Capitalism Flashcards
2 ways to explain the global economy as an international system
- Market dynamics among sovereign but interdependent states and other actors in a semi-regulated system
- Structural dynamics within a capitalist world system
Market dynamics among sovereign but interdependent states and other actors
- A global market in which states seek to manage their interdependence and private actors make choices based on prices and regulations at state and international levels
- Assumes the possibility of joint gains
Structural dynamics within a capitalist world system
Key elements:
- Focus on structural pressures not on the choices of states, IOs, other actors
- Focus on conflicts of interest between social classes and between global core and periphery not on “joint gains”
- Various versions, some drawing on analyses of Karl Marx, some not
Early theorists of capitalism as a national and international system
- Marx
- Hobson
- Lenin
- Gramsci
Karl Marx (Das Kapital, 1876, and other works)
- Politics are shaped by the mode of production (how wealth is created), which changes over time: slave -> feudal -> capitalist -> socialist -> communist
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“Historical Materialist” analysis of society:
– Mode of production (“the base”) - identity and interests of social classes, dominated by ruling class
– Interests of ruling class - government, religion, morality, ideas (“superstructure”) - Theory of history:
– Contradictions in mode of production -> class struggle -> social change
– Capitalism converts labor “surplus” into profits -> impoverishment of workers -> reduced demand for products -> loss of profits -> economic crisis - Expectations:
– Revolt by working classes will lead to revolution and end of capitalism
John A. Hobson (Imperialism, 1902)
- Capitalism produces great concentrations of wealth
- Capitalist elites manipulate the power of the state to advance their own interests
- When a capitalist society’s production capacity is greater than consumer demand, elites (the owners of capital) have two options:
– Redistribution: increase demand at home by redistributing wealth to the poor
– Imperialism: acquire foreign lands for profitable investment opportunities
Vladimir Lenin (Imperialism - The Highest Stage of Capitalism, 1917)
- Combined ideas of Marx and Hobson
- Capitalism will eventually end in communist revolution, but this hasn’t happened (yet) because capitalist states pursue imperialism
- Dynamics of imperialism: Monopoly of capitalism -> falling profits -> capitalists seek new investment opportunities and markets abroad -> imperial competition between capitalist states -> war
Antonio Gramsci (The Prison Notebooks, 1929-1935)
- Agreed with Marx on importance of capitalism and bourgeois ruling class
- Rejected Marx’s economic determinism and Lenin’s expectations of upcoming communist revolution
- Emphasized cultural hegemony: ruling class uses ideas and ideology to sustain capitalism and maintain power
- Social change requires counter-hegemony: the promotion of alternative, critical values and norms
Capitalism and global inequality
Shift focus from dynamics of capitalist states to the distribution of wealth and (under)development around the world
- Why is wealth distributed so unevenly around the world?
Theorists of capitalism and global inequality
- Prebisch 1950
- Rodney 1972
- Wallerstein 1974
- Golub 2013
- Phillips 2017
Dependency Theory (Prebisch, 1950)
Contradicts David Ricardo’s theory of mutual development via “gains from trade”
- In contemporary world system, periphery exports raw materials to centre, while centre exports finished products to periphery
- Over time two factors -> concentration of wealth in the centre:
– “Declining terms of trade” - raw materials get cheaper, finished products get more expensive
– Centre is powerful so retains profits; periphery is weak so easily exploited
- Result: centre gets richer while periphery gets “dependent development”
Imperialism and “under-development” (Rodney, 1972)
- Imperialism is an integrated global system in which wealthy capitalist states dominate and exploit less-powerful regions of the world
- Key dynamics: under-development
– = global capitalism restructures the societies and infrastructure of less-powerful countries and regions in order to exploit their resources for the benefit of more-powerful countries and regions - Africa developed Europe while Europe under-developed Africa
- Africa’s railways in the early 1960s all ran to coastal ports: good for exporting raw material but bad for developing integrated markets
The “modern world system” (Wallerstein, 1974-2011)
The “modern world system” (since 16th century) is a globalist economy characterized by a division of labor that systematically benefits certain economies and states more than others
- Economic exchange on unequal terms -> redistribution and concentration of wealth in “core” economies -> uneven political development
– Core: advanced technologies, strong states
– Semi-periphery: middle technologies, semi-strong states
– Periphery: raw materials, weak states
- Capitalist elites control the policies of core states, while capitalist elites in periphery share interests with core states and societies
Mobility within the global capitalist system (Golub, 2013)
- In 1970s, poor countries challenged the rules of the world economy, proposed a “New International Economic Order” (NIEO) that would mandate redistribution from North and South
– They failed, due to resistance by North and divisions in South - Since 1990s, parts of “Global South” has used global capitalist system to gain wealth and challenge the structure of “haves” and “have nots”
– Some states in Global South have become much wealthier and gained global influence - G20 is now as important as G7 - But capitalism and global inequality remain
How the global capitalist economy works (Phillips, 2017)
- Global economy is dominated by transnational corporations (TNCs) working through global value chains (GVCs)
– Functional fragmentation: Trade is dominated by the exchange of intermediate goods and services, not the exchange of finished products
– Geographic fragmentation: Leads firms out-source/off-shore to specialized production units in multiple countries - 1 of 5 jobs worldwide is linked to production in GVCs
- GVCs are “the world economy’s backbone and central nervous system” (World Bank, 2010)
