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“Avoiding Plutocracy Would Require a Political Change”: Branko Milanovic on the Future of Capitalism — Asher Schechter

Summary:
In an interview with ProMarket, CUNY Graduate Center economist Branko Milanovic discussed the differences and similarities between US-style and China-style capitalism and explained why, without major reforms, liberal capitalism could lead to plutocracy. "Could lead" or "has led"? While I generally like Branko Milanovic's work, I think his analysis of "capitalism" is fundamentally misguided since it is based on a Western-biased view of economics and political theory.  So-called capitalism has not "won," and its gains cannot be attributed to its having shown that it is the superior economic system.  Rather than being the tale of the spread of freedom and democracy it is represented as, the history of capitalism has been the story of the extension of Western imperialism and

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In an interview with ProMarket, CUNY Graduate Center economist Branko Milanovic discussed the differences and similarities between US-style and China-style capitalism and explained why, without major reforms, liberal capitalism could lead to plutocracy.
"Could lead" or "has led"?

While I generally like Branko Milanovic's work, I think his analysis of "capitalism" is fundamentally misguided since it is based on a Western-biased view of economics and political theory. 

So-called capitalism has not "won," and its gains cannot be attributed to its having shown that it is the superior economic system.  Rather than being the tale of the spread of freedom and democracy it is represented as, the history of capitalism has been the story of the extension of Western imperialism and colonialism that began in the feudal era and continues under the regime of neoliberalism, neo-imperialism, and neocolonialism since WWI. In addition, what Milanovic calls "plutocracy," is better characterized as neo-feudalism.

This view is reminiscent of Francis Fukuyama's The End of History and the Last Man (1992), which the author himself later disputed. Milanovic is aware of this and includes a trapdoor.

For example, characterizing the Chinese system as "authoritarian capitalism" is based on Western assumptions that do not accord with the facts seen objectively and certainly not with the way the Chinese leadership characterizes the system it is developing as a work in progress. The issue is really about who controls the commanding heights of the economy, the primary means of production, governmental policy, and the dominant narrative, and who holds the reins of culture. That is, how is authority exercised.

Nevertheless, the point that capitalism and liberal democracy are antithetical and that capitalism leads to plutocracy are well-taken.

Western economists generally assume that everything hangs on "the price mechanism," presuming "free markets" and rational choice by free agents as the basis for a "liberal" (capitalist) system. Well, it's a lot more complicated than that socially, political and economically, because of things like class structure, power distribution, and institutional arrangements. 

In the first place, pure capitalism (classical economic liberalism) exists nowhere. What does exist is various expressions of adulterated capitalism that are closer to neo-feudalism than liberal capitalism as an ideal. Conventional economic assumes classical economic liberalism as the natural state of the socio-economic system, but its models exist only in possibility space and not actual space. It is doubtful that classical economic liberalism could exist anywhere at scale and certainly not at the global level considering world conditions. There is just no way to get there, and there is no power center with the capacity either, about which Milanovic is more aware than most economists and other "experts" in the West.

So let's get real. In my view, Branco Milanovic looks here too much at the surface of the world economy and world order. He needs to look deeper at the world system and how it actually operates in depth. Moreover, since he is looking from a Western point of view, this is difficult for him, as it would be for any Western educated person, even someone from another culture or civilization. Milanovic did grow up in such a situation, being from Serbia in the former Yugoslavia. This does enable him to hold a broader view than most in the West. But this is just an interview, and I have not read his recent book.

But that, too, is about "capitalism," which in my view this is no longer a very useful term in analysis, since it is so assumption-laden and, moreover, has become a cliché. Everyone thinks they know what capitalism is and yet no one does really, owing to the degree of abstraction involved.


That said, this is a good post and a should-read. Milanovic is saying things needing to be said that others are not, since their view is even more limited. I just think that the analysis needs to be broader, deeper, and more nuanced. If we view economics in terms of the big three — Smith, Marx, and Keynes — a fourth view is sorely needed at this juncture, one that deals with the global economy in terms of a world order and global system that are in flux. But is there even anyone with the requisite grasp of the matter, let alone the ability to handle a matter of this scale and complexity rigorously? What type of method would apply?

ProMarket — The blog of the Stigler Center at the University of Chicago Booth School of Business
“Avoiding Plutocracy Would Require a Political Change”: Branko Milanovic on the Future of Capitalism
Asher Schechter

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Abstract
Capitalism has always been a global system, but not in fixed ways. Different national powers have emerged and become dominant over the centuries, but the fundamental processes underlying the uneven development of global capitalism have not altered; they continue to be driven by imperialism — the struggle of large capital over economic territory of various kinds. Since the late 1960s, only the East Asian region has shown notable increases in its share of global GDP, and for the last two decades this has been dominated by the rise of China. This is directly related to the ability of the Chinese state to control the economy and to implement heterodox policies with very high investment rates. However, the Chinese case is exceptional: few other developing countries have followed a trajectory anything like that of China. Meanwhile, internal inequalities have increased across the world, as the bargaining power of capital vis‐à‐vis labour has increased dramatically in every country. This reflects the changed form of 21st century imperialism, which relies increasingly on the international legal and regulatory architecture as fortified by various multilateral, plurilateral and bilateral agreements that establish the hegemony of global capital in different ways.
Wiley Online Library
A Brave New World, or the Same Old Story with New Characters?
Jayati Ghosh
Mike Norman
Mike Norman is an economist and veteran trader whose career has spanned over 30 years on Wall Street. He is a former member and trader on the CME, NYMEX, COMEX and NYFE and he managed money for one of the largest hedge funds and ran a prop trading desk for Credit Suisse.

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