States and the Interstate System

For Wallerstein and his colleagues, the fact that a capitalist world-economy coexists with a political structure of competing sovereign states is no mere coincidence. Rather, both are vital to the existence of the other. Or to put it another way, the capitalist world-economy could not function without the inter-state system, and the inter-state system could hot continue in its present form without the capi­talist world-economy. They are interlinked with each part depending on the other. Why is this so?

States in general are vital to the successful operation of the capitalist world-economy in at least two ways. First, they provide a framework within which property rights can be upheld and enforced. In the absence of such a framework, capitalists do not have the relatively predictable environment neces­sary for investment, the extension of credit facili­ties, and other practices vital to the functioning of a capitalist economy. This is not to claim that all states must approximate to the Western ideal of the state as a law-based guardian of individual rights. What is important is predictability, and corrupt regimes can provide as predictable an environment as that provided by democratic governments. However, if state authority collapses and is replaced by disorder, then capitalist development is effec­tively stymied.

Second, states have a vitally important role to play in reducing the contradictions which are inevitably generated within the capitalist world-economy. As we have seen in the previous section, contractions arise because the structure of the system can dictate that behaviour which is rational in the short run may be self-defeating in the longer term. Nowhere can this be seen more clearly than in the failure of capitalists to invest in the human and physical infrastructure necessary for their long-term prosperity. Organizing and funding pro­grammes for basic general education and transportation links, for example, would be irra­tional for any individual capitalist enterprise. Yet both are essential to the success of the capitalist economy. States of all kinds help to resolve contra­dictions of this nature through legislation and pub­lic expenditure.

However, whilst the existence of states is vitally important to the reproduction of the capitalist world-economy, equally crucial is the fact that they are organized into an inter-state system in which no one state has complete dominance over the, others.

The presence of competing centres of power means that governments are unlikely to impose overly restrictive controls on their own capitalists for fear of damaging their states' relative prosperity, and hence, standing. Of course, should a single world state come into existence—in Wallersteinian terms, such a state would be a world empire—then that entity would have the ability to erode the indepen­dence of capitalists without fearing that they might transfer their activities into areas beyond the state's jurisdiction. Thus a world empire would under­mine the very basis of the capitalist world-econ­omy.

But precisely because the world-system is orga­nized into a competitive interstate structure, the development of a world government is highly unlikely. This is because competition between rival capitalist enterprises leads to regular fluctuations in the relative power of various countries and regions within the system. One effect of this is that since the development of the modern world-system, no one state has ever amassed enough power to control every other state within the system.

So we see that for Wallerstein and other world-system theorists, the capitalist world-economy and the interstate system reinforce each other. They are opposite sides of the same coin: inextricable parts of the same whole.

This stress on the linkage between the interstate system and the capitalist world-economy, and the insistence that they can only be understood when viewed as part of the same overarching system, distinguishes the world-system approach from that of the realists. Another important distin­guishing feature is that unlike the realists, Wallerstein and his colleagues do not regard all states as functionally similar. It will be recalled that realists argue that all states pursue power and differ only in their relative capabilities. However, world-system theorists adopt a more nuanced view and argue that despite the broad similarities already outlined, states have fundamentally different func­tions depending on their position within the divi­sion of the modern world-system into three distinct economic zones.