Worldsystems Analysis: An Introduction

By Immanuel Wallerstein

This is short-book where Wallerstein summarises his life’s work is an immensely dense fashion. So, for my purposes I will mostly focus on Chapter 2, The Modern World System as a Capitalist World-Economy: Production, Surplus Value, and Polarisation where I believe he explains the very essence of his theories. 

Let’s start by how Wallerstein defines the term world-economy:

What’s meant by a world economy is a large geographic zone within there is a division of labour and hence significant exchange of basic essential goods as well as flows of capital and labour. Defining feature of a world-economy is that it is not bounded by a unitary political structure but rather consists of many. World-economy consists of many different cultures. Binding feature of a world-economy is the division of labour.

In here, division of labour refers to partition of production steps between distinct entities that are accepted to be socially cohesive, in our current world-system, we call these entities nations. 

Secondly, he gives a concrete definition of what capitalism is. He defines it as the endless accumulation of capital. That is, accumulation of capital with the goal of more accumulation of capital. Not just exchanging goods for a profit that is in fact not a modern phenomena. 

Wallerstein argues that capitalist system can only exist in a world-economy because it requires a specific kind of relationship between holders of the political power and producers. If former was to be too strong and impose its will to an utmost extent, as in for instance Polanyi’s world-empire like system, their interest will override that of capitalists. However at the same time capitalists require a multiplicity of states as opposing to a single entity because they need different states to organise their correspondent population to follow their assigned parts in the division of labour that the world-economy requires.

He goes on to argue that a world-economy consists of many institutions: The market, states, households, classes and status-groups (by Weber’s term, or identities if you prefer). This chapter primarily focuses on the market and how it constitutes the basis of the Core-Periphery model.

A market is both concrete local structure in which individuals and firms sell or buy goods but also a virtual institution across space where the same kind of exchange occurs. In theory this virtual market exists in the world-economy as a whole. This is also known as free market however in reality a market is never totally free by design. Had it been totally free Wallestein argues, it would make endless accumulation of capital impossible thus rendering capitalist production obsolete. This is because in a market where all factors of production is allowed to flow freely, and where all buyers and sellers were immediately and accurately informed about all prices, negotiating a product’s price down to almost minuscule amount would be possible.

He argues that’s why capitalists prefer monopolies. But since a perfect monopoly is extremely hard to create, they settle for quasi-monopolies. Patents, state restrictions on imports and exports, subsidies and tax benefits are just some ways of creating these quasi-monopolies. Majority of these methods require a strong state and state interference. And from producer’s point of view, influence over that state. Without them, quasi-monopolies wouldn’t be possible. Hence in essence, state interference is the guarantor of capitalism.

However alongside these monopolistic practices, there exists anti-monopolistic ones in a world-economy. Since one producer’s quasi-monopoly is another producer’s loss, losers can organise politically to support political leaders that promise to end a particular monopolistic advantage. Or they can convince other states to open markets for their products. All these anti-monopolistic features make quasi-monopolies self-liquidating. But that is unimportant. Because a quasi-monopoly is usually kept long enough to allow for large accumulation of capital and the moment a product becomes competitive, large accumulators of capital simply move on to another product where they can achieve some sort of quasi-monopoly again. This process moves on in a cycle.

Wallerstein goes on to argue that the Core-Periphery model originally developed by ECLA has actually this monopolistic vs. competitive mode of production at heart. He says that the degree of profitability determines where a product sits on the Core-Periphery model. As in a product is more core-like if it’s a quasi-monopoly hence more profitable, and more peripheral if it’s competitive hence less profitable.

When the exchange occurs in world market, competitive products are in a weak position and monopolistic products are in a strong position. Hence there is a constant flow of surplus-value from producers of peripheral products to producers of core-like products. This is called unequal exchange.

Since quasi-monopolies and thereby core-like products require the support of strong states, their producers are usually concentrated on a few handful of countries whereas peripheral processes are scattered among large number of states. This is the exact difference between being a core state, ie., hosting producers of monopolistic products, and a periphery state, ie., having producers of competitive products. There is also a third category called semiperipheral states which have mix of these two and usually aspire to become a core state by various protectionist measures.

Aforementioned cycle of monopolistic to competitive and then back to monopolistic mode of production accounts of the cyclical pattern of world-economy. Wallerstein argues that Kondratieff Cycle explains this pattern. When there is expansion in industry with quasi-monopolistic leading industries we are in the A-Phase of the cycle whereas when there is a contraction and lower profit margins we have entered B-Phase.

In his book, he goes on to explain, households, workers, status-groups and other institutions’ mode of operation and function within a world-system. He also opens with summarising how social-sciences evolved into what they are today from their primitive forms and some theories that effectively act as founding blocks of his theory like Karl Polanyi’s Great Transformation, Fernand Braudel’s concepts of long duree and economie-monde, ECLA’s Core-Periphery analysis etc. All of this are quite impressive to read about and I should definitely spare time to read volumes of his magnum opus The Modern World-System over the years. But for the purposes of this entry I will cut it short here. I think a good understanding just these concepts summarised in here is good enough to start having a good understanding of his work and subsequent works that refer to him.