Can Capitalism Be Fixed?

The 2008 financial crisis is widely credited with resurrecting the American left, from the tent cities of Occupy Wall Street to the sprawling chapters of the Democratic Socialists of America. But it’s not just street protesters and millennial Marxists who have scrutinized capitalism: Liberal experts and political decision-makers have also become analysts of the sufferings of capitalism. Since Thomas Piketty’s breakout hit in 2013 Capital in the 21st centuryThe publishing industry has been producing new books on capitalism, inequality and economics at a breakneck pace. In the past two years alone, Piketty’s follow-up has been published. Capital and ideology;; Gabriel Zucman and Emmanuel Saez The Triumph of Injustice: How the Rich Tax Taxes and How to Make Them Pay Them;; Heather Bousheys Unbound: How inequality limits our economy and what we can do about it;; and Anne Case and Angus Deatons Deaths of Despair and the Future of Capitalismto name a few. Even the earlier proponents of capitalism are now on the back foot: none other than the manic hype man of globalization, Thomas Friedman, has reached out to Mea Culpa and admitted that “we broke the world” by admitting capitalism to it has spread widely. (“We”?)

The growing body of liberal capitalism studies is found in all academic disciplines, but is most pronounced in business, where a new cohort has eased the formalist constraints of an earlier generation and taken a more historical and sociological approach. Rather than constantly refining idealized and abstract models, these economists justified their analyzes on a mountain of empirical evidence documenting the growth of gigantic wealth at the top, the deterioration in the health of the lower classes, the decline in tax rates of the upper classes, and the stagnation of wages most people.

Although its analyzes and prescriptions are radical by the standards of the last decades of Anglo-American politics, this work is hardly revolutionary. Yet it has forced many liberals to finally reckon with the features of capitalism that the left has long lamented: the production of great poverty amid obscene wealth, the convergence of economic and political power, and the spread of crises that disrupt the promised stability of the system and undermine human health and happiness.

Economist Branko Milanovic was a key participant in the debates in this emerging field, as well as one of its most idiosyncratic contributors. Milanovic was born in Belgrade as part of Yugoslavia and wrote his dissertation on income inequality in his home country long before it was a fashionable subject. He spent nearly two decades researching income inequality as an economist at the World Bank before accepting a number of academic appointments. He currently teaches at the Graduate Center of the City University of New York. But he’s not a typical World Bank economist: Milanovic knows his Marx and, although not a Marxist himself, has long insisted on the value of class analysis and historical perspectives for the economy, while also engaging in political-philosophical debates about distributive justice . His life experience in actual socialism, meanwhile, gave him a critical detachment from the narratives of the end of history that were circulating in much of the West after the fall of the USSR – and of the end of the end-of-history hand-wringing itself has increased since 2016. So the discourse seems to be catching up with where Milanovic has been all along.

Milanovic’s breakthrough came in 2016 with the release of Global inequalityas his longstanding research interests converged with the mainstreaming study of inequality. The book took stock of the effects of globalization on income around the world, focusing internationally on what had been treated as a domestic problem in many countries. It attracted attention for its famous “Elephant Curve” graph, which showed that the emerging economies’ working and middle classes have made tremendous gains since 1988 and the developed West’s working and middle classes have lost incomes – while the rich around the world like the world Bandits made. The graph was notable not because it contradicted conventional wisdom about globalization, but because it provided clear and concise evidence of an often-discussed trend. Milanovic also argued that the graphic wasn’t just bad news: while the North Atlantic working and middle classes were struggling, their counterparts outside the West were doing better than ever. Even if capitalism distributes wealth unevenly, Milanovic said, it remains a powerful engine for wealth creation.


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