EconTalk — Branko Milanovic

On: Capitalism, Alone

Episode: N/A

Date: May 11, 2020

Background: Author and economist.

Key Subjects:

  • Capitalism.
    • Both US and China are capitalist societies (in differing degrees and ways).
      • Decentralized coordination (of economic decisions).
      • Hired labor (open market wage rates).
      • Privately owned capital, investment (profit principle).
  • Inequality.
    • Widening gap between middle-class and self-sustaining upper-class.
      • Upper-class advantages:
        • Income from both capital and labor (historically unique).
        • Family structure (dual income, assortative mating, inheritance of financial assets).
        • Ability to afford rising costs of education.
        • Disproportionately influence on political process.
        • Informational advantage (plugged in, understanding how institutions work).
    • Potential solution:
  • Political capitalism.
    • There are rules, but they are flexible (lack of rigorous rule of law).
      • Rules: help to form an efficient bureaucracy that can manage sufficient level of economic growth.
      • Discretion: go outside the rules to punish or reward specific behavior.
        • Corruption (reward) is endemic, cost of doing business.
    • People are willing to trade economic gain for social freedom.
      • China, Singapore, etc.
  • Global integration.
    • Global value chain incentivizes companies to uplift technologies in poorer countries.
  • Bright side of capitalism.
    • Eradication of classes: capitalism dissolves institution of feudal classes.
    • Empathy: you have to put yourself in the shoes of your customers (to sell anything).
    • Peace: otherwise you can’t trade.
  • Dark side of capitalism.
    • Outsourcing, commoditization and commercialization of private matters (health, food, etc.).
      • Loss of stability (gig-jobs instead of normal jobs).
      • Societal changes.
        • Reduced role of family (incentives to form households have gone down).
        • Atomization of social life (individuals become private enterprises).

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