World-systems approach

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World system approach is a post-Marxist international relations-approach based in part on the works of Samir Amin, Giovanni Arrighi, Andre Gunder Frank and Immanuel Wallerstein.

Post-Marxist world-system theory is much based on the works of Karl Marx, being one of several applications of Marxism to international relations. One of the roots of the theory is imperialism, which for many Marxists in the 20th century was "the highest stage of capitalism", a term coined by Vladimir Lenin, who also used the terms periphery and core as a means to analyse world politics and economy. However, in recent years the non-Marxist interpretations of the world-system approach have grown in their strength rather significantly.

Immanuel Wallerstein describes our world system as characterized by mechanisms, which bring about a redistribution of resources from the periphery to the core. In his terminology, the core is the developed, industrialized, democratic part of the world, which economically exploits the poor, raw materials-exporting, less developed countries - the periphery, through the means of the market.These are the world-system's spatial features. Wallerstein locates the origin of the modern world-system in 16th century Western Europe and defines:

"A world-system is a social system, one that has boundaries, structures, member groups, rules of legitimation, and coherence. Its life is made up of the conflicting forces which hold it together by tension and tear it apart as each group seeks eternally to remold it to its advantage. It has the characteristics of an organism, in that it has a life-span over which its characteristics change in some respects and remain stable in others. One can define its structures as being at different times strong or weak in terms of the internal logic of its functioning."[1]

Apart of these, Wallerstein defines four temporal features of that. Cyclical rhythms represent the short-term fluctuation of economy, while secular trends mean deeper long run tendencies, such as general economic growth or decline. In the theory the term contradiction means a general controversy in the system, usually concerning some short-run vs. long run trade-offs. For example the problem of underconsumption, wherein the drive-down of wages increases the profit for the capitalists on the short-run, but considering the long run, the decreasing of wages may have a crucially harmful effect by reducing the demand for the product. The last temporal feature is the crisis: a crisis occurs, if a constellation of circumstances brings about the losing of the system's structure, which also means the end of the system.

But to be more exact, World-systems analysis is not a theory, but an approach to social analysis and social change developed,as already mentioned above, principally by Samir Amin, Giovanni Arrighi, Christopher K. Chase-Dunn, Andre Gunder Frank and Immanuel Wallerstein, with major contributions by Volker Bornschier, Peter Turchin, Andrey Korotayev, Janet Abu Lughod, Tom Hall, Kunibert Raffer, and others. It should be noted that World-systems analysis is not only derived from the neo-Marxist literature on development but also from the French Annales School (especially Fernand Braudel).

Contents

[edit] The world system perspective

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The Latin American economist Osvaldo Sunkel, a representative of dependency theory, once stated:

‘The interpretation so far advanced suggests that the international capitalist system contains an internationalized nucleus of activities, regions and social groups of varying degrees of importance in each country. These sectors share a common culture and ‘way of life’, which expresses itself through the same books, texts, films, television programs, similar fashions, similar groups of organization of family and social life, similar style of decoration of homes, similar orientations to housing, building, furniture and urban design. Despite linguistic barriers, these sectors have a far greater capacity for communication among themselves than is possible between integrated and marginal persons of the same country who speak the same language (...) Modernization implies the gradual replacement of the traditional productive structure by another of much higher capital intensiveness (...) On the one hand, the process of modernization incorporates into the new structures the individuals and groups that are apt to fit into the kind of rationality that prevails there; on the other hand, it expels the individuals and groups that have no place in the new productive structure or who lack the capacity to become adapted to it. It is important to emphasize that this process does not only prevent or limit the formation of a national entrepreneurial class, as indicated by Furtado, but also of a national middle class (...) and even a national working class. The advancement of modernization introduces, so to speak, a wedge along the area dividing the integrated from the segregated segments (...) In this process, some national entrepreneurs are incorporated as executives into the new enterprises or those absorbed by the TRANCO (i.e. transnational corporations), and others are marginalized; some professionals, forming part of the technical staff and the segment of employees are incorporated, and the rest are marginalized; part of the qualified labor supply and those that are considered fit to be upgraded are incorporated, while the remainder are marginalized.
The effects of the disintegration of each social class has important consequences for social mobility. The marginalized entrepreneur will probably add to the ranks of small or artesanal manufacture, or will abandon independent activity and become a middle class employee. The marginalized sectors of the middle class will probably form a group of frustrated lower middle class people trying to maintain middle class appearance without much possibility of upward mobility and terrorized by the danger of proletarization. The marginalized workers will surely add to the ranks of absolute marginality, where, as in the lower middle class, growing pools of resentment and frustration of considerable demographic dimension will accumulate (...) Finally, it is very probable that an international mobility will correspond to the internal mobility, particularly between the internationalized sectors (...) The process of social disintegration which has been outlined here probably also affects the social institutions which provide the bases of the different social groups and through which they express themselves. Similar tendencies to the ones described for the global society are, therefore, probably also to be found within the state, church, armed forces, political parties with a relatively wide popular base, the universities etc.’ (Sunkel, 1972: 18-42).

Dependency and world system theory hold, that poverty and backwardness in poor countries are caused by the peripheral position that these nations have in the international division of labor. Ever since the capitalist world system evolved, there is a stark distinction between the nations of the center and the nations of the periphery. Cardoso summarized the quantifiable essence of dependency theories as follows:

  • there is a financial and technological penetration by the developed capitalist centers of the countries of the periphery and semi-periphery
  • this produces an unbalanced economic structure both within the peripheral societies and between them and the centers
  • this leads to limitations on self-sustained growth in the periphery
  • this favors the appearance of specific patterns of class relations
  • these require modifications in the role of the state to guarantee both the functioning of the economy and the political articulation of a society, which contains, within itself, foci of inartuculateness and structural imbalance (Cardoso, 1979)

Already the classics of political economy provided a framework of quantifiable dependency theory. Let us recall that for Marx and his labor theory of value, total product consists of constant capital, c, variable capital (labor), v, and surplus, s. Rate of surplus value, s’, the organic composition of capital, q, and the profit rate, p, are hence:

P = c + v + s
s’ = s/v
q = c/(c+v)
p = s/(c+v); hence, after some transformations:
p = s’(1-q)

Class relationships of a rising power of labor in the centers determine, that, in the end, long-term fluctuations notwithstanding, cheaper raw materials and exploitation of the periphery become one of the cornerstones of a strategy to halt the fall in the profit rate. Among others, mass migration, unequal exchange, and a new international division of labor are key elements to increase, at least temporarily, s’. Michal Kalecki adapted political economy to the age of monopolization. Let gross production be P, W are wages, M are the payments for raw materials. The monopolization factor is k. We are in a situation of less than full employment. Costs for wages, W, and raw materials M, are multiplied by a factor of k (k > 1) to arrive at prices. The gross value of production of an enterprise is thus

P = k * (W + M)

if M/W denote the terms of trade, j, between the raw material producing sector of the economy and the rest, then we arrive for the determination of the share of wages, w, by the following formula: w = 1/(1+(k-1)*(j+1))

A rising degree of monopolization in the leading center countries over time determines, that, in order to keep the share of wages at least constant, a rising exploitation of the raw material producers sets in to offset the balance.

Giovanni Arrighi proposed in his provocative analysis of the ‘Long 20th Century’ (1995) the thought that the logic of accumulation on a world-scale is governed by the ups and downs in the succession of regulation and de-regulation, starting from the Venetian (regulatory) and Genoese (deregulated) era of capitalism, followed by the Dutch (regulatory) and British (deregulated) era, and the US hegemony, which - after 1945 - was a regulatory model. From the late 1970s, however, we witness, Arrighi’s argument goes on, again the renewed rise of a deregulated model of world capitalism. The often bemoaned end of the Keynesian era has its real basis, Arrighi’s argument goes, in the shifting accumulation pattern of world capitalism. We agree with Arrighi that the rise of financial capitalism and the decline of productive capitalism are always connected to major shifts in the location of the centers of world capitalism, first from Venice to Genoa, followed by the shift from Genoa to Amsterdam, from Amsterdam to London, from London to New York, and from there on to the capitalist archipelago of East Asia of yesterday, perhaps to be followed by South Asia today (Arrighi, 1995). Arrighi also introduced the important notion, that there is a certain coexistence in the time-perspective between the ‘different logics’, so that elements of the waning and elements of the emerging order might coincide for years. Arrighi’s sequential model of world capitalism is also a historic interpretation of the old Marxist notion of financial expansion - > material expansion- >financial expansion (MCM’), and as such radically challenges the notion of ‘unchanging’ general laws of rise and decline. Following Arrighi, we postulate that regulatory strategies might have been well compatible with growth under the rise of the Venetian, Dutch, and American era, while at the time of the rise of ‘deregulation’, such deregulatory strategies and not ‘big government’ will be conducive to economic growth

[edit] Wallerstein's formulation of the world-system approach

The most well-known version of the world-system approach has been developed by Immanuel Wallerstein. Wallerstein analyzes the World System as follows: "A system is defined as a unit with single division of labour and multiple cultural systems."

In Wallerstein’s 1987 publication, World-System Analysis, he disavows the term

  • The 'disciplines' of modern social science are intellectually coherent groupings of subject matter that refer to discrete 'logics.' World-systems analysis calls for an unidisciplinary historical social science, and contends that the modern disciplines, products of the 19th century, are deeply flawed because they are not separate logics, as is manifest for example in the de facto overlap of analysis among scholars of the 'disciplines.'
  • History is the study of events (the idiographic approach) and social science discovers universal rules of human/social behavior (the nomothetic approach). Wallerstein writes that "World-systems analysis offers the heuristic value of the via media between trans-historical generalizations and particularistic narrations...It argues that the optimal method is to pursue analysis within systemic frameworks, long enough in time and large enough in space to contain governing 'logics' which 'determine' the largest part of sequential reality, while simultaneously recognizing and taking into account that these systemic frameworks have beginnings and ends and are therefore not to be conceived of as 'eternal' phenomena."
  • Modern countries or 'states' are societies, or there is a society underlying each state. World-systems analysis argues that modern states have never been societies, but are the political units of modern society's interstate system and economy. In Wallerstein's view, there have been three kinds of societies across human history: mini-systems or what anthropologists call bands, tribes, and small chiefdoms, and two types of world-systems (single state world-empires and multi-polity world-economies). World-systems are larger, and ethnically diverse. Modern society, called the "modern world-system" is of the latter type, but unique in being the first and only fully capitalist world-economy to have emerged, around 1450 - 1550 and to have geographically expanded across the entire planet, by about 1900.
  • Capitalism is a system based on competition between free producers using free labor with free commodities, 'free' meaning its available for sale and purchase on a market. Situations in countries that deviate from this definition, such as the "communist" or "socialist" countries, and "Third countries", are not yet capitalist. World-systems analysis argues that capitalism, as a historical social system, has always integrated a variety of labor forms within a functioning division of labor (world-economy). Countries do not have economies, but are part of the world-economy. Far from being separate societies or worlds, the world-economy manifests a tripartite division of labor with core, semi-peripheral, and peripheral zones. In core zones businesses, with the support of states they operate within, monopolize the most profitable activities of the division of labor. In recognizing a tripartite pattern, world-systems analysis criticized dependency theory with its bimodal system of only cores and peripheries. There are many ways to attribute a specific country to the core, semi-periphery, or periphery. Using an empirically-based sharp formal definition of "domination" in a two-country relationship, Piana in 2004 defined the "core" as made up of "free countries" dominating others without being dominated, the "semi-periphery" as the countries which are dominated (usually—but not necessarily—by core countries) while at the same time they dominate others (usually in the periphery)and "periphery" as the countries which are dominated. Based on 1998 data, the full list of countries in the three regions—together with a discussion of methodology—can be found here.
  • The late 18th and early 19th centuries marked a great turning point in the development of capitalism in that capitalists achieved state-societal power in the key states which furthered the industrial revolution marking the rise of capitalism. World-systems analysis contends that capitalism as a historical system formed earlier, that countries do not "develop" in stages, but rather the system does, and these events have a different meaning as a phase in the development of historical capitalism; namely the emergence of the three ideologies of the national developmental mythology (the idea that countries can develop through stages if they pursue the right set of policies): conservatism, liberalism, and radicalism.
  • Human history is progressive and inevitably so. World-systems analysts, along with anthropologists, argue that the historical evidence suggests the contrary, that human societies have become increasingly unequal. The reason for the belief otherwise is precisely that modern social science emerged in the core zones, which contain about 20% of the modern world-system's population but controls about 80% of its wealth, which has expanded as inequality and power polarization has increased as a trend of the system.
  • Science is the search for rules which summarize most succinctly why everything is the way it is and how things happen. Wallerstein writes: World-systems analysis is a call for the construction of a historical social science that feels comfortable with the uncertainties of transition, that contributes to the transformation of the world by illuminating the choices without appealing to the crutch belief in the inevitable triumph of good. World-systems analysis is a call to open the shutters that prevent us from exploring many areas of the real world. World-systems analysis is not a paradigm of historical social science. It is a call for a debate about the paradigm.

[edit] Developments of Wallerstein's approach

Sobocinski [2] noted that "points to the relevance of even the simplest indicators - per capita GDP - to identify core, semi-peripheral, and peripheral countries, and notes that, as the areas "external" to the world system have disappeared over time, so also has there been a decrease in the percentage of the world's population that exists in peripheral countries, as defined in traditional developmental terms. Sobocinski's approach favors degree of proletarianization (described in Wallerstein's "Historical Capitalism") as an indicator of a country's status rather than degree of domination (as described above). Sobocinski indicates that economic trends seem to point to semi-peripheral status for the vast majority of the world's population, and the importance of internal inequalities (and internal colonialism) within such countries as a predominant concern over the near future, to likely be followed by the emergence of international class-based conflict on a global scale (rather than merely within selected nations and regions) as (per-capita) wealth inequalities between nations continue to decrease. Note that this sort of analysis is one of convenience, due to the ease of using data at the state level, although Wallerstein has pointed out that peripheral areas are not to be confused with peripheral states. Thus, one of the modern trends would seem to be the decline in peripheral states, in favor of a reemergence of peripheral areas within states - a kind of neo-"internal colonialism."

Originally Wallerstein distinguished two types of world-systems: "world-economies", systems of polities integrated within a single economy, and "World-Empires" where a single polity dominated and integrated an economy.

[edit] New Developments of the World System Analysis

[edit] Abu Lughod's version

Janet Abu Lughod argues that a pre-modern World System extensive across Eurasia existed in the 13th Century prior to the formation of the modern world-system identified by Wallerstein. Janet Abu Lughod contends that the Mongol Empire played an important role in stitching together the Chinese, Indian, Muslim and European regions in the 13th century, before the rise of the modern world system.[3] In debates, Wallerstein contends that her system was not a "world-system" because it did not entail integrated production networks, but was instead a vast trading network.

[edit] Other contributions

Andre Gunder Frank goes even further and claims that a global-scale world system that includes Asia, Europe and Africa has existed since the 4th millennium BCE.[4] The center of this system was in Asia, specifically China.

Europe only prospered when Asian economy was in its contracting phase of long-term economic cycle and Europe had access to virtually free silver and gold from the Americas. There was no European miracle, Europe simply had geographical advantage in the discovery of Americas. This contracting phase is now coming to an end and the center is moving back to Asia. In a joint critique, Wallerstein, Arrighi, and Samin attacked the empirical data of this argument.

Archaeologically too the idea of a World System was extended to the Late Chalcolithic-Early Bronze Age, looking at the period of dominance of ancient Uruk, within the system that stretched from Egypt to the Indus.

These debates have seen a split in the identification of world-systems analysis and "world systems theory."

An important contribution to the study of the history of the World System was produced by Christopher Chase-Dunn and Tom Hall who discovered a significant synchrony in the urban dynamics of the western and eastern parts of Afroeurasia starting from the 1st millennium BCE (Chase-Dunn, C., and T. Hall. Rise and Demise: Comparing World-Systems. Boulder, CO.: Westview Press, 1997). The possible mechanisms of this synchrony were analyzed by Peter Turchin and Tom Hall (Turchin, Peter and Thomas D. Hall. 2003. Spatial Synchrony among and within World-Systems: Insights from Theoretical Ecology. Journal of World-Systems Research 9:37-66).

Modern applications of the theory have sought to incorporate the changing relations between the First World and the Second World with the collapse of the Soviet Union, describing attempts by the United States and Europe to "colonize" or "absorb" the Newly Indepenent States of the Soviet Union and Eastern Europe into the New World Order. David Lempert's description of "Pepsi-stroika" builds on the "Coca-colonization" theme. Michael Burawoy has also focused on these transformations.

Looking at World Systems Theory (as distinct from world-systems analysis) from this perspective demonstrates similarity to the concept of the Oecumene, used by cultural historians like William McNeill. Historically World Systems Theory have been very useful as an antidote to the exceptionalism of Globalisation Theorists who argue that the current system is wholly without precedent in world history.[5]

[edit] The question of cycles

World systems theory has become part and parcel of the debate in major international peer-reviewed journals in the social sciences. For one, the entire notion of business cycles fascinates the profession. Without question, the notion of business cycles and war cycles dominates the debate about the time-series trajectory of the world system.

Although many contemporary economists treat the legacy of Nikolai Kondratiev with utter contempt, several major figures of economics of the 20th Century, among them Economic Nobel Prizewinners, were deeply impressed by Nicolai Kondratiev's research, which forms the starting point of the world systems theory notion of long cycles. It suffices to mention here not just Joseph Alois Schumpeter and also in a way Simon Kuznets, but Ragnar Frisch; Gottfried Haberler; Alvin H. Hansen; Walt Rostow; and Jan Tinbergen. The revival of Kondratiev research in the 1960s and beyond is linked to the simulation efforts of Jay Forrester at the MIT in the context of his world modeling for the Club of Rome. IIASA developed a highly sophisticated debate on the issue, centered mainly on the works of the physicist Cesare Marchetti and the Portuguese systems scientist Tessaleno Devezas. Devezas' research is particularly noteworthy here, because it combines sociological insights into values and generations with the mathematics of cyclical swings in economics and demography. Forrester reproduced a 50-year pattern for the US-economy, based on his System Dynamics National Model (NM-model) which is based on 15 sectors. Marchetti moved the debate away from price series to physical quantities, including production and energy consumption. Unfortunately, as sophisticated and statistically satisfying as this IIASA debate might sound, it has been rather overlooked by both the mostly Marxist and world system supporters of Kondratiev waves and by their economist detractors.

Early on, the United States Central Intelligence Agency commissioned a research paper by Ehud Levy-Pascal in the 1970s on Kondratiev cycles, and it was published in 1976. The Swiss world system sociologist Volker Bornschier also carried out quantitative sociological surveys of Kondratiev type of waves. In addition, a decisive breakthrough in the entire debate was the Ph. dissertation by Joshua Goldstein at the Massachusetts Institute of Technology under supervision of Hayward Alker Jr., which was published in 1988. NATO's interest in the entire question has an obvious background - long cycle theory allows long-term predictions that are important for military and political contingency planning. Finally yet importantly, Kondratiev's native Russia fully rehabilitated one of her greatest social scientists of all times and now devotes a state research institute to scientific investigation in his memory.

Kondratiev downswings were always particularly severe in the Russian periphery of the world system, and the vicissitudes of reform and the re-centralization of government are closely linked to the Kondratiev cycle. The cyclical swings in the periphery are by far more pronounced than in the center and the depressions more severe. The level of inequality is historically higher in the periphery than in the center, but inequality also increases in the centers. Such comparisons clearly suggest three tendencies:

a) first, a faster growth in the peripheries during the beginning B-phase of the Kondratiev cycle
b) a more severe depression in the peripheries than in the center
c) a belated recovery in the periphery

The very logic of industrial processes and basic innovations, as well as the societal models, connected with them, would suggest building cyclical fluctuations into more general theories of development (Amin, 1997). Blast furnaces and other important components of the industrial process, too, have a certain life cycle, comparable with the Juglar cycles and Kuznets cycle, just as technical innovations are scattered in a non-random fashion along time, coinciding with the Kondratiev cycle (Bornschier, 1988 and 1995; for a very comprehensive summary Scandella, 1998). There are short term instabilities of 3 to 5 years duration (Kitchin cycles), 8-11 years duration (Juglar cycles), 18-22 years duration (Kuznets waves), and longer, 40-60 year Kondratiev waves. The following dating scheme, taken here from Tausch/Ghymers, 2006 could be suggested in the light of the Schumpeterian theory tradition (Scandella, 1998). Global capitalism since 1740 had the following Kuznets cycles (calculations based on the untransformed rates of global industrial production growth, 1740 - 2004), based on polynomial expressions of the sixth order:

1741-1756; R^2 = 23.5 %
1756-1774; R^2 = 36.1 %
1774-1793; R^2 = 34.8 %
1793-1812; R^2 = 39.7 %
1812-1832; R^2 = 16.4 %
1832-1862; R^2 = 25.7 %
1862-1885; R^2 = 36.3 %
1885-1908; R^2 = 56.2 %
1908-1932; R^2 = 44.2 %
1932-1958; R^2 = 19.1 %
1958-1975; R^2 = 60.9 %
1975-1992; R^2 = 75.8 %

The period between 1756 and 1832 is then the first Kondratiev cycle of the industrial age, the period between 1832 and 1885 as the second Kondratiev cycle, the period between 1885 and 1932 as the third Kondratiev cycle, and the period between 1932 and 1975 as the fourth Kondratiev cycle. Therefore, according to this logic, we are now in the fifth Kondratiev cycle of the industrial age; with one Kuznets cycle after the depression of the mid-1970s already well behind us, and the second Kuznets cycle since 1992 pointing in a downward direction.

For Volker Bornschier, there are the following phases in the K-cycle:

  • Upswing
  • Prosperity
  • Prosperity-recession
  • Crisis
  • Temporary recovery
  • Depression

Tests, provided by Tausch/Ghymers show that the Bornschier dating scheme much better corresponds to the structure of world production data than the alternative, proposed by Goldstein. This scheme is in line with the dating scheme proposed by Joshua Goldstein, Phil O'Hara, and Ernest Mandel, among many others.

The question of war cycles has received enormous international attention. Joshua Goldstein was led to the conclusion that the capitalist world systems tends continuously towards wars and violent conflicts. The international system is characterized according to him by

global war -> world hegemony of the dominant power -> de-legitimization of the international order -> de-concentration of the global system -> global war et cetera

The duration of these phases of the international order is approximately one Kondratieff cycle, so the unit of time of the international system can be symbolized by the expression 1K.

At a time of major shifts in world politics and economics, it is no wonder that systematic studies in the evolution of the international order have gained ground. Goldstein's quantitative approach (1988 ff.) concentrated on the major power confrontations as the `watershed' in international relations. Ample empirical evidence supports both Arrighi's and Goldstein's theories. Each world political cycle up to now corresponded to a `W'-pattern of untransformed annual battle fatalities from major power wars in thousands. The war cycle 1495-1648 is a polynomial expression of the 6th order; R^2 is 91.7%; 1649-1816 yields an R^2 of 33.6%; while a polynomial expression of the 6th order explains 50.1% of war intensity 1817-1945. The x-axis in our graph is the number of years after the end of the major power wars, i.e. 1648, 1816, and 1945. The same, deadly function explains 49.5% of annual battle fatalities in thousands from 1946 to 1975 (Tausch, 2007).

Now, one of the most intriguing features of contemporary capitalism seems to be the fact that vigorous upswings need to be supported by a tightly organized new world political hegemonic order, while the strength of the downswings and the severity of the depressions always are a function of the waning world political order. All real major depressions in the world system were hegemonic transition phases, and all these major crises thus had the character of what the present author calls a "Tsunami wave" of world politics that each time was also connected with terrible social upheavals, depressions and the onsets of major power wars, like the great crash of the early 1340s, which marked the beginning of the Genoese age (Arrighi) or Portuguese and Genoese age (Modelski), the crash of the 1560s, which marked the beginning of the Dutch era, the depression of the 1750s and 1760s, which marked the beginning of the British era, and the Great Depression in the 1930s, which was the terminal crisis of British world capitalist dominance (Arrighi, 1995).

By re-analyzing latest conflict data (great power battle fatalities from all wars, Goldstein, 1988 and COW/PRIO, 2005, from 1495 to 2002 and as yet unpublished UNIDO data about the growth of world industrial production 1740 - 2004) it was shown in Tausch/Ghymers that the long Kuznets and Kondratiev swings and cycles of capitalist world development that play such an important role in the analysis of global war since 1495 have indeed not ended after the end of Communism, and that instability, and not stability, characterize the world economy, and that there is an indented "W" shaped pattern of global conflict since 1495 that did not end with the end of the Cold War. World hegemonies that characterize the workings of world capitalism arise and they end. As it is well known in world system research, especially from the works of Arrighi and Silver, there are signal crises of world capitalism (the usual Kondratiev depressions), and there are terminal crises of the world system, when hegemonies end. Peaceful transitions from one hegemony to the other are among the most intricate questions of peace research and peace policy of our time.

[edit] Regaining a Schumpeterian perspective

Authors like Joseph Alois Schumpeter, and later world system and dependency writers like Samir Amin, Volker Bornschier, Fernando Henrique Cardoso, Raul Prebisch, and Osvaldo Sunkel were always aware of the crises, cyclical imbalances, regional shifts, and of the rise and decline of entire regions and even continents in the process of capitalist development.

Like many other development theorists of the first generation of development economists after the Second World War, whose stars began to rise long after Schumpeter in the post-war period, and who all greatly influenced “dependency theory” in the world periphery, like Kurt Mandelbaum, Paul Narcyz Rosenstein-Rodan, and Hans Wolfgang Singer, capitalism for Schumpeter never was a smooth equilibrium process, whose end result is crisis-free growth, full employment, environmental sustainability and an end to social exclusion.

Quantitative world systems debate has to mention the name of the Swiss sociologist Volker Bornschier, who throughout the 1970s, 1980s, and beyond, has been a critical voice on the long-run detrimental effects of transnational penetration on the host countries in world capitalism, dynamizing the host countries of transnational foreign investment only in the short run, but leading towards inequality and stagnation in the long run, thus enormously enriching earlier work on dependency theories, pioneered by Peter Heintz and the Latin American "dependency theory school". His theoretical and empirical developments made "dependency theory" truly global and linked it up to the evolving world system school, and by his networking and collaboration –especially with Christopher Chase Dunn – firmly entrenched the "quantitative approach" in the world system school. His later work, related to the long cyclical fluctuations in the world economy, has shown that instability is also an overwhelming element in the historical evolution of capitalism, and that the world would need a new social contract similar in its encompassing nature to the one that shaped the world after the Great Depression in the 1930s. Bornschier put high hopes into the European Union as an alternative, more "social" pole in the world economy.

Conventional wisdom of the "Washington Consensus" has it that it is always the periphery or semi-periphery country that got it all wrong during a crisis, like in East Asia, Russia or recently in Turkey and that a good combination of economic freedom, privatization, tight monetary policies and above all private foreign direct investment will "fix" it, once the forces of the market are properly at work (see Tausch and Ghymers, 2006).

The "Washington Consensus" represents the following policy priorities:

  1. Fiscal discipline: a primary budget surplus of several percent of GDP
  2. Public expenditure priorities: defined as re-directions of public expenditures towards fields with high economic returns such as primary health and education
  3. Tax reform: cutting marginal tax rates
  4. Financial liberalization: moderately positive real interest rates and the abolition of preferential interest rates (such as for developmentally useful or socially demanded projects)
  5. Exchange rates: unified and competitive
  6. Trade liberalization: abolishing quotas (replacing them by tariffs) and reducing tariffs to a uniform low level within three to ten years.
  7. Foreign direct investment: equal treatment with domestic firms. The World Bank calls this the elimination of barriers. This principle is also enshrined in the WTO treaties
  8. Privatization
  9. Deregulation: abolishing regulations aiming at achieving developmental or social aims
  10. Property rights: must be guaranteed

The counter-position, advanced by globalization critics, environmentalists, liberation theologians of all denominations, and - most recently - dissidents from the once homogeneous neo-liberal camp would hold that unfettered globalization increases the social gaps between rich and poor both within countries as well as on a global scale. Most of the adherents of this camp would share the view proposed by Giovanni Andrea Cornia and associates that income distribution in the world system has worsened during the period of globalization. Indeed, the challenge by dependency theory to the neo-classical consensus is a real one – especially in a time of growing stagnation in the centers and social polarization in many countries of the periphery.

It has been established fairly well enough that there is a continuing phenomenon of world poverty. However, what beyond that? Is globalization really the cause of world poverty? Or is rather the absence of globalization and foreign investment to blame for the continued misery in countries, say, like Myanmar, while outward-looking policies dramatically increased the lot of wide strata of the population in countries like China, Thailand and India over the last decades?

This growing international controversy on globalization and social inequality can be neatly portioned in two camps – scholars maintaining that world inequality is increasing during globalization, and scholars, maintaining that world inequality is decreasing over time during globalization. Much of the confusion rests on the fact that most globalization - > increasing inequality studies deal with world incomes measured at exchange rates, while world income distribution and world social equity, measured in purchasing power parities or “hard” basic human needs indicators, tended to become more egalitarian over recent decades.

Especially the thorough methodological criticism voiced by the very well known US economist James K. Galbraith should be mentioned here. Galbraith's freely available UTIP (‘University of Texas Inequality Project’) global inequality data base documents wage inequality (inequality of wages in 21 economic sectors) for over 70 countries on a time series base from 1960 onwards. This massive research project then estimates the econometric relationships between these inequality data and the often-deficient World Bank data series and projects GINI coefficients of estimated income inequality over time since 1960 in 70 countries that concentrate the large majority of world population within their borders. Galbraith and his team could show that based on such data, global inequality is increasing under globalization.

For the globalization -> poverty reduction school to be maintained, it must be shown that several indicators of globalization, and not just the indicator “share of foreign trade by GDP”, are significantly and systematically linked to a series of indicators of national and social well-being, including income redistribution, democracy, and sustainable development, irrespective of the development level achieved.

Finally, a truly massive cross-national research literature exists whose results are often diametrically opposed to one another, with dependency scholars claiming that dependency has adverse affects on the ‘human condition’ (economic growth, income equality, human well-being, gender and ecological relationships), while neo-liberal scholars claiming the opposite. In a cautious ballance sheet of the debate up to now, Tausch (2003) proposed the determination of 14 indicators of development in 109 countries with complete data.

The determinants of world development were chosen to be the following:

  •  % population, aged >65y, 1998
  •  % women in government, ministerial level
  • (I-S)/GDP (calculated from UNDP; investments minus savings per GDP)
  • economic freedom (Heritage Foundation and Wall Street Journal website for economic freedom, 2000)
  • EU-membership
  • Islamic conference membership (OIC website)
  • ln (GDP PPP pc)^2 (natural log GDP per capita in real purchasing power parities)
  • ln(GDP PPP pc) (natural log GDP per capita in real purchasing power parities)
  • military expenditure as % of GDP
  • MNC PEN 1995 (UNCTAD)
  • public education expenditure per GDP
  • unequal exchange (calculated from UNDP, concept: ERDI; exchange rate deviation index)

The dependent variables were:

  •  % people not expected to survive age 60
  • CO2 emissions per capita
  • development stability (year with highest real income minus year with lowest real income) since 1975 (calculated from UNDP)
  • ESI-Index (Yale/Columbia environment sustainability index project website)
  • Factor Social Development (calculated from 35 UNDP social indicators, SPSS factor analysis)
  • female economic activity rate as % of male economic activity rate
  • female share in total life years (calculated from UNDP - share of female life expectancy in the sum of male and female life expectancy)
  • GDP output per kg energy use ("eco-social market economy")
  • GDP per capita annual growth rate, 1990-98
  • human development index
  • life expectancy, 1995-2000
  • Political rights violations (Freedom House, 2000)
  • share of income/consumption richest 20% to poorest 20%
  • unemployment (UN social indicators website)

The empirical record, presented speaks a clear language in favor of Islamic democracy and against those in the West that attempt to treat Islamic cultural heritage as a general development burden. It should be also clear that a reliance on the “Washington Consensus” alone will not “fix” the performance of countries beyond a better and more predictable “development stability”. The most consistent consequence of the “dependency” analysis of this essay is the realization that a reliance on foreign capital in the short term might bring about positive consequences for employment – especially female employment – but that the long-term negative consequences of dependence in the social sphere, but also for sustainable development, outweigh the immediate, positive effects. The three-fold empirical understanding of the process of globalization – reliance on foreign savings, MNC penetration and unequal exchange, - shows how different aspects of dependency negatively affect development performance. The integration of the countries of the periphery into larger currency blocs – quite contrary to what the “Washington Consensus” has to say about “competitive currencies” - will be one of the most important tasks for international development strategies for years to come.

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[edit] References

  1. ^ Immanuel Wallerstein (1974) the Modern World-System, New York, Academic Press, pp. 347-57.
  2. ^ An article by Sobocinski (pages 8-9)
  3. ^ Abu-Lugod, Janet (1989), "Before European Hegemony: The World System A.D. 1250-1350"
  4. ^ Andrey Korotayev et al. go even further than Frank and date the beginning of the World System formation to the 10th millennium BCE, connecting it with the start of the Neolithic Revolution in the Middle East - see: Korotayev A., Malkov A., Khaltourina D. (2006). Introduction to Social Macrodynamics: Compact Macromodels of the World System Growth. Moscow: KomKniga. ISBN 5-484-00414-4
  5. ^ An overview of current world systems theory debates is to be found, among others, in the volume: Globalization. Critical Perspectives. Editors: Gernot Kohler and Emilio José Chaves. Nova Science Publishers, Hauppauge, New York, 2003, with key-note contributions by Samir Amin, Patrick Bond, Christopher Chase-Dunn, Andre Gunder Frank, Immanuel Wallerstein.

[edit] See also

[edit] External links