Session 16: Capitalism - Doomed to Fail?

In “The Rise and Future Demise of the World Capitalist System”, Immanuel Wallerstein presents the notion of a “world system” as the means to analyzing the international system. By providing a historical account of how capitalism flourished in Europe and subsequently spread on to Asia and Africa, Wallerstein has attempted to highlight how the global world order shifted from the establishment of a “world empire” to a “world economy”, and thus draw a trajectory to the ultimate collapse of a capitalist system in favour of a “socialist world government”.

While tracing the path followed by Europe in arriving at its current stage of development, Wallerstein highlights three interrelated features of the capitalist system of exchange: the rise and fall of Mercantilism, the entrenchment of structural positions in the world economy and the subsequent colonization that occurred. Following the European world system’s decision to forgo expansion in favour of the development of stable political and economic structures internal to the states, Europe partially withdrew from the world market. However, it was within this framework of isolation that (what Wallerstein has described as the European nations’ “race” to diversify economic activities) that the core, peripheral and semi-peripheral states established their positions in the world economy. Rapid industrialization, coupled with improved military, transport and communication, allowed for European states to move towards the status as a ‘core’ in the world economy. However, the geographic expansion of the European world economy and a decline in mercantilism was imminent. In an attempt to locate sources of raw materials and new markets for manufactured goods, the world economy subsumed the “mini-systems” such as the Russian and Ottoman empires, into the broader world-system.  

In addition, Wallerstein has argued that the structural positions occupied by states are not fixed and are subject to change. As a result of the expansion the world economy and the increasing emphasis placed on industrial rather than agricultural capitalism, nations which had an advantage in the manufacturing sector were able to gain “political ascendancy”; hence, signifying a shift towards the core. Furthermore, the “Scramble for Africa” resulted in the exploitation of untapped sources of raw materials and labour, creation of new markets and allowed for a shift from manufacturing towards provision of infra-structure to develop these peripheral nations. 

Given the trajectory faced by European nations and subsequent creation of a world economy, Wallerstein argues that while the capitalist mode of production may be crucial to the growth of the world economy, there exists a contradiction within the system itself: “whereas in the short run the maximization of profit requires maximizing the withdrawal of surplus from immediate consumption of the majority, in the long-run the continued production of surplus requires a mass demand which can only be created by redistributing the surplus withdrawn”. The creation of an “urban proletariat” as a result of the process of manufacturing has led to an increase in the “anti-capitalist mass spirit” which manifests itself as trade unions and socialist parties aiming to challenge the bourgeoisie of the prevalent system. In addition, the increase in supply of agricultural commodities has outstripped the increase in demand for the goods culminating in a “bottleneck of demand”. Therefore, alongside capitalist tendencies, there exists a need for “social liberalism or welfare state ideology” in order to prevent greater unrest in the international system.

In essence, what Wallerstein argues is that states are interdependent; however, owing to the economic balance of power, conflict between them is inevitable. Therefore, there is a need to tweak the capitalist system to incorporate redistributive measures, in order to prevent complete exploitation of the proletariat at the hands of the bourgeoisie and the subsequent organization of the former to challenge the latter.