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.