Book SummaryCapitalism, Alone, by Branko Milanovic

1-Page Summary1-Page Book Summary of Capitalism, Alone

Rise and Characteristics of Capitalism

This section delves into the rise of capitalism as the only global economic system and distinguishes between its two prevailing forms: Liberal Meritocratic Capitalism, primarily found in the West, and Political Capitalism, exemplified by China.

Meritocratic Capitalism Within Liberal Democracies: Private Property, Wage Work, Decentralized Coordination, Meritocracy, Redistribution

Milanovic uses the term "Liberal Meritocratic Capitalism" to describe the dominant Western form of capitalism. It shares the fundamental features of all capitalist systems—private control over production resources, a workforce compensated with wages, and decentralized coordination—but adds specific characteristics related to social mobility, equal treatment, and the government’s function.

Meritocratic Capitalism: Increasing Capital Returns, Concentration, Income Associations, Marrying Based on Similar Traits, and Intergenerational Advantage

Within capitalist frameworks that are both liberal and meritocratic, Milanovic observes several underlying elements driving inequality. First, unlike the traditional view of stable factor shares, he points to a growing portion of the national earnings derived from capital. This trend benefits those who possess capital at the expense of workers. Second, the holding of capital within liberal meritocratic systems remains highly concentrated, further amplifying the effects of a rising capital share on overall income inequality. Third, rather than a clear divide between capitalists and workers, as in classical capitalism, contemporary meritocratic liberal capitalism is characterized by individuals who earn substantial income from both capital and labor. This “homoploutia,” as Milanovic terms it, complicates addressing inequality through traditional policies like high tax rates on capital income since these high earners are also seen as “deserving” due to their labor contributions.

Fourth, assortative mating, or homogamy, is more prevalent under this capitalist system. Highly educated, wealthy people tend to wed one another, reinforcing inequality inside families. When combined with the growing benefits of investing in children, primarily accessible to educated couples, passing advantages across generations becomes pronounced. This leads to the fifth factor: a more significant passing down of money and assets through generations, effectively undermining the "American Dream" narrative of equal opportunity. Milanovic highlights data showing that more unequal income distribution is linked to less intergenerational mobility, both across countries and throughout U.S. history.

Practical Tips

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Capitalism, Alone Summary The Relationship Between Capitalism, Communism, and Globalization

This section challenges liberal and Marxist narratives regarding communism's role and evolution throughout history. Milanovic contends that communism, instead of being the structure that follows capitalism, as Marxism predicted, has instead played a historical role in enabling the transition from feudalism to indigenous capitalism in colonized regions. Additionally, he examines how global supply networks have fundamentally altered the relationship between the developed and developing worlds, allowing poorer countries to overcome previous obstacles to industrialization and accelerate income convergence.

Communism Prompted a Shift From Feudal Systems to Native Capitalism in Colonized Regions, Rather Than as Marxism Predicted

Challenging traditional interpretations, Milanovic argues that communism played a crucial role in transitioning from feudal societies to locally grown capitalist ones in many areas of the developing world, rather than representing a superior system succeeding capitalism as predicted by Marx. He argues that neither Marxist nor liberal viewpoints adequately account for the historical progression of developing nations. They both assumed a linear progression...

Capitalism, Alone Summary Systemic Inequalities and Challenges in Capitalist Systems

This section explores the persistent and growing challenges posed by inequalities inherent to capitalism. Milanovic examines how those inequalities manifest within a liberal meritocratic capitalist system and threaten to undermine the stability of the welfare system. Similarly, he looks at how corruption, inherent to capitalism with a political structure, generates inequality, threatens social cohesion, and ultimately challenges the foundations of the system itself.

Inequality in Liberal Meritocratic Capitalism: Rising Capital Share, Concentration, Income Association, and Intergenerational Advantage

Milanovic reiterates the key drivers of inequality under liberal meritocratic capitalism: the growing proportion of capital income alongside highly concentrated capital ownership, the growing prevalence of “homoploutia” – individuals possessing significant wealth and earnings, assortative mating among educated and wealthy individuals, and the increasing passage of advantages across generations.

Globalization Challenges Welfare and Redistribution Models

He argues that traditional methods for addressing inequality—powerful labor organizations, universal education, elevated...

Capitalism, Alone Summary Future Evolution and Trajectory of Global Capitalism

This section explores possible future trajectories for global capitalism, considering both the rivalry between liberal and political capitalistic models and the need to address systemic inequalities to prevent a descent into dystopia.

Liberal vs. Political Capitalism: Balancing Government Efficiency and the Risks of Corruption

Milanovic predicts that the trajectory of worldwide capitalism will be influenced by the rivalry between capitalism based on liberal meritocracy, which has the intrinsic benefit of democratic governance, and political capitalism, which can potentially lead to quicker economic growth. Meritocratic liberal capitalism's strength mainly stems from its political system. Democracy acts as both a “primary good”—worthwhile on its own—and as an instrumental good, providing correctives to detrimental economic trends and strategies. This self-correcting mechanism, however, may come at the expense of efficiency, as the need for consultation and debate can slow down implementation and limit how quickly the economy grows.

In contrast, state-directed capitalism relies on a powerful, centralized government to effectively manage the economy. This efficiency, often...