Key Points

• For exponents of world-system theory such as Immanuel Wallerstein, all social рурпк have to be analysed within the context of a world-system.

• Systems have two main features: all features within a system are interrelated; and all develop­ments within the system can be explained by internal factors.

• Historically there have been two types of world-system: world empires and world-economies. The modern world-system is an example of a world-________.

• The world-economy is a capitalist system, which started to emerge in Europe in the sixteenth cen­tury.

The Modern World-System in Space and Time

The modern world-system has features which can be described in terms of space and time. The spatial dimension focuses on the differing economic roles played by different regions within the world-econ­omy. As we have seen Lenin's theory of imperial­ism posited a core-periphery division based on a geographical division of labour. According to this view, the core is home to those production processes which require the highest levels of skills and the greatest concentrations of capital, whilst the periphery acts as a source of raw materials and extensive surplus extraction. This model was subsequently taken up by other writers especially the dependency school (see Box 7.2). However, Wallerstein has (somewhat controversially) in­cluded another economic zone in his description of the world-economy, an intermediate semi periphery.

A ccording to Wallerstein, the semi-peripheral zone has an intermediate role within the world-system displaying certain features characteristic of the core and others characteristic of the periphery. For example, although penetrated by core economic interests, the semi-periphery has its own relatively vibrant indigenously owned industrial base (see also Fig. 7.1). Because of this hybrid nature, the semi-periphery plays important economic and political roles within the modern world-system. In particular, it provides a source of labour that counteracts any upward pressure on wages in the core and also provides a new home for those industries that can no longer function profitably in the core (for example, car assembly and textiles). The semi-periphery also plays a vital role in stabilizing the political structure of the world-system—a point that will be elaborated upon in the next section.

According to world-system theorists the three zones of the world-economy are linked together in an exploitative relationship in which wealth is drained away from the periphery to the centre (see Box 7.3). As a consequence, the relative positions of the zones become ever more deeply entrenched: the richer get richer whilst the poor become poorer.

Box 7.3. Exploitation of Peripheral Areas

World-system theorists argue that the different zones of the world-economy are linked together in an exploitative relationship~in_which wealth is extracted from the peripheral areas" by the core. As a result, their relative positions become more deeply entrenched as the rich prosper at the expense of the poor. There is a great deal of empirical evidence to support this general line of argument. The UN Human Develop­ment Report published in 1996 shows that the gap between rich and poor is expanding. Between 1960 and 1991, the richest 20% of the world's population in­creased their share of the world's wealth from 70% to 85% whilst the poorest 20% saw their share fall from 2.3% to 1.4%. Throughout this period there was a massive net transfer of resources from the so-called developing world to the richer countries despite their much-heralded—but ultimately half-hearted—aid pro­grammes. However, whilst the empirical evidence does suggest that exploitation of the peripheral areas is taking place, describing the exact mechanisms through which this occurs has proven to be more difficult. Generally speak­ing, world-system theorists deploy a range of different arguments in order to try and show how wealth is drained from the periphery to the core. None of these is entirely satisfactory but two have been particularly influ­ential. Raul Prebisch (see Box 7.2) argued that countries in the periphery were suffering as a result of what he called 'the declining terms of trade'. Put simply he suggested that the price of manufactured goods increased more rapidly than raw materials. So, for example, year by year it requires more tons of coffee to pay for a refrigerator. As a result of their reliance on primary goods, each year countries of the periphery are becoming poorer relative to the core. Arghiri Emmanuel's theory of 'unequal exchange' has also been very influential amongst world-system the­orists. Emmanuel argues that an unequal relationship exists between the core and periphery because of unequal wage levels. His argument is that structural fac­tors mean that wage rates in the core and periphery do not equalize over time in the way predicted by classical economic theory. These structural factors include institu­tionalized workers' rights and higher levels of technology in the core, and controls on labour mobility from the periphery to the core because of immigration controls. Because of these, the ability of workers in the periphery to increase their wage levels is dramatically curtailed. The upshot is that when comparing goods containing equal amounts of labour time, those produced in the core and purchased in the periphery are overpriced compared to those produced in the periphery and purchased in the core: an inherently unequal relationship in which the high-wage area benefits at the expense of the low-wage area. Whatever the exact mechanisms through which the core exploits the more peripheral parts of the world economy, world-system theorists regard them as one of the central features of the modern world-system.

Together, the core, semi-periphery, and periph­ery make up the spatial dimension of the world-economy. However, described in isolation they provide a rather static portrayal of the world-sys­tem. In order to understand the dynamics of their interaction over time we must turn our attention to the temporal dimensions of Wallerstein's description of the world-economy. It is these, when combined with the spatial dimensions, which determine the historical trajectory of the system.

Wallerstein has outlined four temporal processes at work in the modern world-system: cyclical rhythms, secular trends, contradictions, and crisis.

The first temporal dimension, cyclical rhythms, is concerned with the tendency of the capitalist world-economy to go through recurrent periods of expansion and subsequent contraction, or more colloquially, boom and bust. Wallerstein has enthusiastically endorsed the work of the Russian economist Kondratieff who amassed an impressive set of data to demonstrate that these periods of expansion and contraction take place in regular 40-60 year cycles (Fig. 7.2). Although evidence to support the existence of these cycles—often called Kondratieff waves—is overwhelming, there is much controversy as to their cause. Nevertheless, they clearly form one of the central dynamics at work within the modern world-system.

Whatever the underlying processes responsible for these waves of growth and depression, it is important to note that each cycle does not simply return the system to the point from which it started. Rather, if we plot the end-point of each wave we dis­cover the secular trends within the system (Fig. 7.3). Secular trends refers to the long-term growth or contraction of the world economy.

T he third temporal feature of the world-system is contradictions. These arise because of 'constraints imposed by systemic structures that make one set of behaviour optimal for actors in the short ran and a different, even opposite set of behaviour optimal for the same actors in the middle ran' (199la: 261). These constraints can best be explained and under­stood by examining what Wallerstein regards as one of the main contradictions confronting the capitalist system, the crisis of underconsumption.

In the short term it is in the interests of capitalists to maximize profits through driving down the wages of the producers, i.e. their workers. However, to realize their profits, capitalists need to sell the products that their workers produce to consumers who are willing and able to buy them. The contra­diction arises from the fact that the workers (the producers) are also the potential consumers, and the more that wage levels are driven down in the quest to maximize profits, the less purchasing-power the workers enjoy. Thus, capitalists end up with shelves full of things that they are unable to sell and no way of getting their hands on the prof­its. So, although in the short term it might be bene­ficial for capitalists to depress wage levels, in the longer term this might well lead to a fall in profits because wage earners would be able to purchase fewer goods: in other words, it would create a crisis of underconsumption. Thus, contradictions in the world-economy arise from the fact that the struc­ture of the system can mean that apparently sens­ible actions by individuals can, in combination or over time, result in very different—and possibly unwelcome—outcomes from the ones originally intended.

In everyday language we tend to use the word crisis to dramatize even relatively minor problems. Our football teams, governments, and personal finances seem to be in perpetual states of crisis! However, in the context of the world-system, Wallerstein wishes to reserve the term to refer to a very specific temporal occurrence. For him, a crisis constitutes a unique set of circumstances that can only be manifested once in the lifetime of a world-system. It occurs when the contradictions, the secular trends and the cyclical rhythms at work within that system combine in such a way as to mean that the system cannot continue to reproduce itself. Thus, a crisis within a particular world-system heralds its end and replacement by another system.

Interestingly, Wallerstein argues that it is in period of crisis that the actors within a world-system have most freedom of action. When a sys­tem is operating smoothly behaviour is very much determined by the nature of its structure. Indeed Wallerstein goes so far as to argue that 'within a functioning historical system there is no genuine free will. The structures constrain choice and even create choice' (1991a: 235). However, when the sys­tem enters a period of terminal decline—its period of crisis—the structures lose much of their power and individual or collective action becomes far more meaningful. In another section of this chap­ter we will discuss Wallerstein's contention that our own world-system has entered such a period.