Why it is not the crisis of capitalism — Branko Milanovic

I don't think that Branco Milanovic has this quite right. First, he conflates capitalism with a market economy. Markets are ancient and can hardly be represented as evidence of capitalism. 

Secondly, he notes, correctly, that capitalism as vastly extended marketization by commodifying as much as it can, thereby capitalizing it. But this is not necessarily the expansion of capitalism. It is more properly viewed as the expansion of privatization, which he notes. 

Recalling the enclosure of formerly pubic lands considered to be the common, much of what is happening now involves developing new avenue of enclosures, most of which are dependent on government policy, and all on some from of asymmetric power. This has this has produced new forms of rent extraction and extension of old ones, which Milanovic passes over.

"Capitalism" is a weasel word unless defined precisely. When it is so defined, the modeling assumes perfect markets that preclude rent extraction through operation of the price and mechanism under perfect competition. This is an ideal system, existing only in terms of model of a possible world. It never fit the real world and it never will since it is unrealistic in a variety of ways, socially, politically and economically.

It is rent extraction that leads to inequality of wealth and income. Rent extraction depends on asymmetric power. Distribution of power is a consequence of many factors that cannot be reasonably be eliminated in practice, or even diminished significantly without restructuring the system to include more socialism. 

The problem is that the playing field is not level, and the tilt is toward the top. As the system becomes more weighted toward the top, the rate of flow increases in that direction. 

There are a number of ways that this could be addressed, and they all assume addressing economic rent. Now a major problem is the proliferation of markets into areas where rationing scarce goods by price is counterproductive socially, with political consequences that challenge the status quo. The natives are restless. Maybe this is not a "crisis of capitalism." But it is a crisis that is reaching critical mass, to which widespread social unrest testifies.

Global Inequality
Why it is not the crisis of capitalism

Branko Milanovic | Visiting Presidential Professor at City University of New York Graduate Center and senior scholar at the Luxembourg Income Study (LIS), and formerly lead economist in the World Bank's research department and senior associate at Carnegie Endowment for International Peace