To Predict the Future, He Follows the Money

November 5, 2019

Professor Branko Milanovic looks at why capitalism now reigns supreme and what that means for inequality, democracy, and morality in his new book, Capitalism, Alone: The Future of the System That Rules the World.

branko-bookcover-469 capitalism alone

Professor Branko Milanovic and his book, Capitalism, Alone.

By Beth Harpaz
Editor of SUM

Economist Branko Milanovic, visiting presidential professor at The Graduate Center and a senior scholar at the Stone Center for Socio-Economic Inequality, has just come out with a new book, Capitalism, Alone: The Future of the System That Rules the World. He has a lot to say about a world where capitalism “is now the only way of organizing production,” not only in Western countries, but in places like China, Russia, and Vietnam as well.  
He also has some dire warnings about democracy. If current economic trends in the U.S. continue, “a self-sustaining elite will control the economy,” he told The Graduate Center. “Democracy will slowly evolve into plutocracy. We see signs of that quite strongly in the U.S. already.”
The success of capitalism in authoritarian countries like China "undermines the West's claim that there is a necessary link between capitalism and liberal democracy,” he writes. “Indeed this claim is being undermined in the West itself by populist and plutocratic challenges to liberal democracy."
About 90% of all financial wealth in the U.S. is held by the wealthiest 10%, he says, and they use their money to elect politicians whose policies allow them to preserve that wealth and accumulate more. Thus, the top 1% of the top 1% are responsible for 40% of total campaign contributions.
“I actually believe the biggest threat to democracy in liberal capitalist societies is the political power of money,” Milanovic told The Graduate Center. “It has such an insidious impact on democracy. People still have the right to vote, the right to publish whatever you want or freedom of assembly. The façade of a democracy remains, but the system essentially makes a mockery of voting.” In many countries around the world today that hold elections, “you cannot get rid of the leaders, because they are always able somehow to get the majority of the vote.”
But Milanovic says the trajectory of the U.S. and other countries toward a future controlled by a few extremely wealthy entities could change if political power were to shift.
“History is not predetermined entirely,” Milanovic says. Leaders with socially progressive agendas have in the past created government programs that used tax money to provide more services for poor and middle-class Americans. But creating political support for those agendas has become difficult, he writes, as voters increasingly take “a skeptical view of the role of government and of tax-and-transfer policies.”
There is a flip side to all this. While wealth inequality is on the rise within countries like the U.S., Milanovic says, global inequality between all individuals in the world is declining. Fewer people live in destitution globally now than in the past, and the gap between rich and poor countries has narrowed. The economic boom in China, Vietnam, India, and other non-Western countries “returns the distribution of economic activity in Eurasia to roughly the position that existed before the Industrial Revolution,” he writes. “This geographical rebalancing is putting an end to the military, political, and economic superiority of the West, which has been taken for granted during the past two centuries.”
Milanovic’s research includes some stunning figures. In 1970, the West produced 56% of world output and Asia (including Japan) only 19%. Today the West produces 37% and Asia produces 43%. No wonder globalization is more popular in Asia than elsewhere.
Harnessing economic data, as Milanovic does, to study social and political issues is a relatively new trend in the field. But he predicts it will become more common: “Political, social, and moral dilemmas that have to do with inequality, we can now ‘marry’ them with the numbers. The numbers are something we did not have nearly to the extent we do now.” Those findings could be used to work towards eliminating social problems.

Milanovic spoke about his book at The Graduate Center on Dec. 10 as part of our series "The Promise and Perils of Democracy." 

Beth Harpaz is the editor of SUM. Follow her on Twitter at @literarydj.