Not too long after I started graduate school, a right-leaning relative who had heard that I studied economics asked me what my area of focus was going to be. When I mentioned political economy as one of my interests, he suddenly appeared concerned. “See that’s when I start to get nervous,” he interrupted, “when people start talking about political economy.” Puzzled, I wondered what I was missing. Were “political economists” the latest Fox News bugaboo, a menace akin to the threat once posed circa 2008 by “community organizers”?
I explained to my relative that the phrase can have different meanings. Adam Smith would have understood it as denoting a branch of moral philosophy, but modern economists use it to refer to the study of political institutions with the help of economic methodologies like game theory. This seemed to put him more at ease. “Oh, now I see,” he said, “I thought you were talking about political control of the economy. You know, like when politicians try to run everything.”
I was reminded of this conversation as I read Branko Milanovic’s Capitalism, Alone: The Future of the System that Rules the World, because it occurred to me that its author may have coined just the term my relative was searching for: “political capitalism,” Milanovic’s label for one of what he sees as the two major variants of capitalism in existence today. Such a system is distinguished by three things: first, “a highly efficient and technocratically savvy bureaucracy…[that] has as its main duty to realize high economic growth”; second, the “arbitrary use of power”; and third, a private sector allowed “wide latitude, but never so wide and powerful as to be able to dictate its preferences to the state.”
The irony is that my relative was almost certainly picturing the United States (at least under Democratic administrations) as an example of such a “political economy.” But Milanovic, an economist at the City University of New York Graduate Center, believes that the archetypal example of political capitalism is in fact China; other notable specimens include Vietnam, Malaysia, Singapore, Algeria, and Ethiopia. Officially or unofficially, almost all of these nations are one-party states in which the governing party is effectively exempt from the rule of law. Their enduring existence puts the lie to the once-common claim that democracy and capitalism logically require one another to survive.
The United States, by contrast, is home to what Milanovic calls “liberal meritocratic capitalism,” which has two defining characteristics: first, a formal absence of “legal obstacles preventing individuals from achieving a given position in society,” despite substantive obstacles generated by the intergenerational transmission of advantage and disadvantage through inheritances and the like; and, second, the use of taxation and free education to limit the formation of familial dynasties. (Milanovic also mentions a third variant of capitalism that he considers to be a mostly marginal phenomenon: “social-democratic capitalism,” which features a more generous welfare state and a relatively stronger labor movement than its liberal meritocratic counterpart. Here he has in mind the Nordic countries or the United States and Western Europe during the decades after World War II.)
Milanovic argues that all varieties of capitalism share certain essential features—“production organized for profit using legally free wage labor and mostly privately owned capital, with decentralized coordination”—and that these features are here to stay. He sees no contradiction in observing that a system that “rules the world” nevertheless exists in quite different versions, since throughout history “the rise and apparent triumph of one system or religion is soon followed by some sort of schism between different variants of the same credo”—such as Eastern and Western Christianity, Sunni and Shia Islam, or Soviet and Chinese Communism. The question is whether multiple species of capitalism can coexist indefinitely, or whether one will come to dominate in the end.
In a way, Milanovic actually agrees with Margaret Thatcher’s dictum that “there is no alternative” to capitalism now that state communism, its erstwhile rival for world domination, has been all but eradicated. One of the book’s epigraphs is from Marx and Engels, who were more prescient on this point than they might have hoped: “[the bourgeoisie] compels all nations, on pain of extinction, to adopt the bourgeois mode of production.”
That said, Milanovic nevertheless has little patience for Francis Fukuyama–style theories that place us at “the terminus of socioeconomic formations invented by humankind.” If a “liberal international order where all the key players [are] capitalist and globalist” really represents the “end of history,” then how to account for the outbreak of World War I, which occurred against just such a backdrop? Likewise, how can the collapse of Communism be explained by “scientific socialists,” who would view such an event as tantamount to modernity spontaneously reverting to feudalism? “The liberal paradigm has problems with 1914,” he declares, “the Marxist paradigm with 1989.” Capitalism, then, will surely still undergo “accidental” change even if, in substance, it remains the same forever.