, especially about the future, are famously very difficult, and tend to be overtaken by events. COVID-19 is just one perturbation that may render some of Mr. Milanovic's conjectures moot, but you can decide for yourself!
Top international reviews
Milanovic recognises the claims made by Aristotle about the nature of man as a political animal but believes that market relations have changed how humans interact with each other gutting the content of moral doctrines ‘90 percent of our waking lives is spent in purposeful activities whose objective is improving our standard of living, chiefly through money making.’
Milanovic’s historical analysis owes a great debt to Giovanni Arrighi’s ‘Adam Smith in Beijing’. Arrighi argued that China was a more Smithian growth path and would outperform US western capitalism in the medium to long term. This is because of the greater level of investment in production, infrastructure and education. Arrighi saw China’s elite as wedded to a form of Marxism kept in check by a tradition amongst China’s citizens of popular protest.
Milanovic agrees with Arrighi that the role of communism in China was crucial to allowing indigenous forms of capitalism to develop by ending both the rule of Imperialists and Landlords and actively creating skilled labour forces. Milanovic however doesn’t believe China is socialist either in terms of ideology or practice. China’s elite is just a competent bureaucracy whose ability to bend the rule of law allows it to solve many of the problems of capitalism and generate higher forms of growth.
Milanovic broadens this analysis to the rest of the world: he contrasts the favourable growth rates of developing countries under one party rules vs average growth rates over the last 50 years. Milanovic calls this political capitalism and contrasts it to liberal meritocratic capitalism. In the final chapters of the book Milanovic sketches out potential pathways for these variants of capitalism and gives his view on proposed reforms such as Universal Basic Income (UBI) and reducing working hours.
Milanovic’s background (he was born in Yugoslavia) and natural scepticism means that he is refreshingly lacking in the dogmas and myopia of many Western intellectuals. He takes seriously both Communist development strategies and the mostly ignored histories of developing nations. Those beliefs that he does hold are deeply informed by both his personal experiences and by an engagement with wide-ranging authors; from Plato to Taleb.
I am not entirely convinced in Milanovic’s view of morality. The viewpoint he observes certainly seems dominant amongst the upwardly mobile classes or owners of capital. However I am unconvinced that ideologically it is as strong as Milanovic paints it as it lacks any existential depth or higher purpose. The absence of a discussion of global warming might be a deliberate omission because it could seriously challenge consent for hypercommercialized capitalism.
I found the book well written and constantly engaging and would recommend it to anyone even vaguely interested in the subject matter. The great strength of Milanovic’s book is that it takes the moral nature of humanity seriously whilst asserting the primacy of the economic in how we relate to each other under capitalism.