Book Review: Branko Milanovic, Capitalism, Alone: The Future of the System that Rules the World

I wrote this before interviewing Branko for yesterday’s podcast, but thought I’d put it up anyway as a companion piece

Full disclosure, I am a huge fan of Branko Milanovic, both because of his brilliant analysis of inequality (think Elephant Graph), but also because of his style – a formidable old-school Serbian public intellectual, never happier than when browsing St Petersburg bookshops and reviewing an account of Stalin’s banquets that he picks up. Read in the original Russian, obviously.

I rave reviewed his last book, Global Inequality (2016) and so got very excited when picking up his latest, Capitalism Alone.

Did it live up to expectations? Yes and no. The starting point of the book is the ‘global victory of capitalism’ – ‘the entire globe now operates according to the same economic principles – production organized for profit using legally free wage labour and mostly privately owned capital, with decentralized coordination.’

No credible alternatives currently exist out there in the real world. So far, so Fukuyama. But then he goes on to explore two broad branches of contemporary capitalism and the strengths and vulnerabilities of each. The two are ‘Liberal Capitalism’, epitomised by the USA, and ‘Political Capitalism’, aka China.

Liberal Capitalism in the turbo-charged US version sees the masters and mistresses of the universe both owning capital and commanding huge salaries (no Marxist-style division between capital and labour for them). If you wanted to design a system to drive up inequality, it would be hard to do a better job: Liberal Capitalism involves spending megabucks on elite schools for your kids (bye bye social mobility); them then marrying the sons/ daughters of other rich families (‘assortative mating’). The assets of the rich earn the highest returns, thus making them even richer (see Piketty). This all contrasts with ‘social democratic capitalism’, where trade unions, mass public education, and taxes and transfers keep inequality in check.

Capitalism, Alone then moves on to the second category – Political Capitalism. This emerged from Communism, which presents an analytical problem: both Marxists and Liberals have been unable to explain Communism or its fall/transmogrification into a Capitalist superstar. Liberals like Acemoglu and Robinson are forced into a pretty unconvincing ‘China must ultimately fail because it’s not like the US’ theory of history.

But Milanovic has an answer: ‘it is precisely in the neglected history of the Third World that we shall find the place of communism within global history’ because ‘it enabled backward and colonized societies to abolish feudalism, regain economic and political independence, and build indigenous capitalism.’ Communism was the ‘functional equivalent of the rise of the bourgeoisie in the West.’ It’s this bewitching combination of data-crunching and big sweep history that make him such a special author.

Capitalism, Alone highlights 3 ‘systemic characteristics’ of Political Capitalism: an efficient bureaucracy, absence of the rule of law and autonomy of the state. The relationship between these 3 is fraught: efficient bureaucrats struggle when their bosses are not bound by the law, and corruption is an inevitable result.

These first three chapters are brilliant, original and make for gripping reading. But then the book seems to go off the boil a bit, with a very economistic, and slightly disjointed chapter on ‘the interaction of capitalism and globalization’, which highlighted what for me are two significant gaps in Milanovic’s thinking.

Like 2019, but without the capitalism. Credit:

His first gap is on the environment. There is a jarringly dated discussion on whether natural resources are running out, rehearsing the argument of the Simon-Ehrlich wager. But that was 40 years ago, and the debate has moved on – the big issue now is surely not whether resources are running out, but whether the planet is filling up/bursting. The underlying paradigm shift is from seeing the world as an open system, where exponential growth is fine, to seeing it as a closed system, with it limits becoming ever more obvious through climate change and planetary boundaries. Neither warrants even a single mention – it feels like Milanovic is trapped in open system thinking –  which seems an extraordinary oversight in a book that ends with a chapter on ‘The Future of Global Capitalism’.

That chapter is written with verve, but a deep underlying pessimism about the state of the species. He sees human nature as irredeemably corrupted by the creeping commodification of the private sphere and paints a dystopian future where all family functions are outsourced to the UberKid providers of the gig economy. He is strikingly negative and dismissive of the alternatives being mooted by the Left (check out his fascinating exchange with Kate Raworth).

Which brings me to a second gap – Milanovic seems much more confident and powerful in the descriptive mode, brilliantly summarizing historical events. But he is noticeably more tentative when it comes to prescription – suggesting what should happen next. A ‘how to fix it’ section is brief and pretty thin: He advocates redistributive taxation, big investments in public schools, limited and temporary migration and limited and exclusively public funding for political campaigns. That hardly lives up to the epic scale of the events and challenges he describes earlier in the book.

And then the book stops suddenly, as did his previous work, Global Inequality. Milanovic seems to end his books in mid-argument, like a great dinner conversation suddenly brought to an end by the arrival of the cab home.

Overall verdict? Read the book for the first 3 chapters, relish the erudition and panache, but notice and think about the gaps.

Talking to Branko subsequently didn’t change this reading of his book much, but he did show a genuine interest in engaging with the whole closed system/planetary boundaries issue. We agreed to try and set up a conversation with Kate Raworth at the LSE next year, with me in the chair to keep things civil. Can’t wait!

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6 Responses to “Book Review: Branko Milanovic, Capitalism, Alone: The Future of the System that Rules the World”
  1. Alicia Harley

    Thanks for the review of this book. I had mostly similar reactions and loved the first three chapters. I disagree with you on where the state of thinking on environment is. Not everyone is as convinced by the planetary boundary framing as you are suggesting within the world of people thinking hard about this stuff. At the very least we will have a very hard time knowing when we are coming on a particular boundary (other than climate change perhaps). And from a policy perspective its difficult to ask policy makers simply to avoid a tipping point without more info about what tradeoffs they need to make today and how they/we can better measure progress against sustainable development goals on a daily, weekly, yearly basis.

    • P S BAKER

      Re decisions by policy makers, I don’t agree. We’ve got plenty of evidence about dangerous feedbacks from deforestation, water pollution, N, P, ozone etc. etc. to act.
      We simply don’t have time to wait for more research – this was GW Bush’s idiotic response to CC. We know what to do, it won’t be easy but it could be done.
      However, with the caliber of politicians we have globally, I think the likelihood of that is very remote.
      I like Vonnegut’s statement: ‘We’ll go down in history as the first society that wouldn’t save itself because it wasn’t cost-effective.’

  2. Matthew Steinle

    Most disturbing to me was his conclusion of the unavoidable moral emptiness that has to attend hypercommercialization sans religion under both liberal meritocratic capitalism and political capitalism. Although his identification of this strong tendency is undoubtedly correct, I hope that there remains a sufficient post-Christian hangover in the world, which manifests itself in the policy recommendations of E Warren and B Sanders, that the turn from social democratic capitalism remains, at least, contested territory during the near future