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If Capitalism Is Our Future, What Will It Look Like?

(Christopher Furlong/Getty Images)
(Christopher Furlong/Getty Images)

This is Part II of our “pop-up” series on capitalism. Listen to Part I here.

With Meghna Chakrabarti

Capitalism works, says economist Branko Milanovic, but it comes with a price. We look at new models of capitalism that can break the cycles of greed and inequality in the U.S.


Branko Milanovic, professor at the Stone Center on Socio-Economic Inequality at the Graduate Center of the City University of New York. Author of “Capitalism, Alone: The Future of the System that Rules the World.” Former lead economist in the World Bank’s research department. (@BrankoMilan)

Interview Highlights

On whether inequality is required in order for capitalism to function

“Let me answer this question by saying first: yes, indeed, it is absolutely required. But, secondly, I have to also qualify that by saying that many people, actually — when they ask that question — imagine that inequality is some kind of a binary variable. Which means either you have inequality, or you don’t have inequality. The reality, of course, is much more complex. You should think of inequality like the way that you measure, for example, temperature, or weight and so on. It’s a continuous variable. So, the question that we have to ask [is]: is inequality that we have now actually bad for growth, and bad for social stability and bad for, basically, what we call [in] economics, intergenerational equality? In other words, equality of opportunity. So, let me just say it again, I think it is bad for growth. It is bad for social stability, and it is bad for equality of chances, or equality of opportunity.”

On whether capitalism as a system is sustainable

“It’s a very difficult question. I do believe, to a large extent, [capitalism] is sustainable. Even if all of inequality continue[s] to be the way that [it is], unchecked. It is sustainable, largely, because we don’t have a blueprint for an alternative system. However, something being sustainable, something being efficient, something being good, are two different things. You can actually have capitalism, with the way that it functions in South Africa. We don’t see an immediate sort of revolution, but you can eventually have a revolution — you can have a change. So, you know, the question is: Is this a desirable way for the system to function? That you will let things, really, run away in one direction which is clearly — I’m not saying it’s unsustainable – but, difficult to sustain. And, it’s inefficient, even for growth purposes.

“And, then, eventually you end up with either revolution, or a disorder, or conflicts and so on. Or, is it more intelligent to actually take stock of the situation as it is, and to devise ways in which certain negative elements — significant negative elements brought by inequality — would be kept in check? And just [a] further point on that, this is actually a very similar reaction [to what] happened in the 1930s. You know, people in the 1930s were accused … including FDR, were accused of being socialists — covert socialists — all of that. [Economist John Maynard] Keynes was accused of being one as well. But, what in reality they wanted to do, and which they did, is actually to make capitalism more sustainable. And that’s exactly what I think we should do now.”

On whether capitalism is built to make the rich richer

“Yes, I think so. … The system, the way it functions today, is generating — and, I’ll actually give it two examples — generating really increasing inequality. And that increasing inequality leads to the control of the political process by the rich. And, the control of the political process by the rich is really required for the rich to transfer, or transmit, rather, all these advantages. Be it through money — financial advantages – or, education, to their offspring. Which then reinforces the dominance of whatever is called the upper class. So, I think this is the logic that I see. High inequality, political control, intergenerational transmission of disadvantages.”

On living — for the first time — in an age where inequality between nations is shrinking while inequality within nations is increasing

“We never had this particular combination. You know, we actually, we have the data from the early 19th century. Actually, they start from 1820, and we can chart these two types of inequality. And what was happening in the 19th century was that both — between inequality — was increasing. Because Western Europe, North America, and so on, became richer. And, India and China stayed at their old level of income. And, you know, inequality between nations went up, and inequality within them also went up. But, we never had the situation that we have now, that there was a significant decline in between country inequalities, mostly due to the Asian growth. And it’s not only China. It’s also India, Vietnam, Thailand, Malaysia, Indonesia and so forth. And, on the other hand, inequality within each of those nations, including China … which now has inequality higher than the U.S. level — inequality in each of them has gone up. So we never had that particular combination of the two inequalities.”

From The Reading List

Excerpt from “Capitalism, Alone” by Branko Milanovic

There are two epochal changes the world is living through. One is the establishment of capitalism as not only the dominant, but the sole socioeconomic system in the world. The second is the rebalancing of economic power between Europe and North America on the one hand and Asia on the other, owing to the rise of Asia. For the first time since the Industrial Revolution, incomes on the three continents are edging closer to each other, returning to roughly the same relative levels they had before the Industrial Revolution (now, of course, at a much higher absolute level of income). In world-historical terms, the sole rule of capitalism and the economic renaissance of Asia are remarkable developments—which may be related.

The fact that 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— is without historical precedent. In the past, capitalism, whether in the Roman Empire, sixth-century Mesopotamia, medieval Italian city states, or the Low Countries in the modern era, always had to coexist—at times within the same political unit—with other ways of organizing production. These included hunting and gathering, slavery of various kinds, serfdom (with workers legally tied to the land and banned from offering their labor to others), and petty-commodity production carried out by independent craftspeople or small-scale farmers. Even as recently as one hundred years ago, when the first incarnation of globalized capitalism appeared, the world still included all of these modes of production. Following the Russian Revolution, capitalism shared the world with communism, which reigned in countries that contained about one-third of the human population. None but capitalism remain today, except in very marginal areas with no influence on global developments.

Capitalism facilitates—and when foreign profits are higher than domestic, even craves—the cross-border exchange of goods, the movement of capital, and in some cases the movement of labor. It is thus not an accident that globalization developed the most in the period between the Napoleonic Wars and World War I, when capitalism largely held sway. And it is no accident that today’s globalization coincides with the even more absolute triumph of capitalism. Had communism triumphed over capitalism, there is little doubt that despite the internationalist creed professed by its founders, it would not have led to globalization. Communist societies were overwhelmingly autarkic and nationalistic, and there was minimal movement of goods, capital, and labor across borders. Even within the Soviet bloc, trade was carried out only to sell surplus goods or according to mercantilist principles of bilateral bargaining. This is entirely different from capitalism, which has an inherent tendency to expand.

The uncontested dominion of the capitalist mode of production has its counterpart in the similarly uncontested ideological view that money-making not only is respectable but is the most important objective in people’s lives, an incentive understood by people from all parts of the world and all classes. It may be difficult to convince a person who differs from us in life experience, gender, race, or background of some of our beliefs, concerns, and motivations. But that same person will easily understand the language of money and profit; if we explain that our objective is to get the best possible deal, they will be able to readily figure out whether cooperation or competition is the best economic strategy to pursue. The fact that (to use Marxist terms) the infrastructure (the economic base) and superstructure (political and judicial institutions) are so well aligned in today’s world not only helps global capitalism maintain its dominion but also makes people’s objectives more compatible and their communication clearer and easier, since they all know what the other side is after. We live in a world where everybody follows the same rules and understands the same language of profit-making.

Such a sweeping statement does need some qualification. There are indeed some small communities scattered around the world that shun money-making, and there are some individuals who disdain it. But they do not influence the shape of things and the movement of history. The claim that individual beliefs and value systems are aligned with capitalism’s objectives should not be taken to imply that all of our actions are entirely and always driven by profit. People sometimes perform actions that are genuinely altruistic or are driven by other objectives. But for most of us, if we assess these actions by time spent or money forgone, they play only a small role in our lives. Just as it is wrong to call billionaires “philanthropists” if they acquire an enormous fortune through unsavory practices and then give away a small fraction of their wealth, so it is wrong to zero in on a small subset of our altruistic actions and ignore the fact that perhaps 90 percent of our waking lives is spent in purposeful activities whose objective is improving our standard of living, chiefly through money-making.

This alignment of individual and systemic objectives is a major success achieved by capitalism. Unconditional supporters of capitalism explain this 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.

It is an old idea, argued by writers as distinguished as Plato, Aristotle, and Montesquieu, that a political or economic system stands in harmonious relation with a society’s prevailing values and behaviors. This is certainly true of present-day capitalism. Capitalism has been remarkably successful in imparting its objectives to people, prompting or persuading them to adopt its goals and thus achieving an extraordinary concordance between what capitalism requires for its expansion and people’s ideas, desires, and values. Capitalism has been much more successful than its competitors in creating the conditions that, according to the political philosopher John Rawls, are necessary for the stability of any system: namely, that individuals in their daily actions manifest and thus reinforce the broader values upon which the social system is based.

Capitalism’s mastery of the world has been achieved, however, with two different types of capitalism: the liberal meritocratic capitalism that has developed incrementally in the West over the past two hundred years, and the state-led political, or authoritarian, capitalism that is exemplified by China but also exists in other parts of Asia (Singapore, Vietnam, Burma) and parts of Europe and Africa (Russia and the Caucasian countries, Central Asia, Ethiopia, Algeria, Rwanda). As has occurred so often in human 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. After Christianity triumphed across the Mediterranean and the Near East, it experienced ferocious ideological disputes and divisions (the one between Orthodoxy and Arianism being the most notable), and eventually it produced the first big schism between the Western and Eastern churches. No different was the fate of Islam, which almost immediately after its dizzying conquest split into Sunni and Shia branches. And finally, communism, capitalism’s twentieth-century rival, did not long remain a monolith, splitting into Soviet-led and Chinese versions. The worldwide victory of capitalism is, in that respect, no different: we are presented with two models of capitalism that differ not only in the political but also economic and, to a much lesser degree, social spheres. And it is, I think, rather unlikely that whatever happens in the competition between liberal and political capitalisms, one system will come to rule the entire globe.

Excerpted from CAPITALISM, ALONE:THE FUTURE OF THE SYSTEM THAT RULES THE WORLD by Branko Milanovic, published by Harvard University Press. Copyright © 2019 by the President and Fellows of Harvard College. Used by permission. All rights reserved.

The New Yorker: “The Rich Can’t Get Richer Forever, Can They?” — “There is ample evidence that this shift, in turn, led to more uneven income distributions. Countries with larger tax cuts experienced bigger increases in inequality. Appelbaum’s book—focussing on the who, rather than the how—does not delve deeply into these consequences. But they are richly detailed in ‘Capitalism, Alone: The Future of the System That Rules the World,’ by Branko Milanovic.

“Even though inequality began to rise after 1980, it took economists a couple of decades to really notice. Among those who turned their attention to the fallout was Milanovic, who grew up in Communist Yugoslavia, spent a couple of decades in the research department of the World Bank, and now teaches economics at the City University of New York. Milanovic originally built his reputation in the late nineties, when, using a giant World Bank database of household incomes, he was able to demonstrate how the benefits of globalization had been distributed among different classes across various groups of countries. The big winners were the ‘global plutocrats,’ whose returns on capital shot up, and the new mass middle class of the emerging world, mainly in East Asia and India, who benefitted from the spectacular growth of their regions. The big losers were Western middle-class workers whose incomes stagnated as the industries they worked in were hollowed out by foreign competition. Hence the visceral appeal of Donald Trump’s protectionist measures against China.

“Milanovic isn’t just a whiz at number crunching; he has a whimsical, wide-ranging appreciation for history and culture. He has written about income distribution in the early Roman Empire (inequality during the Augustan age was roughly comparable to that of the United States today), the effects on European soccer when limits on the number of foreign players allowed in club teams were lifted (the richest clubs became even more dominant in their leagues), and the financial implications of Elizabeth Bennet’s decisions in ‘Pride and Prejudice’ (marrying Mr. Darcy would put her in the top tenth of one per cent, while, as a spinster, she would have fallen from the top percentile to about the fiftieth percentile). ‘Capitalism, Alone’ builds on Milanovic’s previous book, ‘Global Inequality,’ which came out in 2016. Indeed, so many of the themes and ideas in the new book were prefigured in the last one that ideally the two should be read together.”

The Guardian: “Inequality: is it rising, and can we reverse it?” — “Income inequality has risen sharply since the 1970s in most advanced economies around the world, and has been blamed for increasingly polarised politics.

“While growth powered ahead in the second half of the 20th century, and resumed more fitfully after the 2008-09 financial crisis, there have been major winners and losers from the wealth generated.

“Sir Angus Deaton, the Nobel prize-winning economist who is leading a five-year review of inequality with the leading Institute for Fiscal Studies thinktank, said: ‘There is this feeling that contemporary capitalism is not working for everybody.

“‘There’s a sense that London is gobbling up everything and there are cities that are doing OK, but there are large parts of the country where that’s not the case at all.’

“There are a host of causes, including fiscal policy, technology, globalisation, deregulation, education, emasculation of trade unions and austerity.”

Anna Bauman produced this hour for broadcast.

This article was originally published on

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