Capitalism has been the subject of a renewed wave criticism in the last few years. Exacerbated by various crises in the Western world and beyond, capitalism is often (rightly) critiqued for its prioritization of profit over all else and for its proliferation into every facet of our economic, political, and social lives. Countless books have been written critiquing global capitalism, urging us to imagine new ways of thinking and living in the world apart from the profit motive. Yet, capitalism persists in our world today, especially in the marked absence of any tangible viable alternative or competitor after the fall of the Soviet Union. While predictions regarding the end of capitalism have existed since its inception, it seems that capitalism might be here to stay, as it has become ingrained within the very way we think. If there is truly no alternative to capitalism, then the question remains: what kind of capitalism will we have to live under?

In his 2019 book, Capitalism, Alone: The Future of the System that Rules the World, Serbian-American scholar and former lead economist at the World Bank Branko Milanovic investigates this very question. Capitalism, Milanovic argues, is here to stay and will continue to dominate the global economic landscape in one form or another. By examining these levels of inequality in tandem with issues such as immigration and globalization, Milanovic traces the development of these two strains of capitalism and imagines what they might look like in the near future if we hope to improve it and reduce economic disparity.

Overview:

  According to Milanovic, capitalism has won out over any competing alternative, so that in our world today, “the entire globe now operates according to the same economic principles – production organized for profit using legally free wage labor and mostly privately owned capital, with decentralized coordination” (2). Following in the footsteps of Fukuyama, Milanovic states that capitalism has won in the history of ideas throughout much of the developed world, its influence felt and its logic understood by pretty much every major nation in our world today. 

Capitalism is not, however, a single, monolithic system. Diverging from Fukuyama, Milanovic does not see our current economic system as the “end of history.” The victory of liberal capitalism in the United States did not usher in an unprecedented era of prosperity and equality as theorists believed in the early 1990s. Although capitalism may no longer have any external competitors, it is now facing a type of internal fission. As such, Milanovic argues that capitalism’s domination of the world has been achieved through two competing variations: liberal-meritocratic capitalism (exemplified by the United States) and political capitalism (e.g. China). Milanovic argues that while both of these systems have their own unique merits, they also have distinctive structural challenges that have contributed to global inequality. Throughout the first three chapters, Milanovic discusses how these systems developed over the past 200 years, as well as the internal strains and problems that these systems possess. 

I. Liberal-Meritocratic Capitalism

Liberal-meritocratic capitalism is called such due to “how goods and services are produced and exchanged (‘capitalism’), how they are distributed among individuals (‘meritocratic’), and how much social mobility there is (‘liberal’)” (13). While many might take issue with this definition, Milanovic is sure to clarify his definition of both meritocracy and liberalism. According to Milanovic, utilizing a strict definition from Rawls, this system can be considered meritocratic and liberal because there are no specific legal impediments to anyone achieving a higher social/economic position within the system.

Milanovic also defines liberal-meritocratic capitalism by contrasting it against two earlier forms of Western capitalism: classical capitalism (think Industrial Revolution-era England) and social-democratic capitalism (Western Europe and the US from 1945-1980). In classical capitalism, there is a clear bifurcation between income earned via capital and labor. In social-democratic capitalism, this wealth inequality is less pronounced due to the proliferation of trade unions and progressive taxes on both income and inheritance. Furthermore, in social democratic capitalism, there is a less degree of homogamy (marrying exclusively within one’s social/economic class) and mass public education that is accessible to all. 

In liberal-meritocratic capitalism, by contrast, there is a rising share of those who are capital-rich also being labor-rich (think of the outsized salaries of large tech CEOs or hedge fund managers), as well as a high degree of homogamy and inherited wealth. This allows the economic elite to send their children to top schools, which heightens their chances of marrying within their class (“assortative mating”). As such, in this system, there is increasingly limited wealth mobility, the rising influence of money in the political process, a higher rate of return on the assets of the rich, and a concentration of political and economic power in the hands of the elite. This high concentration of capital income and assets in the hands of the few creates a self-perpetuating upper class, ultimately works to increase inequality and erodes the democratic process.

II. Political Capitalism

In contrast, Milanovic argues that Political Capitalism emerged from the ashes of formerly communist regimes. The failure of communism has always posed a problem for Marxists and Liberals alike, in that neither has an adequate explanation for why communism, instead of being the highest stage of development, has ultimately faltered in developed countries such as Russia and China in favor of more capitalistic modes of production. In a controversial thesis, Milanovic argues that we can find an answer by looking to Third World countries. In these countries, he posits, communism served its purpose in history as a transitional stage between feudalism and capitalism for these countries, allowing for an unprecedented level of growth and independence from colonial rule. Thus, communism has served its purpose in history and has necessarily been disregarded in favor of more capitalistic modes of production, which have served to both increase global prosperity while also increasing inequality. But how does this form of political capitalism operate differently than liberal-meritocratic capitalism?

Milanovic argues that in countries with political capitalism (China, Vietnam, Singapore, India, etc) are a product of communist revolutions in countries that were colonized or de-facto colonized, and have three main characteristics: 1) an efficient bureaucracy, 2) an absence/arbitrary enforcement of the rule of law, and 3) autonomy of the state from economics. In this system, private sector dynamism is managed by an efficient, bureaucratic, one-party political system. This bureaucratic government’s central duty is to realize high economic growth and to put in place policies that reinsure this growth. As opposed to liberal-meritocratic capitalism, policy decisions do not have to be filtered through a slow democratic process and can be implemented efficiently, even though these policies tend to disregard human rights. Corruption is endemic and integral to this system and is always in a precarious state of equilibrium. 

Essentially, as long as political capitalism continues to deliver high rates of economic growth and increased standards of living, corruption can be tolerated. Yet, to get rid of corruption would be to relinquish control of the one-party rule in favor of elite competition. Thus, to function, political capitalism must maintain a fine balance between enforcing the rule of law (thus reducing one-party power and inviting political competition) and tolerating corruption (which, if too excessive, undermines its authority). Milanovic is skeptical whether this form of capitalism can be exported to other countries, noting that the viability of the model rests on: “(1) the ability to insulate politics from economics, which is intrinsically difficult because the state plays an important economic role, and (2) the ability to maintain a relatively uncorrupt centralized ‘backbone’ that can enforce decisions that are in the national interest, not just in the narrow business interest” (128). Regardless, corruption has become a key figure in global economics and has worked to increase levels of inequality by the relative ease of moving money across various legal jurisdictions.

III. Globalization (Immigration, Technology, and Corruption)

Yet, these forms of capitalism are not simply constrained to national borders. In addressing this relationship between capitalism and globalization, Milanovic then focuses his attention on migration and mobility, both of people (labor) and money (capital). He discusses citizen premium as the benefits that one obtains as well as the costs that one incurs by retaining their status as a citizen in a given country. If one lives in a country that has ample capital and advanced technology, then they will have a greater overall income than someone of equal skill, ability, and education in a country without these advantages. As such, migration has often been seen as a way to increase one’s overall economic status, yet it has also come at the expense of increasing global inequality and nationalist backlash. 

Milanovic proposes a novel if controversial, thesis: the establishment of a form of “citizenship-light,” in which immigrants are afforded a limited set of rights in exchange for their status as workers in the country. He insists that this model already exists in several countries, such as Singapore (although it must be noted that migrant workers are still often treated as second-class citizens). By abolishing the bifurcated distinction between citizen and non-citizen, Milanovic hopes to provide a sort of middle ground that would allow migrant workers to continue to live and work in the country without provoking a nationalistic backlash. For Milanovic, this model is preferable if we are going to have globalized mobility of labor; otherwise, the only two options to limit immigration would either be to 1) reverse globalization by shutting down borders or 2) coordinate a massive effort to accelerate the income convergence between rich and poor countries, thus eliminating the motivation to immigrate in the first place. 

These insights are also tied into the movement of capital as companies from the Global North have outsourced their technological knowledge to the Global South as well as their liquid assets into tax havens that are difficult to find and regulate (and which hold an estimated $5.9 trillion, or 10% of the global GDP). Milanovic also expresses his skepticism regarding the survival of the welfare state, as he sees it as incompatible with globalization and the free movement of labor. He also discusses the root causes of corruption in our globalized capitalism and is highly skeptical of our ability to do anything about it, especially since to fight corruption would require us to direct our strategy by enacting policies against those who control the demand for such illicit goods/services. Since this then becomes a political calculation, Milanovic is resigned to accepting certain levels of corruption, seeing it as endemic and intractable to the system. 

IV. The Future of Capitalism

  So, what does the future of capitalism look like? Capitalism seems like it is here to stay, so we might as well try to improve it. Taking stock of our current situation, Milanovic examines in which capitalism has begun to invade the private sphere of life, as commodification and atomization have eroded traditional structures of behavioral regulation and socialization, such as religion and family. Through atomization, we have outsourced the functions of the family and traditional morality for the sake of wealth accumulation. Through commodification, in an era of Uber and AirB&B, we are witnessing the rise of the gig economy, in which both dead capital (cars, apartments, etc) and leisure time are being turned into economic opportunities. In this hyper capitalized culture that strips the subject of all individuality and reduces all interactions to economic exchanges, Milanovic worries that we might slowly become a society in which there is no incentive to be kind to one another, leading to the deterioration of personal relations. We have all become capitalist centers ourselves, so Milanovic is convinced that our integration into the capitalist mode of production cannot be reversed. He also criticizes the concept of UBI, arguing that would be too costly and it hasn’t been seriously tried anywhere. In terms of technological progress, he downplays the fears that many have regarding automation, positing that while it will destroy some jobs, it will surely create many more in its wake. 

Finally, Milanovic ends the book by proposing four possible policy proposals that could reduce inequality in liberal-meritocratic capitalism: 1) tax breaks and increased ownership of bonds and stocks for the middle class (with a government assurance that the return would be greater than 0%) and tax increases for the rich, including an increased inheritance and estate tax to deconcentrate capital, 2) increased investment in the equal access to high-quality education, 3) the creation of a form of “citizenship light,” and 4) strictly limited and exclusively public funding of political campaigns to mitigate political control by economic elites. Milanovic admits that such large scale reforms are not probably within our current system, especially when wealthy elites are also at the helm of the political realm and thus must vote against their interest. Furthermore, such high taxes would be difficult to enact in our globalized society without international cooperation to ensure that the rich won’t just transfer their assets to tax havens. 

Yet, without these reforms, capitalism in America is likely to become increasingly plutocratic as democratic institutions start to erode and the public becomes discontent with their government. As the economic and political spheres of power become increasingly united, liberal-meritocratic capitalism will come to resemble political capitalism. On the other hand, while China’s model might be appealing to developing countries due to its unprecedented economic growth in a relatively short time, political capitalism also faces a crisis of its own, with corruption becoming more and more intolerable as economic growth gradually slows. Unless we can begin to reduce wealth inequality and transform into either a “people’s capitalism” or “egalitarian capitalism,” Milanovic argues, the end of both of our current systems is the same: “unification and persistence of the elites” (217). 

Commendations: 

There several aspects of Capitalism, Alone that are well worth commending. First and foremost is Milanovic’s empirical, data-driven approach. As a former economist at the World Bank, Milanovic knows a thing or two about the current landscape of global economics. Always the pragmatist, he provides clear, concise, if sometimes cold and controversial, assessments and recommendations to the problems of economic inequality. Milanovic’s writing style is straightforward and accessible, and he is particularly prone to simplifying and pointing us toward his central argument throughout the book, telling the reader exactly where he is going and spelling it out piece by piece. Milanovic is methodical in his approach and he defines his terms clearly and concisely, telling the reader exactly where his definitions come from (with direct quotations and fidelity to the definitions of Marx, Weber, etc). He is open in his willingness to consider alternative perspectives and avenues of disagreement, and he anticipates such counterarguments while handling them with tact and respect. He takes on theories from both Marxists and liberal economists alike, turning them aside, giving them due consideration, and also showing their respective weaknesses. It is also a relatively well-organized book, and Milanovic includes little organizational side headers to let the reader know where the argument is going and subheadings (5.1a, 5.1b, etc) to summarize the main idea of a particular section. To aid in understanding some of the more complex numbers and statistics, he includes a handful of graphs and visual aids along the way, which makes for an incredibly accessible and logical read, even for non-specialists in economics like myself.

Furthermore, Milanovic, contrary to many theorists, articulates actual policy proposals that might work to alleviate global inequality. While he is indeed skeptical about whether these ideas would be adopted in our current political world, it is rather refreshing to see some concrete steps that we could take to make capitalism more equitable for all (as long as you believe that capitalism is capable of such a thing). While some of his ideas can be seen as controversial (primarily in his assertions that communism paved the way for capitalism to establish itself and thrive in Third World countries and the idea of “citizen-light”), they are still rather novel ideas that deserve to be considered, even if you disagree with his conclusions. Milanovic covers ground much more efficiently and creatively than most other economists, and whether he’s discussing global inequality or the ideological underpinnings of the logic of capital and its impact in our lives today, his ideas are always interesting and worth contemplating. Milanovic covers a lot of ground in a short amount of time, and his strongest chapters are when he tackles inequality in the Western world. His analysis of political capitalism and China is not quite as strong, but to his credit, he admits the methodological obstacles to analyzing China from the outset (mostly, the limitation and absence of rigorous, reliable income surveys and other sets of economic data from the country). 

Regardless, one of the lasting impacts of this book is the taxonomy of capitalism in our world today, as he elaborates on the strengths, differences, and structural weaknesses of both forms. To accomplish this, Milanovic references classical economists and synthesizes their ideas in concise and easily understandable ways throughout the book, helping the reader understand the background of how capitalism has been evaluated over the past century and a half. Once the reader understands this basic framework to the book, the argument flows smoothly as he covers a lot of ground in a short amount of pages. 

Furthermore, Milanovic’s invention of homopleutia (one who possesses both high capital and labor value, unique in the history of capitalism) and the concept of homogamy (the economic impact of marrying within one’s socio-economic class) are well-handled and thoughtful. Even with issues such as the welfare state and the role of UBI, Milanovic discusses it and gives valuable insight into their shortcomings, giving one much to consider even if you disagree. Overall, for someone wanting to get a wide snapshot image of global inequality but are wary of dry economics textbooks, then Capitalism, Alone, especially in its first few chapters, serves as a rather enjoyable entry point into the data. 

Critique: 

That being said, there are a few shortcomings of the book that are worth noting. Although Milanovic is rather clear in his writing and does a commendable job in defining terms, it can still be a bit dense at times, especially if you don’t have any background at all in macroeconomics. Also, the structure of the book can be a bit confusing at times, as Milanovic likes to take occasional digressions through the chapters, which ultimately slows down the pace of reading and detract from his main arguments. To be sure, Milanovic ties up most of the loose ends by the end of the book, but toward these last few pages, some of the conclusions seemed a bit rushed. The book ends rather abruptly, as he doesn’t go too much into detail regarding the positive directions that capitalism could develop toward, namely “people’s capitalism” and “egalitarian capitalism.” He gives these terms a basic definition, but never really fleshes out what they might look like or how we might actualize them. I was curious as to the nature of the alternative, more egalitarian forms of capitalism that he proposes toward the end of the book, but Milanovic is much more interested in describing the weaknesses of our current systems.

This shortcoming is especially disappointing if you (like me) find the totalizing dichotomy between liberal-meritocratic and political capitalism to be a bit simplistic. For example, while Milanovic’s definition of “meritocracy” is technically correct (aka, there are no explicit legal barriers to social and economic mobility), when viewed in light of how certain laws are constructed to explicitly exclude specific groups of people, it can be a term that obscures more than elucidates. To his credit, Milanovic does state that this bifurcated model is simplified, as it cannot encapsulate the entirety and variation of different forms of capitalism. It is still an interesting distinction, even if it does not have full explanatory power. 

He is also far too soft on China and their human rights violations that result from political capitalism. While he acknowledges that human rights are often trampled over in favor of economic efficiency, Milanovic admits that he is not here to moralize, positing it as a positive feature of the system from an economic perspective, though unlikely to be exported to other countries due to such idiosyncratic structural and cultural features. This is also true when he discusses corruption, which he sees as necessary within political capitalism, and a factor of politics that we must simply become accustomed to and reckon within our system of meritocratic liberal capitalism as well. His curious admiration of China’s policies is readily apparent when he praises various Chinese investments in foreign nations, such as the Belt-and-Road Initiative (BRI) that provides infrastructure loans to Africa and other parts of Asia, which has been criticized by many as a new form of neocolonialism and an example of “debt-trap diplomacy.” Milanovic downplays the political nature of these dealings by insisting that China has no interest in the domestic policies of recipient nations, rendering these investments as no-strings-attached deals (126). This seems to be a rather spurious and naive claim from a political analysis perspective and is simply asserted without much empirical data to support it. As such, while Milanovic is indeed empirical and data-driven when it comes to economic analysis, he begins to blur the line between fact and opinion when it comes to his digressions into politics. 

Speaking of these digressions in the book, while Milanovic is strongest when describing global inequality, he is a bit weaker when it comes to his philosophy of history and evaluation of ideology. This is especially apparent when it comes to the more controversial aspects of the book, such as his proposal of “citizenship-light” or the role of communism in global history. Regarding immigration, he posits that there is a societal demand curve for immigration, as the more immigrants are allowed in a country, the fewer rights that natives will want to afford them to protect their citizenship value. Immigration is no doubt a thorny issue, and Milanovic approaches it from an economic standpoint, situated in terms of citizenship premium. From this perspective, companies tend to avoid this cost by outsourcing cheap labor abroad, while citizens of poorer countries tend to migrate to countries with better opportunities for employment and economic mobility. 

This dynamic, Milanovic argues, explains much of the anti-immigrant xenophobia we see today, and he proposes that a country could create a form of “citizenship-light,” which creates a second class of people who have working rights similar to citizens but are not allowed to access certain civil rights such as voting or access to welfare. This seems like an incredibly dubious and one-dimensional solution to me, and would likely be a policy with disastrous social consequences. While I think it's an interesting idea, I am not sure how this could work on several levels, especially in terms of legality and morality. As I noted before, migrant workers are often treated like second class citizens, and such a policy would face so many obstacles against political precedents. Milanovic essentially proposes this as an immediate, temporary alternative, as he sees the only two options to limit migration would be to close borders or coordinate global efforts to reduce inequality, which would take decades. While it is interesting to contemplate, I am doubtful of its practical utility. 

Furthermore, his philosophy of history, particularly the role of communism in global history, is not convincing. Milanovic sees communism as useful in history, but only insofar as it helped Third World countries overthrow colonial rule and transition from feudal societies to capitalist ones. He praises Marxist analysis for forcing us to confront the historical contingency and limitations of every socioeconomic system. Yet, he consigns communism to the dustbin of history, writing in Appendix A, “Communism has fulfilled its function, and is unlikely to have a role in the future of global history. It is not a system of the future, but a system of the past” (224). While I do agree that we on the Left have to find a new signifier under which to unify that doesn’t carry the baggage of a term like communism, I am not convinced of Milanovic’s teleological perspective of communism as the intermediary stage between feudalism and capitalism. While it’s an interesting idea, I don’t think it holds up to historical scrutiny either (as many Third World countries have adopted capitalism as their mode of production without going through a phase of communist rule). 

Additionally, in his musings on the ideological implications of hyperconsumerism, Milanovic ditches his empirical methodology in favor of freestyling speculation. Milanovic sets up this dichotomy between pre-modern culture and modern hyper-capitalist culture, arguing that moral and social institutions have eroded our incentives for moral behavior. While I partially agree with this sentiment and find aspects of it valid (indeed, I do think that capitalism has become the de facto religious institution of modernity, even subsuming most remainders of religious institutions within the logic of capital and justified by “meritocracy”), his analysis of human behavior is a bit simplistic, relying primarily on a rational economic exchange in the social realm. Milanovic doesn’t offer much data to support his philosophical and sociological musings, leaving the section rather weak in comparison to his robust economic analysis. 

  Finally, there are some conflicting ideas throughout the book. For example, in the first chapter, Milanovic writes that it is unlikely that one system will come to rule the entire globe (5). Yet, by the end, he warns that liberal-meritocratic capitalism, if left unchecked, will come closer and closer to resembling political capitalism. This kind of vacillation occurs periodically throughout the book and leaves some of Milanovic’s ideas a bit disjointed at times. In short, Milanovic is phenomenal in his descriptions of economic inequality, tracing how we got to where we are today. Yet, when it comes to his analysis of ideology and how to move forward with policy proposals, Milanovic seems a little bit out of his depth. While his musings are undoubtedly interesting and worth thinking about, they’re much less robust and convincing than his economic appraisal. 

Conclusion:

Overall, Capitalism, Alone is a concise, well-written account of the current state of capitalism, inequality, and globalization in our world today. Milanovic synthesizes a wide array of economic theory and history of inequality, giving the reader a relatively accessible, insightful account of our socio-economic system. Milanovic’s insights are especially relevant to understanding the role of mobility in terms of both labor and capital as well as the effects of globalization. While I am much less convinced of his political/sociological musings, Milanovic still offers a deeply insightful and poignant analysis of the various forms of capitalism.

If you want to get a big picture perspective of global inequality, but do not have the time or patience to wade through more complex and tediously thorough sets of data found the work of those like Thomas Picketty (which you should still read anyway), then Milanovic’s book serves as a fantastic primer on the state of capitalism and its effect on wealth inequality in our globalized world. Whether you are someone well-seasoned in economics, looking for a conceptual framework for understanding our current economic climate, or just mildly curious about the economic system that currently dominates the world, Milanovic’s ambitious and occasionally provocative work will surely challenge your not only your current understanding of capitalism but also the immense challenges it will almost certainly face in the years to come.