Origins of Capitalism : A World-System Analysis

The World-Systems Analysis is a method of understanding world history and social change, for understanding how structures of the modern world arose and why some became dominant. It is fundamentally based on the idea that the world-system, rather than individual nation-states, is the primary—but not only—unit of social analysis. Immanuel Wallerstein developed the best-known form of this mode of study – which he introduced in his book The Modern World System (1974) which was the first of an (as of now) four-volume series of immense scale and scholarship, also aimed at unifying the social sciences.

Understanding Wallerstein’s World-Systems Analysis 

The Skeleton 

Until the early 1970s, historians, on the whole, treated the different forms of history (economic, political, social, and so on) as a distinct object of study. World-systems analysts questioned the validity of this, argued that the focus of research should be on “historical systems” – mini systems and world-systems (either world-empires or world-economies). Where “world-system” was a spatiotemporal zone spanning numerous political communities, unified by a set of institutions obeying systemic rules, and by an integrated zone of activity.

They posited that the modern world-system, beginning in the 15th-16th centuries, was a capitalist world-economy, and classified zones in this world- economy based on the level of production processes (core, periphery, and semiperiphery) in these zones. The world-system was characterized by an axial division of labor which resulted in unequal exchange in favor of those in the core zones. These zones were defined based on the degree to which production processes were relatively monopolized or relatively free market. Core countries, through monopolization, became wealthier. It is essential to understand that the core-periphery idea is a relational concept and not a pair of terms with separate meanings.

Rather than understanding capitalism in terms of markets, they saw capitalism as something inherently opposed to the idea of free markets and defined it as a sphere of monopolization. It eventually brought them to question the Enlightenment theory of progress, which they saw neither as inevitable nor necessarily good.

Scope and characteristics of the Modern World-System 

Wallerstein explains that the modern world-system is, and has always been a capitalist world-economy. A “world-economy” being a large geographical zone within which there is a division of labor and significant exchange of goods and capital. World-economies are distinct from world-empires, which are bounded by a unitary political framework. Capitalism is defined as a system which gives primacy to the endless accumulation of more capital.

The leading institutions of the world-economy are firms, markets, states in an interstate system, households, classes, and status groups. While capitalists claim to extoll the virtues of a free market, in practice; they want to establish quasi-monopolies (since they are easier to create than full monopolies). This is because entirely free markets would allow buyers to negotiate between sellers to bring down the price such that the profit is arbitrarily small. These quasi-monopolies are self-liquidating since different firms are always competing to form their oligopolies. Firms—competing with other firms and at the same time maintaining the costs of production and the rising costs of administration—are the leading players in the market system. Weak firms are eliminated (go bankrupt), and these failures are essential fodder for more prominent firms. These quasi-monopolies depend on the help of strong states to maintain their hold and hence are located within such states – leading to the formation of core, periphery, and semiperiphery states. The life cycle of a modern world-system, consists in a significant way, of the shift of core-like processes from strong countries to ones in the semiperiphery, and eventually, to the periphery.

While laborers form an essential part of the production processes, Wallerstein explains that the household, rather than individual wage- laborers that should be analyzed. Households are categorized as proletarian (only dependent on wage income) or semi-proletarian (partially dependent on wage income due to small contributions from other forms of income). While in an industrialized society, most of the people seek to be “proletarianized” (due to better wages), the employers themselves seek to have laborers from semi-proletarian households (since such laborers have less need of higher fees). Thus, proletarianization is not a necessity of a capitalist economy but is something that the capitalists themselves try to prevent. And finally, households locate themselves within classes and status groups (identities of race, nations, sexual preferences – to name but a few). Households—and their corresponding classes and status groups—are the primary unit of conditioning in the world-system. Seconded by the repressive and ideological state apparatus, they seek to educate the young about most things in society and are a major homogenizing factor.

World-systems analysis also elaborates on political structures and how they came to be. It claims that the modern state is a sovereign one, where sovereignty is defined as reciprocal recognition, both internally (where local authorities recognize the country), and externally (recognition between states in the interstate system). From the perspective of capitalist firms, sovereign states are an essential factor. They determine the rules on import and export and property rights, decide the degree to which monopolization may occur (and the extent to which firms have to internalize production costs), have the power to tax, and finally because they can deal with—based on their position in the interstate system—other states to favor individual firms. Thus, while capitalists claim a laissez-faire ideology, they rarely believe in this in practice. With a capitalist system in place, there is now a struggle over the allocation of surplus-value (created at the end of the circuit of capital) between the households, and the capitalists themselves (who wish to allocate it to the purpose of accumulating more capital). And it is this struggle that Marxists call the “class struggle”, where both sides organize politically to put pressure on the government.

These two concepts – of sovereignty and of the people being able to hold politically arose out of the French Revolution. The people now defined themselves as citizens. While this was a concept based on trying to include people, it turned out to be an extremely exclusionary one with women, children, people from minority ethnic groups, and those without property initially being excluded. Thus, politics of inclusion and exclusion became a significant part of politics of the next two centuries, with those excluded trying to get themselves included (often through organizing in extra-legal ways). This debate led to the rise of three main categories – conservatives, liberals, and radicals. After Napoleon’s defeat at Waterloo, and the world-revolution of 1848, the conservatives reframed their ideology (since it had been abused by the people in power and was becoming unfavorable), as did the radicals (who realised that they needed better organizing capabilities), and thus, the centrist liberal ideology became the dominant aspect of the culture. The question they were faced with was about who could be responsible enough to be entrusted with the act of bringing about change. Believing in the Enlightenment principles, they felt that “specialists” like scientists—who claimed to be searching for truth—and not philosophers or humanists could be entrusted this responsibility. Therefore began the process of educating children with an emphasis on science, so that they would eventually become citizens—or specialists—of a nation-state (a concept invented by states to reinforce their authority and further internal recognition).

 

The success of the liberal geoculture increased further by the inadvertent help of the radicals and their anti-systemic movements. Between 1848 and 1915, there was a rise in the number of anti-systemic changes – various excluded groups who struggled for inclusion. First, it was wage laborers, then women, and then members of ethnic minorities. These groups lacked unity—both within individual groups (based on how to achieve their objectives) and with other such groups (since each group felt that their goals were more important than that of the other).

With the concept of nation-states defined within an interstate system, the model proceeds to describe how states interact. While states are theoretically sovereign, the relative strength of states is the degree of ease with which strong states can intervene in the internal affairs of weaker ones (like the US in Iraq). Powerful states can also strong-arm weaker states into keeping their frontiers open for unequal exchange with the former. However, it is the semiperiphery states that find themselves amidst the most competition. Their primary goal is to promote themselves to the status of a core state, or at least, to not end up as a periphery state. Core states have a life cycle, near the end of which continuing production in these places becomes very expensive, leading to firms exiting such states and relocating to states in the semiperiphery. It is precise with this moment in mind that semi-periphery states compete with such enthusiasm. Within such a system, no single country or zone can achieve full dominance, since this would allow it to supersede the capitalist goal of endless accumulation of capital. Thus the world-system selectively breeds against such empires. However, what exists in its stead are hegemonic states which allow the maintenance of quasi-monopolies.

The Crisis 

World-systems analysts make the argument that our modern world-system has been in crisis since the world-revolution of 1968, which brought the liberal dominance to an end. But what, if any, secular trends could point to this? This can be understood by analyzing the constraints faced by producers.

Producers are constrained by these facts that they cannot price their product more than what a buyer is willing or able to pay for it, nor can it be priced more than what a competitor is ready to offer. Firstly, as the world-system has grown, there has been a steady (albeit slow) increase in the amount of proletarianization all over the world. Thus, the minimum wage has increased. Secondly, given that the world-system has been in operation for so long, resources have become scarcer, dumping costs have increased, and there are only a finite number of zones in the world which would possess cheap labor and resources. Thirdly, as nation-states have tried to become more developed, they have increased taxation. There has been a constant squeeze on profits, hinting at the growing systemic crisis.

Given that the system bifurcates, the citizens are faced with a choice as to which of two paths the system should traverse. The key element of the debate is the degree to which the future system will lean in one direction or the other on the issues of liberty and equality. Liberty here can be understood as the difference between the liberty of the majority against that of the minority. Equality is something often depicted in opposition to liberty. However, the very existence of minorities necessitates the need for equality.

In constructing the successor system, we will have to choose between a hierarchical and an egalitarian system. While the current world-system has not resolved any of the debates plaguing it, it has brought these topics to the fore. It is now up to the people to identify what is happening, contemplate where we can and where we want to take the system, and understand how we need to act to take the system along the desired trajectory.

References: 

  1. Aronowitz, Stanley. “A Metatheoretical Critique of Immanuel Wallerstein’s ‘The Modern World System’”. Theory and Society, Vol. 10, No. 4 (Jul., 1981), pp. 503-520. Can be accessed at: https://www.jstor.org/stable/657151 Date of accession: 30/8/2018
  2. Wallerstein, Immanuel. World-Systems Analysis: An Introduction. Duke University Press, Durham and London, 2004, pp. 16-17.
  1. Ibid, p. 18, pp. 23-24, pp. 32-37, pp. 42-50, p. 66, ch. 5

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