The U.S. sociologist Immanuel Wallerstein described the modern world-system as the political-economic system that extends beyond the boundaries of nations and has evolved through four stages. Originating in the sixteenth century in the wake of the Spanish and Portuguese conquest of America, the modern world-system consisted initially of Western Europe, Eastern Europe, and Latin America. It culminated in a neocolonial world-system that encompasses the entire world, attaining its zenith around 1965 (see “We must overcome the colonial denial: Wallerstein versus the woke,” May 14, 2021). Wallerstein left a body of work that enables us to understand the characteristics of the modern world-economy and its class, political, and ecological contradictions.
The modern world-economy is the economic component of the modern world-system. It consists of all the economic activities throughout the world that are related to one another through a geographical division of labor, in which particular economic activities are carried out in specific geographical regions. The core is the manufacturing, commercial, and financial center. The periphery supplies cheap raw materials to the core, on a base of forced or economically coerced labor; and it provides markets for core surplus goods that are beyond the capacities of core national markets to consume. The semiperiphery has some core-like characteristics, but it is much closer to the periphery in its conditions.
In the fulfillment of its function of producing and exporting raw materials (agricultural, animal, and mineral products) and more recently low-waged manufactured goods, the periphery does not require advanced technology or complex systems of production. As a result, peripheral regions experience distorted development, characterized by labor-intensive production and simple technology. In contrast, the core, in the fulfillment of its world-systemic function, requires and utilizes a diversity of economic activities related to the most recent human advances in production, technology, and science.
The structures of the world-economy thus generate a fundamental inequality between core and periphery. The economic function of each ensures that the core will have much greater diversity in manufacturing, higher levels of technology, higher wage levels, and higher levels of consumption. The core-peripheral relation creates and reproduces two different realities: the core with its culture of consumerism, materialism, and individualism; and the periphery, where the basic democratic rights of access to adequate nutrition, housing, education, and health care are denied on a large scale, giving rise to a popular culture of social struggle and solidarity.
The modern world-economy is dominated by large transnational capitalistic enterprises. It therefore is a capitalist world-economy, politically organized to maximize profit and to accumulate capital for transnational corporations. The exploitation of labor in the capitalist world-economy takes two forms. First, there is exploitation in the sense defined by Marx, where the workers are paid less than the value of what they produce. Second, there is superexploitation, defined by Wallerstein, where the workers are paid less than what they need in order to live. In the core, most workers are exploited but not superexploited; in the periphery, most workers are exploited and superexploited.
This dual system of exploitation and superexploitation resolves a fundamental dilemma of capitalism. Namely, the capitalist has an interest in the lowest possible wages, but low wages limit the capacity of the workers to buy the products that the system produces, thus restraining the system’s capacity to expand. This dilemma is resolved in the capitalist world-economy through an international division in the labor market, in which relatively high-waged core workers function to consume as well as to produce; and superexploited peripheral workers function primarily to produce, with consumption levels determined by the system’s need for the reproduction of labor.
The structures of the capitalist world-economy generate class dynamics that are different from what Marx described for capitalism. Marx anticipated the growth of the industrial working class in conditions of increasingly automated industry, which would provide the material foundation for the transition to socialism. But in the distorted development of the periphery, industry does not evolve toward advanced forms of production and automated industry. As a result, industrial workers are the minority of the labor force; most laborers are agricultural workers, tenant farmers, mine workers, and informal workers, reflecting the peripheral function and associated conditions.
In addition, in the periphery of the world-economy, the national bourgeoisie and the middle class are subordinate to foreign capital, and their function is to represent the interests of foreign capital in the colony/neocolony. Their political outlook is that of accommodation to foreign interests. However, some of the national bourgeoisie and the middle class attain economic and/or ideological independence from foreign capital, and they therefore have an interest in the true sovereignty of the nation, in an autonomous development that leaves behind the distorted development inherent in the peripheral role. This independent wing of the national bourgeoisie and middle class has a political interest in alliance with the popular sectors, seeking the revolutionary transformation of the colonial/neocolonial situation and the true sovereignty of the nation. There thus is an inherent contradiction in the peripheral and semi-peripheral zones, in which there emerges an alliance of the popular sectors and the independent wing of the national bourgeoisie and the middle class, which seeks to forge a transformative revolutionary project directed toward true sovereignty; in opposition to the dominant tendencies of the national bourgeoisie and the middle class, which are directed toward alliance with and accommodation to the interests of foreign capital.
In the periphery, revolutionary ideas advance much more completely than revolutionary structural transformation, because of the practical difficulties confronting structural change. The people are dependent on the imposed colonial economic structures for their daily bread, with a daily food allowance that places the people at the brink. Alongside the dependent impoverishment of the people, governments are dependent on “aid” from the neocolonial powers and international organizations. Therefore, efforts to transform conditions have to be undertaken with a cautious eye toward possible negative and even catastrophic consequences; and with the awareness that, if bold changes were to be implemented without the authorization of the neocolonial masters, economic sanctions and other punishments would be the consequence.
But revolutionary popular consciousness continues to express itself behind the cautiousness of the governments, as is evident in the declarations of principles and sentiments of the Non-Aligned Movement, an organization of governments of the peripheral and semi-peripheral zones. The Non-Aligned Movement provides space for governments to declare their true interests. The global powers have taken little notice of the phenomenon, inasmuch as the far-reaching declarations have been lightly implemented in practice by the great majority of the member states. With such freedom of expression, the governments of the Non-Alignment Movement, from 1961 to the present, have declared the need for a post-neocolonial and post-imperialist world order that respects the true sovereignty of nations, in which the nations of the world would have the practical option of developing mutually-beneficial trade with one another, without the interferences of the neocolonial powers.
In the 1970s, the Non-Aligned Movement reached its first zenith (a second would come from 2006 to 2016). In 1974, the General Assembly of the United Nations approved the proposal of the Non-Aligned Movement for a New International Economic Order. The document affirmed the principles of the right of nations to self-determination and the sovereignty of nations over their natural resources. It envisioned an international economic order characterized by the regulation and control of the activities of transnational corporations and by cooperation among the nations of the Third World. With this diplomatic achievement, the international corporate elite could no longer deny the reality of a popular revolutionary consciousness beyond the compliance of the great majority of governments with the demands of the neocolonial world-system.
At the same time, popular revolutions had triumphed in China, Vietnam, and Cuba, nations that defied the rules of the neo-colonial world-system and pursued a road of sovereignty and autonomous economic development, inspiring the peoples of the Third World. These three projects were joined by Chile (temporarily) and Nicaragua in the 1970s. In the Islamic world, the failure of secular national liberation movements to attain their goals led to the rise of an Islamic Revolution that emphasized cultural resistance to European domination; which triumphed in Libya and Iran.
The Third World rebellion and revolution reflects a fundamental contradiction in the modern world-system. The conquered peoples of the planet have declared themselves to be an inseparable part of humanity, and they do not accept their forcibly imposed condition as colonized; as the suppliers of cheap labor and cheap raw materials, and as purchasers at high prices of goods the core cannot use. For the last two hundred years, they have formed anti-colonial, anti-neocolonial, and anti-imperialist movements, seeking true sovereignty and control of their natural resources and their national economies; placing themselves in ideological contradiction with the owners and managers of the large corporations, the de facto rulers of the world-system. As it is presently organized, the world-system inevitably is characterized by a permanent condition of global political conflict, of which the corporate elite became conscious during the 1970s.
There is another fundamental contradiction in the modern world system. Since its origin, the modern world-system has expanded by conquering new lands and peripheralizing the economies and the labor of the newly conquered nations and peoples. But such conquest of new territories could not proceed endlessly. Eventually, the modern world-system would reach its geographical limits, at which point economic expansion would have to be based on the human scientific and technological capacity to utilize the natural resources of the earth in accordance with the principle of ecological sustainability.
From the 1950s to the 1970s, this potential contradiction between the mode of expansion and the natural environment became manifest, as the productive processes of the world-system reached and overextended the geographical and ecological limits of the earth. Concerned voices in the most privileged sectors of the world-economy began to warn of the ecological unsustainability of the established forms of production and distribution.
When the world-system reached the geographical limits of the earth, its historic mode of economic expansion through conquest of new lands and peoples was taken away. Concrete signs of trouble became visible in the early 1970s: Global economic stagnation, higher levels of unemployment, and high inflation; and increasing levels government, corporate, and consumer debt. In addition, in the period 1971 to 1973, the U.S. government abandoned the gold standard for fixing the value of the dollar. Instead, the value of all national currencies is determined by the currency exchange market, creating a situation of volatility, short-term instability, and price uncertainty in international markets. The USA was compelled to abandon the gold standard because, during the 1950s and 1960s, it had begun to circulate dollars without adequate backing in gold reserves, in order to finance military expenditures and global defense commitments to its political allies.
Therefore, during the 1970s, with growing consciousness of the fundamental geographical and political contradictions of the world-system, the corporate elite stood at an historic crossroads. At that critical moment, it turned to the neoliberal project, thus deepening the inherent contradictions of the world-system and throwing the system into sustained structural crisis. In doing so, it demonstrated its moral and intellectual incapacity to serve as the de facto ruling class of the world-system, an incapacity that itself is both cause and symptom of the sustained structural crisis of the world-system.
My intention in today’s commentary has been to describe the structures of the capitalist world-economy and its contradictions, looking at them from the lens of the world-systems perspective, rather than the perspective of classical Marxism, yet preserving Marx’s insights into the relation between economic interests and political viewpoints. In future commentaries, I will be analyzing the sustained structural crisis of the world-system from 1980 to the present. And I will be discussing the reaction of the Third World movements of national liberation to the sustained structural crisis, including their projections of a possible and necessary transition to a socialist world-system, ultimately affirming Marx’s vision.
In the following commentaries, I will be reviewing the four-century-long European conquest of the world, which validates Marx’s insight that force is “the secret of primitive accumulation.” I do so not for the purpose of hurling woke accusations against us folk with light skin color, but for the purpose of discerning meaning in human history and the possibilities for human emancipation, as Marx would appreciate.
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