Milanović’s new book, which will be released on 6 November, charts the decline of neoliberalism and the rise of what he calls ‘national market liberalism’.
Ivan Radanović is an economist at the National bank of Serbia and economic journalist based in Belgrade. He received an MSc in Universal basic income at Faculty of Economics at the University of Belgrade. His research covers history of economic thought, comparative economic systems and theory of degrowth. He has written for Nova ekonomija, Politika, NIN and other publications and portals in Serbia. Tweets @IvanRadanovic_
Cross-posted from LSE Politics
Because of its long-term economic growth, China no longer contributes to the decline in global inequality, Milanović now tells us. But it’s not just China. Vietnam’s and Indonesia’s shares in world GDP are also rising at the same time as those of their ex-colonisers (France and the Netherlands) are falling, and India’s GDP is four times that of Britain. These countries are presently at their “relative income peak” (21) their GDP per capita, expressed as the ratio to the world average, is at its maximum. Western countries reached this peak approximately twenty (UK, Sweden, Australia), thirty (Italy, Japan, Germany) and even sixty years ago (USA).
For Branko Milanović and many others, China is at the centre of the current ideological paradigm shift. China’s rise, enabled by global neoliberalism, also made the end of global neoliberalism inevitable, by growing too big to be integrated into a global order whose rules are written by the US and its allies. Тhe second death knell of neoliberalism is an emerging class of wealthy Western elites. These two changes have created major discontent across the West, which has in turn shifted the political mainstream to the right. Ideas that defined neoliberalism, from trade liberalisation to the free movement of people across borders, have waned in our current moment of Trumpian tariff wars and widespread anti-immigration policy.
Asia’s rise and its impacts
Milanović devotes the first of the book’s five chapters to the economic rise of Asia, as the key event in the last hundred years. As argued in his 2016 book Global Inequality, the rise of Asia has redistributed income to create a global middle class (albeit poorer than what is considered middle-class in the West) comprising 11 per cent of the world’s population with a per capita income of 2,600-3,900 international dollars.
This is the context of the change in US policy regarding China – from tighter controls on the export of sensitive technology to sanctions on Chinese corporations. Such policies negatively affect growth rates for both China and the US, but if such policies affect the Chinese growth rate more, then they would effectively postpone China’s “catch-up” rate. This, Milanović writes, is the rationale of American anti-globalisation policies: to decelerate Chinese growth, and extend its own economic supremacy. Contrasting large Asian countries – India, Indonesia, Vietnam, Thailand and Pakistan – with OECD countries produces similar results, though the current median-to-median income gap between these two groups is much greater (more than 10 to 1) than the gap between the US and China (4.6 to 1).
But the probability of finding a Chinese citizen in the very top part of the global income distribution is rising: if the growth gap remains around three per cent per year in favour of China, in twenty years it could be equal to the chance of finding an American citizen in the same group.
Defining a new ruling class
Forty years of underregulated capitalism have created new ruling classes in America and China: a rising number of people who are both labour-income and capital-income rich. He terms this phenomenon “homoploutia”, meaning equal (homo) richness (ploutia) in two key factors of production. After partially analysing this group in Capitalism, Alone (2019), Milanović now spells out the key characteristics of this new class. Its members are in the top decile in their societies by labour-, capital- and total income.
In the US and other high-income countries, this class represents around three per cent of the population, while in Chinait comprises the richest five per cent of the urban population. In America, homoploutia was driven through high parental income (which, often as inheritance, increases the chances of upward mobility) and the mixture of good education, luck, hard work and high salary that allows for substantial savings. In China, the greatest advantage is membership of the Communist Party of China.
The key shift Milanović identifies is that this new elite is not in opposition to, but in alliance with capitalists. He describes three characteristics of this class. The sociological dimension, as seen in fusion with capitalists; the economic, as seen in the data on increasing homoploutia; and the ideological, seen in the sincere acceptance of the importance of private property. The latter feature means that the top class is now more elitist, since high incomes go together with “credentialism”: educational status in the US, and party membership in China.
As more people derive their high incomes both from labour and capital, the old-fashioned capitalist class is destined for extinction. Milanović suggests that this new development has, at least for the homoploutic elite, solved the perennial conflict between capital and labour, and predicts further expansion of this class in future.
The rise of national market liberalism
Afterneoliberalism peaked around 2002 when China entered the World Trade Organization, the 2008 Financial Crisis dealt it a death blow. It marked a transitional period of political turbulence, debt and migration crises and popular protests until two key events in 2016 ushered in a new phase: Trump’s first presidential term and Brexit. Since then, there has been a growing understanding that neoliberalism has not only created a financial nouveau riche and hence widened inequalities. It has also led to nefarious social outcomes such as lower social mobility, higher rates of mortality and morbidity among the poor and the middle class, low economic growth and job precarity.
In the West, the reaction to this instability has been rising populism; in China, a strengthening of the Communist party; in Russia, a strengthening of the security services. All three intend to push back against the accumulated power of the elite. This is somewhat ironical, since Trump, Xi Jinping, and Putin are themselves products of neoliberalism: they all rose to power helped by inheritance and entrepreneurship (Trump), paternal influence in the party (Xi), and control over oligarchs (Putin). In other words, by the accumulation of wealth and power.
An increasingly capitalist order
Milanović analyses the change of eras by outlining two components of neoliberalism: the “global”, embodied in the rules imposed by the political West and the “domestic”, embodied in the national economic and political order. The first component is disappearing: “The emerging multipolar system may be characterised by the inability of individual countries to influence the internal domestic power structure of other countries”, he writes. Although we are witnessing the proliferation of new platforms (BRICS) and the failure of old ones (the UN), the exact rules of the new system have yet to be written.
But, as Milanović writes in his fourth chapter, national market liberalism includes parts of both classical and neoliberal thinking regarding markets, but it rejects other parts of the liberal project that include civil equality. While it excludes multiculturalism, cosmopolitanism or free movement of labour, it retains deregulation, low taxes, and an overall “businessman’s” approach to the economy. Capitalism is becoming even more capitalist.
There is no alternative, again?
Several of the book’s underlying assumptions may be considered inaccurate or incorrect, such as that neoliberalism functioned on the principle of free trade (it did not) or that, during neoliberalism, the economy was insulated from politics (in fact, it was insulated from democracy). These assumptions spring from the book’s specific ontological premises about human nature and capitalism, as well as author’s belief in historical determinism. Hence his (not so optimistic) prediction that national market liberalism will linger.
Nevertheless, the book is a worthwhile study. Milanović’s analysis is enriched by important insights from history and sociology, especially from classical authors such as Lenin, Rosa Luxemburg, Karl Polanyi, and, for economists, the indispensable Joseph Schumpeter. Whatever premises it originates from, the book is based on diligent work on empirical data, and produces a strong socio-economic analysis of the Chinese and Western elite. Most notable are his proposals of so-called circular migration (allowing foreigners to move on a temporary basis) to solve the “impossible trinity” of globalisation, high income inequality and the absence of structural migration; and the concept of homoploutia. Both are original and useful analytical tools which social scientists can take up in service of understanding capitalism’s transformations.
Be the first to comment