“It’s so much darker when a light goes out than it would have been if it had never shone.” John Steinbeck
I owe the title of this review to the eponymous book of John Steinbeck who borrowed it from Shakespeare. William Shakespeare has used this phrase in his popular play, Richard III, where King Richard is expressing his feelings of discontent regarding living in the world that hates him. But in the same quote Richard refers to a ‘glorious summer’ that will eventually replace the cold and gloomy winter. The authors of the three books that I’m going to review are mightily disappointed with the current state of affairs in our world completely dominated by capitalism. To quote another famous Shakespeare’s play, “something is rotten in the state of Denmark…“ That rotting something has a number of dimensions, social, political and economic. Greed and shameless disregard of social obligations ruin social relations; populism, nativism, and nationalism are poisoning the political sphere and destroying liberal democracy; stagnating incomes, growing inequality and corruption shatter the very foundation of capitalism. Will summer come? Well, each author suggests a set of recommendations about how these ailments of the capitalist system can be remedied. Each of them believes that these measures are realistic and will bring positive results but all of them are also more or less aware of the political will that such measures will require and that such a political will may not be readily available.
So, here are the three: Yasha Mounk with his The People Vs. Democracy: Why Our Freedom is in Danger and How to Save It (Harvard University Press, 2018), Paul Collier with his The Future of Capitalism: Facing the New Anxiety (Allen Lane, 2018) and Branko Milanovic with Capitalism, Alone: The Future of the System That Rules the World (Belknap Press, 2019). The title of this review (Trio II) refers back to my previous review of three authors writing on financialization—John Key, Nicolas Shaxson and Mariana Mazzucato—although to be honest that review was called 2⅓ Books. Bringing several authors under the same roof makes it a lot of fun to review because it opens new opportunities. A regular review is two parallel dialogues: one between the reviewer and the author (the review agrees or disagrees with the author) and the other between the reviewer and the reader (the reviewer invites the reader to share her impressions). A review of more than one book enriches the narrative through a polylogue where the reviewer initiates a series of discussions and arguments between different authors as well as between the authors and herself while keeping an eye on the reader and maintaining a continuous dialogue with her.
As already mentioned, what unites all three books is the concern about the current (unsatisfactory/precarious) state of (modern Western) society, more so for Mounk (‘…our freedom is in danger’) and Collier (‘new anxieties’) and less so for Milanovic who, although well aware about the problems of liberal capitalism, is open to discussing other possible forms of capitalism (and even non-capitalism in a technical sense) that may co-exist or even replace liberal capitalism. Furthermore, Milanovic is generally more optimistic about the evolving situation. Approaching it from the perspective of inequality, Milanovic takes encouragement in the positive effects of capitalism on global inequality (i.e., a decline in inequality between countries, which has gone down from .72 Gini at its high around the 1980 to .65). (At the same time, Milanovic is acutely aware of the rising inequality in the developed countries.)
Two books (Mounk and Collier) are essentially in defense of the existing liberal order, which thought to have been more effective and efficient and morally superior to the one that emerged after Trump came to power and the upsurge of populist and nativist parties in the West and somewhere else in the world. One cannot help to be amazed at the affinity between these two authors who nostalgically bemoan the ‘good old days’ and condemn the contemporary moral decline despite an age difference of 30 years. In general, Mounk’s book creates an impression of having been written by someone much older than the author who is in his mid-30s. One would expect something more provocative from an author this young rather than advocating for the return of the ‘ancien régime’. To quote Victor Hugo, “If a man is not a liberal at twenty, it is because he has no heart, and if he is not a conservative at forty, it is because he has no brains.” This last comment is not meant however to question the quality of Mounk’s book, which demonstrates his academic erudition and genuine concern about the degradation of the liberal order. Milanovic, again, is somewhat special in this respect. His book is less a lamentation about the ‘glorious’ past than a deliberation about the pros and cons of the evolution of modern capital and the forms it may take in the future. For Mounk and Collier there is nothing better than liberal democracy/liberal democracy. Mounk is more nuanced in this respect whereas Collier angrily lambasts any attempts to discuss alternatives (as Paul Mason did in his Postcapitalism, for example), dismissing whoever takes this path as ‘people with a taste for the paranoid psychology of the cult’. In doing so, Collier lumps together Marxism (not even Communism), fascism and religious fundamentalism. (I believe Collier knows enough to distinguish between Marxism (which is anti-capitalist by nature) and fascism and religious fundamentalism on the other hand (which are very comfortable with capitalism) but confuses them intentionally to discredit any attempt to look for a non-capitalist future. It is a shame when a respected academic explicitly discourages and even condemns a freedom of thought. But this is of course just another illustration of how much in economics—starting with the research theme and ending with interpretation of the results—is shaped by ideology. As Collier himself rightly remarks, ‘ECON 101 starts where SOC PSY 999 and POL SCI 999 finish’.)
Mounk and Milanovic introduce a dichotomic explanatory scheme to describe the evolution of modern society. Mounk believes that the two components of liberal democracy—individual rights and the popular will—are increasingly at war with each other, lending liberal economy to a decomposition of these two. Hence, he introduces undemocratic liberalism, liberalism without rights (e.g., the EU arrangement where liberal decisions are taken without direct democratic participation) and illiberal democracy (a system in which rights are curtailed through a democratic process). The latter, Mounk argues, is represented by the regimes in Poland, Hungary, Turkey and some other countries, and this is the direction in which Trump’s America is moving. Essentially, for Mounk, any deviation from the ideologized status quo in the Western-type liberal systems is a move towards illiberal democracy (and potentially an outright dictatorship).
There are two very important limitations to Mounk’s approach. First, he makes no attempt to situate ‘liberal democracy’ in the context of capitalism (the word ‘capitalism’ appears in his book only three times). This leaves unaddressed a critical question: Are capitalism and liberal order natural bed fellows or is this a transient marriage of convenience? As Milanovic quips in his book (quoting Plato), ‘Democracy is a wonderfully pleasant way of carrying on in the short run, isn’t it?’ Liberal capitalism is a recently new phenomenon: There was a time in the past when capitalism functioned without much democracy (or no democracy at all) and we may be surprised by what the future has in store for us (one of the themes Milanovic develops in his book). In fact, Collier explicitly recognizes that ‘the social-democratic era from 1945 to 1970 was built on the exceptional history’. Furthermore, Mounk’s classless approach makes an implicit assumption that modern liberal democracies are classless by design and deliver fair outcomes to the society at large rather than any particular groups. This is unfortunately manifestly not true. Mounk himself recognizes this much when he states that the bulk of the economic gains in the US went to the richest members of society or when he refers to the startling discovery of Case and Deaton that life expectancy of Americans belonging to the lower middle and working classes is falling. Both Collier and Milanovic highlight the increasing share of capital in income and decreasing intergenerational mobility that widens the gap between haves and have nots.
Second, Mounk’s analysis is geographically limited. He refuses to consider the case of China and some other countries in Asia and Africa that are trying to emulate China’s path moving away from a ‘liberal democracy’ model. He dismisses China as a ‘special case’ whose system cannot be replicated by other countries who don’t share its unique history—a statement that flies in the face of the reality and requires more justification than just a fleeting remark (Milanovic devotes about a quarter of his book to a discussion of Chinese capitalism).
Milanovic offers a somewhat similar dichotomy based on the political characteristics of the two currently existing variants of capitalism: liberal meritocratic capitalism and political capitalism. Liberal meritocratic capitalism describes how goods and services are produced and exchanged (‘capitalism’), how they are distributed among individuals (‘meritocratic’), and how much social mobility there is (‘liberal’). Political capitalism is characterized by ‘the use of political power to achieve economic gains’ and its three key systemic features, according to Milanovic, include efficient bureaucracy, absence of the rule of law and autonomy of the state. This type of capitalism is practices in China, Vietnam, Malaysia, Singapore (these are the ones that Milanovic mentions) and, I would add, a number of African states, such as Ethiopia and, with some qualifications, Uganda.
Lastly, Collier offers no explanatory model. His dichotomy is between the wonderful past characterized by strong social bonds and mutual obligations, generous social support schemes, responsible businesses caring about stakeholder value, and the grim present characterized by the absence of the above. Collier is at his best when he applies empirical research to particular problems rather than moralizing in a grand way. His analysis of the distribution of benefits of urban agglomeration and the resulting taxation scheme (based on a joint research with Tony Venables) is deep and interesting although not uncontroversial. He suggests a differentiated tax rate for wealthy and skilled urban dwellers who, in his opinion, are the main beneficiaries of urban agglomeration, not landowners as is usually believed (he is rather critical of those wealthy urbanites accusing them of being selfish cosmopolitans with disproportionate political influence. Landowners will be happy, of course. But underlying this proposal is a genuine problem of geographic disparity in income distribution and a growing number of dying urban areas suffering the combined impact of globalization, structural transformation from industrial production to services and new technologies (which Collier analyzes in a convincing way).