Modern World-System

* Book: The Modern World-System. By Immanuel Wallerstein. vol. 1: Capitalist Agriculture and the Origins of the European World-Economy in the Sixteenth Century; (1974); vol. 2: Mercantilism and the Consolidation of the European World-Economy, 1600-1750, (1980). Academic Press, 1974, 1980.

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Summary

1. Via the Modern History Sourcebook at Fordham University:

"In his book, Vol 1, Immanual Wallerstein develops a theoretical framework to understand the historical changes involved in the rise of the modern world. The modern world system, essentially capitalist in nature, followed the crisis of the feudal system and helps explain the rise of Western Europe to world supremacy between 1450 and 1670. According to Wallerstein, his theory makes possible a comprehensive understanding of the external and internal manifestations of the modernization process during this period and makes possible analytically sound comparisons between different parts of the world.

MEDIEVAL PRELUDE

Before the sixteenth century, when Western Europe embarked on a path of capitalist development, "feudalism" dominated West European society. Between 1150-1300, both population as well as commerce expanded within the confines of the feudal system. However, from 1300-1450, this expansion ceased, creating a severe economic crisis. According to Wallerstein, the feudal crisis was probably precipitated by the interaction of the following factors:

Agricultural production fell or remained stagnant. This meant that the burden of peasant producers increased as the ruling class expanded. The economic cycle of the feudal economy had reached its optimum level; afterwards the economy began to shrink. A shift of climatological conditions decreased agricultural productivity and contributed to an increase in epidemics within the population.

THE NEW EUROPEAN DIVISION OF LABOR

Wallerstein argues that Europe moved towards the establishment of a capitalist world economy in order to ensure continued economic growth. However, this entailed the expansion of the geographical size of the world in question, the development of different modes of labor control and the creation of relatively strong state machineries in the states of Western Europe. In response to the feudal crisis, by the late fifteenth and early sixteenth centuries, the world economic system emerged. This was the first time that an economic system encompassed much of the world with links that superseded national or other political boundaries. The new world economy differed from earlier empire systems because it was not a single political unit. Empires depended upon a system of government which, through commercial monopolies combined with the use of force, directed the flow of economic goods from the periphery to the center. Empires maintained specific political boundaries, within which they maintained control through an extensive bureaucracy and a standing army. Only the techniques of modern capitalism enabled the modern world economy, unlike earlier attempts, to extend beyond the political boundaries of any one empire.

The new capitalist world system was based on an international division of labor that determined relationships between different regions as well as the types of labor conditions within each region. In this model, the type of political system was also directly related to each region's placement within the world economy. As a basis for comparison, Wallerstein proposes four different categories, core, semi-periphery, periphery, and external, into which all regions of the world can be placed. "

(https://sourcebooks.fordham.edu/mod/wallerstein.asp)

2. Via the Wikipedia:

"Wallerstein's first volume on world-systems theory (The Modern World System, 1974) was predominantly written during a year at the Center for Advanced Study in the Behavioral Sciences (now affiliated with Stanford University).[5] In it, he argues that the modern world system is distinguished from empires by its reliance on economic control of the world order by a dominating capitalist center (core) in systemic economic and political relation to peripheral and semi-peripheral world areas.

Wallerstein rejected the notion of a "Third World", claiming that there is only one world connected by a complex network of economic exchange relationships — i.e., a "world-economy" or "world-system" in which the "dichotomy of capital and labor" and the endless "accumulation of capital" by competing agents (historically including, but not limited, to nation-states) account for frictions. This approach is known as the world-system theory.

Wallerstein located the origin of the modern world-system in 16th-century Western Europe and the Americas. An initially slight advance in capital accumulation in Britain, the Dutch Republic, and France, due to specific political circumstances at the end of the period of feudalism, set in motion a process of gradual expansion. As a result, only one global network or system of economic exchange exists in modern society. By the 19th century, virtually every area on earth was incorporated into the capitalist world-economy.

The capitalist world-system is far from homogeneous in cultural, political, and economic terms; instead, it is characterized by fundamental differences in social development, accumulation of political power, and capital. Contrary to affirmative theories of modernization and capitalism, Wallerstein did not conceive of these differences as mere residues or irregularities that can and will be overcome as the system evolves.

A lasting division of the world into core, semi-periphery, and periphery is an inherent feature of world-system theory. Other theories, partially drawn on by Wallerstein, leave out the semi-periphery and do not allow for a grayscale of development.[27] Areas which have so far remained outside the reach of the world-system enter it at the stage of "periphery". There is a fundamental and institutionally stabilized "division of labor" between core and periphery: while the core has a high level of technological development and manufactures complex products, the role of the periphery is to supply raw materials, agricultural products, and cheap labor for the expanding agents of the core. Economic exchange between core and periphery takes place on unequal terms: the periphery is forced to sell its products at low prices, but has to buy the core's products at comparatively high prices.

Once established, this unequal state tends to stabilize itself due to inherent, quasi-deterministic constraints.[citation needed] The statuses of core and periphery are not exclusive and fixed geographically, but are relative to each other. A zone defined as "semi-periphery" acts as a periphery to the core and as a core to the periphery. At the end of the 20th century, this zone would comprise Eastern Europe, China, Brazil, and Mexico. It is important to note that core and peripheral zones can co-exist in the same location.

One effect of the expansion of the world-system is the commodification of things, including human labor. Natural resources, land, labor, and human relationships are gradually being stripped of their "intrinsic" value and turned into commodities in a market which determines their exchange value.

In the last two decades of his life, Wallerstein increasingly focused on the intellectual foundations of the modern world-system and the pursuit of universal theories of human behavior. In addition, he showed interest in the "structures of knowledge" defined by the disciplinary division between sociology, anthropology, political science, economics, and the humanities, which he himself regarded as Eurocentric. In analyzing them, he was highly influenced by the "new sciences" of theorists like Ilya Prigogine.[citation needed]

Criticism: Wallerstein's theory provoked harsh criticism, not only from neo-liberal or conservative circles but even from some historians who say that some of his assertions may be historically incorrect. Some critics suggest that Wallerstein tended to neglect the cultural dimension of the modern world-system, arguing that there is a world system of global culture which is independent from the economic processes of capitalism;[28] this reduces it to what some call "official" ideologies of states which can then easily be revealed as mere agencies of economic interest. Nevertheless, his analytical approach, along with that of associated theorists such as Andre Gunder Frank, Terence Hopkins, Samir Amin, Christopher Chase-Dunn, Thomas D. Hall, Anibal Quijano and Giovanni Arrighi, has made a significant impact on the field and has established an institutional base devoted to the general approach of intellectual inquiry. Their ideology has also attracted strong interest from the anti-globalization movement.

Arthur Stinchcombe was very critical of Wallerstein's The Modern World-System, writing that the book presents no theoretical argument and no determinate mechanisms. Instead, the theory of the book "reduces to a general imperative for the scholar to look for world system influences, perhaps wise advice but not very specific." Stinchcombe also argues that the book does not define its concepts independently of their effects, thus entailing tautologies regarding cores, peripheries and semi-peripheries."

(https://en.wikipedia.org/wiki/Immanuel_Wallerstein)

Contents

Volume 1: Capitalist Agriculture and the Origins of the European World-Economy in the Sixteenth Century

Friedrich Lenger:

"In his historical account Wallerstein postulated the formation of a European world-system during a very long sixteenth century (1450–1650) and argued that this world-system was also a world-economy “because the basic linkage between the parts of the system is economic” (Wallerstein, 1974: 15).1 He had borrowed the term world-economy from Fernand Braudel and like him he admitted that there were several world-economies (Braudel, 1985: 84 and 872). It was, however, the European world-economy alone which “embarked on the path of capitalist development which enabled it to outstrip these others” (Wallerstein, 1974: 17). In reconstructing this path he paid close attention to long-distance trade because for Wallerstein the dynamic of capitalism is governed by “the endless accumulation of capital” (Wallerstein, 1983: 18). And he explicitly took exception to more orthodox readings of Marx like that of Maurice Dobb putting wage labor at the center of any definition of capitalism. This enables him to integrate the manyfold ways of organizing labor (including forced labor) that historically have proven to be quite compatible with capitalism and that to this day occur as sources of extra profits when e.g. the recourse to household income in not yet commodified forms puts pressure on wages. As he asserts for the sixteenth century: “The periphery (Eastern Europe and Hispanic America) used forced labor (slavery and coerced cash-crop labor). The core […] increasingly used free labor. The semiperiphery (former core areas turning in the direction of peripheral structures) developed an in-between form, share-cropping, as a widespread alternative” (Wallerstein, 1974: 103).

The focus on long-distance trade alone is not yet a sufficient justification for tying the emergence of a European world-economy to the long sixteenth century, however. After all, Braudel lets his equally trade-centered narrative begin in late-medieval Italy. Wallerstein therefore introduces the partial transformation of long-distance trade “into bulk trade which would, in turn, feed the process of expanded production” as a further indication of a basic change defined largely by three elements: “an expansion of the geographical size of the world in question, the development of variegated methods of labor control for different products and different zones of the world-economy, and the creation of relatively strong state machineries in what would become the core-states of this capitalist world-economy” (Wallerstein, 1974: 21–38). While the context of the conquest of the New World is obvious enough the distinction between luxury and bulk trade remains problematic as Wallerstein himself admits in volume 3 (1989): “It is difficult to decide that any particular products—spices or tea or furs or indeed slaves—are or are not, in a given context, luxury exports, not to speak of the special case of bullion. I say luxury export, because in an economic sense there is little meaning to the idea of luxury import. If an item is bought on a market, it is because someone feels subjectively a ‘need’ for that item” (Wallerstein, 2011a: 131). But even conceding that on an empirical level distinctions like these will seldom be clear-cut, one may be irritated by the evaluation of the export of precious metals “as being, from the point of view of the European world-economy, the outflow of a dispensable surplus (hence a ‘luxury’ export) during the European world-economy’s long contraction of the seventeenth century” (ibid.: 137). Be that as it may the concept of luxury trade carries even more weight than that because it is intimately linked to the distinction between regions not yet incorporated into the world-system and others: “While parts of the external arena engaged in trade and other forms of interaction with the capitalist world-economy, the trade […] was largely in ‘luxury’ goods and was therefore not essential to either party. As a result, the trade was relatively equal in the sense that each side was exchanging items that it considered of low value for items it considered of high value. We might call this a win-win situation” (ibid.: XV—2011 prologue). Needless to add that such win-win situations were highly unlikely in the exchange between the core and the periphery of the capitalist world-economy itself.

The distinction thus translates into one between the periphery of the European world-economy that during the long sixteenth century supplied mainly precious metals from Latin America and grain from Eastern Europe and those world regions not yet incorporated. The economic structures of the latter remained largely unaffected as the direct effects of the Portuguese spice trade on the Indian Ocean economy or that of the China Sea were negligible. Wallerstein’s history of the modern world-system thus is basically that of a long-drawn process of incorporating the world into a global division of labor dominated by the European core, a process finally completed around 1900. But what got the process started? Wallerstein’s answer is—as so often—a functionalist one. There was simply no other way out of the crisis of European feudalism but the expansion of “the economic pie to be shared, a solution which required, given the technology of the time, an expansion of the land area and population base to exploit” (Wallerstein, 1974: 24). This idea of an expansion induced by crisis returns in volume 3 which analyses the incorporation of the Indian subcontinent, the Ottoman Empire, the Russian Empire and West Africa from the mid-eighteenth century onwards. It bears witness of Wallerstein’s heavy reliance on Kondratieff cycles of mostly fifty to sixty years which itself is intimately linked to his understanding of profit. And as he stresses himself this is quite distinct from orthodox Marxism: “Marx had one major fault. He was a little too Smithian (competition is the norm of capitalism, monopoly a distortion) and a little too Schumpeterian (the entrepreneur is the bearer of progress)” (Wallerstein, 1974: 51). For Wallerstein as for Braudel, with whom e shares both the distinction between equal and unequal exchange and the belief in the efficacy of cycles, profit is linked to monopoly instead. A monopolistic position is gained during the expansive A-phase of a Kondratieff cycle and lost in the stagnant B-phase thus bringing with it the functional need for the creation of a new monopoly position. The latter, however, results not so much from entrepreneurial i.nnovation but is mainly the product of power politics by nation states—a perspective with some plausibility especially for historical epochs in which the incorporation of new regions into the capitalist world-economy was the result of military force rather than comparative advantage in trade.

Processes of state formation and conflicts within the international state system thus have a far more central place in Wallerstein’s theoretical frame than in Fernand Braudel’s historical account which informs it."

(https://journals.openedition.org/socio/10939?lang=en)

Characteristics of the new world system

Via the Modern History Sourcebook at Fordham University:

"The categories describe each region's relative position within the world economy as well as certain internal political and economic characteristics.

---The Core

The core regions benefited the most from the capitalist world economy. For the period under discussion, much of northwestern Europe (England, France, Holland) developed as the first core region. Politically, the states within this part of Europe developed strong central governments, extensive bureaucracies, and large mercenary armies. This permitted the local bourgeoisie to obtain control over international commerce and extract capital surpluses from this trade for their own benefit. As the rural population expanded, the small but increasing number of landless wage earners provided labor for farms and manufacturing activities. The switch from feudal obligations to money rents in the aftermath of the feudal crisis encouraged the rise of independent or yeoman farmers but squeezed out many other peasants off the land. These impoverished peasants often moved to the cities, providing cheap labor essential for the growth in urban manufacturing. Agricultural productivity increased with the growing predominance of the commercially-oriented independent farmer, the rise of pastoralism, and improved farm technology.

---The Periphery

On the other end of the scale lay the peripheral zones. These areas lacked strong central governments or were controlled by other states, exported raw materials to the core, and relied on coercive labor practices. The core expropriated much of the capital surplus generated by the periphery through unequal trade relations. Two areas, Eastern Europe (especially Poland) and Latin America, exhibited characteristics of peripheral regions. In Poland, kings lost power to the nobility as the region became a prime exporter of wheat to the rest of Europe. To gain sufficient cheap and easily controlled labor, landlords forced rural workers into a "second serfdom" on their commercial estates. In Latin America, the Spanish and Portuguese conquests destroyed indigenous authority structures and replaced them with weak bureaucracies under the control of these European states. Powerful local landlords of Hispanic origin became aristocratic capitalist farmers. Enslavement of the native populations, the importation of African slaves, and the coercive labor practices such as the encomienda and forced mine labor made possible the export of cheap raw materials to Europe. Labor systems in both peripheral areas differed from earlier forms in medieval Europe in that they were established to produce goods for a capitalist world economy and not merely for internal consumption. Furthermore, the aristocracy both in Eastern Europe and Latin America grew wealthy from their relationship with the world economy and could draw on the strength of a central core region to maintain control.

---The Semi-Periphery

Between the two extremes lie the semi-peripheries. These areas represented either core regions in decline or peripheries attempting to improve their relative position in the world economic system. They often also served as buffers between the core and the peripheries. As such, semi-peripheries exhibited tensions between the central government and a strong local landed class. Good examples of declining cores that became semi-peripheries during the period under study are Portugal and Spain. Other semi-peripheries at this time were Italy, southern Germany, and southern France. Economically, these regions retained limited but declining access to international banking and the production of high-cost high-quality manufactured goods. Unlike the core, however, they failed to predominate in international trade and thus did not benefit to the same extent as the core. With a weak capitalist rural economy, landlords in semi-peripheries resorted to sharecropping. This lessened the risk of crop failure for landowners, and made it possible at the same time to enjoy profits from the land as well as the prestige that went with landownership.

According to Wallerstein, the semi-peripheries were exploited by the core but, as in the case of the American empires of Spain and Portugal, often were exploiters of peripheries themselves. Spain, for example, imported silver and gold from its American colonies, obtained largely through coercive labor practices, but most of this specie went to paying for manufactured goods from core countries such as England and France rather than encouraging the formation of a domestic manufacturing sector.

---External Areas

These areas maintained their own economic systems and, for the most part, managed to remain outside the modern world economy. Russia fits this case well. Unlike Poland, Russia's wheat served primarily to supply its internal market. It traded with Asia as well as Europe; internal commerce remained more important than trade with outside regions. Also, the considerable power of the Russian state helped regulate the economy and limited foreign commercial influence."

(https://sourcebooks.fordham.edu/mod/wallerstein.asp)

STAGES OF GROWTH

The development of the modern world economy lasted centuries, during which time different regions changed their relative position within this system. Wallerstein divides the history of the capitalist world system into four stages, which for our purposes can be simplified and divided into two basic phases:

* Stages 1 and 2:

This period follows the rise of the modern world system between 1450-1670. When the Hapsburg Empire failed to convert the emerging world economy to a world empire, all the existing western European states attempted to strengthen their respective positions within the new world system. In order to accomplish this move, most of the states consolidated their internal political economic and social resources by:

a) Bureaucratization. This process aided the limited but growing power of the king. By increasing the state power to collect taxes, the kings eventually increased state power to borrow money and thereby further expand the state bureaucracy. At the end of this stage, the monarch had become the supreme power and instituted what has been called "absolute monarchy."

b) Homogenization of the local population. To underline state involvement in the new capitalist system and encourage the rise of indigenous capitalist groups, many core states expelled minorities. These independent capitalist groups, without deep rooted local ties, were perceived as threats to the development of strong core states. The Jews in England, Spain, and France were all expelled with the rise of absolute monarchy. Similarly, Protestants, who were often the merchants in Catholic countries, found they were targets of the Catholic Church. The Catholic Church, a trans-national institution, found the development of capitalism and the strengthening of the state threatening.

c) Expansion of the militia to support the centralized monarchy and to protect the new state from invasions.

d) The concept of absolutism introduced at this time related to the relative independence of the monarch from previously established laws. This distinction freed the king from prior feudal laws.

e) Diversification of economic activities to maximize profits and strengthen the position of the local bourgeoisie. By 1640, northwestern European states secured their position as core states in the emerging economy. Spain and northern Italy declined to semi-peripheral status, while northeastern Europe and Iberian America became peripheral zones. England gained ground steadily toward core status.

During this period, workers in Europe experienced a dramatic fall in wages. This wage fall characterized most European centers of capitalism with the exception of cities in north and central Italy and Flanders. The reason for this exception was that these cities were relatively older centers of trade, and the workers formed strong politico-economic groups. The resistance of workers broke down the ability of employers to accumulate the large surplus necessary for the advancement of capitalism. Meanwhile, employers in other parts of Europe profited from the wage lag by accumulating large surpluses for investment.

Long-distance trade with the Americas and the East provided enormous profits, in excess of 200%-300%, for a small merchant elite. Smaller merchants could not hope to enter this profiteering without substantial capital and some state help. Eventually, the profits of the trans-Atlantic trade filtered down and strengthened the merchants' hold over European agriculture and industries. Merchants with sufficient power accumulated profits through the purchase of goods prior to their production. By controlling the costs of finished products, merchants could extend their profit margin and control the internal markets. This powerful merchant class provided the capital necessary for the industrialization of European core states.

* Stages 3 and 4 (18th century and beyond):

Industrial rather than agricultural capitalism represented this era. With the shifting emphasis on industrial production, the following reactions characterized this period.

a) European states participated in active exploration for the exploitation of new markets.

b) Competitive world systems such as the Indian Ocean system were absorbed into the expanding European world system. With the independence of the Latin American countries, these areas as well as previously isolated zones in the interior of the American continent entered as peripheral zones in the world economy. Asia and Africa entered the system in the nineteenth century as peripheral zones.

c) The inclusion of Africa and the Asian continents as peripheral zones increased the available surplus, allowing other areas such as the U.S. and Germany to enhance their core status.

d) During this phase, the core regions shifted from a combination of agricultural and industrial interests to purely industrial concerns. Between 1700, England was Europe's leading industrial producer as well as the leader in agricultural production. By 1900, only 10% of England's population was engaged in agriculture.

e) By the 1900s, with the shift toward manufacturing, core areas encouraged the rise of industries in peripheral and semi-peripheral zones so that they could sell machines to these regions."

(https://sourcebooks.fordham.edu/mod/wallerstein.asp)

Discussion

Context at the time of writing: the theses of Andre Gunder Frank

Friedrich Lenger:

"His expertise as a sociologist focusing on Africa which made him familiar with both the literature on (post-)colonialism in general and the controversies over development in particular. With regard to the latter he clearly sided with those who like Andre Gunder Frank argued under the influence of Paul Baran and Paul Sweezy that underdevelopment was not the consequence of a lack of capitalist development but to the contrary the outcome of a specific historical development of the global capitalist system which chained the fate of satellites like Chile or Brazil to the interests of a metropolitan bourgeoisie (cf. Frank, 1967; Stephens, 2018). Like many dependency theorists dealing with Latin American developments Frank had, of course, to address quite a number of interpretations put forth with specifically Brazilian or Chilean conditions in mind but his reference to a capitalist system operating on a global scale already anticipated Wallerstein’s world-system. And so did Frank’s assertion that its beginnings were to be found in the Spanish expeditions into the New World.

Still, Wallerstein’s Modern World-System was a far more systematic attempt to reconstruct the historical development of a global division of labor since the late fifteenth century and one based on a thorough reading of the historical literature. Its author, however, self-consciously proclaimed that he “was not interested in writing its history” (Wallerstein, 1974: 7). Rather he intended to uncover the laws of its development and referred to an analogy with astronomy in order to confront the obvious problem that the uniqueness of a single world-system defied the usual ways of establishing causality by comparing different instances."

(https://journals.openedition.org/socio/10939?lang=en)