A reply to Branko Milanović’s review of Ricardo’s Dream

Branko Milanović – a high-profile global inequality researcher at the City University of New York (CUNY) – has written an overly harsh review of my book Ricardo’s Dream.

That’s not just my opinion. Milanović says that his review ‘will be more critical than the book itself deserves’. He is, of course, entitled to his views and to broadcast them far and wide. Unfortunately, some of his most damning claims are based on straightforward factual errors and misrepresentations. That’s a shame as the review also makes some insightful points about globalization, China, and Karl Marx.

To be clear, I’m a fan of a lot of what Milanović does. We both argue that Western, mainstream economics got caught up in highly abstract modelling causing great harm to peoples’ lives and our understanding of the world. We both look to the history of economic thinking for better ways forward and we are both deeply interested in who wins and who loses in today’s economy.

And, the review does offer some praise for Ricardo’s Dream. The book’s critique of mainstream economics is ‘very sensible’, Milanović says, and the thesis is simple and clear. The early, historical chapters ‘powerfully’ lift the lid on the little-known story of classical economist David Ricardo’s life and his trade theories, he judges, showing they were ‘part of a much larger canvass of political alliances, wars, colonialism and slavery’.

Then, the review turns to the ‘more critical than it deserves’ part saying that Ricardo’s Dream is ’emblematic’ of the mistaken view of many Western liberals and leftists. These views have clearly been annoying him for some time. Looking through the book means that Milanović is often shadow boxing with his own projections, rather than engaging with my positions. This leads to some sloppy mistakes.

An elephant in a china shop

Born in the early 1950s in Serbia, then socialist Yugoslavia, Milanović worked at the World Bank for almost 20 years before making his name with a graph. Known as the ‘elephant curve’, it charts changes in income globally in the post-Cold War period.

The name comes from the shape of the curve: the ‘tail’ of the elephant showing the poorest have gained little, the arched back showing big gains in Asian middle classes, the dip down the trunk showing losses among Western middle classes, and the rising trunk showing that the global 1% have been doing marvellously, thank you very much.

On China, Milanović’s ire focuses on one chapter towards the end of Ricardo’s Dream on trade and globalization. He alleges that my critique of globalization is too Western centric and ignores its huge poverty reduction benefits in Asia. Worse, he tells readers, my text ‘acquires disturbing nationalistic tones when the only mention of China and globalization is given in the context of ‘the challenge of…. resurgent China’ [sic]. Apparently, he says, ‘convergence of world incomes is presented solely as an evil’.

But, the quotation he gives is not the first or only mention of China in the chapter. Eight pages earlier are these lines:

‘China is one of the great winners from hyper-globalization. Since the early 1990s, it has experienced the largest and most sustained economic growth in history. Hundreds of millions of its citizens have been lifted out of poverty… This has been called the ‘Great Convergence’ closing the gap created in the ‘Great Divergence’.’

That’s a very odd denunciation of evil.

Even the actual paragraph Milanović quotes ends by warning of the ‘danger’ that Western governments replace the ‘dogma’ of free trade with one of great power competition and ‘hand over the running of the global economy to security hawks, which might harm both peace and prosperity.’

Again, this is a strange way to beat the drum for aggressive nationalism.

Milanović’s other main critique is that I go too far in my attacks on Ricardo’s abstract theorising. ‘Dyer unfortunately misses the crucial point’, Milanović says, and ‘forgets’ that Ricardo’s abstract theorising includes a class-based view of society that was taken up by Karl Marx and a host of socialist thinkers. Ricardo’s Dream critiques modern orthodox economics, he says, but not its rejection of class-analysis that made it unable to see inequality.

The facts are, however, that Ricardo’s Dream does not miss or forget that Ricardo had a class analysis or that it influenced critics of capitalism. It introduces Ricardo as an innovating force in both capitalist and socialist thinking and discusses what Ricardo-expert Terry Peach called the ‘bitterly contested paternity suit’ over his legacy. (Welcome to the latest instalment!). The book explains, over several pages, Ricardo’s vision of society divided between three classes, which I describe as a ‘powerful story’ that ‘influenced, with a few twists, free-market capitalists, socialist thinkers like Karl Marx, and twenty-first-century critics of the concentration of wealth’ (p. 107-110). 

Neither does the book claim that neoclassical economics was an exact replica of Ricardo’s ideas. Many of them including ‘his class-based view of society… remained on the mainstream economics’ junk pile,’ it says (p. 163). ‘The new classicals [or neoliberals] took what they found useful [in Ricardo] and left the rest,’ it says, just as they did with Adam Smith.

On the points above, Milanović’s review has all the finesse of an elephant liberated from its famous graph and let loose in a china shop. Most senior academics, I’d hope, would tread more carefully on the work and reputation of a first-time author. Perhaps, we are looking for the same thing in each other’s writing: more class.

It is, therefore, false that Ricardo’s Dream completely misses the boom in China or the link to Karl Marx.

That said, the review does make some valid and interesting points. These reflect Milanović’s deep expertise in the global inequality field and his study of the history of economics. I have much to learn on both fronts. It is correct to say that China and Marx are included in the book as minor rather than major notes. The real questions Milanović’s review prompts me to ask are: should they have featured more prominently? Was the balance right?

The West and the rest

Let’s look first at the decision to focus mainly on Western thinkers, to tell the story of globalization from a particular angle, and where China fits in.

Ricardo’s Dream explicitly says that it is not a comprehensive history of economics. It aims to explode the reputation of a certain type of highly-influential and abstract economics that has prospered particularly in the UK and US. So, the Western focus is built into the premise of unearthing a 200-year tradition of critiquing overly-abstract theories within the mainstream. The book aims to open up space for other approaches and types of economics that have been marginalized, but doesn’t set out all these alternatives. It has, of course, the usual limitations of its author juggling the constraints of research time, word limit, and readers’ attention. I continue to read widely – beyond Europe and economics – to appreciate a variety of perspectives and thinkers.

There are so many stories you can tell about globalization. My chapter ‘Trading Barbarians’ focuses on how ‘free trade’ was captured by powerful global corporations to increase their power and profits. This includes a discussion of the surge of Chinese imports into the US: a phenomenon well-established in academic literature known as the China Shock. It explains how the benefits of this trade were very unevenly distributed and how leading economists missed this story until it was too late. One of those featured is Paul Krugman, perhaps the most prominent Western left-liberal economist, who happens to work three doors down from Milanović at CUNY. On this actual thesis, the review is silent.

What about China? Milanović has decades of experience studying the data on the economic success of China. He’s clearly right that this is a major part of the story of the past few decades. However, Ricardo’s Dream does not critique global integration itself so much as how it was seen and done in the West. China did globalization differently. My understanding – based on books such as Isabella Weber’s How China Escaped Shock Therapy – is that China based its approach less on the ‘Ricardian vice’ of guiding policy with simplified abstract models and on a more inductive, experimental approach to economics. Sometimes this method is called ‘crossing the river by touching the stones’. Better economics, and alternative forms of globalization, can provide better outcomes.

It is hyperbole to say, as the review makes out, that Ricardo’s Dream confuses the problems of the Western middle class with ‘the entire universe’. First, this entirely ignores other chapters in the book on the climate and ecological crisis, the growth and power of global finance, and on the regulation of large multinational corporations. Second, as the elephant curve shows, some of the poorest places on the planet – including much of Central Africa where my work focused for a decade – have not prospered from neoliberal globalization. Different vantage points suggest different stories.

Even with a fully global perspective, the losses of Western middle classes are a huge deal politically. Due to their location, they have contributed to the US’s stunning turn from the creator and supporter of neoliberal globalization to its chief critic and challenger. Even Milanović’s own field of inequality studies ‘exploded’, as he describes in his recent book Visions of Inequality, partly due to poor and middle-class people in America feeling ‘cheated’ (p. 277-278). It is no marginal phenomenon.

Finally, he’s right that I do not follow mainstream economists in ignoring or wishing away the realities of politics and power. My book comes from the perspective of global political economy, as practiced by its pioneer Susan Strange, who recognised the value of ‘security’ as legitimate alongside ‘wealth’, ‘freedom’ and ‘justice’. The state – for all its many ills – is where many of the historic victories of democratic and socialist movements were won. Globalization’s challenge to state power is, in part, a threat to these victories. There is no countervailing power at the global level. Nations remain a centre of belonging and meaning for many people. Engaging with those realities – while trying to envision a better, alternative globalization – does not mean giving over everything to zero-sum geopolitics.

Which Ricardo? Which Marx?

Milanović’s Visions of Inequality and Ricardo’s Dream share many similar arguments. I enjoyed how he pinpoints the big differences in outlook and methods between Adam Smith and David Ricardo. I love his critique about ‘dark money’ funding of economics’ departments and think tanks.

But, whereas Ricardo’s Dream talks of oligarchy, concentration of power and wealth, and a ‘quiet’, ‘slow motion’ coup by big corporations and Wall Street, Milanović more explicitly adopts a world of classes to replace the neoliberal world of individuals. Class analysis, the review implies, always leads to a more ‘realistic depiction of any capitalist economy’. As Ricardo put forward a sharp analysis of class, Milanović argues: ‘it is not that we have too much of Ricardo. We have too little of him.’

One response to this interesting critique is: which Ricardo do you want more of?

As Ricardo’s Dream attempts to show, David Ricardo was a rich and complicated character. The wealthiest stockbroker of his day, he was deeply embedded in the political and economic power structures and interests of his time and class. In addition to his (anti-poor) class analysis, he also has a trade theory and an abstract method beloved by neoliberals.

At one point in Visions of Inequality, Milanović briefly entertains the argument that ‘with its austere modeling, neoclassical economics does represent a continuation of the abstract approach initiated by Ricardo’ (p. 267). But, mostly he sees Ricardo through the eyes of Karl Marx. The chapter on Ricardo in Visions almost entirely ignores his idea of ‘comparative advantage’ and its impact on global inequality. It mentions Ricardo’s ‘vice’ of exaggerated abstraction but then seemingly forgets this while inhabiting the great economists’ model world page after page. Even when discussing Ricardo’s class analysis, it overplays how realistic it was, falsely (in my view) arguing that there was little conflict between capitalists and labourers in early nineteenth-century England. Tell that to the Luddites or the Blanketeers.

Even if we were to narrow our view of Ricardo to only his class theory, does Milanović really want more of Ricardo’s system in which the most important thing is high capitalist profits and – as I interpret it – workers stuck forever on the bread line? Likely not, I think he wants what others built out of its materials.

Marx is only mentioned a handful of times in Ricardo’s Dream, perhaps it should have been more. I simply haven’t read enough of the mountain of Marxist literature to write authoritatively about it. The book instead focuses on often forgotted historical and institutional thinkers who exposed the errors of Ricardo’s theories. But what I do know is that, like Ricardo, there are many different Marxs and Marxisms. Take, for example, the dispute between ‘humanist Marxists’ such as the English historian E.P. Thompson who stressed human action, morality and social responsibility and more theory-first ‘scientific Marxists’ such as the French philosopher Louis Althusser. Ricardo’s Dream catalogues the ‘theory-induced blindness’ of capitalist economists: arguments on similar themes have also taken place within the Marxist tradition.

Even Milanović admits in Visions of Inequality that sometimes class analysis can lead economists astray. As classical political economy was born in Britain, the three classes it maps out were based on this one society at one point in time. They can be ‘reified’, Milanović notes, and limit the ability of those who use them to ‘look at other, non-Western societies’ (p. 61).

So, while class analysis is powerful, and can offer a more realistic vision of societies, this is not always the case.

Reading into the history of economics, I’ve often been dismayed to see different schools of thinking disappear up their own assumptions, rather than look out at the world. This has caused much confusion, turgid writing, and harm to public understanding of the subject. Ricardo’s Dream argues for a more radical rejection of formalism in economics and for the importance of observation. We all need some simplifications to understand the world, it argues, but we must hold them lightly. This epistemological argument does not appear to have pleased my reviewer.

‘I really enjoyed reading it’

I’m grateful that Milanović read Ricardo’s Dream. His review has made me consider again how the text – and summaries of it – deals with the socialist legacy of David Ricardo, the anti-poverty success in Asian countries in recent decades, and non-Western economists and thinkers. Things I’ll continue to ponder. The more bombastic language and arguments mixed in with these useful provocations, I’ve rebutted above and won’t repeat here. Any readers coming to Ricardo’s Dream will make up their own minds.

Milanović said that my book was ‘extraordinary difficult’ to review. Perhaps he’ll have another go. I hope he decides to set the record straight. He might even want to tell readers – as he told me on Bluesky – that despite disagreement with some of the substance: ‘Your book is super easy & nice to read‘ and ‘I really enjoyed reading it.’