This is my third blog on Branko Milanovic’s ‘The Global Transformation’, which suggests I’m both enjoying reading it and finding doing so challenging and rewarding.
My first comments have to do with his claim that we have entered what he calls a new era of national market liberalism. In four areas, he contends, there is now clear evidence of direct changes that are antagonistic to neoliberalism:
- ‘instead of globalisation there are tariff wars and economic exclusion zones;
- ‘instead of economics being insulated from politics, there are politically motivated sanctions and state-led industrial policies’;
- ‘instead of the aspiration to full mobility of people around the world, there are walls and fences’; and
- ‘instead of cosmopolitanism (as a desired ideology), there are openly nationalistic movements in positions of power’.
Trump is the ideal typical representative here: there is a novel ‘businessman’s approach to neoliberalism’.
Notwithstanding this shift, national market liberalism retains elements of neoliberalism: low taxation of high incomes and inheritance; tax preference given to incomes from capital vs incomes from labour; deregulation; limited state spending; and no government interference in private matters.
We have witnessed a concomitant shift from a foreign policy of ‘American exceptionalism’, an ideology of American pre-eminence, which was focused on the US being ‘top country’, to ‘America First’, which says America will follow its own interests on what is – conveniently and falsely – portrayed as a level playing field and expects others to do the same. The US government, in short, will behave ‘transactionally’.
Milanovic also analyses the emerging situation in China, the subject matter of my second set of comments. Too often, he argues, China is misrepresented through the ideological lens of the West. China under Xi Jinping is a society of ‘political capitalism’. Where the state maintains its autonomy:
‘Under political capitalism the state must not allow itself to be ‘co-opted’ or ‘contaminated’ by capitalist interests. In other words, capitalist interest is one of the interests to consider – but not the only one, or even perhaps not the chief one. ‘Politics’ and ‘capitalism; are there together defining the system but each rules its own realm’ (p.163).
As Braudel wrote, the Chinese state never allowed the top capitalist class to emerge.
Milanovic cites Lenin at this point. The closest antecedent of Chinese political capitalism, he suggests, is Lenin’s New Economic Policy (NEP) introduced in 1921 (and formally ended with collectivisation and the First Five Year Plan in 1928). Lenin saw the NEP as a learning experience: once the communist cadres had learned how to do business the NEP could shut down (‘state capitalism is capitalism that we shall be able to restrain, and the limits of which we shall be able to fix’). Milanovic:
‘the justification of the NEP was that while it was a retreat from socialism, it was a temporary retreat and after its objectives had been achieved, future advances would be much more powerful because they would be better organised and sustainable. And the country would be richer. These are the objectives that Deng Xiaoping clearly stated many times’ (p.165-166).
Lenin made a statement on the NEP to the Eleventh Party Congress in 1922, making a distinction between (i) state capitalism under capitalist conditions, and (ii) state capitalism under socialist conditions. He opposed Bukharin’s view that they were the same. For Lenin (i) applies when the state, ruled by the capitalist class, takes over some of the private sector functions whilst the substantial part of the economy remains capitalist, and (ii) when the state is controlled by the Party and allows capitalists to function in order to boost productivity and to learn management skills from them. So for Lenin, according to Milanovic’s interpretation, state capitalism under socialism is entirely different, in the political sense, from state capitalism under capitalism. In the Chinese context, ‘the political power is held by the Party and this enables communist rulers, whenever they decide to do so, to curtail capitalists’ involvement in the economy. The power remains solidly with the Party’ (p.166). In this context it is possible to see current Chinese state capitalism as a protracted NEP that began in 1978.
The notion that NEP is likely over time to cede ground (and power) to rich capitalists may have escaped Lenin, but Milanovic asserts that Xi Jinping did not overlook it and took steps to prevent it: he has been tactically astute. ‘We can see Xi Jinping as both heir to Lenin’s New Economic Policy and, in more contemporary terms, as a populist responder to the excesses of the new rich.’
Lots of intriguing propositions here.
Reference
Milanovic,B (2026) The Great Global Transformation. London; Allen Lane.