The Future of the System That Rules the World
by Branko Milanović
Belknap, 2019, 287 pages
Branko Milanović’s Capitalism, Alone is not a thick book, but its title and subtitle hint at its ambition. Epigraphs from Aristotle, Plato, Marx, Adam Smith, and Max Weber do the same. Milanović varyingly plays the unsentimental historian, the scientific-minded economist, the policy wonk, the sociologist, and the moralist. He provides an account of the past, the present, and the future in which the descriptive, the prescriptive, and the analytic are freely mixed.
To start from the present: Milanović argues that since the 1980s, the West, led by the United States, has operated under a deregulated, financialized system he calls liberal meritocratic capitalism. This new system differs from pre–World War I “classical capitalism” and post–World War II “social democratic capitalism” in several ways: a rising share of capital income in total income; an increasing overlap between the capital-rich and the income-rich (the very wealthy today are likely to also draw big salaries as top-shelf lawyers or consultants); assortative mating; and the dogged determination of the wealthy to pass on their advantages to their children by securing them spots in the best schools (from kindergarten to college) and by using their connections to get them jobs after graduation. In short, alongside global-scale systemic factors like the dramatic weakening of national and local labor activism, Milanović sees today’s American economy as characterized by the emergence of a class of wealthy, highly educated, ambitious meritocrats. And these elites are cutting loose from society at large and merging with the existing superrich into an autonomous caste that, with its legions of lawyers, can easily hijack political frameworks like democracy and the rule of law.
The new capitalism’s characteristics have proven difficult to resist, as they result from “deep changes in the nature of work in more advanced capitalism and globalization”—particularly those caused by the advent of internet and advanced communications technology. Classical, nation-state-based defenses against inequality, such as heavy taxation, large government transfers, universal education, and union organization, are increasingly obsolete. Instead, our world is characterized by global supply chains and small, physically dispersed work units; global pools of cheap, mobile labor; global migration, which challenges the presumptions of many countries’ welfare states; global corporations that easily override national polices and barriers; and global corruption, in which wealth easily slips over borders and down rabbit holes into anonymity and secrecy. Pace Marx, today it is capital that has no homeland.
In response, the unsentimental Milanović advocates for the elimination of the welfare state and its replacement with a broad dispersal of capital ownership and a leveling of the playing field through the equalization of educational quality and the reduction of inherited advantages. Such a setup, he suggests, would generate egalitarian outcomes without explicit redistribution. Then, to address the twofold problem migration poses to welfare states—namely, that the native rich will withdraw while the immigrant poor will jump in—Milanović proposes a “fundamental change in the nature of migration.” He proposes the creation of multiple tiers of citizenship and guest worker programs that will allow workers from the global South to cycle through the rich nations under discriminatory conditions and for strictly limited time periods, to make money, and then to be gone.
Economic Convergence and Schism
Much of the preceding material is familiar from Milanović’s 2016 book Global Inequality. So what is new about Capitalism, Alone, and what is the import of the predicament suggested by its title? Today, for the first time, the entire world is capitalist, with no significant area still dominated by hunting and gathering, slavery, serfdom, communism, or any other noncapitalist system. East Asia, India, and the former Soviet bloc—which, for much of the twentieth century, were either outright noncapitalist or autarkic and relatively isolated from the world economy—are today capitalist by a basic definition of the term, relying mainly on privately owned means of production, hired free labor, and decentralized market mechanisms. Moreover, they are all integral parts of the world economy. The full incorporation of these areas into global capitalism is a tectonic shift in world history with profound implications, both practical and theoretical, for the Western nations. On the practical level, it causes new patterns of production and exchange; a rebalancing of world economic and military power; and an acceleration in the global movement of goods, capital, and people. On the theoretical level, it requires serious revisions in the West’s assumptions of why and how capitalism takes root in a given region and what this means.
One of the most pervasive ideas in the book is that capitalism as a system of production is symbiotic with a system of values that puts profit and growth above all else. While Milanović carefully denies that globalized capitalism and the wealth ethic have triumphed because of a unique alignment with innate human nature, it is clear that they represent a stable equilibrium of human behavior—one that, given current technological and social conditions, promises to be difficult or even impossible to dislodge. With the decay of social hierarchy, religious belief, and any sense of a common social contract, wealth alone remains—and the existence of this lingua franca further accelerates global integration. While the causal relationship between the wealth ethic and the material system of capitalism remains vague throughout Milanović’s account (the two are referred to as “counterparts” on one page, while on the next, capitalism is an agent “imparting its objectives to people, prompting or persuading them to adopt its goals”), it seems apt that he quite explicitly puts capitalism in the same category as Christianity—a “system or religion” whose rise and triumph is “followed by some sort of schism between different variants of the same credo.”
The schism in question here is that between the West’s liberal meritocratic capitalism and the capitalism of China and the postcommunist world—a capitalism of a different type, with a distinct provenance. “Political capitalism,” Milanović writes, is “an approach, more than an ideology, that combines private sector dynamism, efficient rule of bureaucracy, and a one-party political system.” Its most significant characteristic is the autonomy of the state—its ability to guide and manipulate the private sector and to selectively enforce or waive laws as dictated by the national interest. And thus its most significant defect is that it lacks any true rule of law (one might also question the genuineness of its property rights, though Milanović does not) and is pervaded by systemic corruption that can be held in check by shrewd rulers but by definition can never be eliminated. Unlike in the West, where clear rules and procedures are exploited in the most cynical way possible, political capitalism’s rules and procedures exist solely at the discretion of the authoritarian, one-party state, which, though constantly afflicted by the incubus of corruption, acts in the last analysis in the national interest. From the neoliberal perspective, this is all a hideous muddle in which ownership structures are entirely unclear, but Milanović maintains that Chinese-style capitalism is a no less genuine form of capitalism for all that, and that there is no reason to assume that it will eventually “evolve” into liberalism or even develop the rule of law.
What Communism Made Possible
What is behind the emergence of this rival form of capitalism, and why has it only now appeared? This brings us to an extended passage of the book that seeks to provide a grand interpretation of the history of communism. While he mocks Marxism and liberalism for coming up with tidy teleological accounts of history that just so happen to require the exclusion of vast reams of evidence (he amusingly says that the “end of history” narrative requires one to ignore the entire short twentieth century), Milanović appears to have his own histoire raisonnée up his sleeve. His ambition is to provide an explanation of the meaning of communism as a historical phenomenon. His haruspicy on the guts of the twentieth century is this: communism was an ideology that allowed third-world countries to organize left-wing nationalistic rebellions; throw off colonial domination; build strong, centralized states; and incubate their own class of “indigenous capitalists.”
Milanović’s picture is reminiscent of James McAdams’s argument that communism was an effective set of ideas not because of its sophistication but because it could be successfully stripped down to its most basic fundamentals and used to justify a revolution of have-nots against haves, even in situations that bore little resemblance to the scenarios envisioned by Marx. But Milanović goes further. He argues that Marxism was an ideology in the Marxist sense: a system of illusion under which, believing themselves to be doing something entirely different, men and women labored to push forward economic‑historical development along largely predetermined lines—in this case, toward capitalism.
The upshot of all this is that for China, Vietnam, Laos, Angola, Ethiopia, and a number of other postcommunist states, Communist revolutions played a historical role analogous to the bourgeois revolutions of western Europe, sweeping away feudal and extractive institutions and establishing modern, capitalist societies. This means that what Marxists, liberals, or unreflective Westerners usually view as the generic path to capitalist modernity is nothing of the kind. (Elements of this line of thought, if not Milanović himself, also recall Liah Greenfeld’s account of communism, nationalism, and capitalism.)
The “Western path of development” is a historically and geographically bounded oddity in which bourgeois-led development produced a law-oriented, rule-following, decentralized polity. On the one hand, this approach enabled the eventual blossoming of genuine egalitarian liberalism. Yet it is also characterized by a systemic vulnerability to capture by private interests, a consistent tendency toward predatory expansion, and the permanent risk of catastrophic war (paradigmatically, World War I). While many Europeans—including liberals and some Marxists—assumed that backwards nations could be pushed along the Western path of development by force through colonialism or gunboat diplomacy, this succeeded only in creating tiny capitalist exclaves like Hong Kong on the margins of exploited hinterlands. Only distinctly national and leftist mass movements could succeed in transforming entire countries into the rising capitalist powers we know them as today.
While Milanović often displays a certain amusement at how the development of the global economy has turned the tables on the Western nations that have been accustomed to ruling the world since the industrial revolution, his interest in this shift goes beyond an appreciation for the cunning of history. For him, the convergence of worldwide incomes and the reduction in global inequality that is finally beginning to occur after several centuries of Western dominance is clearly a matter of justice—and it is a convergence enabled by that most powerful of engines, capitalism.
Milanović’s combination of fascination with, appreciation for, and disgust with capitalism leads him into some strange arguments, like his otherwise off-putting recommendation that Western nations should adopt Qatari-style guest worker programs. This particular example reveals the extent to which Milanović views capitalism as operating under the influence of strongly held and not easily altered subjective human convictions, such as beliefs around what constitutes fairness or the belief that immigration causes substantial social turmoil that can outweigh its economic benefits. Milanović proposes the Qatari model because he believes that, in moral terms, it is only right to allow the citizens of poor nations to circumvent the irrational disadvantages imposed by the circumstances of their births, but in practical terms, a more generous policy would provoke national populists in wealthy nations to take the mad, destructive step of slamming their golden doors, hurting themselves, and, even worse, blocking an avenue by which wealth might otherwise reach the global South.
The Allure of National Populism
Despite his stated concerns about nativism, many aspects of Milanović’s book—both in his occasionally dystopian tone and in the specific topics he discusses—curiously parallel the concerns of national populists. He repeatedly asserts that welfare states can only be justified today on nationalistic grounds; assumes that people retain strong and persistent national loyalties and a quasi-rational distrust of outsiders; insists on the amoral nature and corrupting effects of capitalism; sees migration and mobility as having eroded the concept of citizenship; and warns about the formation of a self-enclosed meritocratic caste in the West. He even seems to assume that authoritarian governments—unlike liberal democratic ones—can effectively defend the national interest against selfish private actors. Ultimately, however, it is clear that he thinks the unalterable global dominance of capitalism renders the national populist path destructive and pointless.
In this sense, Capitalism, Alone is a capitalist book. Neither socialism nor national autarky are at any point presented as living or viable alternatives to globalized capitalism. Marxist socialism is presented as a system that—while it reduced inequality and “worked” as a developmental ideology in postcolonial Asia—proved itself in the late Cold War era to be totally incapable of managing an advanced, information‑age economy. Nationalist or autarkic economic policies, by slamming the emergency brake on globalization, cause a slowdown in growth that few in advanced nations are willing to accept. With its unparalleled ability to generate wealth, globalized capitalism bestrides the world, and unless or until there is a major, global, systemic change in the factors of production, there is no reason to suppose that this reality will change.
In this respect, Milanović’s book displays a loose form of technological or economic determinism. While Milanović thinks that Marxism was irredeemably wrong in its specific predictions about the future, he accepts the basic idea that the progression of the technologies of production results in a more or less regular succession of socioeconomic systems. Whereas the mass production and cheap transport arising from the first industrial revolution produced a world of power-projecting mercantilist states that progressed from staple production to manufacturing to services, the communications technology revolution of the twenty-first century has allowed production to be controlled remotely, enabling outsourcing, dispersed production, and global supply chains. Contemporary phenomena like offshoring, migration, the weakening of national governments, the coercive power of global corporations and institutions, and the decay of organized labor are thus caused by objective, structural factors.
As the pursuit of wealth becomes the world’s universal ethic, its dominance becomes self-reinforcing, and it becomes ever more difficult for dissenters to resist it. Individuals who try to opt out will find their families ignored and outcompeted; countries that idly enjoy their high standards of living will find all their finest villas (and companies) bought up by rich foreigners. Only those who truly accept societal irrelevance and lower standards of living—the Amish and the kibbutzim are mentioned, though monasteries are not—can opt out. The rest of us—we who have accepted the devil’s bargain of greed—cordially welcome the logic of commodification into ever new spheres of previously private life. We turn to the market for food preparation and delivery, for childcare and eldercare, and to rent out our private cars and homes and even our free time. This is in no sense a crisis of capitalism; it is simply its logical development. Milanović seems open to the Mandevillian notion that material improvements in our standards of living rely on our embrace of greed, alienation, and commodification. With a certain matter-of-factness, he states that there is no reason to expect that the family and other noncommercial relations will withstand the power of commodification: “The ultimate success of capitalism is to have transformed human nature such that everyone has become an excellent calculator of pain and pleasure, gain and loss—so much so that even if capitalist factory production were to disappear today we would still be selling each other services for money; eventually we shall become companies ourselves.”
Moral Values under Universal Capitalism
With all that said, the question of the significance of moral values and ideals in shaping action in Milanović’s outlook remains unresolved. Granted, in his view, capitalist production and the wealth ethic enjoy an almost unchallengeable hegemony at the present moment. Efforts to throw them off through sheer willpower, by means of socialist revolution, nativist isolation, or religious revival, can achieve short-term successes, but seem unlikely to establish a stable long-term equilibrium. Such voluntarism has strictly limited efficacy, mainly because it conflicts with the pursuit of material affluence. All this would seem to be clear enough, depressing though it is to anyone who might entertain hopes of a world driven by aspirations slightly higher in nature. But there are reasons to argue that the picture might be more ambiguous.
First, as noted earlier, Milanović argues that communism (itself an ideology that wavered between faith in the iron laws of history and reliance on revolutionary voluntarism) played a “historical role” in pushing forward capitalism that was completely at odds with its professed values and opaque to its advocates. This would seem to cast any simple interpretation of the meaning or role of subjective values and beliefs into serious question.
Second, deep ambiguity surrounds the notion of the national interest in this book. After so often insisting that liberal democracy is unable to withstand the forces of globalized capitalism and is systemically vulnerable to being hijacked by mercenary interests—and that national populism means isolation and poverty—Milanović goes on to say that postrevolutionary authoritarian governments like China’s are able to successfully steer the market in the “national interest.” What exactly this means is not spelled out. The idea that, under the Chinese model, capitalism can be successfully directed by political decision makers in accordance with an enlightened or civic-minded program of values is at variance with the book’s portrait of nationalism, liberalism, socialism, communism, religious belief, or any other system of moral values. Elsewhere, Milanović portrays the latter programs of action as economically unviable and basically futile or obsolete (even if he is happy to acknowledge the “inherent” attractions of liberal democracy). But by giving it a key role in his definition of political capitalism, he seems to suggest that the “national interest” is a stable principle of governance over half the world.
Or is it so stable? One future possibility that Milanović imagines is a convergence of liberal meritocratic and political capitalism. Under political capitalism, political power can be used to acquire economic advantages; under liberal meritocratic capitalism, the opposite occurs. The degradation of liberal meritocratic capitalism into a system of arbitrary power “would be an evolution to a large extent compatible with the interests of the new elite that is being formed under liberal capitalism.” And it is easy to see how the elite in a system of political capitalism could jettison the national interest in favor of personal or factional interests. “The end point of the two systems becomes the same: unification and persistence of the elites.” The implicit point of Milanović’s insistence on the genuineness of nonliberal capitalism throughout this book, as well as his argument that the Western path of development is the exception rather than the rule, is that there is absolutely no reason why a capitalist system may not be ruled by an unaccountable elite, lacking any commitment to liberalism and social mobility, on the one hand, or to the national interest on the other.
What might save us from this spin around the drain of greed and plutocracy? One option would be a deliberate egalitarian restructuring of capital ownership patterns in such a way as to ensure that capitalism enriches everyone more evenly. A technological advance or demographic shift that upends our patterns of production might be another. Or some other system of values could replace the ethic of greed that prevails today, though Milanović has little faith in the big-picture ideologies currently on offer. Perhaps values can be brought to bear on politics in a way that goes beyond voluntarism beating its head senselessly against determinism. Perhaps there are alternative capitalisms to be discovered. But while there may be alternative capitalisms, as yet there is no alternative to capitalism. For now, we live in a world of capitalism, alone.