Milanovic, B. 2019. Capitalism, Alone: The Future of the System That Rules the World. Harvard University Press.

Chapter 1

Summary by James R. Martin, Ph.D., CMA
Professor Emeritus, University of South Florida

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Chapter 1: The Contours of the Post-Cold War World

Capitalism as the Only Socioeconomic System

Today the entire globe operates according to the same economic principles, i.e., production organized for profit using free wage labor, mostly privately owned capital, and decentralized coordination. With the exception of marginal areas with no influence on global developments, prior modes of production are gone (e.g., hunting and gathering, slavery of various kinds, serfdom, independent production of craftspeople, and small-farmers). For several years after the Russian Revolution, capitalism shared the world with communism, but capitalism is essentially the only system that remains today. Capitalism facilitates the cross-border exchange of goods, the movement of capital and occasionally the movement of labor. Communist systems were independent and nationalistic with limited movement of goods, capital, and labor across borders. Capitalism became dominant because making money is the most important objective for most people. Everyone, regardless of their spoken language understands the language of money and profit.

Two types of capitalism have emerged or evolved including Liberal Meritocratic Capitalism and State-led Political, or Authoritarian Capitalism. Liberal meritocratic capitalism developed in the West over the past two hundred years, and state-led political capitalism exemplified by China developed more recently and also includes the systems in Singapore, Vietnam, Burma, Russia, Central Asia, Ethiopia, Algeria and Rwanda.

The Rise of Asia and the Rebalancing of the World

The economic success of state-led political capitalism underlies the rise of Asia. Although liberal capitalism in India and Indonesia are also important, the transformation of Asia is being led by China. This geographical rebalancing has put an end to the political and economic superiority of the West (Europe and North America). Measuring inequality using the Gini coefficient (0= no inequality and 1= maximum inequality), the estimated global income inequality increased from around 55 in 1820 to just under 70 around the time of World War I. After the 1980s growth in China fueled by new information and communication technologies led to a recent drop in the Global Gini to around 65.

The economic rebalancing of the world is also political. China's success is undermining the West's claim that there is a necessary link between capitalism and democracy. The two types of capitalism now seem to be competing. Political capitalism is attractive to the political elites because it provides more autonomy. On the other hand, liberal capitalism includes democracy and the rule of law that are desired values in themselves that promote innovation and social mobility. However, the threat to liberal capitalism is the self-perpetuating upper class, and the polarization between the elites and the rest of society.

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Go to the next Chapter. Chapter 2: Liberal Meritocratic Capitalism

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