Sociology 2:
Class 14: World-System
Theory
Copyright © 2008 by Evan Schofer
Do not copy or distribute without
permission
Announcements
• Office Hours limited:
• Today
• May 29
• Contact me about appointments…
• Topic: Theories of globalization
• Plus, continuing discussion of governance…
Review: What is a Theory?
• Definition #1: A specific claim or argument
that leads to empirical predictions
• Example: Economic law of “supply and demand”
• Definition #2: General imageries about how
the world works
• Example: Marxist theory: not just a single prediction
• This broader kind of “theory” is useful because it
generates a rich description of the world
– Offers directives to guide research
– And produces many specific claims to be tested
– But, it isn’t easy to prove “right” or “wrong”.
Theories of Globalization
• Some major views on the international
system:
• 1. Modernization theory
• 2. World Systems Theory
• And “dependency theory”, a common variant
• 3. “World Polity Theory”
• Also called “neo-institutional theory”
• 4. Realism
• 5. Various responses to Realism
• “Complex Interdependence”, others…
World-System Theory (WST)
• Background: Modernization theory
• An evolutionary theory predicting how societies develop
• See Chirot and Hall article on WST…
– Argument: All societies naturally pass through
certain stages of development
• All societies start out as “traditional” hunter-gatherers
• Then, they develop agriculture; towns & cities grow
• Eventually, they become “modern” industrial societies
– Movement from one stage to the next is driven by
things like population growth & new technologies
• Society becomes more complex; greater division of
labor.
World-System Theory (WST)
• Modernization theory was based on analyses
of European societies
• It was assumed that non-European societies would
have the same experience
– Or modernize faster with aid & technology from the West
• Problem: Non-western countries weren’t
modernizing as predicted
• Example: Argentina was as rich as many European
countries in 1890… but hardly improved by 1960
• Example: Many former colonies in Africa were
stagnant, or becoming more impoverished over time.
World-System Theory (WST)
• World-System theory tried to explain the
failure of many countries to develop
• Scholars: Andre Gunder Frank; Immanuel Wallerstein
• Claim: Underdeveloped/peripheral countries
are not just like Europe, but at an earlier stage
of development
• They have a very different history: colonization
• And, they must compete with highly developed
countries
– Europe was undeveloped and became developed
• Other countries were undeveloped, and now trapped in
a state of “underdevelopment”.
World-System Theory (WST)
• Argument: Europe was able to prosper by
exploiting resources from other places
• The great success of Europe and the failures in the
non-West weren’t just a coincidence…
• Europe became wealthy by maintaining economic &
military dominance over other nations
• Exploited nations will never “modernize” as long as
they are oppressed by Western nations
– Example: Latin America traded a lot with
Europe… and remained underdeveloped
• Whereas Japan avoided contact with Europe; did
better…
World-System Theory (WST)
• World-System Theory: We need to study the
entire global economy as a world system
• We can’t understand the fate of a single country,
without understanding how it fits into the overall
system
• Countries aren’t poor because of their own specific
history or internal characteristics
• Rather, they are poor because of their position
relative to others in the global capitalist system.
World-System Theory (WST)
• Key concepts:
• Core: the rich, developed countries
• Also: west; metropolitan countries; developed world
• Periphery: poor, dependent nations
• Also: underdeveloped countries; satellites;
dependencies
• Semi-periphery: semi-industrialized countries
• Dependency: The vulnerable state of being
exploited by core countries
• They depend on the core for trade, investment, loans,
technology, etc. (related term: underdevelopment).
World-System Theory (WST)
• Classical economic theory (Ricardo) predicts
that specialization & trade is beneficial for all
• Countries that can produce high-tech goods most
efficiently should concentrate on that
• Countries that can produce bananas or coffee
efficiently should concentrate on that
• Specialization leads to a “win/win” situation…
everyone is more efficient; countries become more
wealthy
• World-System theorists criticize this view…
World-System Theory (WST)
• Criticism #1: Specialization in low-tech
production (e.g., bananas) may produce
profits in the short term…
• But, there is a cost: countries fail to develop industry
and sophisticated technology that could lead to
greater profits in the future
– Argument: In the long run, countries would be
better off developing high-tech industry, rather
than just producing coffee…
World-System Theory (WST)
• Criticism #2: trade is asymmetrical
• Rich countries don’t need coffee/bananas badly
– And, they can buy them from many sources
• But, poor countries critically depend on trade to get
technology, machinery to develop their economies
• Thus: Poor countries are dependent on rich
ones
• They need manufactured goods… and are forced to
pay high prices
• And, they must sell their raw materials and agricultural
products very cheaply.
World-System Theory (WST)
• Economists argue that foreign investment is
good for peripheral countries
• World system theorists criticize this, too:
• 1. “Core” capitalist countries tend to extract
profits from the periphery
• This outweighs benefits of foreign investment
• 2. Foreign investment doesn’t really help a
society industrialize
– Foreigners build plantations and mines to extract resources
– They build roads & ports to extract; not to benefit the country
• In sum: They don’t build useful industrial infrastructure.
World-System Theory (WST)
• More key concepts:
• Trade concentration: When a peripheral
country trades with just a few core countries
(or only one)
• Investment concentration: When investment
comes from just a few core countries (or one)
• High concentration may make peripheral
countries vulnerable
• If the core country decides to halt trade or investment,
economic disaster would follow
• Peripheral countries must please core trading partners
• They lose political autonomy to do what is best for its
people.
World-System Theory (WST)
• Scholars such as A. G. Frank found
evidence in studies of Latin America
• Key observation: Latin American economies
and trade was unusual:
• They mainly produced “cash crops” and raw materials
• Trade was almost entirely with the U.S.
– High “Trade Concentration”
• Foreign investment resulted in foreign-owned
plantations, not expanded industry & “development”.
World-System Theory (WST)
• Interpretation of Latin American situation:
• Global capitalism forced countries into a
state of under-development
– 1. They can’t to compete with industries from
high-tech economies
• They do not develop high-profit industries: cars, etc.
– 2. Instead, they trade commodities (coffee)
• They must compete with other poor countries for
sales… so they don’t make much profit
– So, they remain underdeveloped…
Investment Concentration
Country
Concentration (%) Partner
Honduras
97.7
U.S.
Swaziland
96.6
Britain
Niger
95.7
France
Chile
91.3
U.S.
Saudi Arabia
90.4
U.S.
Tanzania
48.1
Britain
Iraq
37.5
Britain
Brazil
35.6
U.S.
Source: Kentor and Boswell 2003
World-System Theory (WST)
• Research literature on WST… Examines:
• Do countries with more trade, investment,
and concentration fare worse in terms of:
•
•
•
•
Economic growth
Poverty
Health and environmental well being
Democracy
• Results: Mixed… More on this later.
World-System Theory (WST)
• Issue: Why don’t all the peripheral countries
band together and overthrow the core?
• Example: In 1970s, Oil-producing countries created
“OPEC”, and restricted the flow of oil to the core
• Result: High gas prices; OPEC countries got rich
– Though eventually the West made friends with Saudi Arabia
and others… who lowered prices.
• Why doesn’t this happen all the time?
World-System Theory (WST)
• Wallerstein’s explanation:
• for stability of the world system
• 1. Military dominance of the West
• Ex: US overthrew any Latin American governments that
tried to oppose the US
• 2. Ideological commitment to the system
• People believe capitalism is “fair”, just
• Similar to Marx: false consciousness
• 3. The existence of the semi-periphery
• Most important, according to Wallerstein
• Semi-periphery is doing OK, so they support the core
• Prevents everyone from ganging up on the core…
World-System Theory (WST)
• Question: How does WST differ from other
analysis of economic globalization?
• Both agree that economics = important
– But, economists often view the world economy
positively (or neutrally)
• Ex: Ricardo thought trade was overall beneficial
• Ex: Many economists think globalization reduces
poverty compared to a world without trade
• WST argues that globalization perpetuates inequality.
World-System Theory (WST)
• In contrast, WST argues that the global
economic system is inherently unfair
• Economic power of core countries and MNCs is so
great that the periphery will always be exploited
• The idea that governments and international
institutions can make the system “fair” is an illusion
– Governments and international institutions (e.g., the WTO)
will always reflect interests of capitalists
– Therefore, WST scholars are pessimistic about the role of
global governance in solving social problems…
– Consequently, the system must be substantially
reorganized… or overthrown.
World-System Theory (WST)
• What should peripheral nations do?
– According to WST scholars?
• 1. Peripheral countries must avoid exploitive
economic relations with the core
• Beware of trade and foreign investment, which can
lead to exploitation and foreign control
• 2. Try to nurture domestic industries
• Don’t sell coffee and rely on core for high-tech
• Try to develop advanced industries locally
• Concept: “Import substitution” – developing local
industries to avoid importing products.
World-System Theory (WST)
• What should peripheral nations do?
– According to WST scholars?
• 3. Band together with other poor nations to
fight against the power of the Core…
• Trade with each other
– Perhaps create cartels to bargain with the Core
• And some argue: start a global anti-capitalist
revolution.
World-System Theory (WST)
• How does WST view international
organizations?
• Answer: They do not affect the fundamental
economic positions of core and periphery
• Claim: Most IGOs and INGOs are created by core
countries, and will never fundamentally undermine the
dominance of the core
– IGOs and INGOs tend to perpetuate core dominance
– Example: WTO has not given big concessions to periphery
• The only thing that could help would be organizations
representing the peripheral countries against the
core!
World-System Theory (WST)
• Question: Is world-system theory “right”?
• WST makes many claims. There is no simple answer
• 1. Analysis of Latin America is generally
thought to be compelling
• 2. Rapid industrialization of South Korea,
Taiwan, etc = major exceptions to WST
• 3. Evidence on foreign/trade investment =
mixed, but often contradict WST
• Some studies find effects consistent with WST, but
many do not.
World-System Theory (WST)
• Criticisms of WST:
• 1. Research findings are mixed at best
• The specific WST predictions about sources of global
inequality/poverty have often been wrong
• It is true that there is horrible poverty in the world…
– But: Are people worse off than if there was no global
economy? That is less clear.
World-System Theory (WST)
• 2. WST doesn’t make clear predictions
• After the fact, almost any action can be interpreted as
“serving the interests of global capitalists”
– Example: The Montreal Protocol on CFC
emissions
• First, the core didn’t sign it… WST scholars said:
“See, the core is using its power to avoid the treaty!”
• Later, when the core signed it, WST scholars said:
“See, the core has ensnared the peripheral countries
in a treaty that will keep them in poverty”
– A theory that can fit any evidence is not so useful.
World-System Theory (WST)
• 3. Reverse causality
– WST argues: Countries that are dependent on
the core of the world capitalist system will be
trapped into a state of underdevelopment
– BUT, maybe it works the other way around
• Poverty produced “dependent” relations in the first
place
• Poor countries can’t produce high-tech goods, so they
trade commodities (e.g., bananas)
• But, this doesn’t necessarily mean that trading
bananas made those countries poorer or “trapped”
them into poverty.
World-System Theory (WST)
• My advice: WST is a useful theory that has
some predictive power
• BUT: don’t become a conspiracy theorist
– Don’t assume that the entire global economy is
conspiring to “keep the little guy down”
– The real answer, as always, is that the world is
complex…
• Some aspects of the global economy have been
beneficial, others not
• Don’t judge without evidence.