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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.


Milanovic is no Thatcherite. Even if he believes that the core elements of capitalism cannot be dislodged, he does believe there is room for significant change.

Despite Milanovic’s confident assertions at the outset that capitalism faces no truly lethal threats, his faith in its immortality seems to waver by the final chapter, and he concedes that it could evolve in directions that would take it beyond the boundaries of his original definition. In their 1986 book Democracy and Capitalism, Samuel Bowles and Herbert Gintis imagine a society of “rentiers who lease or lend their capital to democratically organized companies” in order to illustrate how the standard formula whereby “capital hires labor” could someday be reversed. Milanovic acknowledges that such an economy would no longer be capitalist, because “wages” in the usual sense would no longer exist.

The policy agenda that he lays out for tackling inequality is also premised on the idea that contemporary capitalism, of the liberal democratic variety in particular, can be transformed into something so radically different from what it is today that it would arguably no longer qualify as capitalism. Here Milanovic’s primary concern is with the distribution of capital ownership, since one of the major drivers of rising inequality is an increase in the “capital share,” or the fraction of total income paid out in the form of interest, rents, and dividends. (The remainder, the “labor share,” is the fraction of total income paid out in the form of wages, salaries, and bonuses.)

In principle, however, there is no reason why a rising capital share should necessarily increase inequality: if the ratio of capital income to labor income were the same for all individuals, then an increase in the capital share would, all other things being equal, have no effect on inequality. This is because a “rising aggregate share of capital income [would] increase every individual income in the same proportion.” It’s only because there is a correlation between being rich and being “capital abundant”—or drawing a relatively larger share of one’s income from capital—that a rising capital share leads to worsening inequality.

For a variety of reasons, including the difficulty of organizing labor unions when companies can easily ship jobs abroad, Milanovic believes it would be practically impossible for policymakers to drive up the labor share and compress the capital share. Instead, his recommendations focus on ways to distribute capital ownership more broadly. He wants to revise the tax code to make it more favorable to small investors, institute a wealth tax to fund capital grants for young adults, and encourage the adoption of employee stock-ownership plans (ESOPs), which effectively make workers co-owners of the companies that employ them. To critics who say that ESOPs are too risky because they aren’t diversified investments, Milanovic quite rightly points out that most Americans today have few or no investments at all.

His other policy proposals, which are less related to spreading the ownership of capital and more to spreading opportunity, include public funding of elections and something he calls “citizenship light”—a guest-worker system that does not appear to differ very much from existing visa programs that tie migrant workers to a single employer.

The result of these policies would be to reduce inequality and boost intergenerational income mobility by nudging liberal meritocratic capitalism either toward what he calls “people’s capitalism,” in which everyone has “approximately equal shares of capital and labor income,” or toward “egalitarian capitalism,” in which everyone has “approximately equal amounts of both capital and labor income” and where “[l]ibertarianism, capitalism, and socialism come close to each other.”

Yet once again, one could raise the question of whether such systems would really be “capitalist” by Milanovic’s own definition. Egalitarian and people’s capitalism both sound an awful lot like distributism, an economic philosophy first popularized by English Catholics like G. K. Chesterton and Hilaire Belloc in the early 1900s that advocated distributing productive capital as widely as possible. In the limit case, a distributist society would also be a society without wage labor (because everyone would be a small proprietor), and would therefore not be capitalist. Nor is it clear how even a rough equality of capital incomes could be guaranteed in real life without most capital being publicly owned—for instance, in the form of a social wealth fund in which all citizens hold equal shares.

These thought exercises lead to a further question: If it’s possible for society to venture right up to the definitional boundaries that separate capitalism from other economic systems, what’s to keep us from slipping over them entirely? Milanovic admits in one of the appendices that while “capitalism is stronger than ever…we do not know if this represents its overall peak, or if it is only a local peak, with further expansion of capitalist relations in the future. What we do know, however, is that nothing is forever.” So much for there not being alternatives!

The fact that its thesis gets watered down by the end, however, actually makes Capitalism, Alone a more hopeful book than it initially seems to be. As it turns out, Milanovic is no Thatcherite. Even if he believes that the core elements of capitalism cannot be dislodged, he does believe there is room for significant change. By the rubric of this book, the “democratic socialism” of Bernie Sanders is technically still capitalism in an academic sense, but it nevertheless represents a meaningful “alternative” to the status quo.


Milanovic displays a surprising nonchalance about the ways in which capitalist competition can encourage bad behavior.

Somewhat mysteriously, though, the hopefulness of the book’s conclusion is tempered by a disturbing tone of indifference. Although Milanovic discusses how capitalism has led to increased “atomization” (detachment from community and even family life) and “commodification” (the extension of market logic into areas once beyond its reach, such as the reframing of “free time” as “time when you could be making money driving an Uber”), he is strangely evasive on the question of whether these are real problems. At one point he even says that his own roadmap to egalitarianism is worth following only “if it is found that such a move is desirable.” He offers alternatives, but expresses no strong preference. If you like the capitalism you have, you can keep it.

In his introduction, Milanovic writes:

Unconditional supporters of capitalism explain [its] success as resulting from capitalism’s “naturalness,” that is, the alleged fact that it perfectly reflects our innate selves—our desire to trade, to gain, to strive for better economic conditions and a more pleasant life. But I do not think that, beyond some primary functions, it is accurate to speak of innate desires as if they existed independently of the societies we live in. Many of these desires are the product of socialization within the societies where we live—and in this case within capitalist societies, which are the only ones that exist.

But by the end of his book, he seems to have changed his mind about this, warning that “discarding the competitive and acquisitive spirit that is hardwired into capitalism would lead to a decline in our incomes, increased poverty, deceleration or reversion of technological progress, and the loss of other advantages…. This may be, perhaps, one of the key features of the human condition: that we cannot improve our material way of life without giving full play to some of the most unpleasant traits of our nature.”

Surely preferences are some complex mix of nature and nurture, but it is difficult to square the first observation with Milanovic’s subsequent claims that commodification is a process “in which individuals participate freely” and that “they often find liberating and meaningful.” To those who would ask, “Does the ability to…deliver pizza at any hour that suits you give meaning to your life?” he responds that “the ability to trade one’s own personal space and time for profit is…seen both as a form of empowerment and as a step toward the ultimate objective of acquiring wealth. It therefore represents the triumph of capitalism.” It is hard to tell who is doing the seeing here, let alone whether the reader is meant to take statements like these as descriptive or prescriptive.

Milanovic also displays a surprising nonchalance about the ways in which capitalist competition can encourage bad behavior, since this is just the price of modern life: “it is, of course, possible to impose strong ethical constraints on oneself, but only if one plans to drop out of society, or move to some tiny community outside the globalized and commercialized world.” He similarly dismisses the possibility of any sort of collective effort to impose ethical constraints on society writ large, since “religions,” which he identifies as the most promising bulwark against amorality and immorality, “today say relatively little about what constitutes correct economic behavior.” In an endnote he awkwardly grants that “an exception may be the recent attempts by the Catholic Church under Pope Francis to reinforce ethical considerations in business”—as if Catholicism had not been engaged in moral reflection on economic life all along.

Capitalism, Alone is an extraordinarily valuable book for anyone who wants to gain an understanding of current topics in economic research and their bearing on policy debates, even if it does frequently lapse into the style of an academic literature review. (If you’re the editor of an economics journal, maybe that’s a feature and not a bug.) It will also be helpful for anyone pondering the various paths that capitalism’s future evolution might follow, notwithstanding its author’s hesitation to take a stand on which of these paths is the best one.

In any case, the danger of the path we’re on now will be clear to any attentive reader. “The more economic and political power in liberal capitalism become united,” Milanovic writes, “the more liberal capitalism becomes plutocratic and comes to resemble political capitalism.” And since, ironically, “[t]he objective of political capitalism is to take politics out of people’s minds, which can be more easily done when disenchantment and lack of interest…are high,” the solution is not less politics but more—much as it would pain my relative to hear it. In the end, only a mass movement can right what’s wrong with the system that rules the world.

Capitalism, Alone
The Future of the System that Rules the World

Branko Milanovic
Harvard University Press, $29.95, 304 pp.

Matt Mazewski holds a PhD in economics from Columbia University. He is a research associate at the Rutgers School of Management and Labor Relations and a contributing writer for Commonweal.

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Published in the February 2020 issue: View Contents
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