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This is from Gene Shackman's dissertation, written in 1994, based primarily on Wallerstein's 1984 book, Politics of the World-economy: the States, the Movements,and the Civilizations.
See copyright note at bottom.
A. An Overview
Wallerstein (1984; p. 6, 16) explains economic growth using a number of factors. Basically, he argues that there exists a capitalist world system, made up of competitive economic actors, and which operates on the principal of capital accumulation. Every entrepreneur within the system must continually expand his or her volume of output in order to survive, so that the total system, by the actions of the individual actors, is continually driven toward expansion. Economic growth of the system, that is, is explained as the sum of actions by individuals within the system, who are forced into certain behavior by the constraints of the system.
Wallerstein (1984) goes on to argue that this system is unstable, and goes through cycles of over-production crises and recoveries, explained through demand and distribution of surplus.
As production is expanded in the individual search for accumulation, there regularly come points where the amounts produced throughout the world-economy exceed the effective demand resulting from the existing distribution of world income (as fixed by the resolutions of prior acute sociopolitical conflicts). The consequent periods of stagnation both reduce overall production and lead to class struggles which force a redistribution of world income to lower strata within the world-economy. (Wallerstein, 1984: 6).Production continually is driven to growth, but distribution of world income, or surplus, remains constant over short times, so that demand periodically cannot sustain the increasing supply. The result is over-production, crisis, and forced redistribution of income, which then increases demand again, and leads to recovery. These cycles of expansion, over-production, redistribution of surplus and recovery are said to last about 40-60 years. For example, Wallerstein writes "The A-phases of expansion and the B-phases of stagnation seem to have occurred historically in cycles of forty to fifty-five years" (1984; 16.)
Wallerstein (1984) further elaborates on some of the mechanisms of the World-System. He indicates that the short term stability of distribution of surplus mentioned above is based on "the resolution of prior acute sociopolitical conflicts" (p. 6), that is, agreements made between capitalists and proletariat following the previous over-production crisis. The distribution of surplus only changes, as mentioned, after each over-production crisis, and consequent class conflict, which then forces the redistribution of income (Wallerstein, 1984). This redistribution expands the market, which leads to recovery from overproduction. The redistribution of wealth, however, is counter to the interests of the core upper strata, and "can be most effectively compensated for ... by the incorporation of new zones within the world-economy, adding new components of ultralow-income-receiving direct producers" (Wallerstein, 1984: p.6), from whom surplus profit can be extracted. That is, the capitalist system expands, but at the expense of newly created periphery.
There are also processes, in addition to the stepwise cycles of expansion and decline, which are now leading to a permanent crisis in the world system, and to the eventual decline or destruction of the capitalist system (Wallerstein, 1984, p. 23).
First, the limits to continuous expansion of the world system, or incorporation of new ultralow income receiving areas, have nearly been reached, as most of the world is already included. Recovery by expansion will soon no longer be possible. Also, the limits to proletarianization will be reached "within the coming century" (p. 23). This process, commodification of labor, in which labor must sell its labor power on the market, is not yet complete, and at this time accounts for only half of the world's workforce (1984; p. 19). The limits to these two processes, incorporation and proletarianization, will contribute to the eventual decline of the capitalist system. These processes, however, appear to be important for the future of the world economy, rather then the past, so I mention them here only for a complete treatment of WST.
Second, there are antisystemic movements; nationalism and social movements (Wallerstein, 1984; p. 104.) According to Wallerstein (1984), social movements began as labor unions, socialist parties and worker movements, and have the long term goal of the "basic transformation of the system of inequality" (p. 104) between bourgeois and proletariat. "Ad interim, however, the particular movements organized to obtain partial or total state power to advance the interests of the proletariat" (p. 104). Wallerstein (1984) indicates that nationalism has the eventual goal of a "basic transformation of the system of inequality" (p. 105) between core and periphery, but the short term goals are for stronger national entities, changing from assimilated to autonomous zones, and from colonies to independent states. These two antisystemic movements "transform not primarily the economics but rather the politics of the capitalist world economy" (Wallerstein, 1984; p. 109), and "undermines the viability of the world-system" (Wallerstein, 1984; p. 109). These two movements have been longstanding movements, since 1848, according to Wallerstein (1984), and continually grow stronger, and, with the two processes mentioned above, with eventually bring about the downfall of the capitalist system.
Finally, Wallerstein (1980, 1987) describes the economic path of states within the world system. The USA had been a hegemon after the second world war, but is now in decline, following a pattern of previous hegemons. The United Provinces in the mid 17th century, the United Kingdom in the mid 19th century, and now the United States, all developed an edge in agro-industry, then commerce, then finance, and became the hegemon power. Each state, at their height, endorsed liberal trade policy and was the primary sea or sea and air power of the time. These states also secured their hegemony with extended wars. Following the wars, the state then assumed its world responsibilities, of protecting and preserving the liberal order. The liberal trade arraignments, however, meant that spread of technology was easier, so that entrepreneurs from the non-hegemon states could adopt the newest technology, and undermine the material base of productivity of the hegemon. Also, the liberal order leads to the rise of income for the hegemon state working class, which further reduces the competitive advantage of the hegemon state enterprises. The hegemon then loses its primary place.
In the current case, the relative USA decline is caused by decline in its productivity, high economic costs of political and military leadership, higher wages given to labor, and increased competition from Japan and Europe (Wallerstein, 1987). According to Wallerstein (1980), the decline in USA hegemony is only in the beginning stages, as the USA has lost its productivity edge, but not yet the edge in commerce or finance. Japan and Europe, on the other hand (Wallerstein, 1987), have newer plants and lower wages going to labor, so can grow at faster rates, at least so long as those conditions persist.
Wallerstein (1984) means for the WST to explain the capitalist system and all of its consequences. Wallerstein (1984) writes that "the development of the capitalist world-economy has involved the creation of all the major institutions of the modern world: classes, ethnic/national groups, households - and the 'states'" (p. 29), and "all are consequence, not cause" (p. 29) of capitalism. World system theory is a theory of society, which attempts to explain the capitalist social system, and it's problems, including, among other things, economic growth.
B. Critique of economic growth and decline mechanisms
While World System Theory (WST) is quite popular, there is still considerable disagreement over some of its basic notions. For example, the particular mechanisms used to explain the long waves are open to question. Wallerstein (1984) proposed that the varying differences between output and distribution of surplus are responsible for the periodic crises of over-production, which lead to the long waves of growth and decline in the world system. However, technology, or growth in knowledge, is seen by others as the factor of primary importance. While Wallerstein (1984) also indicates that technology can be an important factor in recovery from the overproduction crises, his emphasis is more on the redistribution of income as the cause of the overproduction crises. On the other hand, economists, such as Abramovitz (1989, 1990), Kendrick (1989), Kuznets (1989) and Maddison (1989) emphasize technology or growth in knowledge as sources of growth, so that slowdown in economic growth is the result of slowdown in technological growth, rather than the result of growing discrepancy between production and distribution of surplus. For example, Kuznets (1989) writes that a source of growth is "a high rate of accumulation of useful knowledge and of technological innovations derived from it" (p. 8). This knowledge and technology, though, can only be used along with the appropriate conditions, such as financial and legal systems which allow mobilization of savings and investment, and with a stable government, which can deal with social or economic disruptions which may occur during periods of change (Kuznets, 1989; p. 8+). Thus, the rapid growth of Europe and Japan in the 1950's was due to the relative peace and stability following WW II, which allowed those countries to restructure their organizational systems, so to take advantage of newer technology, to rebuild, and so forth, in other words, to achieve high growth rates. Once they "caught up", or organized around the newest technology, their rates of growth would naturally slow down. The slowdown in Europe and Japan is simply the result of those countries catching up to their technological potential (Abramovitz, 1990), rather than to problems in distribution of surplus.
Another process used by WST in accounting for recoveries in the growth and decline cycles is extraction of surplus from newly included periphery, as the world-system expands. Research does not seem to wholly support this idea of extraction as a basis for recovery. For example, Firebaugh (1992) argues that earlier WST researchers misinterpreted foreign investment variables, and that foreign investment from core countries to the periphery actually was positively associated with economic growth in the periphery. It would be difficult to argue, that is, that core recovery is dependent on extracting surplus from the periphery if the periphery benefits from the core investment.
In addition, several authors indicate that core relations with periphery states may have played only minorw roles in early development of the core anyway. For example, Cameron (1989; p. 298) discounts the notion of economic necessity for early core imperialism. Rather, in the late 1800's and early 1900's, the core states were each others major suppliers and markets, while colonies were quite peripheral. Also, Bairoch (1989) indicates that the source of almost all of raw material used for energy by the "core" powers were the core countries themselves, and that core exports to future third world countries accounted for at most 8% of the core output. Imperialism, Cameron (1989) argues, was the result of "sheer political opportunism" (p. 300), power politics and military expediency. Chirot (1986; 208+) also writes that the development of the west in the late 19th century was based more on research labs than on raw material or labor in colonies. For a more recent example, he mentions that Japan and Germany were the fastest growing western states following WW II, and this was after they lost all of their colonial possessions. His conclusions are that growth in the core states is based more on internal structure then on colonial empires.
In sum, World System Theory (Wallerstein, 1984) proposes an explanation of growth in the world system, based on capital accumulation, and operating under certain dynamics, resulting from the competition for capital accumulation. There are, however, a number of problems associated with the WST model, including the existence of long waves, and some of the proposed causal factors of the growth, decline and recovery cycles.
C. Critique in general
In addition to the above criticisms of WST ideas of economic growth, there are more general criticisms about World-System Theory. For example, Stinchcombe (1982), in reviewing Wallerstein's The Modern World System II: Mercantilism and the Consolidation of the European World Economy, 1600-1750 (1980) describes the vagueness, tautological reasoning, and selectivity of Wallerstein's presentation. Stinchcombe (1982) writes that mechanisms of capitalist growth "remain vague and ad hoc" (p. 1390), and, "nearly every kind of domestic and international condition is urged as a cause of concentration of property or business in a few hands" (p. 1392). Consequently, there is never any coherent idea of what made capitalism develop. Similarly, Stinchcombe (1982) suggests that Wallerstein (1980) seems to present historical facts which support the WST view, and ignore many other facts which seem more problematic. For example, Stinchcombe (1982) descibes the incompleteness of Wallerstein's (1980) analysis of the decline of the Dutch empire. According to Wallerstein (1980), the Dutch had advantage over the UK because Dutch built better and cheaper ships, but Wallerstein (1980) apparently does not explain how England later came to dominate the shipbuilding industry. Other aspects of the Dutch decline are similarly ignored. Finally, Stinchcombe (1982) lists a number of examples of where Wallerstein's (1980) use of references or abstracts of sources are discrepant, or imply conflicting conclusions from references used in other parts of Wallerstein's (1980) book. Stinchcombe (1982) concludes that Wallerstein (1980) has failed to demonstrate that the world of the 1600's and 1700's could be explained by a single theory of social change, whether by World System Theory, or any other theory.
Stinchcombe's (1982) criticisms of Wallerstein's (1980) view of history are important. Errors of discrepancies and selective presentation can considerably weaken the case that Wallerstein (1980) attempts to make. If Stinchcombe's (1982) critiques are accurate, then Wallerstein (1980) fails to demonstrate that his ideas are correct or appropriate, that capitalism developed as he maintains it did, and for the reasons that he gives.
On the other hand, Stinchcombe's final criticism, that there may not be a single simple explanation of social change, does not seem to me to be an appropriate criticism with what Wallerstein (1974) argues for that time period. Wallerstein's (1974) description of the origins of the capitalist world system allows for peculiar circumstances and events, and more "chance". For example, Wallerstein (1974) wrote that Europe was where the capitalist world system began, rather than other areas, because of a combination of things, including the specific kind of state system existing there, agriculture, and climate. Europe had a multitude of states, and so was not burdened by a unified bureaucracy, which seemed at that time to be a form of government less open to change, or more concerned with stability and maintenance of power. The European states, on the contrary, were in competition with each other, which tended to push for advancement of technology, at least military technology, and hence this lack of unification became one source of change. This long term trend interacted with another factor: agriculture. Europe relied primarily on wheat and cattle for food, and at the time, in the 16th century, apparently the demand, due to the growing ruling class, had outgrown the supply. In order to increase the output of meat and wheat, new land was required, so this drive for new land also became a source of growth. Finally, Wallerstein (1974) mentions that a climatological change occurred, which adversely affected soil productivity, and also increased epidemic conditions. It was the conjunction of these factors, among other things, which pushed for exploration, technological advancement, and the development of the world capitalist system. Wallerstein (1974) writes that "it is most plausible to operate on the assumption that the "crisis of feudalism" represented a conjuncture of secular trends, an immediate cyclical crisis, and climatological decline. It was precisely the immense pressures of this conjuncture that make possible the enormity of the social change" (p. 37). That is, Wallerstein's (1974) explanation of why the capitalist system developed in North West Europe was the co-incidence of a number of factors, rather than a single systematic factor. However, if Stinchcombe's (1982) criticisms are correct, then Wallerstein's (1974, 1980) descriptions, as mentioned, become less credible. His idea of the development of capitalism may be correct, that there were multiple and complex causes of capitalism, but he fails to make his case, and fails to demonstrate that his particular analysis, on specific causes, are accurate. Likewise, if Wallerstein's (1974, 1980) analysis of the beginnings of capitalism are faulty, then his presentation of contemporary capitalism is open to doubt as well.
Others criticize Wallerstein's contention of the repetitive process of hegemon and decline. Strange (1988) mentions that the general study of empires fails to reveal any consistent pattern of growth and decline, so that comparing the U.S. pattern to only two previous patterns, the UK and the United Provinces, is problematic, at best. For example, Strange (1988) points out that the previous hegemon, the British empire, was a fairly small island, and was built as a colonial power. On the other hand, the U.S.A. is a large geographic state, with a large non-territorial "empire". The processes of development of these two "empires" should be quite different, which in fact they were.
In particular, an examination of trade and industrial development reveals some differences between the USA and previous "hegemons". Holtfrerich (1989) presents data that shows that Great Britain had its greatest point in proportion of world trade in 1800, at 33% of the total, and has since declined to about 5%. North America's greatest proportion peaked at 22% in 1948 and has remained fairly constant since then, at 18-19%. The UK had a much higher proportion of world trade than the US ever did. Similarly, Bairoch (1982) shows the pattern of manufacturing production, which also points out significant differences. The UK, in 1800, had only 4-5% of total world manufacturing, achieved its high in 1880, with 23%, and has since declined to 4%. The USA achieved its height in 1953, at 45%, and in 1980 was at 31%. Moreover, the USA has maintained its majority of manufacture share since 1900 (over 30% since 1913), that is, for 80 years so far. The UK had its majority of manufacturing for about 40 years, and never more than 23%. The USA, contrary to the UK, had a much higher proportion of world production, for a longer time, while the UK empire was based on trade, much more than manufacture.
There was also a difference in timing of the hegemons. Wallerstein (1984) indicates that the UK was a hegemon in the time period 1815 to 1873 (p. 17). However, the highest points of its trade was before its period of "hegemon", while its highest point of its manufacture was after its hegemon, a separation of 80 years. The USA, on the other hand, achieved its heights of trade and manufacture in 1948 and 1953, respectively, 5 years apart, and while it was in its "hegemonic" position.
Since the USA pattern of hegemony, in world trade and manufacture, differed from that of the British empire, it seems likely that the USA need not follow the same pattern of decline as did the British empire. These data give reason to doubt the repetitive pattern of the hegemon/decline proposal of World System theory, in addition to the doubts about the origin of the capitalist system mentioned above. Similarly, as the structure of the world-system differed in the time of the UK hegemon and the USA hegemon, it does not seem necessary that the world-system should repeat its other patterns, for example, the long waves.
In sum, there are criticisms on World-System theory about a number of
points. WST sees the differences between output and demand as the primary
factor in long waves, while others point out the importance of technology
and exogenous factors, such as the oil shocks. WST also uses extraction
of surplus from the periphery as one means of recovery from declines, while
others argue that the evidence, about colonialism for example, does not
support this reasoning. Further, core relations with the periphery were
minor, and in some cases beneficial to the periphery, so that extraction
from the periphery could not be very important in core recovery. WST also
uses a model of hegemon and decline, and applies this idea to the current
world situation. Many argue, however, that such a comparison is inappropriate
and not justified, that the current situation cannot be compared to earlier
"hegemon" periods. Finally, there is a criticism about WST itself, that
it is vague and selective, never specifying specific models and selectively
ignoring data which does not fit its analyses.
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Copywrite 1994 by Gene Shackman. May be quoted freely provided proper citation is given. Cite as "Gene Shackman. 1994. World System Theory: a review. Available from Social, Political and Economic Change , http://gsociology.icaap.org".
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(Look for 1974 reference)