‘Chinese capitalism has characteristics that sometimes involve great contradictions, for example, that the absence of the rule of law causes corruption and this corruption endangers administrative efficiency. ‘There is a danger that these contradictions will call into question the legitimacy of the system,’ said Branko Milanovic in a dialogue at ESADE with Javier Solana, president of ESADEgeo. Milanović is visiting professor at the Graduate Center of the City University of New York and visiting professor at IBEI.

Milanovic explained that the Chinese system could be called ‘political capitalism’ – Max Weber's term for those systems that convert political power into economic power. In addition, ‘China, in certain aspects is more capitalist than some Western countries that call themselves such. Its growth model is based on high levels of competition and technological revolution’.

A new imbalance of global power

During the dialogue, Milanovic advanced some of the main themes from his forthcoming book, Capitalism, Alone. The world has changed radically in recent years due to globalisation and the emergence of new superpowers such as China and India. ‘Asia is getting richer and richer. Many developing countries have become developed and now have considerable economic weight’, said Milanovic. He went on to say that we live in the third epoch since the Industrial Revolution, ‘the era of convergence and internal divisions’.

Both Solana and Milanovic believe that globalisation is producing imbalances that must be corrected to alleviate the resentment of middle classes in the developed world: the so-called ‘losers from globalisation’. As Milanovic pointed out, China's growth correlates with the crisis in developed countries and this is prompting some governments to reach for radical measures to alleviate the effects on their economies. Milanovic believes that ‘despite the imbalances, the effects of globalisation can be corrected with redistribution policies and other measures, such as investing in the welfare state, that are being proposed by politicians such as Alexandria Ocasio-Cortez in America’.

Solana commented that during his most recent trip to China he visited Huawei factories that were completely robotised. Milanovic noted that technological change in China is happening very quickly which means that the related social and economic changes have been drastic, both inside and outside China. ‘China has become in a decade a leader in several sectors, including technology, and this is something that nobody expected’.

Milanovic also raised the question of whether China could be willing or pressured into exporting its model, or if other countries could copy its growth model. It was also asked if the emergence of the Chinese middle classes implies a change in the long-term political model.

Tools, dialogue, and global organisations

Javier Solana explained that: ‘We need new tools to solve the social problems and imbalances caused by increasing inequality’. Milanovic argued that ‘capital and labour movements have become internationalised, and therefore, we must redefine the tools and social partners when talking about equality and alleviate the negative effects in this new scenario’.

Solana and Milanovic also discussed if the Bretton Woods institutions remain valid to represent the reality of countries and the global economy. ‘Global changes, and the emergence of new superpowers such as India or China, mean major changes in the weight of global players, but global institutions have not reflected this new reality’, said Milanovic.