APRIL 1984 - VOLUME 5 - NUMBER 4
Widening Cracks in the Capitalist Road
by Guy Gran
It is the nature of nondemocratic politics and economics to produce periods of uneven, unequal growth, followed by periods of stagnation and crisis.
By the early 1980s, this cycle had taken on international dimensions as developed and developing countries alike showed signs 'of acute economic stress. Third World debt passed $800 billion, much of it unlikely to be repaid, while unemployment in the advanced capitalist countries remained high. The individuals and institutions directing the world economy do not seek the structural changes needed to raise real productivity in the Third World. Instead they shuffle papers to insure short term interest payments and postpone discussion of issues of substance; Third World elites are happy to collude.
It is no great mystery how Western elites have managed this charade. They define the terms of the debate (neoclassical economics), control the mediating institutions (the IMF and the World Bank), fund both political parties in the U.S., and nurture, if not directly subsidize, the mass media. The major broadcast networks, print dailies, and weeklies are so enamored with their institutional fixes that they rarely notice independent critical assessment from anywhere on the political spectrum.
Yet scholars keep trying to affect the debate, and growing numbers are using what is called world-system methodology.
The "world-system" has come to be seen by many analysts as the most useful phrase to indicate the systemic links of the world economy. One cannot, the reasoning goes, analyze political, economic, and social events in isolation; events in one part of the world economy affect people and regions far beyond national borders. The larger world-system has its own additional dynamics, such as cycles between periods when one power dominates the world-economy, as the U.S. did from 1945 to 1970, and periods when several major powers compete for control as in the years from 1970 to the present.
The two volumes under review continue the exploration of these dynamics and their relation to public policy. International Money and Capitalist Crisis, by E.A. Brett of the University of Sussex in England, is one of the most important analyses of the post-war global economy in several years. Crisis in the World System, edited by Alfred Bergesen, is the sixth annual collection of essays on the political economy of the contemporary world-system. Together the two volumes shed significant light on capitalism in crisis, what we can learn from other eras of crisis, and how the capitalist system is seeking to extricate itself.
Brett's argument begins with the uneven structure of international accumulation and distribution of wealth, and the impossibility of long term equilibrium in such a system. (Neoclassical economics, presuming natural harmony, does not explain such phenomena.) Brett looks first at the state caught in the international system. The state needs to serve the interests of international investors and yet invest enough at home to insure political stability. But since capital goes where it is most profitable, not all capital is equally subordinated to social control. Multinational bankers seeking tax havens in the Cayman Islands, for example, are subject to almost no control. This results in uneven development and political instability.
The root cause of uneven development is found in the drive to realize economies of scale on the level of the plant, the corporation, and the nation-state. When unequal nations or companies trade, the stronger exploits the weaker by using the inequality to achieve economies of scale. The result is a cumulative process of uneven development.
The drive to sustain a given rate of profit - by eliminating competition and lowering production costs through the threat of unemployment-accelerates uneven development. Without social plan ning, it also leads to an uneven balance between various economic sectors. When one adds uneven technological change, it is little wonder market signals go awry with hoarding and speculating. Demand and supply get out of balance, and the rate of profit is too low to sustain existing investment. This is the heart of capitalist crisis.
Brett then explores why methods and institutions designed to ensure the smooth operation of the capitalist system have failed. He finds that the IMF and related institutions, which are supposed to assure unregulated trade through intervention in the marketplace (an inherently contradictory notion), have become too weak to do the job well. The U.S. and other dominant capitalist powers have, in brief, prevented these institutions from developing sufficient power to assure long term system stability, preferring instead to seek short term goals.
In the 1950s and 1960s, the U.S. government sought to maintain stability by supplying large amounts of capital, especially through economic and military aid. The U.S. nearly went broke in the process, and by the 1980s the industrialized world as a whole cannot supply the resources needed to counteract the uneven development crisis of the Third World. Thus the private banking system, faced with the threat of default by big debtor nations like Brazil and Mexico, is urging governments to increase development aid and their contributions to the IMF, passing on the cost to Western taxpayers.
The current crisis thus has several elements. If industrial countries don't grow, they can't use the imports the Third World must sell to repay its loans. If the borrowers don't export, they bankrupt Western banks-which is the current situation; if they do export, they threaten to bankrupt much of Western industry. Those institutions traditionally called in to rescue the system-governments, private banks, and the IMF-haven't the power, the tools, the resources, or the creativity to do the job; IMF policies deflate economies and destabilize states, while bank lending goes to cover old debts rather than generate new productive capacity.
Brett concludes that the world-system faces prolonged depression and cannot endure in its present form. Like most authors in the political economy tradition, he eschews bureaucratic and cultural analysis, and does not pursue practical prescriptions for reorganizing the worldsystem. But, for those trying to construct policy alternatives, Brett has managed to pose the macroeconomic problem more precisely than almost any previous work.
The volume edited by Bergesen pursues a similar agenda with a much wider topical and historical sweep. Contributors to the volume seek understanding of the present crisis by looking at various historical periods.
Walter Goldfrank pursues one line of inquiry about systems crisis by comparing the present situation with periods of capitalist crisis in times past. He looks at the decline of late Victorian Britain as the world power and draws a number of important parallels with the contemporary U.S. position. He finds five interrelated processes contribute to decline: loss of productive superiority; inability to maintain the most efficient organization of production; costs of rising standards of living; underinvestment in research and development; and the persistence of free trade policies. If economic growth indeed requires the reversal of these processes, it is obvious how ill-suited mainstream Republican and Democratic policies are to affecting long term decline.
Historian Randall Collins follows another basic line of inquiry by looking at how the world-system overcame crises in the past by creating a new institutional framework. In an electrifying case study, he chronicles an institutional revolution in the High Middle Ages that laid the basis for capitalism. For it is this period in which technological advances (in agriculture, transport, iron, machines), the institutional features (bureaucratic state, rationalized legal system, citizen rights), and the entrepreneurial ethic all appeared inside the first bureaucratic state, the Papacy. It was the organized decentralization of the Papacy that allowed one activist order, the Cistercians, working at Europe's frontiers where feudal authority was weak, to turn their monasteries into what were essentially factories. Clearly understanding capitalist evolution must take us farther back in time than heretofore admitted.
Can one affect economic crisis by altering culture? Robert Wuthnow reflects on the disruption of the cultural norms legitimizing economic behavior during expansionary eras and the usefulness of ideology to ruling classes as lubrication while the world-system surmounts crisis, shifts gears, and rearranges interest groups. Phillip Hammond shows how the contemporary loss of confidence in mainstream American churches is part of a general withdrawal of legitimacy from U.S. institutions that has previous parallels in American history. So does the mass cultural attraction to diverse forms of evangelicalism.
It is no surprise, as Kathryn Ward suggests in an essay on the hidden crises in world-system development, that women bear a major burden in reconstructing the economic order. In the transition the system works to lower the already inferior economic status of women even further. Women continue the burdens of reproduction, see traditional livelihoods destroyed, and find unequal access to new modes of production.
What then are the alternatives? Immanuel Wallerstein sheds some light in his chapter. The world-system, he says, is now composed of a small number of superaccumulators (the multinational corporations), bureaucrats and officials manning the political and economic machinery, and those seeking status and reward from the economic order.
But why aren't movements opposing the world-system more successful? Wallerstein finds such efforts flawed as products of the system themselves. Their leadership tends to include some who aspire to membership in the world system (witness Zimbabwe). The constraints of being a movement in power, of bureaucratic machinery and the interstate system, are severe. All conspire to stifle mass mobilization as soon as possible.
History thus suggests that some portions of the system elites or would-be elites could well lead a controlled transformation out of the current crisis to a new system of hierarchical exploitation. Wallerstein is correct to ask that forces that oppose the current world-system reanalyze their basic strategy. He is also correct in rejecting ideal social categories that try to describe evolving social institutions like the state. Finally, Wallerstein is correct to note that the state is not the only locus of power or route to power in society. Social change can begin at many levels or locations.
This leaves the reader with far more insight into a far more serious set of problems-rethinking the methods of social analysis as well as those of political action. The European alternative development movement has lit upon part of the possible in the phrase "thinking globally, acting locally." What these two works reflect is the need to move beyond improving political economy to a social analysis integrating institutional and cultural aspects more effectively, linking macro and micro dynamics of household, village, region, state and system, and educating for action, not just awareness.
Guy Gran is an assistant professor at American University and author of Development By People: Citizen Construction of a Just World (Praeger, 1983).