Dependency, Neoliberalism and Globalization in Latin America
Dependency, Neoliberalism and Globalization in Latin America
Dependency, Neoliberalism and Globalization in Latin America
volume 150
Editorial Board
José Bell Lara (University of Havana, Cuba)
Walden Bello (State University of New York at Binghamton, usa and
University of the Philippines, Philippines)
Samuel Cohn (Texas A & M University, usa)
Ximena de la Barra (South American Dialogue, Chile/Spain)
Víctor M. Figueroa (Universidad Autónoma de Zacatecas, Mexico)
Marco A. Gandásegui, Jr. (Universidad de Panamá, Panama)
Ligaya Lindio-McGovern (Indiana University-Kokomo, usa)
Daphne Phillips (University of West Indies, Trinidad and Tobago)
Jon Shefner (University of Tennessee-Knoxville, usa)
Teivo Teivainen (University of Helsinki, Finland and Universidad Nacional Mayor de
San Marcos, Peru)
Henry Veltmeyer (Saint Mary’s University, Nova Scotia, Canada and Universidad
Autónoma de Zacatecas, Mexico)
Peter Waterman (Institute of Social Studies, The Hague, Netherlands) † (1936–2017)
volume 10
By
Translated by
Jacob Lagnado
leiden | boston
Typeface for the Latin, Greek, and Cyrillic scripts: “Brill”. See and download: brill.com/brill-typeface.
ISSN 1877-2110
ISBN 978-90-04-35541-5 (hardback)
ISBN 978-90-04-41554-6 (e-book)
Foreword ix
Theotonio Dos Santos
Preface to the English Edition xii
Translator’s Acknowledgement xxiii
List of Figures xxiv
Prologue xxv
Adrián Sotelo Valencia
Introduction 1
8 Conclusion 312
Bibliography 319
Index 344
liberalism. Whilst he was in power, so too was New Labour in Britain (until
2010) and the SPD in Germany (until 2005). This period was succeeded by the
election victories of Barack Obama (2008, 2012) and François Hollande (2012),
who relaunched the social democratic Third Way offensive. The Bush adminis-
tration mostly kept within the parameters of neoliberal globalization, pushing
free trade agreements and Chinese membership of the WTO, although it did
engage to some degree in military imperialism and the economic annexation
of the Middle East and South Asia.
However, since the mid-2010s, the neoliberal globalization process that be-
gan in 1979 and was driven forth politically from 1994 by alternating govern-
ments of the neoliberal right and the Third Way centre-left has been showing
signs of exhaustion. Falling global growth figures indicate it can no longer miti-
gate the sharp rise in accumulated levels of inequality by containing or limit-
ing poverty. This has meant the accelerated decline of its driving forces. The
end of political liberalism and centrism has initially benefitted the far right,
whose alternative to liberal globalization is an internationalisation based
on the political power of the State, the US state in particular, which comes
across as more immediate and powerful than the left’s alternative. The domi-
nant versions of social democracy cling to abstract universalist formulas and
fear breaking with their concrete neoliberal expressions, while some of the
national-popular experiences have been isolated by capital flight, financial
blockade at the hands of the Atlanticist powers, and the restructuring of US
imperialism in order to confront the nationalisation of strategic resources
such as Venezuelan oil. Political setbacks in Brazil and South Africa have so far
restricted the potential of the BRICS to articulate the global South and offer a
geopolitical alternative to the world hegemony of the United States and its
chief allies. Nonetheless, the powerful dynamics of the Chinese, Indian and
Russian economies now occupy the spaces vacated by American unilateralism,
expanding their Silk Road, Asia-Pacific and Global South projects in the pro-
cess. Intensified social struggle in Latin America and Africa in the years ahead
could change the political makeup of those regions and strengthen the BRICS
again. In the coming systemic chaos, class struggle is poised to determine the
geopolitical potentialities of the different power blocs, with intrastate conflict
heavily conditioning interstate conflict and international alliances.
Through the Trump administration, an ascendant US right sought to weap-
onize the State to resist the competitive pressures of globalized production
and against corporate relocation overseas, free trade, the WTO, Chinese expan-
sion, European Union exports, Mexican and Central American immigration,
organised labour, social rights and multiculturalism. While the US state’s
repressive capabilities are an important instrument of international power,
they can hardly halt or undo the world economy’s most deep-rooted tenden-
cies. They do however suggest a new form of regulation. The emergence of a
radical right plays a leading role in the US in fuelling the far right’s rise globally.
In Europe, electoral victories in Hungary, Norway and Italy, the Brexit referen-
dum in the UK and voting patterns in France, Germany, Holland, Austria, Swe-
den, Ukraine and Greece are evidence of this trend. In Latin America, we could
see a similar pattern in the coups in Honduras (2008), Paraguay (2012) and Bra-
zil (2016); Colombia’s joining of NATO and rejection of the peace deal with the
FARC, the election of Macri in Argentina (2015), and above all the victory of
far-right Jair Bolsonaro in Brazil (2018). These developments ushered in gov-
ernments that restrict political liberalism and workers’ rights whilst subordi-
nating themselves to neoliberalism and the Trump administration’s extreme
version of imperialism.
Although global military spending has fallen in the 2010s compared to the
2000s, a closer look reveals an intensification of interstate competition. Be-
tween 2001 and 2017, China and Russia’s growth rates were markedly higher
than those of the United States. US military spending expanded by 2.3% in this
period, compared to 10% for China and 7% for Russia. This meant their com-
bined military expenditure jumped from 16% to 48% of US military spending
in 2000–2017. If these rates are maintained there is a real possibility of China
and Russia achieving military parity over the next 15–20 years. Attempts in the
Trump administration to regain the military initiative, as Republicans have at-
tempted since the 1980s, has invariably come up against the tightening budget-
ary constraints imposed by the expanding US public debt. This prospect com-
pounds US imperialism’s structural limitations, elevates global tensions and
the risk of conflict, and reinforces the bifurcating tendency of global power
projects. Lastly, another aspect of the impending systemic chaos, the collapse
of the existing monetary standard, could in the coming years be combined
with the exhaustion of the expansive phase of the Kondratiev cycle, which we
return to below.
Our second major thesis was that the expansive A-phase of the current Kon-
dratiev cycle would be weaker than its 1950–73 equivalent in terms of its capac-
ity for material and political change. Despite displacing power towards a new
geopolitical axis led by China, its transformative potential is severely curtailed
because of its link to the downturn in the US systemic cycle and to the techno-
scientific revolution. This renders it incapable of dismantling the neoliberal
model, financing strategies, the dollar hegemony and the US cycle’s institu-
tional bases, although it does further weaken them. The splintering of the
world system today confirms our hypothesis.
Starting in 1994, the expansive Kondratiev drove world GDP per capita
growth rates and profit rates up significantly, but not to 1950–73 levels. Between
1994 and 2010, GDP per capita growth stood at 2.4% p.a. This was double the
1973–93 rate but below the 2.9% p.a. achieved in 1950–73 – a gap that widened
in the 2010s due to the slowdown in economic growth. This long phase consists
of three periods: resumption (1994–2000), prosperity (2002–2008), and matu-
rity (2010-). 21st century global crises have centred on the US and the European
Union, slashing economic growth there. The 2001 crisis erupted due to the Nas-
daq and dotcom speculative bubbles bursting, as well as the attack on the Twin
Towers and the Pentagon, whilst the 2008–09 crisis was related to the end of
the housing bubble in the US but also seriously affected the EU.
In the mid-1990s China’s heightened world-economic presence began to
drive up the US trade deficit and public debt, which came increasingly under
the control of international actors and the Chinese state especially. China’s
high growth rates and resulting surpluses enabled it to promote a productive
circuit that articulated exports to the US, internal market expansion and a ris-
ing demand for raw materials and commodities on the world market, whilst
simultaneously maintaining a financial circuit based on US parasitism. This
process intensified in the first decade of the 2000s when the commodity boom
brought Latin America and Africa into the long phase of economic expansion.
But the crisis of 2008–09 showed there were limits to the compatibility of these
two circuits. China redirected its developmental model, which was export-
based between 1994 and 2008, towards its internal market and hinterlands. At
the same time, it led the formation of the BRICS and followed an agenda of
promoting the global South through public investment and financing national
balances-of-payments in Latin America, the Caribbean, Africa and Asia. China
also abandoned its 2002–2011 policy of buying up US bonds in public debt,
which made it the US Treasury’s chief creditor and saw the US through the
2008–09 crisis, in favour of freezing and even reducing its ownership of such
assets.
At the root of these policy changes lies the negative impact of the US/EU
crisis on China’s economic growth, which has fallen from double digits in
2005–11 to 6–7%. The slowdown in growth has made it less effective in reduc-
ing poverty and has thrown a light on the alarming rise in inequality that
occurred during the Chinese and US economies’ articulation. This has pres-
sured the Chinese government into looking for a new model of development.
The whole process looks set to intensify as the current expansive phase comes
to an end. The US’s deepening financial imbalances and aggressive protection-
ist policies could combine with a Chinese policy of containing the trade
b alance and restricting the conversion of its reserves into US bonds to devastat-
ing effect. The China surpluses dwindle in the face of the growing financing
needs of imperialist parasitism and the political and social pressure from its
huge working class to direct those surpluses towards tackling inequality – pres-
sure which typically accumulates at the end of a long expansive phase – and
could collapse the flexible dollar model. The Chinese government is a political
actor and bases its decision-making on political criteria, rather than calculat-
ing the v aluation/devaluation of assets in the manner of private investors who
can influence market prices.
Our third thesis is that of the crisis of US hegemony. This thesis was formu-
lated by Immanuel Wallerstein, Theotonio Dos Santos, Andre Gunder Frank,
and Beverly Silver, and finds its maximum expression in Giovanni Arrighi. The
social, political, economic and ideological evidence of recent years weighs
heavily in its support. Under the Trump administration, financial deregulation,
a regressive fiscal policy, rising military expenditure and the abandonment of
political liberalism combined with a unilateralist and protectionist foreign
policy to hasten the trajectory of US decline instead of reversing it. Trump’s
attempts to reactivate a national industrial policy had a very limited impact.
This compounded US isolation in the world and created space for its rivals to
assert themselves. It did not even succeed in containing the pace of expansion
of the trade deficit, which, tied to cutting-edge technology, is growing far more
consistently than in the opening decade of the 21st century, when it was mainly
associated with the oil account.
But this decline is primarily of US imperialism and it is intensifying social
conflict within North American society. It threatens a financial crisis which in
putting the flexible dollar standard at risk means there might be only two ways
to reorganise public policies and the world system: either by reprioritising mil-
itary spending, which was restricted when the public budget was diverted into
financialisation; or by massively boosting social spending on welfare, infra-
structure and environmental sustainability. Over the course of the 20th
century, each new developmental model has seen public expenditure as a pro-
portion of GDP rise, and the next stage of development could see it surpass the
50–60% figure. The liberal Victorian state was succeeded by the protectionist
state and state capitalism of the 1930s and 1940s. This was followed by military
Keynesianism and the postwar welfare state, which in turn gave way to neolib-
eralism. In the 21st century, the first reorganising option will tend towards fos-
tering fascist forms, while the second will tend to develop forms of transition
to socialism.
Our fourth thesis concerns the post-capitalist character of the techno-
scientific revolution. This was first formulated by Radovan Richta, who drew
on Marx’s writings in the Grundrisse and Capital and was introduced to Latin
American thought by Theotonio Dos Santos. We note that the globalization of
the techno-scientific revolution from the 1970s on has transformed labour
power’s knowledge and subjectivity, and therefore value, into the main
productive force. The education of the labour force is now limitless and is re-
ducing the gap between the value of labour power and the value of labour,
plunging the rate of surplus value and laws of capital accumulation into crisis.
This reverses the logic of surplus value production. Under this logic, machin-
ery deskills labour power, whose knowledge is incorporated into the new tech-
nology, making it ever more intensive and a mere appendix. This creates the
social conditions necessary to devalue it and increase the rate of surplus value.
Faced with new material conditions imposed by the productive forces, gener-
ating a crisis for its mode of production, capital reacts by generalising labour
super-exploitation and paying workers less than the value of their labour pow-
er. This means using the State to produce fictitious capital, maintain high lev-
els of structural unemployment and delocalise production in order to use the
labour force in the periphery to level down the wages of the majority of work-
ers in the central countries. Financialisation arises not only as a cyclical feature
of global capitalism but as a structural one, and the substitution of the me-
chanical principle for the automatic one contributes to it. This gradually weak-
ens the relationship between technological innovation and saving on labour
power and conflicts with the production of extraordinary surplus value be-
cause the latter depends on demand being transferred from workers to capital
to keep prices above value.
The techno-scientific revolution’s productive forces are far more suited to
producing public goods than those of the industrial revolution. The industrial
revolution was focused on producing individual, tangible consumer goods,
and was driven by the textile, civil construction, food, automotive, and electro-
domestic industries. In contrast the techno-scientific revolution is focused on
producing knowledge and intangible assets, and developing services around
health, education, culture, leisure and environmental protection. It is driven
by communication technologies, microelectronics and biotechnology. Where-
as the industrial revolution came about in a world of scarcity and therefore
separated the products of processes as private property, the techno-scientific
revolution drastically reduces the cost of producing use values due to the
greater use of immaterial goods. This means prices are increasingly an expres-
sion of monopoly. As workers get used to a consumption structure based on
access to public goods, they create a new subjectivity that capital seeks to limit
or deny, breaking with full employment policies and artificially imposing
scarcity.
and cooperation, and the Bolivarian Alternative for the Americas (ALBA). It
boosted popular consumption levels enormously and reduced rates of super-
exploitation.
We argue, however, that this historical bloc’s relatively peaceful advance –
coup attempts notwithstanding – and the growth and leftward turn of the po-
litical centre had to do with a specific historical context highly favourable to
international insertion and the deeply demoralised state of the neoliberal
forces. In the first edition of this book, we argued that this state of affairs was
nearing its end and there would be a resurgence of conflict, making it incum-
bent on the left to radicalise its programme. The 2010–14 period allowed the
popular and democratic camp’s offensive to continue up to a point, but its ex-
haustion put huge obstacles in the way of further progress. Foreign capital in-
flows recovered, increasing reserves, but they were mainly channelled towards
Brazil. Commodity prices peaked in 2011 and then slowly receded until, along
with foreign capital inflows, they crashed in 2015. This provoked a major crisis
of hegemony among the political forces in question, who were then the targets
of a counter-offensive by local oligarchies and imperialism. As we anticipated,
the reversal of the terms of trade has led to increased pressure from various
fractions of big capital to bring back policies favouring super-exploitation,
which has squeezed any room for centrism. The governments of Maduro (Ven-
ezuela) and Cristina Kirchner (Argentina) were strangled by balance-of-
payments deficits, and the coups in Paraguay and Brazil, the election of Macri
and Bolsonaro, and the isolation suffered by Venezuela’s Bolivarian revolution
have inaugurated a new period of conservative ascendancy in which an in-
creasingly global right is bringing neoliberal and fascist forces together with
the beginnings of the most radical forms of imperialism.
A range of errors and omissions contributed to the defeat of the left(s).
Among them, we would highlight the following:
a. Its agenda for regional integration based on sovereignty and cooperation
remained largely unfulfilled. It was applied far more to ALBA than UN-
ASUR or Mercosur, and the Banco del Sur never got off the ground. Nei-
ther did it succeed in its aim of creating a regional stabilisation fund for
international crises or a regional alternative currency to the dollar for
local exchange purposes;
b. Joining Mercosur did little to diversify Venezuela’s foreign trade and more
to help Brazil’s trade surpluses as it continued to provide the latter with
just 1% or so of its oil needs. Venezuela remained vulnerable to the
restructuring of US imperialism that drastically reduced its oil account
deficit and Latin American countries failed to use surpluses obtained
We trust that our analytical proposals put forth in this revised English edi-
tion will bear fruit not only in terms of understanding the huge structural
transformations taking place before our eyes, but also in developing our strate-
gic thinking in the struggle for a new world amidst the uncertainty and deep
crisis that is currently unfolding.
I wish to thank the two people who have helped me hugely in this work,
namely, Dr. Andy Higginbottom and Vitor Filgueiras.
—Jacob Lagnado
Carlos Eduardo Martins is currently one of the most prominent theoretical ex-
ponents of critical Latin American thought. At a time when many intellectuals
were abandoning critical thinking and Marxism to follow the path of neoliber-
alism and the latest theoretical-methodological trends, Martins articulated
Marxist dependency theory with the approach known as capitalist world sys-
tem analysis. The virtuous relationship between the two approaches and the
renewed dialectical analysis of Latin American dependency in the global con-
text that it produces lie at the heart of the present volume.
Unlike other authors, Martins makes it clear that the concept of a world sys-
tem cannot erase or substitute that of a mode of production. This is key to avoid-
ing the mistake of one-dimensional analysis, as the latter constitutes the
material base of production and reproduction of social life in all of humanity’s
historical epochs. He thus takes his place as one of the leading Marxist expo-
nents of dependency theory in the tradition of classic figures such as Ruy Mau-
ro Marini, Theotonio Dos Santos and Vania Bambirra, whose insights and ideas
contributed most to its development.
The book begins by laying out the big challenges facing the social sciences
in the context of what is called globalization. It then comprehensively explains
the origins, cycles and secular nature of the modern world system and its crisis.
This leads to his exposition of the contemporary structural features of depen-
dency in what is described as a modern world system constituted by intensi-
fied labour super-exploitation.
In my view, the originality of the author’s contribution to dependency theo-
ry lies in identifying, describing and systematising super-exploitation – the
backbone of the global capitalist economy. Martins shows that this is a mecha-
nism that operates not only in dependent economies like those of Latin Amer-
ica, but also as a function of capital’s structural and civilisational crisis. It is a
mechanism that is gradually penetrating the very heart of the economic and
productive cycles in the advanced capitalist economies of the imperialist na-
tions: the European Union, United States and Japan. Previously, only the mech-
anism of production for average and extraordinary profits had functioned in
those countries. This primarily took place via the rise in labour productivity
achieved by intensely incorporating the fruits of the techno-scientific revolu-
tion into the productive process between the end of WWII up until the big
structural and financial crisis of the 1980s and 1990s.
The author argues that today, the structural determination constituted and
driven by labour’s increased productive capacity is joined by super-exploitation
as a new component of social relations and capital’s exploitation of labour in
the advanced countries. This is precisely why his chapter “Revisiting the Politi-
cal Economy of Dependency in the Light of Marx and Contemporary Capital-
ism” is so important. Here, he sets out his own unique view of this polemical
issue, one which is crucial to understanding the modern-day dynamics of
crisis-ridden capitalism.
After laying out the history of the notion of super-exploitation as it appears
in the classic work of Marini’s Dialéctica de la dependencia, Martins then draws
up a thought-provoking balance of the concept. He traces out the historical
forms assumed by super-exploitation in Latin America in the export economy,
import substitution and neoliberalism. In so doing, he offers a fascinating dis-
cussion of the past and present relationship between labour intensity and ac-
cumulation patterns based on technological development aimed at the world
market. Martins concludes that the new model of capitalist development in
the region broadens and deepens super-exploitation; generates economic
growth that is both low on average and ecologically unsustainable because it
actually destroys the environment; triggers the return of deep social and politi-
cal crisis as a result of poverty, unemployment, and the rise in precarious and
super-exploited labour, with growth tied to a capitalist world economy gripped
by decline and a terminal civilisational crisis.
The book also presents alternatives to capitalism’s self-destructive path
even if there are no magic answers or caudillos to perform miracles. As the
author argues, capitalism in all its guises, dependent or advanced, needs to be
superseded by what he calls a new model of regional development, whose his-
torical transformative subject consists of whichever “antisystemic social move-
ments” capable of articulating and developing a serious alternative project,
democratic and liberatory in nature, that reaches beyond systems predicated
upon exploitation and domination.
The question of exactly what alternatives might embody the social, eco-
nomic and political transformation of the system is not an easy one for Marx-
ism and critical Latin American thought to resolve as it involves a whole range
of concepts and issues which that must be resolved. And that is precisely why
Carlos Eduardo Martin’s book is so important. It provides an essential starting
point for an urgent and necessary debate among interested parties and popular
movements with the capacity to build alternative projects in the face of capi-
talism’s global crisis as both a mode of production and a system of political
domination.
In The Modern World System and Capitalism: Origins, Cycles and Secularity
(Chapter 2), we seek to understand capitalist development through the notion
of historical capitalism. Historical capitalism arises from the formation of the
modern world-system (its political superstructure) and its articulation with
the capitalist mode of production (its material base). We identify its secular
trends and cycles in order to locate the theoretical and historical space inhab-
ited by the current stage of capitalism and the world system in which we live.
We do this by weaving together various traditions, which are gradually finding
common ground. These include the Braudelian one developed by the Fernand
Braudel Center and the Marxist tradition based on Marx’s theory of value and
his view of cycles but also on theories of imperialism, dependency, the scien-
tific and technological revolution and long cycles. However we also engage
with other traditions, including Schumpeterian, neo-Schumpeterian, regula-
tionist and institutionalist thinking on technological innovation, systems of
innovation, cycles, and institutional regimes. This makes for a very rich dia-
logue, but also one that requires us to exercise great caution in (re)developing
concepts in order to avoid the ever-present but ultimately sterile temptations
of eclecticism. We hope we have been successful in this.
The following chapter, Globalization and the Crisis of the Modern World
System, locates the crisis of the world system within the context of globaliza-
tion. We argue that globalization is a revolutionary force, and therefore both
creative and destructive. However, despite being relatively autonomous of one
another, the processes of creation and destruction establish a dialectic with
unforeseen effects, in which one pole can dominate and condition the other.
At the current stage, globalization has still yet to find a social and institutional
structure that allows it to create. Historically, systemic crises represent bifurca-
tion points, and our thesis is that in the next ten to forty years we will head
towards a new bifurcation quite unlike those that occurred in the modern
world system. During this stage, the struggle for a new world will involve both
destruction and construction. Destruction will be used in the fight to preserve
privilege by saving the empire. Construction, on the other hand, will be driven
by the force of life itself. It will appear spontaneously and unexpectedly, to
then take on an organised form as it strives towards a post-hegemonic world
with humanity at its centre and which realises the French Revolution’s ideals
of liberty, equality and fraternity everywhere.
In Chapter 4 we turn to one of the most crucial and controversial issues in
contemporary social thought in The Impasses of US Hegemony: 21st Century
Perspectives. We discuss the two main approaches to the issues currently fac-
ing US hegemony. One posits that the US is experiencing a crisis of hegemony.
The other maintains the opposite: that the US has actually grown stronger in
its march towards empire. We identify with the first school of thought, and
provide a historical and empirical analysis of the development of US hege-
mony as part of our debate with the leading proponents of the second.
In the fifth chapter, Dependency and Development in the Modern World
System, we look at the main theses in Latin American and world thought to
have evaluated the role of foreign capital in the development in the modern
world system. This chapter also looks at the persistence of poverty and under-
development and how to improve the income and welfare of Latin Ameri-
cans, linking that discussion to the empirical analysis of Latin American
development.
The sixth chapter is entitled Revisiting the Political Economy of Dependen-
cy in the Light of Marx and Contemporary Capitalism. It was written for Brill’s
English edition and replaces the corresponding chapter in the Brazilian edi-
tion. Here we analyse super-exploitation within the framework of Marxist
value theory and the debates surrounding it, and seek to update some aspects
of the concept in order to conserve the key tenets of Marini’s thought. We also
look at the forms super-exploitation has taken in the chief models of develop-
ment adopted in the region, with an emphasis on the neoliberal model and its
spread throughout the world today.
Finally, in Latin America: Dependency, Neoliberalism and New Models of
Development (Chapter 7) we conclude with a balance of neoliberalism in the
region, highlighting its disastrous social and economic consequences. We also
look at Latin America’s prospects in the 21st Century and China’s potential in-
fluence on the region in light of its role in the world economy.
In Chaos and Governance in the Modern World System,1 Giovanni Arrighi and
Beverly Silver argue that we live in a period of global fog due to the uncertainty
created by the globalization processes fanning out across the world economy
since the 1970s. The profound changes to the productive forces have affected
social life as a whole. Historical time has speeded up and impacted upon exist-
ing societal structures and the geohistory of the world’s peoples, changing our
habitats and ways of life. The economy, politics, our thought patterns and daily
life have all been transformed. But what exactly is globalization? How does it
affect pre-existing economic, political, social and ideological structures? And
what new paths of human development lie on the horizon?
Times of transition are also times of confusion, and so the answers to these
questions vary a great deal. Broadly speaking, we can identify five main inter-
pretations of globalization. Here we shall present their most general features,
bearing in mind they each encompass varying shades of opinion, and there
may indeed be significant differences between the leading advocates of any
one perspective.
The first we shall call a globalist interpretation. This starts from the assump-
tion that globalization presented the social sciences with a new object of study:
global society. In this account, the global appears as a radically new era, which
subsumes the national and the local. At its core is the new technological (mi-
croelectronic) paradigm where electronic and communication technologies
have joined forces to integrate the financial and productive spheres on a global
scale. This process has created a new set of dominant actors in the world
economy – global businesses and market forces who subjugate national states
through the planetary or cosmic reach of their technologies and the speed of
circulating capital. This has created a deterritorialised regime of accumulation,
which asserts financial wealth over productive wealth and has turned the glob-
al age into the age of financial capital. In this new era, multinational corpora-
tions are transformed into global network-based businesses or ‘technobergs’
which act on the same global scale as investment and pension funds and big
describe the need for an organised capitalism which can bring about internal
financial centralisation, allowing a local industrial bourgeoise to develop using
public and private banking capital. Furtado also stresses the importance of
generating consumption patterns which prioritise national technological de-
velopment and the internal market in ‘semi-continental’ countries with a het-
erogeneous social structure.
World-systems theorists put forward a fourth understanding of globaliza-
tion. They can be divided into two main groups. The first group takes the idea
of the modern world system as its analytical starting point, and includes Im-
manuel Wallerstein (1979, 1995b, 1998a, 1999a, 1999b, 2000a, 2000b, 2003, 2004,
2006, 2011a, 2011b); Giovanni Arrighi (1996, 1997a, 1997b, 2000a, 2001, 2007) and
Beverly Silver (Silver et al. eds. 1995, Arrighi and Silver 1999). But others ques-
tion this concept, including Gunder Frank (1990, 1996, 1998) and Barry Gills
(1996). This second group posits instead the existence of a single world system
in history as their chief theoretical reference point in analysing globalization.
Both perspectives emphasise the continuity that globalization represents
when it is viewed as part of a movement of systemic expansion. Nonetheless,
they also display serious divergences.
The first perspective uses Fernand Braudel’s conceptual division of histori-
cal time into the longue durée (the long duration or term), conjoncture (con-
juncture or cyclical phase) and evenement (short term or ‘event’) to fashion
powerful analytical instruments such as systemic cycles and secular trends.2
Systemic cycles relate to the rise and fall of hegemonic states which organise
an unequal and polarised world economy into centres, semi-peripheries and
peripheries. During periods of cyclical ascent and consolidation the modern
world system expands, but in periods of decline crisis prevails and a restructur-
ing is required. The emergence of new systemic cycles that redirect develop-
ment is possible providing the secular trends of the modern world system can
absorb their contradictions.
In this view, globalization is the final stage along a long continuum. It repre-
sents not only the high point of the modern world system but also its inability
2 Wallerstein (2011) argues that the French term conjoncture should not just be rendered liter-
ally as ‘conjuncture’ in Braudel, as previous English translations have done. Thus in his trans-
lation of Braudel’s History and the Social Sciences: the longue durée (2009) he translates it as
‘cyclical phase’ or else leaves it as conjoncture. In order to distinguish from the author’s sepa-
rate and literal references to cyclical phases, the present translation either follows the earlier
English translations of Braudel in rendering conjoncture simply as ‘conjuncture’ or else re-
tains the original French term, especially where the author is directly comparing Braudel’s
temporal categories. Likewise, longue durée has been left in the original French throughout. –
Trans.
State, with its power to eliminate market asymmetries, as offering the best
route to that utopia. State science finally disappeared in Germany in the sec-
ond decade of the 20th century, giving way to the Anglo-Saxon organisation of
knowledge.
The origins of the Annales School lie in the Revue de Synthèse Historique,
founded in 1900 by Henri Berr. This journal was followed in 1929 by the Annales
d’Histoire Économique et Social, founded by Lucien Febvre and Marc Bloch.
But the School’s real heyday was from 1945 to 1968, when in the midst of the
Cold War it expounded a worldview that resisted both Anglo-Saxon intellec-
tual hegemony and the official Soviet version of Marxism. This view gained
influence just as France was striving to become a third major power alongside
the US and Soviet Union, and as the culture of non-alignment symbolised by
the 1955 Bandung Conference was gaining traction worldwide. Fernand Brau-
del’s work in particular stood out in this period. His concept of the longue du-
rée or long duration (Braudel 2009) was a key contribution to the critique of
the foundations of liberal thought. He used this notion to question the separa-
tion between the nomothetic and idiographic sciences and the division of the
former into separate disciplines (economy, political science and sociology). In
Braudel the duration is unlike the Newtonian chronological and physical time,
which is founded at one and the same time on the diachrony of atoms, stan-
dardised and infinitely small, and statics, based on infinitely larger dimensions.
Instead the duration is the time of structures, signifying change, process and
therefore irreversibility. It represents the dialectic between the multiple and
contradictory times of social life, which cannot exist in isolation from one an-
other. In this dialectic the time of structures coexists with that of the conjonc-
ture and l’evenement. Structural time implies the gradual deterioration of the
more or less fixed organisational architecture connecting social realities and
groups. But while structures provide support, they are also a hindrance that
symbolise the limits man cannot surpass – Braudel’s ‘prisons of the longue
durée’ (2009, 179). The conjoncture or cyclical phase represents the regular, pe-
riodic swings that act upon structures, modifying and renewing them but with-
out affecting the expansion of their core components. And l’evenement is the
time of the event: the daily chronicle, brief, instant even, and chaotic, it influ-
ences structures and their cyclical swings.
Braudel’s notion of duration thus denotes a process that is only visible at a
high level of abstraction: a reflexive movement that proceeds from the general
to the particular – not, as liberalism would have it, the other way around –
and reveals both the limits and potential of instant time and l’evenement. This
reflexive movement integrates not only the multiple times of social life, but
also the different dimensions of reality. In other words, it runs counter to the
4 “I may be quite wrong, but I do not have the impression that capitalism is likely to collapse of
its own accord, in some form of ‘endogenous’ deterioration; for any collapse to take place,
there would have to be some kind of external impact of great violence; and a credible alterna-
tive would have to be available” (Braudel 1984, 626).
5 The Annales’ approach to long-term economic data fundamentally transformed historical
investigation because it allowed historians to go beyond the limits of document and archive-
based work in describing and interpreting reality.
6 Liberalism’s assimilation of Marxism manifested itself, for example, in the rightist and cen-
trist positions adopted in the Second International, used to justify open support (in the case
of the right) or support of a subtler nature (the centre) for colonialism, imperialist wars, and
reform instead of revolution. It can also be seen in the theories of socialism in one country or
region promoted in the Third International by Stalinism and its subproducts. All of these
perspectives relied on a methodological nationalism to define capitalist development on a
national basis. They posited either bringing capitalist development to backward countries
through colonialism (Henri van Kol), or else breaking with proletarian internationalism and
supporting national bourgeoisies in kickstarting local capitalism, supporting policies aimed
at either reform (Bernstein) or revolution (Plekhanov). There were also attempts to theorise
a stage of endogenist capitalism subjected to planning and with its competitive-globalising
instincts stifled, thus allowing it to coexist alongside a parallel socialist world system (Stalin)
or within a peaceful world order (Kautsky), even if its birth were marked by violence.
abstract categories to the most concrete, complex dimensions of the social for-
mation. The integration and subordination of the abstract to the concrete and
the simple to the complex are the key components of the Marxist method. By
emphasising processes, this approach can posit and identify both the develop-
ment of a totality and its breaking point.
For Marx, we can only understand capitalism’s development as a social-
historic formation using the following levels of analysis:
a. The abstract determinants present to varying degrees in all societies
(population, production, distribution, exchange and consumption).
b. The categories constituting the internal structure of bourgeois society
(capital, wage labour, landed property) and the basis of the three main so-
cial classes in bourgeois society (capitalists, proletariat and landowners).
c. The concentration of bourgeois society in the form of the State, which
brings in elements such as taxes, state debt, public credit, and the colo-
nial question.
d. The international relations of production, which introduces the interna-
tional division of labour.
e. The world market and crises. (Marx 1973, 108)
Reflecting on the relationship between these levels of analysis, Marx stressed
that a society’s economic categories derive their importance not so much from
the historical sequence in which they appear, but from how they are inter-
articulated within a concrete society. As capitalism develops, its tendency to
globalisation redefines and integrates its most general and abstract laws of ac-
cumulation. Whereas on the one hand, capital, as a more complex category
than the commodity, integrates and subordinates its laws to those of capital
accumulation and sets production costs below product value upon transform-
ing labour power into commodities, on the other hand the development of the
State, global production relations and the world market influences capital ac-
cumulation and the way it works. But unlike in the first instance, this does not
create a new historical-social totality.
The first attempt to develop the implications foreseen by Marx was made by
theories of imperialism. They showed how the development of the State, inter-
national relations of production and the world market was crucial to core
countries overcoming their crises and to ushering in a new stage of capital ac-
cumulation led by finance capital, understood as the cross-penetration and
fusion of banking capital with industrial capital. Finance capital drained the
savings of small and medium businesses and wage workers in order to bankroll
the growth of large-scale industry, stimulating monopoly formation in the pro-
cess. But because the wage mass did not grow accordingly, this increase in the
scale (and stages) of production was not matched by an expansion of national
markets in the big centres. As a result, profit rates fell and capital was exported
in pursuit of more profitable investment opportunities and in order to expand
the global availability of raw materials, minerals and foodstuffs, which would
cheapen the costs of constant and variable capital in the major centres. As part
of this process of internationalisation the world was carved up between the
major powers. But theories of imperialism focussed too much on the core
countries and not enough on colonialism as the dominant political form as-
sumed by inter-capitalist competition during Britain’s periods of hegemonic
crisis. They thus failed to grasp how international relations of production and
the world market conditioned the State and were able to break free from neo-
colonial political forms.
Theories of dependency highlighted the division of labour and internation-
al relations of production as the cornerstones of a capitalist system of rule
which tied the interests of the dominant classes in the core to those of their
dependent counterparts. They went beyond theories of imperialism because
they acknowledged and theorised the commitments articulated by those
classes and their dynamic nature. In doing so, dependency theories almost cre-
ated a world-system theory and were therefore an important forerunner of
world-systems analysis. By recognising the dynamic nature of international
relations of production, they were able to pick up on the cyclical changes at the
centre of the world economy and critique the school of thought that overstat-
ed imperialism’s political and economic powers of coercion and saw depen-
dent countries as incapable of developing or exercising self-determination.
Although imperialism first tried to maintain its coercive tools and caused ma-
jor distortions in the dependent economy, it failed to prevent dependent coun-
tries from developing on the basis of internal determinations articulated with
the world economy.
Dependency theory also reignited the debate around the laws of capitalist
accumulation by introducing the notion of labour super-exploitation. Super-
exploitation derives from the effect of the laws of competition, driven by
international relations of production and the world market, on profit rates in
dependent countries. It is a prerequisite for establishing the set of relation-
ships that underpin the workings of the capitalist world economy. But although
dependency theories were an important forerunner of world-systems theories,
their explanatory power was limited by over-focussing on dependency rather
than putting the world-economy at the centre of their analysis.
Marxist thinkers have also challenged the dominant liberal perspective
through crisis theory. This is divided into cyclical theories and theories of de-
cline. The best proponent of cyclical theories is Nicolai Kondratiev, who anal-
ysed the capitalist economy in terms of 48–60 year periods which themselves
Immanuel Wallerstein sets out to integrate the critiques of liberalism into his
concept of the modern world-system. He uses this concept to build a structural
framework for understanding what he calls historical capitalism, seeking to
reconstruct capitalism’s historical trajectory as a dominant economic form by
transcending the limits of the concept of mode of production. Such an endeav-
our is supported by the work of Marx and Engels themselves. They never in-
tended to make modes of production an all-embracing concept – least of all in
the nascent stages of a new mode of production, when political and social
forces outweigh the material base.7
7 Marx and Engels argued that the rise of the capitalist mode of production presupposes a
long period of primitive accumulation, during which commercial and usurers’ capital, and in
particular their articulation with the State, are key to creating the conditions needed in order
to turn labour power and land into commodities and to direct resources towards industrial
investment. They also saw the communist mode of production as requiring a prior transi-
tional stage of communist society based on wage labour and the dictatorship of the prole-
tariat. See, especially, The Communist Manifesto (Marx and Engels 2002) and Critique of the
Gotha Programme (Marx 1938).
This approach effectively dissolves the idea of the capitalist mode of production
into the empirical reality of historical capitalism and prevents us from seeing
historical capitalism as a concrete phenomenon whose expansion parallels the
development of the capitalist mode of production’s more abstract laws. Whilst
we agree that historical capitalism precedes the capitalist mode of production,
we think it is a mistake to do away with the more abstract dimension of the
mode of production as a determinant of historical capitalism’s empirical de-
velopment and expansion.
Wallerstein’s omission leads him to define the capitalist mode of production
using strictly empirical criteria. He understands it as production for maximum
profit and geared towards the market, which uses all and any kinds of labour to
achieve that aim:
9 Braudel (1983) draws attention to capitalism’s presence on the sugar plantations of colonial
Brazil, which he saw as capitalist creations par excellence despite yielding low rates of profit
and relying on slave labour.
(1989).10 In their account, men make their own history but in conditions of
material scarcity not of their own choosing that can only be overcome and
humanised through civilisational accumulation on the widest scale. This scar-
city is determined by the need to work to survive. But through working, men
not only survive but produce their own existence. They begin a process of
humanising nature which is only fully realised when the purpose of work is
determined by their own subjectivity, independently of the needs imposed by
nature. This happens when the productive forces have been developed to a
level where they systematically ensure survival independently of labour.
Man’s ability to satisfy his basic needs through labour sets him apart from
animals and generates specific thought patterns, feelings and sensibilities. By
producing the means to satisfy his needs, he increases his power over nature.
This leads to new needs, as does a growing population. But as Marx and Engels
observe, creating new needs is also related to the struggle for survival:
The productive forces, the relations of production and the ideological super-
structure function as an articulated whole which underpins the mode of pro-
duction and produces man’s way of life. Relations between man and nature
follow three general historical-structural models in Marx and Engels. In the
first, primitive communism, men are essentially concerned with reproducing
their physical existence, and the productive forces and relations of production
are still in an incipient form. The second model is characterised by class-based
modes of production. Here, the expanded production of the means of life and
rise in population combine to create new needs, and so society is organised
around producing a surplus. The third and final model is still imaginary and
utopian, but the conditions for it are already semi-visible. In it, scarcity will be
overcome by automated working and communist relations of production.
In the second such general model of man-nature relations, the productive
forces exercise a determining influence on social development as a whole.
10 The concept of relations of production, for example, is not fully developed in The German
Ideology, where it is described as the form, mode, relations or conditions of intercourse.
They themselves are driven by the relations of production, which are one of
their components and define the social organization of any given mode of
production. Radovan Richta notes that for Marx and Engels the concept of pro-
ductive forces refers to the whole range of forces that produce human life (1969,
18) – not just the means of production and objects of labour, but also popula-
tion, labour power, labour relations and superstructure (systems of ideas,
values, feelings and forms of social organization). To understand the real com-
position of the productive forces in each historical structure or conjuncture,
i.e. the part played by each of these elements, we must look at how they act as
inputs in the productive process.
In this second model the means of production are the dominant productive
force. But as they continue to develop they contradict and eventually dissolve
social organisation’s chief form of labour.11 This is followed by a period of revo-
lutionary crisis, in which property relations assume a pivotal role in relations
of production in an attempt to prevent changes to labour relations and the
break-up of the dominant mode of production. Marx discusses this situation in
summarised form in the Grundrisse and A Contribution to the Critique of Po-
litical Economy (1859), notably the Preface.
Superstructures tended to play a marginal role as a productive force in this
historical-structural model. For a long time this was because thought systems
were not developed enough to systematically enter the productive process. But
that was not the only reason. It was also because with the development of so-
cial classes the thought systems, values, feelings and sensibilities of workers
and other popular sectors were excluded from economic decision-making.
This restriction on working-class subjectivity hit a high point with the Indus-
trial Revolution and Fordism.
However, the globalisation of the techno-scientific revolution has driven
changes in the makeup of the productive forces. This process began in the 1970s
with the microelectronic paradigm that came out of the convergence of elec-
tronic and communications technologies. The techno-scientific revolution has
helped superstructures to act as a productive force. They have achieved this
through science and through processes of social and political democratisation,
which put the thought systems, values, feelings and sensibilities of the popular
sectors at the centre of social organization and production. Productive systems
have been reconfigured by automation, integration, flexibility and remote
11 As was the case with serfdom in Western Europe when it was threatened by new farming
methods, in particular the crop rotation system. (Anderson 1985; Wallerstein 2011a). It can
also be seen in contemporary capitalism in the case of wage labour threatened by auto-
mation. (Richta 1969; Santos 1983, 1987).
c ontrol systems. Wage labour has come under threat because new technologies
tend to eliminate specialised, intensive manual labour and in its place require
subjective, skilled labour based on generic competencies, which is still inten-
sive but subordinates speed to quality. The investment to put into generating
this new paradigm of labour power on a mass scale increases the value of labour
power at an ever-greater pace and can diminish the rate of surplus value, thus
endangering the reproduction of the capitalist mode of production.
The productive forces thus clash with the relations of production and above
all their property relations and juridical-political instruments, which seek to
prevent any transition to a new set of productive forces dominated by the su-
perstructure. This represents a break with a structural setup where matter
takes precedence over thought and human will, which has thus far character-
ised societal organization.
The main points to keep in mind from the foregoing explanation of mode of
production theories are:
a. A theory of the longue durée ought to incorporate the general models of
relations between man and nature as set out by Marx and Engels. This
means acknowledging that structures break down not only because of
their developing internal laws (as the Braudelian approach suggests), but
because, as they develop, said laws incorporate a growing number of
components which contradict their own logic. The expansion of the pro-
ductive forces introduces elements belonging to a new material base
whose full incorporation demands the dissolution of the existing rela-
tions of production and the types of labour relations, distribution, ex-
change, consumption, property and political power at their core. This
quest to incorporate new stages in the development of the productive
forces whilst hanging onto existing relations of production is what leads
to the crisis of the mode of production.
b. Globalization is not the prolongation of a process underway since the
16th century. Instead it signifies a radical break with the makeup of the
productive forces: one which affects historical capitalism in contradicto-
ry fashion through a structural conflict with the relations of production.
Globalization pushes the law of value to its limit and points to a crisis of
surplus value production linked to the end of wage labour, which prefig-
ures the collapse of the capitalist mode of production.
c. An antisystemic theory of globalization should combine the ability to de-
scribe the fundamental contradictions of the law of value under histori-
cal capitalism – using the tools developed by Marxist theory – with the
integrated vision of the world economy’s political superstructure and
crises provided by world system theory through Fernand Braudel Center
power by socialist movements in national states, above all in the periphery and
semi-periphery, is destined to play a crucial role in the transition from a mod-
ern world system to a truly global one.
To gain a better understanding of the period of crisis and transition which
has opened up since the end of the 1960s, we propose combining the following
levels of analysis:
a. The falling rate of profit crisis, which shows that the power of the capital-
ist mode of production to appropriate the productive forces is running
out and that said crisis is linked to the development and generalisation of
the techno-scientific revolution and the new technological paradigm. It
manifests itself as a global crisis not only of surplus value production but
of surplus value appropriation.
b. Systemic cycles of accumulation, systematised by Braudelian world sys-
tem theories. According to such theories, humanity entered a period of
hegemonic crisis in the late 20th century. This crisis is dragging the mod-
ern world system into a chaos that it will find hard to emerge from.
c. Kondratiev cycles, which are one of the keys to understanding conjunc-
tures. In Nicolai Kondratiev’s theory these cycles are organised around
technological innovation, organisational restructuring and the impact of
both these factors on profit rates.
Articulating these three levels of analysis will give us a clearer insight into the
crisis of the modern world system as it continues to unfold over the coming
decades, along with the alternatives available to the world and dependent
countries in particular. In the next chapter we apply these different levels of
analysis to the development and crisis of the modern world system.
1 The differences between feudal, slave and Asiatic modes of production set out by Marx are
diluted by the superstructural concept of tributary mode of production, as the following pas-
sage illustrates: “The states were of varying sizes and internal forms. They were sometimes
very extensive over time and space with elaborate bureaucracies (Ancient Rome, China),
sometimes smaller but still very centralized, or extensive but with a very atrophied center (as
in feudal Europe or in the early Middle Ages). […] But as a mode of production, all the varia-
tions retained the same essential core: the ruling groups pressed the direct producers to pro-
duce a specified surplus over their direct consumption needs (which amount could vary), but
they also produced no incentive (and some positive disincentives) for producing more than
the specified surplus.” (Wallerstein 2000b, 151).
2 Although we agree that feudalism falls within the category of world-empire (as its political
institutions tried, somewhat precariously, to become more centralised), as a mode of produc-
tion it had certain unique features compared to the vast central bureaucracies created by the
Asiatic mode of production. European feudalism can be most accurately described as a po-
litically unified system which connected various economies and cultures but was unable to
establish a more articulated division of labour, which prevented it from becoming as central-
ised as the Asiatic mode of production.
restricted in its ability to control markets and private power, especially on the
Roman Empire’s western periphery. The crisis of feudalism gave its institu-
tions, led by the seigniorial reaction, the chance to reinvent their relationship
with the State – a chance they seized between 1450 and 1650.
The crisis of the feudal mode of production was expressed in the decline of
feudal rents. Wallerstein shows that the crisis originated with the rise in agri-
cultural labour costs between 1250 and 1450. Several factors explain this rise,
with migration chief amongst them. Migratory movements were behind the
huge growth of cities in the 13th century and were driven by the increase in
trade thanks to new agricultural techniques introduced from the 9th century
on, which made it possible to support a growing urban population. In Lineages
of the Absolutist State (2013), Perry Anderson argues that the main source of
feudal society’s structural crisis lay in the relationship between monetisation,
peasant migration, and the end of rural servile labour.3 Agricultural produc-
tion costs were also increased by peasants fleeing the first stage of the seignio-
rial reaction and by population loss from starvation.
The first seigniorial reaction (1350) was a strategy aimed at recovering the
power to extract a surplus. This attempt to augment traditional forms of sur-
plus extraction heralded a dramatic period for European society, featuring
wars of nobility, peasant revolts, major population decline (due to epidemics
like the Black Death) and the cultural crisis of the Christian synthesis. After
1450, the seigniorial reaction was more preoccupied with creating a new world-
system that would extend the geographical reach of the world-economy as a
means of reducing labour costs in Western Europe whilst increasing surpluses.
This Portuguese and then Spanish-led expansion of the world-economy would
anticipate many features of the modern world system, including (a) the
creation of a world-economy enlarged by the inclusion of new areas (the
Americas) and dedicated to the production of basic goods or supplies of vital
importance to the European economy, such as metals for manufacturing coins,
foodstuffs to reduce Europe’s calory deficit, and fuel; and (b) an international
3 “The changes in the forms of feudal exploitation which supervened at the end of the medi-
eval epoch were, of course, far from insignificant. […] The new form of noble power was in its
turn determined by the spread of commodity production and exchange, […] With the gener-
alized commutation of dues into money rents, the celular unity of political and economic
oppression was gravely weakened, and threatened to become dissociated (the end of this
road was ‘free labour’ and the ‘wage contract’). The class power of the feudal lords was thus
directly at stake with the gradual disappearance of serfdom.” (Anderson, 2013: 18–19).
Wallerstein underplays the crisis of servile labour as the main component of the secular
trend that drove forth the transformation of feudalism, preferring, as we have seen, to high-
light superstructural aspects.
Writing in 1998 for the Fernand Braudel Center Review, Giovanni Arrighi adopts
a midway position between Braudel and Wallerstein. Whilst acknowledging
the role of cities in the rise of capitalism, he also points out that capitalism was
only able to consolidate its presence through the articulation of city-states
with territorial powers. For Arrighi, the crisis of feudalism was irrelevant to
capitalism’s emergence, which should instead be located in cities and their
interstitial growth in and between different ‘worlds.’4 City-states connected
territorial organizations with each other and with other worlds, and became
centres of wealth accumulation based on long-distance trade, including a mo-
nopoly on the trade in rare goods. The competition between territorial organ-
isations for mobile capital fuelled this city-state-centred accumulation whilst
also stoking politico-military conflict between them. And whilst this did not
alter the European balance of power, it certainly set the stage for a transforma-
tion of the power relations between Europe and the rest of the world.
4 The crisis of feudalism and the so-called transition from feudalism to capitalism in European
agriculture are no doubt very relevant to an understanding of English, French, Polish, Ger-
man and many other “national” histories of the European world. They nonetheless are largely
if not entirely irrelevant to an understanding of the origins of world capitalism for the simple
reason that world capitalism did not originate within the economic activities and social rela-
tions that were predominant in the larger territorial organizations of the European world.
Rather, it originated in the interstices that connected those larger territorial organizations to
one another and their totality to other “worlds.” (Arrighi 1998, 120).
In Arrighi’s account, the crucial aspect of the transition to the modern world
is not the change from feudalism to capitalism, but from an interstitial capital-
ism based on the city-state system to a capitalism built on nation-states. The
zero point of capitalist development was the financial expansion unleashed
when the trade expansion of the 13th and early 14th centuries ended. Genoa
played a key role in this process. Faced with military obstacles on the Mediter-
ranean route to Asia, conflict between incipient mercantilist policies, and the
territorial expansion of other Italian city-states, it joined forces with the Span-
ish Empire to finance the pursuit of endless accumulation. As it was the weak-
est city-state in terms of territorial power, Genoa gave up on capturing trade
routes by force and instead opted for a “marriage of convenience” with the
Spanish, bankrolling their imperial expansion in return for protection. Subse-
quently, the military defeat of the Spanish endeavour made it possible to build
nation-states (Arrighi 1996).
Braudel and Arrighi’s criticisms of Wallerstein nevertheless do not help so
much in forging a theory of the longue durée because they divorce the rise of
capitalism from its structures and bypass its particular systemic features.5
Braudel suggests that feudalism survived into capitalism thanks to the growth
of cities, beginning in the 11th–13th centuries. But that is to ignore the theoreti-
cal and historical space in which the feudal mode of production entered into
crisis and the modern world system emerged as the ideal superstructure for
the development of historical capitalism.
Polemicising with Braudel, Wallerstein notes that although world-econo-
mies had indeed existed in Antiquity and the Middle Ages (alongside the first
signs of capitalism), they only became hegemonic with the advent of the mod-
ern world system:
Ten years ago I did not accept the existence of multiple world-economies,
but you have managed to convince me. I now accept the existence, before
the 16th century, of these world-economies, but I believe that each of
them, due to the internal contradictions of its structure, either disinte-
grated or was transformed into world-empire. For one odd reason that
ought to be explained, that was not the fate of the world-economy con-
structed in the 16th century; in consequence, it was from then on that real
capitalism emerged.
braudel et al., 1989: 119
5 In Braudel and Arrighi the difficulty of separating the rise of capitalism as a historical system
from its local expressions can be seen by their relative inability, theoretically and historically
speaking, to imagine the exhaustion of capitalist structures and the need to go beyond them.
We look at this issue in greater depth in the next chapter.
The spread of cities should be seen as part and parcel of the development of
the feudal mode of production. It is not surprising that the leading Italian city-
states were located in areas ill-suited to rural life, where they grew on the back
of higher agricultural productivity but were constrained by existing power re-
lations. At a certain point this increase in productivity began to pose a threat
to feudalism. But cities alone do not explain the transition from the Middles
Ages to the Modern Age. In this sense Arrighi is right in his criticism of Brau-
del. But he fails to fully explain why territorial powers articulated themselves at
a given point with city-states and respected their autonomy and interstitial
condition given that, despite representing centres of accumulation, they were
still militarily vulnerable.
Answering this question means accepting the proposition that the Europe-
an territorial powers sought to resolve the crisis of feudalism by building a
capitalist world-economy. Unable to bring the developing market economy,
which was threatening feudalism, under a unified imperial command, the ter-
ritorial powers set about redefining the State. The market economy’s origins
lay not in the cities – although it was most visible there – but in rising produc-
tivity in the countryside. This could not be fought by military means and it
triggered peasant exoduses which reduced the surpluses appropriated by the
rural nobility and dissolved feudal labour relations. In effect this meant the
exhaustion of secular trends which could not be overcome by a new expansion
of the feudal system. The territorial powers started by joining forces with city-
based financial and commercial capital to build a world-economy that would
bring the cost of peasant labour back down and increase surpluses. They later
abandoned any imperial pretensions of politically centralising the world-
economy and turned their empires into absolute monarchies. These monar-
chies were hegemonised by mercantile and financial capitals and turned into
vast bureaucracies which sealed their alliance with the territorial nobility by
making many of them Court nobility. Starting with Westphalia, this represent-
ed a big step towards recognising the territorial limits of absolute sovereignty
because it separated political tensions from international economic relations.
This separation was reinforced by the notion of the sovereignty of the people,
which took hold during the French Revolution and reached maturity in the
latter half of the 19th century.6
6 Wallerstein argues that the French Revolution adapted the ideological superstructure to the
political and economic changes that took place when the modern world system was con-
structed. In his view the Revolution was the moment when, from the standpoint of the capi-
talist world-economy, the ideological superstructure was brought in line with the economic
base. The Revolution did not represent fundamental transformation from a political or
The world system wide reality is the competitive dog-eat-dog war of all
against all (à la Hobbes), in which only the few can win and the many
must lose. And so it has been for millennia, thanks to the world system’s
unequal structure and uneven process, which Wallerstein helps us
identify.
frank and gills, 1996: 215
For Frank and Gills, the fact that most East-West exchange involved luxury
goods does nothing to invalidate the notion of a single world system encom-
passing the two regions. In fact, they argue, luxury goods are one of the mate-
rial forms of the surplus and their circulation supports the theory of an
expanding millennial world system. But the authors fail to perceive that for
accumulation to develop on a global scale, its agents must be fully able to com-
pare product costs and prices across different regions. Otherwise it remains
stunted and politically and socially unstable. The fact that exchange was con-
centrated in luxury goods reflects the political obstacles world-empires put in
the way of cost comparison, thereby limiting the development of a globally
integrated mode of accumulation.
If Frank and Gills were to describe the process of capital accumulation as
capitalism then their vision would resemble Weber’s thesis (1930, 1978) that
e conomic perspective, because the modern world system already had a structure (1998a: 72).
Although we agree with Wallerstein that the capitalist world-economy was already struc-
tured as an interstate system, the ideological turn represented by the French Revolution –
which by the late 19th century had been assimilated into the capitalist world-economy via
political acceptance of the idea of the sovereignty of the people – was crucial to the develop-
ment not just of the modern world system’s cultural superstructure, but also its political
superstructure.
capitalism is defined by the quest for surpluses. But their ideas are located at
an even higher level of abstraction. This makes it very hard to trace the history
of structures, because it reduces their historico-specific concepts to a very gen-
eral framework.
Another critique of Wallerstein’s thesis comes from Samir Amin (1997), who
locates the origin of the world system in the capitalist mode of production. We
expressed earlier our reservations about an approach which gives the infra-
structural aspects of modes of production so much precedence over their su-
perstructural aspects. As we saw, the construction of modes of production
starts with the superstructure – notably political control – which then grows
material roots. It is as these material roots take hold and develop that they
condition the superstructure as a whole and enable its overhaul.
7 State intervention in capital and commodity chains must trigger a rise in profit rates if it is to
succeed in attracting global capital.
8 Marx notes in both the Grundrisse and Capital that the transport of commodities under
the direction of commercial capital is productive labour that adds surplus value to the
product. But that surplus value only represents a small fraction of the product’s value and
is not enough to meet capital’s valorisation needs under the hegemony of commercial
capital. Therefore commercial capital must use coercion to appropriate value created by
precapitalist forms of production.
9 This issue is addressed in Fernando Novais’s (1974) classic Portugal e o antigo sistema colo-
nial (1777–1808).
10 It is not only extraordinary profits that cause the price of commodities to deviate from
their value: prices of production produce the same effect by levelling the profit rates of
capitals of different organic and technical compositions. Both relate to technological mo-
nopoly, and prices of production associate the free flow of capitals and commodities to
this monopoly.
system as a whole these surplus value transfers go beyond their original con-
dition and create new stages of polarisation which drive uneven and com-
bined development in the capitalist world-economy:
The centres typically insert themselves into the world economy by organising
a base of high quality use values. Their ability to compete for circulating capital
is linked to their ability to offer a powerful national system of innovation,11 po-
litical stability and security. This is how they become the nodes articulating
global capital and commodity chains. They thus become global financial cen-
tres. In contrast, peripheries compete in the world-economy through their
ability to offer low-cost services. The periphery does not compete for circulat-
ing capital on the basis of a quality differential in its base of use values but
rather because it can offer certain use values at a lower and deferred cost. The
price of labour power becomes the key to reducing the costs of the services
offered. Meanwhile, the semi-periphery is in an intermediate position: it can
11 The concept of a national system of innovation was introduced in the late 1980s by Chris-
topher Freeman in his studies on Japan (Freeman 1987, 1988). It was later developed by
Bengt-Åke Lundvall (1992) and Richard Nelson (1993), and much was written about it sub-
sequently. In his overview of the idea, Charles Edquist highlights its contribution to the
literature on innovation. Essentially, he argues that traditionally the literature has empha-
sised research and development (R&D) centres and explicitly innovation-focussed organ-
isations, but that the new approach goes much further, bringing out the role of political,
economic and educational institutions and their aims. A national state entails knowl-
edge, values, norms, routines, laws, objectives and interaction that together constitute an
environment that either tacitly or explicitly favours innovation (Edquist 1997, 49). The
systemic aspect to the concept of a national system of innovation stresses interaction as a
core component of innovation which cuts across organisations and institutions and plac-
es value on learning by interacting, learning by doing and learning by using.
attract capitals on the basis of both the quality and low cost of its assets. So by
offering a variety of use values, the semi-peripheral state can choose whether
to specialise in high quality services – in principle more advantageous – or in
low cost services, which would relegate it to the periphery.
For Wallerstein and Arrighi, however, it is not enough just to want to be-
come part of the centre in the modern world system, and semi-peripheral or
peripheral regions very rarely achieve this.12 The competitive environment in
which historical capitalism develops is a powerful barrier to doing so. On the
potential for semi-peripheral states to adopt status-raising policies, Waller-
stein argues that
This sounds voluntaristic, and to some degree it is. Intelligent state poli-
cies have much to do with what happens. But two caveats must immedi-
ately be added. First, state policies are not prime movers but intervening
processes. Secondly, not every state machinery can utilize any given set of
policies with the same expectation of happy result. Indeed, quite the
contrary. Many may try, but only a few succeed in significantly transform-
ing the rank of their state in the world division of labor. This is because
the very success of one eliminates opportunities and alternatives for
others.
wallerstein 2011, 179
Changing rank usually requires the presence of two factors: an internal catch-
ing-up policy in the semi-peripheral country aimed at pushing it to the fore-
front of new technology, and the support of the world system’s financial
centres. The latter may support development in a region because of a political
need to bolster a particular hegemony by allying with local ruling elites.13 But
concessions made on that basis risk limiting hegemonic power over the medi-
um to long term. Changes of rank in the modern world system are especially
important when a systemic cycle enters its crisis phase. Usually in such periods
the hegemonic power in crisis seeks a successor with whom to ally from a posi-
tion of privilege.
Systemic crises bring reconfigurative hegemonic shifts and polarisation. So-
cial divisions sharpen, the middle stratas within nation-states hollow out, and
globally the size of the semi-periphery shrinks.14 But such crises also mean that
dominant models break down and opportunities arise for mobility within the
14 Wallerstein points out that the semi-periphery is not an absolute fact of the modern
world system but a historical configuration, which plays a vital role in keeping it stable
and intact. Whenever it shrinks, political and institutional instability increases in the
world system. Its structural function is to foster the belief in ascent in historical capital-
ism, either from the semi-periphery to the core or from the periphery to the semi-
periphery (however unlikely in most cases), and to reduce the sense of polarization. The
limited upward mobility that does exist encourages semi-peripheral and peripheral coun-
tries to compete with each other to ascend and influences the path they go down ideo-
logically as they become integrated into historical capitalism: “The semi-periphery is then
assigned as it were a specific economic role, but the reason is less economic than political.
That is to say, one might make a good case that the world-economy as an economy would
function every bit as well without a semi-periphery. But it would be far less politically
stable, for it would mean a polarized world system.” […] “We are not saying that three tiers
exist at all moments. We are saying that those on top always seek to ensure the existence
of three tiers in order to better preserve their privilege, whereas those on the bottom
conversely seek to reduce the three to two, the better to destroy this same privilege.”
(Wallerstein 1979, 23, 223).
For us, the semi-periphery is undoubtedly a key factor in bringing political stability to
the world-economy. But we do not see it as the only factor. The prospect of super-exploit-
ing labour often does much more to integrate individual elites into the world-economy
than the simple expectation that a country might ascend a tier. The clearest example of
this is the willingness of dependent country bourgeoisies to appropriate super-exploited
labour in order to project themselves in the world-economy even if at the expense of their
own country’s ranking in it. If a political, institutional or economic crisis threatens such
appropriation then it can derail said elites’ integration into the world-economy. That was
the only reason many peripheral countries opposed rules against social and ecological
dumping at the wto’s 3rd Conference, displaying unprecedented autonomy from the po-
sitions adopted by the Clinton-led US government in the 1990s. Nevertheless, similar ex-
amples can also be found in core countries, albeit on a more limited scale given that, as
we have seen, the long-term positioning of a particular bourgeoisie depends on the qual-
ity of its use values. Under British hegemony, the prospect of colonial conquest served to
keep liberalism relevant to inter-European power relations even after it had caused the
semi-peripheralisation of the economy’s centre between 1820 and 1870. (Maddison
2001, 185).
Although this liberalism suffered from the rise of protectionism and movements of
national unification, it was only with the final carve-up of the world – and the obstacles
that put in the way of European bourgeoisies adding to their reserves of super-exploited
labour in the colonies – that nationalism and liberalism could no longer coexist, thus
ramping up national tensions and pushing the world towards the systemic chaos of
1914–1945.
interstate system. In times of systemic stability and growth its structural deter-
minations are solid enough to stifle antisystemic movements. It is very hard for
any country to switch rank in such periods. But during a systemic crisis its de-
terminations are unstable and open the way for a sweeping reconfiguration.
Unchecked, this process can undermine polarisation itself. But the system’s
secular trends, tied to endless accumulation, limit the extent of any reconfigu-
ration and reactivate the underlying forces of historical capitalism.
15 We must acknowledge Immanuel Wallerstein as the best theorist of the modern world
system concept, and Giovanni Arrighi, as the best thinker of hegemony and the systemic
cycle notions.
16 During hegemonic periods, the hegemonic power sells its competitively priced products
on other core countries’ internal markets. As Wallerstein notes, “Hegemony involves more
than core status. It may be defined as a situation wherein the products of a given core state
are produced so efficiently that they are by and large competitive even in other core
states, and therefore the given core state will be the primary beneficiary of a maximally
free world market. Obviously, to take advantage of this productive superiority it must be
strong enough to prevent or minimize the erection of internal and external political bar-
riers to the free flow of the factors of production; and to preserve their advantage, once
ensconced, the dominant economic forces find it helpful to encourage certain intellectual
and cultural thrusts, movements, and ideologies. The problem with hegemony, as we shall
see, is that it is passing.” (Wallerstein 2011, 38).
17 “These superiorities are successive, but they overlap in time. Similarly, the loss of advan-
tage seems to be in the same order (from productive to commercial to financial), and also
largely successive. It follows that there is probably only a short moment in time when a
given core power can manifest simultaneously its productive, commercial and financial
superiority over all other core powers. This momentary summit is what we call hegemony
(Wallerstein 2011, 38–39).
18 We find two definitions of liberalism in Wallerstein: firstly as a worldview and doctrine
associated with empires and absolute monarchies; and secondly in its mature form as an
ideology and geoculture. In its first form, liberalism emerged as an approach that sought
to promote the core principles of competition and its application in the world-economy,
despite certain states helping fractions of their bourgeoisies to compete. In its second
form, as an ideology and geoculture, it represents a centrist political programme of social
and institutional change. Here it develops the principles of competition and hegemony at
the political and cultural level, conditioning them to supporting capitalist accumulation.
With the French Revolution, liberalism inflicted a violent cultural defeat on conserva-
tism, and in the mid-19th century it began to mature. It defended modern technology and
social liberation and questioned the imperial world-view, which would admit no chal-
lenge to political and institutional power. Thus the modern world system fashioned its
own geoculture.
Wallerstein argues that before establishing its own geoculture, liberalism made a
claim for itself without first developing the principle of popular sovereignty in either the
world-economy as a whole or its centres, and without really caring to articulate its cadres’
ideas with popular sentiment. In this context liberalism took the form of a doctrine.
Consent was strictly limited to the sphere of interstate relations because the cadres of
different national structures realised they could not incorporate capital and commodity
circuits by force. This was despite a participatory environment being created within the
However, the way it intervenes varies considerably from one systemic cycle to
the next.
Hegemony is linked to a given state’s ability to establish the institutional
order governing the world-economy, through which the general interest is de-
fined. But while the state in question must command enough productive, com-
mercial, financial and military power to impose this institutionality, it does not
need a monopoly on all those powers in order to sustain it. Braudel refers in his
work to a hegemony’s “sign of autumn” (1984, 246). Autumn represents that
period when a hegemonic centre loses its competitive edge in production and
trade but retains financial superiority by controlling a large chunk of the
world’s monetary reserves – either through direct access or because they are
held in its national currency.
Giovanni Arrighi redefines hegemony and develops the theoretical implica-
tions thereof by analytically constructing systemic cycles. In The Long Twenti-
eth Century he argues that there are two dimensions to hegemony. First and
foremost, the hegemonic power leads the state system, convincing other states
it is the motor force behind the collective power of rulers over individuals. The
second dimension, with destabilising effects in the long term, is the hegemon-
ic state’s power to attract others to its particular path of development (Arrighi
1996, 29). Having defining hegemony more broadly in terms of the capacity to
lead the modern world system’s political and ideological superstructure, Arri-
ghi is theoretically equipped to locate the loss of combined productive, com-
mercial and financial leadership as a phase in the hegemonic process which
does not necessarily imply a loss of hegemony in the wider sense. He also theo-
rises systemic cycles, with the signs of autumn marking the passage between
their different phases.
Systemic cycles are not the same as trends seculaires20 or Braudelian logistic
cycles, which are based on oscillating price movements over 150–300 years. In-
deed, attempts to use trends seculaires to chart movements longer than Kon-
dratiev cycles seem to have met with little success. The periods of oscillation
are extremely long-lasting and their inflexion points do not always mark the
start of new periods with the characteristics they might be expected to have.21
20 Braudel’s trends seculaires were first theorised by Gaston Imbert in 1959. Imbert himself
built on the work of Jenny Griziotti-Kretschmann and León Dupriez in the 1930s and
1940s, who used the fluctuations in price series to designate a given period as one of pro-
ductive expansion and recession. See Scandella (1998, 9–12).
21 Braudel distinguishes four secular cycles, each divided into an expansive phase (A) and a
crisis phase (B) and mediated by a point of inflexion: from 1250 to 1507–1510, with an in-
flexion point in 1350; from 1507–1510 to 1733–1743, with an inflexion point in 1650; from
1733–1743 until 1896, with an inflexion point in 1817, and from 1896 for an undefined length
of time, with an inflexion point in 1974. But this periodisation is highly questionable: it is
hard to see the entire 19th century as a time of crisis, or the first half of the 20th century
and the quarter-century after wwii as falling within the same period. Wallerstein recog-
nises these cycles and attempts to link them to the question of hegemony, using them as
the starting point for his five-stage model consisting of (1) slow growth of the hegemonic
power; (2) thirty-year war; (3) restructuring of the interstate system by the hegemonic
power; (4) gradual decline of the hegemonic power, and (5) a return to the normal state of
rivalry between powers (Wallerstein 2000a, 217).
22 Arrighi draws on Braudel’s ‘three-storey’ model of the capitalist world-economy. On the
top floor we find the political power relationships which make capitalism possible. This is
the shadowy zone of monopolies, where capitalists seek to obtain privileges by establish-
ing relationships with the State and then availing itself of its power to trade in rare com-
modities. In the middle tier we find market relations. This is the transparent terrain of
exchange and small business, where supply and demand equal each other out and the
level of profit reflects to some degree the amount of work performed. Finally there is the
ground floor, which represents material life and is described by Braudel as the realm of
self-sufficiency and use values. This level is traditionally inhabited by peasants and work-
ers who work for their own subsistence. But it is more than just that, as it encompasses
their routines, gestures, habits, secular and millennial customs, i.e. the starting point of
economic life. This realm is also seen as shadowy: not for the same reasons as the top
floor, but because of its focus on survival and conservation, its spatial and temporal di-
mensions, and its extremely slow pace. Braudel summarises this conceptual model in
Afterthoughts on material civilization and capitalism (1977), having first introduced it in
his monumental three-volume Capitalism and Civilization 15th – 18th Centuries (1982, 1983,
1984).
23 This accumulation drains the system of some of its capacity for material expansion and
leads to a period of containment and absolute or relative decline of wealth production.
marked by a thirty-year war as the two rival historical blocs compete to impose
new institutional frameworks for organising adhesion to the world system.
These three phases are described by Arrighi as hegemonic expansion, hege-
monic crisis and chaos. Unlike Wallerstein, he stresses that each systemic cycle
leads to a specific model of governance and not necessarily to global liberal-
ism. Indeed, the new dominant ideological and institutional forms that are
imposed respond not only to the interests of the hegemonic power’s ruling
classes, but to the interests of ruling classes in other countries and the different
class fractions they represent in the interstate system. The key to hegemony is
to make individual aims converge in a hierarchical global interest that benefits
the power articulating it.24
Arrighi refers to the existence of a pendular movement which determines
the institutional model adopted during each systemic cycle. In order to devel-
op, historical capitalism must avail itself of two different and expansive logics
characterised by both unity and contradiction – a capitalist logic and a territo-
rialist logic. The two logics combine because for capitalism to develop it needs
the ‘top floor,’ that is, the interstate system. World-empires were territorialist
systems that used capital accumulation in order to obtain power, which they
understood in terms of territorial expansion and population density in their
domains. But part of the wealth they created was used up in conquering and
retaining power, and eventually this cost began to outstrip the wealth accumu-
lated. This threatened the political unity of the world-empire, and land loss
and barbarian invasion followed. Capitalism, in contrast, tends to use territo-
rial expansion in order to accumulate capital. Its economic logic is borne of
careful calculations which enable it to forecast the surpluses that can be ob-
tained over and above the production costs of a given activity, and to know
therefore if it is feasible. This requires a large market that can judge the price
of the different use values and credit.25 However, the uncertainty surrounding
the cost of incorporating territories and populations imposes limits on capital-
ist calculus.
These limits can hinder the expansion of capitalism. But capitalism needs
to incorporate a growing base of use values in order to guarantee the expanded
reproduction of capital. To break through this impasse, a political institution
with a monopoly over the right to use violence must intervene in territories
and populations on behalf of capital accumulation. This institution is the in-
terstate system organised and led by the hegemonic state with the backing of
24 Arrighi developed this critique of Wallerstein in conjunction with Beverly Silver. See Ar-
righi and Silver (1999).
25 The market is at the heart of what Max Weber (1930) calls the capitalist spirit.
other states which lend it greater power. For Arrighi, the oscillation between
activity linked to economic calculus and activity focussed on the political
intervention required to make said calculus possible is the defining feature
of the pendular swings that regulate the institutional patterns of historical
capitalism.
In Arrighi, systemic cycles are either ‘cosmopolitan-imperial’ or ‘corporate-
national.’ The former foster extensive and all-conquering accumulation
regimes in which increased productivity goes hand in hand with the incorpo-
ration of new populations and territories into the world-economy, redefining
its administrative paradigms. In contrast, corporate-national cycles establish
intensive accumulation regimes which consolidate expansion. They succeed
cosmopolitan-imperial cycles and combine increased productivity with quali-
tative changes in the institutional administration of the existing world-
economy without altering its geographical boundaries.
A swing of the pendulum does not, however, fully account for specific mod-
els of interstate systems. It does not imply a clean break with the previous
movement. The structure of each new systemic cycle retains features devel-
oped during the preceding cycle. This accumulative systemic character means
that each new hegemonic actor has a broader and more complex organisa-
tional base. It means a new kind of relationship between the State and the
capitalists – one grounded in innovative technologies and models of public/
private administration, broader territorial and demographic bases, and new
geographic locations. That is how the Genoese-Spanish26 and British systemic
cycles (both cosmopolitan-imperial) developed, as did the Dutch and North
American cycles (both corporate-national).
26 Neither Arrighi nor Wallerstein consider Spain to have been a hegemonic power. Arrighi
prefers to talk of Genoese hegemony, whilst for Wallerstein the Spanish Empire marked
the transition towards the modern world system, which only fully developed upon its
downfall. But although its imperial self-projection and the territorialism of its ruling elites
certainly weigh against it, Spain did play a strategic role in articulating a world-economy
which it could never dominate, but which equally could never have been built on Genoa’s
initiative alone. Between 1450 and 1650 Spain’s territorial power was vital to the expansion
of historical capitalism, and so we prefer to talk of a Genoese-Spanish hegemony, thus
denoting what Wallerstein (1979) himself calls a “marriage of interests” between the em-
pire and the city-state. In his most recent work, Arrighi largely rectifies his position and
refers to the first systemic cycle as Genoese-Iberian (2007, 236–237).
trade. As we saw, this articulation was fundamental to the birth of the capital-
ist world-economy. This is because it brought together, on the one hand,
territorialists seeking to resolve the European feudal crisis by using imperial
expansion to find new sources of wealth, raw materials, food and labour pow-
er; and, on the other, Genoese capitalists seeking new investment outlets for
their capital. The Genoese commercial bourgeoisie had been badly hit by the
Italian city-states’ crisis of accumulation and were vulnerable on two fronts.
Firstly, they were supported by a weak feudal-military aristocracy. Hence when
Mediterranean trading profits declined they were pushed out of the disputed
Eastern Mediterranean and Black Sea trade routes by Venice (during the Hun-
dred Years’ War). Secondly, they were weaker than their own feudal aristocracy,
which prevented them from refeudalising and investing their profits in land,
castles and armies.
It was in such circumstances that Genoese capitals looked to the Iberian
Peninsula for the kind of protection their own aristocracy had withheld when
the Genoese trade empire entered into crisis. Its advantageous location prom-
ised greater control of African gold and an alternative Atlantic route to the
Orient. But it was Spanish imperial interest in an expansion of incalculable
expense that really made this convergence of interests work. The Genoese
were at first only interested in trade, but later agreed to finance the colonisa-
tion of new peoples and territories (Arrighi 1996, 125). Thus the foundations of
the Genoese-Spanish cycle were cemented in a way which involved each party
taking on a specialised role.
Spain assumed the costs of colonial conquest and the protection of territo-
ries and trade routes. It recouped this expense by collecting tribute in the areas
it occupied – including up to 20% of the silver produced in its American
colonies – and restricting colony-metropolis trade relations by imposing the
metropole’s exclusive monopoly on colonial trade. But the Spanish Empire did
not pursue mercantilist policies. Instead it retained a firmly pan-European
outlook. Geographically speaking, it was spread over non-contiguous areas be-
reft of any national identity and enjoying only the most precarious administra-
tive unity. Politically and ideologically it was united by Catholicism, in whose
name it expelled non-Catholic traders and bankers and relied instead on for-
eigners who benefitted from the metropole’s monopoly over colonial trade. It
neither built up a navy of any significant size, nor enclosed common land, nor
protected Spanish manufacturing, nor rationalised its system of tribute to al-
low commodities to circulate in its hinterlands. Genoa, for its part, bankrolled
the Spanish treasury and put its navigational expertise at the service of over-
seas trade. But above all it would end up specialising in finance (Wallerstein
1998a, 233–316; Arrighi 1996, 111–130; Kennedy 1987, 31–72).
27 “The trade to the colonies was a monopoly throughout most of the sixteenth and seven-
teenth centuries. The monopolist was not the Crown (as in Portugal) but the consulado –
the merchant guild – of Seville, with its subsidiary organization at Cádiz. By an elaborate
series of fictions, merchant houses all over Spain became members by proxy of the Se-
ville guild, consigning their cargoes in the name of resident Seville merchants. Even for-
eign commercial firms, German, English and Flemish – adopted this device, (…)” (Parry
1966, 66).
Similarly, Andre Gunder Frank notes that “of all the merchandise arriving in Cadiz at
the end of the seventeenth century 25% was consigned to French merchants, 22 per cent
to Genovese, 20 per cent to Dutch, 10 per cent to Flemish, 8 per cent to German, and only
5 per cent to Spanish receivers (Regla 1961: 346). Simultaneously, Spanish merchant
shipping was replaced by that of her European rivals” (2011, 72).
empire which sent the pendulum swinging back towards territorialism, but
this time with economic calculus exercising greater control.
The United Netherlands developed aspects of the previous systemic cycle
to become the productive, commercial and financial centre of the world-
economy. The boundaries of this world-economy were largely Iberian-drawn,
but whereas in the preceding cycle accumulation and coercive force had ex-
isted separately, the Dutch managed to articulate them through a single organ-
isation – the nation-state. By prioritising calculus over conquest they made
much higher profits out of managing the world-economy. Despite advocating
Mare Liberum ideals, they were very pragmatic when it came to putting their
liberalism into practice, often preferring Mare Clausum. In Asia, the Dutch East
Indies Company’s (voc) government-granted monopoly over trade and the ex-
ercise of military power in the region’s ports and spice-producing areas was
crucial to securing superprofits from the European trade route. The sheer
abundance of spices meant the huge profits to be had could only be main-
tained by prohibiting all competition. The Dutch also sought a monopoly over
the coastal African slave trade by setting up the voc’s counterpart – the Dutch
West Indies Company (wic). But in this they fared poorly. Such a monopoly
could not be won via military control of the African coast, with the incalcula-
ble costs that implied. It could only be achieved in conjunction with colonial
policies, but Dutch antiterritorialism prevented them from developing as a co-
lonial power, whilst their weakness compared to the British limited their abil-
ity to unite with the Iberian colonial empire (Arrighi and Silver 1999, 102–112).
Looking at this systemic cycle as a whole, we find the liberal project lacked
ambition and was overtaken by mercantilism. The United Netherlands lacked
the coercive means to impose itself on emerging nationalisms. However, the
cycle only entered into crisis when mercantilism reached the Baltic Sea and
central and eastern Europe. There, and in Sweden, Denmark, Prussia and Rus-
sia especially, mercantilism sent the Dutch trading empire into decline as the
British one expanded.
materials from the world economy. The industrial driving forces behind British
hegemony and two different Kondratiev cycles were textiles (mainly cotton);
and iron, which facilitated railway-building and the transport revolution. They
both relied heavily on indigo and raw silk from India, cotton from Egypt and
the southern United States, Australian wool, grain from Russia and the Bal-
kans, strategic minerals and foodstuffs from Latin America and industrial lu-
bricants produced in West Africa (Wallerstein 1998a, 179–265; Hobsbawm 1983,
124–142; Furtado 1969, 42–85; Cardoso and Brignoli, 1983, 290–300).
The British trade empire not only cheapened the cost of labour power and
constant capital, but also created a huge consumer market for Britain’s manu-
factured products. In his analysis of how Britain overtook France to become
the locus of industrial development between 1780 and 1840, Wallerstein locates
the root cause for its success in the advantages gained from what Arrighi later
described as “free trade imperialism.” These can be summarised as:
a. The reaffirmation of this type of imperialism through naval power, which
redirected expansion based on conquering markets away from the
restrictions imposed by Europe’s different mercantilisms. European mer-
cantilism could not be destroyed by a land force because the demograph-
ic, political and military strength of the monarchical states had made
European imperial unity an increasingly unrealisable goal. But Europe’s
military superiority over other regions such as Asia meant it could use
coercion to incorporate them into the capitalist world-economy.28 This
territorialism targeting the East was modelled on and preceded by spe-
cifically British strategies and methods of penetration in Asia.29
b. Building territorial power, starting with the conquest of Bengal at the
Battle of Plassey in 1757, allowed Britain to pay off its debts to the United
Netherlands. Since their financialisation in 1740, Dutch capitals had
increasingly underwritten the British economy whilst at the same time
undermining it by repatriating resources. As Britain’s economy became
solvent, its demand for circulating Dutch capital diminished. This proved
28 The regional fragmentation of the Mughal Empire in Asia had much to do with this be-
cause it enabled the British to exploit internal rivalries and set up a native colonial army
to defend and expand its Asian empire. See Maddison (2001).
29 Arrighi and Silver (1999, 109–111) show how Dutch hegemony in Asia excluded Britain
from the highly profitable spice trade through its control of ports and spice-producing
islands. Britain therefore had to turn to exporting piece goods – a form of insertion which
was only profitable if the lower added value of commercial production was offset by a
higher product volume. This kind of specialisation required direct control over the pro-
ductive process in order to guarantee production volumes and the supplies needed. This
in turn fed the trend towards territorialisation.
30 “By ‘internalization of production costs’ we shall understand the process through which
production activities were brought within the organizational domain of capitalist enter-
prises and subjected to the economizing tendencies typical of these enterprises. To be
sure, capitalist enterprises specializing in production activities had existed long before
the British cycle of accumulation took off. But this kind of enterprise had played either no
role or only a secondary and subordinate role in the formation of the Genoese and Dutch
regimes of accumulation” (Arrighi 1996, 181).
31 In 1813 the British government ended the East India Company’s monopoly and began pro-
moting competition led by English enterprises, affecting the international division of
labour.
32 In Europe, liberalism developed most in the latter half of the 19th century, when the first
expansive phase of the Kondratiev cycle began under British hegemony: “In 1820–70,
these mercantilist barriers were largely eliminated. The UK removed all tariff barriers and
trade restrictions between 1846 and 1860. Free trade policy was enforced in British colo-
nies, and in quasi-colonies such as China, Thailand and Turkey. In Germany, the customs
union (Zollverein) of 1834 ended barriers between the German states and the external
Zollverein tariff was lowered after 1850. In 1860 the Cobden-Chevalier Treaty removed
French quantitative restrictions and reduced tariff barriers to a modest level. This was
followed by French commercial treaties with Belgium, the Zollverein, Italy, Switzerland,
Spain and other countries. These treaties had most-favoured-nation clauses which meant
that bilateral liberalisation applied equally to all countries.” (Maddison 1995, 61). See also
Kemp (1994, 39).
33 As Paul Kennedy notes, “In the year 1800, Europeans occupied or controlled 35 percent of
the land surface of the world; by 1878 this figure had risen to 67 percent, and by 1914 to
over 84 percent” (Kennedy 1987, 150).
On the other hand, in 1820 China, India and Africa together represented 63.8% of the
world population, falling to 55.2% in 1870 and 48.4% in 1913 (Maddison 2001, 243).
34 Andre Gunder Frank (1998) argues that Asia remained the world economy’s core region
until the mid-18th century, when its balance of payments with Europe went into deficit.
He attributes Asia’s loss of status to it entering the B-phase of one of the 500-odd year
cycles he postulates. The exhaustion of this B-phase would focus the world economy back
on the region. His theory is interesting and provocative, based as it is on a comprehensive
review of social thought which seeks to cut away its Eurocentric roots. However, it does
not appear to be supported by the indicators cited in Maddison’s recent long-term statisti-
cal analysis of the world economy. According to these figures, Western Europe exceeded
Asia in per capita income from 1300 onwards, reflecting the development of its productive
forces under feudalism and the beginnings of its transition to capitalism. Western Euro-
pean leadership was consolidated in 1500, when its per capita income reached US$774
compared to Asia’s US$575 (Maddison 2001, 264).
35 In 1750, the regions later included in the so-called Third World accounted for 73% of glob-
al manufacturing production, of which China and India alone represented 57.2%. By 1830
these figures remained high at 60.5% for the Third World overall and 47.8% for China and
India. But they then declined sharply, and by 1900 the former represented 11% and the
latter just 7.8% (Kennedy 1987, 149).
Arrighi and Silver note that of 200–250,000 Indian handloom weavers in 1830 there
were only 40,000 left by 1850. See Arrighi and Silver (1999, 118).
36 China and India, bastions of the British Empire in Asia, experienced very low per capita
growth rates between 1820 and 1950. This is especially evident when compared to other
parts of Asia, the periphery or the world economy overall. In the 1820–1870 period China
and India expanded by 0.25% and 0% respectively. Then in 1870–1913 they expanded by
just 0.1% and 0.54%, and in 1913–1950 they declined again, to -0.62% and -0.22%. In com-
parison, Japan, which took a path of its own after the Meiji Revolution, enjoyed per capita
growth of 1.48% between 1870 and 1913 compared to 0.19% in 1820–1870. Between 1913 and
1950 this fell to 0.89%, reflecting the country’s defeat in wwii. In the periphery, Latin
America and Africa performed much better than China and India. They enjoyed per cap-
ita growth of 0.10% and 0.12% respectively between 1820 and 1870. Between 1870 and 1913
their growth accelerated, reaching 1.81% and 0.64%. Then in 1913–1950 they expanded by
1.43% and 1.02%. The world economy overall also enjoyed much higher growth than Chi-
na and India, reaching 0.53% (1820–1870); 1.3% (1820–1870), and 0.91% (1913–1950). (Mad-
dison 2001, 262).
37 The relationship between technological paradigms and new organisational forms is ex-
plored in some of the neo-Schumpeterian literature, particularly in the work of Christo-
pher Freeman and Carlota Perez. Freeman and Perez use Schumpeter as their starting
point to illustrate the dynamic of long waves. Growth periods occur when radical organ-
isational innovations are accompanied by technological innovations in the public and
private spheres. During these periods secondary and tertiary innovations help to develop
the technological paradigm. Periods of stagnation and crisis begin when a given techno-
logical trajectory is exhausted and a new paradigm emerges, but without the organisa-
tional changes it needs to develop. This leads to lower profitability and profit. New
organisational relationships affect a society’s use values and imply new workforce train-
ing methods, intra-firm/inter-firm relationships, and public policies. For the authors,
such periods represent an opportunity to reorder hierarchical relationships in the inter-
national economy because leading countries are stuck with a set of use values that relate
to the previous paradigm. We return later to Freeman and Perez, simply noting here that
their approach is limited in scope because it refers only to 50–60-year periods – long
enough for a Kondratiev cycle but not for potentially longer systemic cycles, which may
incorporate more than one Kondratiev.
of enterprises and capital accumulation (Kemp 1994; Teixeira 1999; Keck 1993;
Odagiri and Goto 1993).
From 1789 to 1871 Britain led the development of two technological para-
digms: the textile and iron industries. As seen, they were mainly applied to
cotton fabric production and railway construction, both of which were per-
formed by small and medium-sized industrial enterprises using semiartisanal
labour and capital drawn from their own profits. Department i, the producer of
motive machines and machine-made machines, had not become sufficiently
autonomous of Department ii, the producer of consumer goods, and innova-
tion still depended largely on empirical, non-systematised knowledge intro-
duced by workers by artisanal means (Mandel 1978, 184).38
But Thomas and Gilchrist’s success in producing basic steel with non-
phosphorous materials in 1878 and 1879 provided the key input of a new tech-
nological paradigm that made it possible to surpass the limits of empirical and
non-systematised knowledge. Innovations in steel production and electricity
were combined to convert mechanical power into continually transmittable
electric currents. Steel revolutionised the consumption of materials and en-
abled heavy engineering to develop beyond the limitations of iron.39 It was
mainly used in transport, leading to a second wave of railways expansion, and
enhanced sea travel through building high capacity cargo ships. The steel revo-
lution culminated in the production of high-precision machine-tools in terms
of cutting and strength that would be at the heart of the next technological
paradigm, which took off in the 1910s and was centred on cars, assembly lines
and interchangeable parts (Freeman and Perez 1988; Hobsbawm 1987; Kondra-
tiev 1984; Maddison 1995; Martins 1996).
These technological paradigms fostered a generalised growth in scales of
production and signalled the need to articulate the productive and financial
sectors. Innovations went from being the domain of manual workers and em-
pirical knowledge to that of scientific management and R&D laboratories that
38 This was one of the reasons why France failed to achieve technological and industrial
supremacy, despite being at the forefront of scientific production in the first half of the
19th century through bodies such as the Collège de France, the Ecole Polytechnique and
the Muséum d´Histoire Naturelle. On French scientific leadership in this period see
Chesnais (1993).
39 “Steel is a superior variety of iron. It possesses all the advantages attributed […] to metal
and especially ferrous metal, in higher degree. Chemically, the two are distinguished by
carbon content: pig iron, 2.5–4 per cent; steel, 0.1 per cent to about 2 per cent; wrought
iron, less than 0.1 per cent. […] Pig iron is hard but is also brittle […] wrought iron is ex-
tremely susceptible to wear and tear, is easily altered by shock, and offers low resistance
to pull or bending. Where pig iron will crack or snap, wrought iron will yield. Steel com-
bines the advantages of both. It is hard, elastic, and plastic.” (Landes 2008, 251).
40 David C. Mowery and Nathan Rosenberg provide an interesting analysis of the US system
of innovation prior to 1945. See Mowery and Rosenberg (1991).
41 On this topic see Coriat (1979).
42 Horizontal integration brought together the productive and financial sectors through the
creation of investment banks and through banks merging with one another or becoming
shareholders in industry. See Kemp (1994, 101–139).
43 In 1913 German public expenditure stood at 17.7%, rising in 1938 to 42.4%. This was some-
what higher than the overall averages of 11.7% and 27.7% in the same years respective-
ly for the UK, the US, France, the Netherlands, Japan and Germany itself (Maddison
1995, 65).
44 See “The National System of Technical Innovation in Germany” by Otto Kecks in Nelson
(1993) and José Carlos de Souza Braga (1999).
45 According to Barry Eichengreen (2000), in 1913 Britain controlled just 3.4% of global gold
reserves owned by central banks and governments. In comparison the US controlled
26.6%; France 14%, and Germany 5.7%.
Maddison (2001: 358) notes that between 1870 and 1913 British foreign trade lost the
advantages it had enjoyed over its competitors. The volume of German exports rose from
half those of British exports to equal them, and US exports climbed from around 20% to
49% of the British total in the same period.
twofold: it was more profitable for British capital to invest in the US; and Eu-
rope was gripped by geopolitical disputes in which Germany was emerging as
a power with serious expansionist and territorialist ambitions.
The First World War (1914–1918) gave way to a period of systemic chaos as
British hegemony finally collapsed without any other power strong enough to
take its place. The war exposed the rising protection costs that went with ter-
ritorialism and Britain’s inability to keep paying them. This in turn played a key
role in ending British hegemony as the country was forced to liquidate many of
its foreign assets in order to fund the war effort. As a consequence, the United
States went from debtor to creditor in its relationship with the old hegemonic
power. It bought up British foreign assets in the US at bargain prices and be-
came Britain’s chief supplier of military equipment, goods and credit. The re-
turn of the gold standard and sterling’s strategic role in its administration in
the 1920s turned out to be heavily reliant on the US financing the British bal-
ance of payments. Britain became weighed down by trade deficits that far out-
stripped prewar levels, and its earnings from foreign and colonial investments
stagnated. This made it less competitive, leading to a global economic reces-
sion and a rising tide of protectionism and nationalism. When the US econo-
my’s newly-found dynamism and the speculative manoeuvres that provoked
the 1930s crisis led to American investments being channelled into the US
economy itself, the remnants of the gold standard and sterling were finally de-
stroyed for good (Arrighi 1996; Arrighi and Silver 1999; Landes 1994; Hobsbawm
1983; Mitchell 2007a, 2007b).
The systemic chaos ended when the US joined forces with the powers that
had benefitted the most from British institutionalism such as Britain itself and
France to inflict military defeat on the emerging industrial powers of Germany,
Italy and Japan, which had tried pursuing their own brand of imperialism after
falling behind in the race for colonies. But victory was only guaranteed by the
decisive action of the Soviet Union, proving that a power that was not only
anti-imperialist but also socialist was needed to establish the new systemic
cycle.
46 Beverly Silver uses quantitative indicators to show the rise in labour unrest in the years
preceding major conflicts during the systemic chaos of the US transition to hegemony.
She bases her indicators on reports in newspapers in the hegemonic centres (The Times
and New York Times) of working-class resistance to the commodification of labour power,
longer working hours, worsening conditions including more intensive working; low pay
or wage cuts; mass unemployment; forced proletarianisation, and the destruction of live-
lihoods. As forms of resistance, Silver takes into account not just strike figures but also
data covering acts of sabotage, agitation, go-slows and confrontations (Silver, Arrighi and
Dubofsky, eds. 1995, 7–34).
in making the transition to a new systemic cycle. Nonetheless, in the first half
of the 20+ century this was only achieved through bloody conflicts between
different nationalisms. Countries presiding over defeated hegemonic projects
found themselves in the midst of a class war unleashed by proletarian organ-
isations in response to the spread of the industrial revolution. The greatest so-
cial unrest was in Russia, with the Russian Revolution; in Germany, with the
fall of the Empire and the formation of the Republic amidst intense socialist
agitation; and in Italy, which as part of the Triple Alliance had started the First
World War. But the anti-systemic effects of wwi were felt throughout the
whole of Europe. The consolidation of socialism on the one hand and fascism
on the other represented different and antagonistic responses to the contra-
dictions of imperialist nationalism. Socialist revolution prioritised class strug-
gle over the national state and rejected imperialist expansionism. Fascism,
meanwhile, gave a new form to nationalism: one that abandoned any belief in
social reform in favour of using terror to establish a state dictatorship domi-
nated by big capital, and thereupon use national identity and expansionism to
avert internal and external threats to the ‘destruction of the nation’ in the
shape of class warfare and competing state interests respectively (Hobsbawm
1994; Wallerstein 1995a; Santos 1969, 1977d,; 1978d, 1979a, 1991, 2000a; Guérin
1973; Kershaw 1991).
The US consolidated its hegemony by overcoming these challenges. Having
defeated fascism (its chief antagonist in the interstate struggle), it still had to
find ways to rebuild a consensus in order to meet the challenges the world-
economy had posed to the British institutional order. Meeting these challenges
would involve taking a series of measures, including
a. Promoting a new wave of social reforms in the central countries to ad-
dress demands that had been building up since the 1910s and assuage the
masses’ frustration with the decline in living standards caused by years of
wartime destruction.
b. Containing the spread of socialism, which had benefitted from the Soviet
Union’s decisive role in defeating fascism, the collaborationism of liberal
parties during the fascist occupation of Western Europe, and the world-
economic crisis.
c. Overseeing the expansion of the interstate system and the right of Afri-
can and Asian peoples to self-determination.
Between 1908 and 1913 the labour unrest index rose from 47 to 104 in the world-
economy overall. In the centre it shot up from 59 to 93, hitting a high of 159 in 1912,
whilst in the semi-periphery it jumped from 35 to 243, and in the periphery it fell from 41
to 30 (Silver, Arrighi and Dubofsky, eds. 1995, 155–192).
were ripe for the socialist countries to extend their influence. The Soviet Union
and Eastern Europe were emerging as likely economic partners for Western
Europe, and in Asia revolutionary China appeared to be a potential partner for
Japan – which had been destroyed as an imperialist power – and the two Ko-
reas. To avoid this happening, the US seized on the issue at the top of its na-
tional and international agendas: security. Between 1947 and 1954 it embarked
on a hysterical campaign against the worldwide political threat posed by so-
cialism. This campaign marked the first stage of the Cold War (Arrighi 1996,
Hobsbawm 1994). Through it, the US was able to systematically use foreign
currency to rebuild the economies of Western Europe and Japan and boost
international trade. The resources it transferred to them by building and main-
taining military bases far outstripped inflows in the form of direct economic
aid. After 1950 the world economy returned to more integrated, stable and in-
tensive growth than in 1939–44, and this led to the A-phase of the post-1939
Kondratiev cycle coinciding with the start of a new systemic cycle.
The US systemic cycle swang the pendulum back towards Arrighi’s corpo-
rate-national institutional model, making hegemony conditional upon reach-
ing a compromise with the intrastatal demands coming out of the periphery
and semi-periphery. As with the Dutch cycle, the pendular movement towards
internal economies made it harder to institute liberalism as the global hege-
monic ideology. The accumulative dimensions of this movement added an
extra layer of complexity to the task. The US had to articulate newly defined
intrastate relations with the development of the global world-economy be-
queathed to it by the British cycle. This meant it had to rely on a series of inter-
governmental bodies, although the US state still controlled most initiatives
and never subordinated its sovereignty to such outfits.
The creation of the United Nations was crucial to the North American sys-
temic cycle. It represented a supranational agency that legitimated decolonisa-
tion processes and the international right to self-determination. But despite
the suggestion of democratic institutional arrangements, the UN is still gov-
erned oligarchically on behalf of the leading economic powers (and, on certain
issues, emerging political powers). Politically, the United Nations General As-
sembly, operating on a one-state one-vote basis, advises the Security Council,
which decides on matters of peace, war and diplomatic relations. The Security
Council has five permanent members with vetoing rights: the US, UK, France,
Russia (previously the ussr) and China. In contrast, on the UN’s main eco-
nomic bodies, namely the Bretton Woods-founded imf and World Bank, a
country’s decision-making power is determined by its financial power, which
reflects the size of the quota it pays into said institutions. But these payments
are not open market transactions: to increase its quota size a state must have
sufficient funds available, and the subsequent transfer of political power must
be accepted by the institution, with the US holding a right of veto. That is why
the power of veto was tied to a country’s percentage of votes/quota size.
Liberalism assumed a markedly political character during this period, func-
tioning far more as a centrist ideology that used reforms to unite diverging in-
terests around world-economic expansion than as a doctrine for imposing the
imperatives of the free flow of capital and goods. Despite significant tariff re-
ductions compared to the protectionist wave of the 1930s, no agreement was
made to extend multilateral liberalisation, and so the General Agreement on
Tariffs and Trade (gatt) remained in place until it was replaced by the World
Trade Organization (wto) in the 1990s. The integration of the world economy
was initially achieved as a result of US state-led resource decentralisation, but
it later gained its own momentum and was mainly identified with internation-
al investments in domestic markets made possible by the techno-scientific
revolution in the US and other central countries in the 1940s, 1950s and 1960s.
The technical and scientific revolution meant that as science predominated
over technology, equipment and machinery became obsolete before becoming
physically unusable and so could be reused in countries where it was still com-
petitive. This enabled the US to support industrialisation and protectionism in
peripheral and semi-peripheral countries prepared to remain subservient to
the technological leadership of its corporations.
The ascendant phase of US hegemony was thus based on the following
factors:
a. Technological and financial leadership of the electromechanical techno-
logical paradigm, associated mainly with automotive manufacture47 but
also with the military and machine-making industries. This leadership
relied on the system of Fordist regulation, which prioritised the incorpo-
ration of transaction costs. A productive hierarchy among the workforce
along with greater workloads became crucial to organizing economies of
scale. Technological leadership was transformed into hegemony when it
stimulated transaction economies across the world through direct invest-
ment. This led to an increase in international transactions between units
belonging to the same firm, to the point where by the late 1970s they ac-
counted for more than a third of world trade (oecd 1991, 390; 1996b, 29).
47 In 1913 the number of passenger vehicles in circulation in the United States was 1,190,000,
while in France, Germany, the United Kingdom, Italy, the Netherlands and Japan the com-
bined total was 280,000. By 1950, these figures had reached 40,339,000 in the US and
4,803,000 in the other countries, and by 1973, 101,986,000 and 72,917,000 respectively
(Maddison 1995, 72).
48 In 1913, during the British cycle, British exports accounted for 17.5% of its gdp, and world
exports accounted for 7.9% of world gdp. In 1973 during the US cycle, US exports repre-
sented 4.9% of gdp, but world exports reached 10.5% of world gdp. Between 1820 and
1870 world exports expanded 7.9 times faster than global gdp per capita, reflecting the
cosmopolitan-territorialist movement of the pendulum, whereas between 1950 and 1973
they grew just 2.6 times faster, thus denoting a swing in the opposite direction. However,
as per capita gdp grew almost six times more in 1950–1973 than in 1820–1870, world ex-
ports expanded at a rate of 7.88% in the former period, compared to just 4.2% in the latter
period (Maddison 2001, 363).
49 The quality of territorialist-cosmopolitan or nationalist-corporate systemic expansion
can be quantitatively assessed in the light of historical patterns. We saw that one of the
main secular tendencies of the modern world system is unlimited accumulation. One way
this manifests itself is through world-economic growth, which assumes an increasingly
global dimension as it encompasses new regions and articulates their local economies
through an international division of labour. This growth is expressed by international
trade expanding faster than world gdp growth. Cosmopolitan or corporate cycles affect
this secular average. In cosmopolitan cycles world exports grow at least 3.5 times more
than world gdp per capita, and during corporate cycles by up to 3 times more. During the
British cycle’s expansive period from 1820 to 1870, exports grew 7.9 times more than world
gdp per capita. But during its crisis period the pendulum swing back in the opposite di-
rection, and exports grew just 2.6 times more between 1870 and 1913. Then came the sys-
temic chaos that halted the expansion of the world system and plunged its secular trends
into crisis. Thus between 1913 and 1950 export growth matched that of gdp per capita.
During the expansive phase of the US systemic cycle (1950–1973), it grew 2.7 times more.
But it accelerated again when US hegemony entered into crisis exceeding gdp per capita
3.8 times from 1973 to 1998.
The above calculations are based on Maddison’s indicators (Maddison 1995, 2001,
2010). We used the ratio of export growth to to per capita gdp as our basic indicator for
establishing the quantitative differences between the cosmopolitan and corporate peri-
ods. We then took the difference (1.1) between the period of lowest cosmopolitan growth
(3.8) and the period of highest corporate growth (2.7) and divided it by three in order to
designate the limits of the swings that occur during each cycle and a transitional zone.
did not give up its bargaining tool, i.e. the liberalisation of its domestic
market. Instead it signed a series of diplomatic agreements and bilateral
treaties to achieve an even greater degree of free trade in the world econ-
omy than Britain had enjoyed (Arrighi 1996, 71).
c. Greater state intervention in the economy.50 To enable this the US govern-
ment introduced currency regulation through the Federal Reserve Sys-
tem acting in conjunction with other central banks (Arrighi 1996, 72).
This allowed it to spend more on the economy and specifically on ex-
panding trade and production in the world-economy. This increase in
spending was directed mainly to the military sector, whereby the US gov-
ernment made the largest state transfer of resources out of its economy
and put into maintaining its military bases overseas. It was also tied to
the country’s cutting-edge technology sector51 and protecting other more
underdeveloped but politically critical sectors of the economy.
d. The creation of the United Nations and other intergovernmental bodies.
Their main tasks during the expansive phase of US hegemony were po-
litical and involved setting up new institutional arrangements for the
world economy by bringing the periphery into the interstate system, thus
legitimating decolonisation processes in Europe’s Asian and African em-
pires. UN actions did not replace unilateral US initiatives, rather the
United States used the UN as an additional means of securing its hege-
mony. Furthermore, the UN’s new economic bodies did not play any ma-
jor role until US hegemony entered into crisis.
e. The ideology of hemispheric integration centred on the free Western world.
This integration was in fact intended to go far beyond the West, and its
violent Eurocentricity was exposed when it sought to impose freedom on
the East and westernise it via the institutions of the liberal State. The
ideology was expressed on two levels: by military Keynesianism and de-
velopmentalism. Military Keynesianism made anti-communism a pillar
50 As discussed earlier, the State gets more involved in organising the world-economy with
each successive cyclical phase. In the Genoese-Spanish cycle, capital was allied with an
imperial state that played a key role in the colonial conquest and protection of territories.
But the Spanish state failed to take advantage of the commercial exploitation of the colo-
nies, which mostly remained under the control of third parties. In the Dutch cycle, the
state merged with a capitalist structure and brought commercial exploitation and mili-
tary protection into the same state unit by granting a charter to companies. During the
British cycle, the state was directly responsible for administering the colonial apparatus
and built up its own private enterprises from the transfer of tax revenues or payment for
services such as cargo transport by its merchant navy.
51 Mainly through government purchases and investment in R&D.
crisis, and the virtuous architecture of its hegemony in the centre and strategic
semi-peripheral regions began to crumble. The US state had stopped decen-
tralising resources and now faced liquidity crises on account of its public, trade
and current account deficits, which were draining resources from the world
economy. Entering the 1990s, mounting debts forced it to recalculate and re-
strict its overseas defence budget for the decade ahead.
In the peripheries the crisis of US hegemony had become apparent a little
earlier. It began in Latin America with the 1959 Cuban Revolution before a se-
ries of military coups starting in Brazil in 1964 made it more obvious. The crisis
of the Brazilian model signalled the failure of developmentalism as a strategy
of international insertion for the region and the peripheries in general, as the
promise to lay the ground for political liberalism by opening economies up to
foreign capital went unfulfilled. As dependency theorists Theotonio Dos San-
tos, Ruy Mauro Marini and Orlando Caputo pointed out, direct investment did
not mean foreign savings stayed in the region. It was just a moment in the cir-
culation of international capital, and only translated into high rates of rein-
vestment in the host country under the pressure of competition. Otherwise
profits were channelled back to the countries of origin. Capital inflows were
followed by outflows that decapitalised dependent economies in the medium
and long term. This situation destabilised political liberalism in Latin America
and undermined State support for universal suffrage and social rights.
Asia tested the limits of US hegemony more than any other region, present-
ing it with a series of economic, political and military challenges. The hege-
monic power’s difficulties in managing decolonisation in the European
empires forced it to make huge concessions to strategic Asian countries, who
in return set themselves up as local powers that would drive capitalist expan-
sion and contain socialism. This led to the offer of ‘development by invitation,’
which involved the US supporting agrarian reform, industrialisation and the
formation of a new ruling elite in Japan, South Korea and Taiwan. Vast sums of
money were transferred in the form of military occupations or subsidised cred-
its. But the US was also forced to accept the protectionist approach of local
ruling elites, with regard not so much to tariffs as restrictions on foreign direct
investment. As a result of this political liberalism, within 20–30 years East Asia
had mounted a serious challenge to the United States’ technological, commer-
cial and financial leadership52 (Maddison 1998, 2000; Medeiros 1998; Johnson
1995).
development initiatives were up and running long before they picked up even greater
momentum by becoming articulated with the centres of the world system.
legitimate the institutional order.53 Yet both of these features have contradic-
tory effects, at first strengthening the economic hegemon’s powers of penetra-
tion and persuasion only to later undermine them. This happens for two
reasons. Firstly, the circulation of factors of production implies the diffusion of
technological expertise and encourages countries in the centre or on its bor-
ders to copy and develop products without having to cover the initial innova-
tion costs. Secondly, the diffusion of compromise and democracy internally
necessitates concessions to workers and technical staff that push production
costs above those of the hegemon’s competitors.
Arrighi and Silver (1999) critique Wallerstein’s model, but in reworking it
they retain many of its features as part of their own more advanced theory of
systemic cycles. They point to its lack of historicity: systemic properties are
predetermined in relation to the system’s actors, whom they influence exoge-
nously. The authors argue that although systemic properties do coerce and or-
der their actors, the latter are equally capable of altering and reorganising said
properties when a new hegemony is established. Systemic institutionality thus
depends on the particular forms assumed by governmental-business complex-
es at each cyclical stage. Loss of leadership status and cyclical crisis are deter-
mined not only by the ability to imitate the leader’s developmental path, but
also, above all, by the ability to establish a new organisational paradigm that
surpasses the previous system of innovation. Consolidation of this new para-
digm develops the system’s secular trends but also changes its systemic
properties.
We saw that Arrighi distinguishes between two core, pendular models of
organisation: the cosmopolitan-imperial model and the corporate-national
model. But these models do not repeat themselves in the same way each time.
Systemic cycles represent patterns that repeat themselves over the course of
the secular, evolutionary trends that are an irreversible aspect of the modern
world system’s development. Some situations or aspects repeat themselves in
new ways and require different approaches and answers depending on the par-
ticular level of development and organisation of the social forces.54 This
53 In each successive hegemony we can see how institutionality grows out of legitimacy.
This was first noticeable in the Spanish Empire’s flexibility towards Genoa in tax matters;
later, in the development of parliamentary institutions and the principles enshrined in
the Peace of Westphalia, the notion of popular sovereignty and the Concert of Europe;
and most recently, in the growth of universal suffrage, the welfare state and the multilat-
eralism promoted by the UN and other intergovernmental bodies. See Wallerstein (2011a).
54 The combination of cyclical and systemic perspectives highlighting evolutionary secular
trends offers the social sciences a methodology full of analytical promise – one able to
reflect on the integration of repetition and difference or of retrospective and prospective
d ifferentiated repetition has implications for the way the cycles are measured
because the development of capitalism’s secular trends influences the length
of each repetition.
Whilst we should qualify Wallerstein’s claim that the causes of hegemonic
decline lie in the development of global liberalism – as each cycle produces its
own institutionality – we should accept the argument that the factors of pro-
duction become more internationalised with each expansionary phase, regard-
less of whether the dominant form is the flow of capitals, as with the US cycle,
or simultaneously the flow of goods, as in the British cycle. Concerning forms of
State organisation, the theory that hegemonic powers are propped up inter-
nally by political liberalism also needs qualifying. It would be more accurate to
say that each hegemon strives for domestic legitimacy because otherwise it
cannot achieve its goal of representing the consensus in the world system.
Notwithstanding these caveats, we have before us the main features in the
establishment and exhaustion of systemic cycles. The internationalisation of
the factors of production boosts production and surplus value appropriation
in the world-economy. But it also creates an environment characterised by
technological diffusion, which becomes an obstacle for the hegemon when it
starts outweighing the benefits obtained. The same logic applies to an internal
environment characterised by legitimacy and negotiation: it strengthens hege-
mony, but then reduces competitive edge when it makes production costs too
expensive. This allows a transfer of economic dynamism towards competitors
working with different organisational models. The more intense the diffusion
of technology and the broader the hegemonic state’s social base, the shorter
the systemic cycle. This confirms a cyclical pattern inherent to the modern
world system: wherein the more advanced its secular trends, the shorter its
systemic cycles.
In The Long Twentieth Century, Arrighi sets out to measure the length of sys-
temic cycles and prove they are getting shorter. As the most suitable yardstick,
he uses the interval between the crises that mark each successive cycle, i.e.
between the signs of autumn that bring each expansionary phase to a close. He
chooses this yardstick because of the degree of consensus over when the crises
took place, and concludes that each systemic cycle is significantly shorter than
the one before. Thus, the Genoese cycle lasted about 220 years, from 1340 to
1560; the Dutch cycle approximately 180 years, from 1560 to 1740; the British
cycle 130 years, from 1740 to 1870; and the American one barely 100 years, from
1870 to 1970.
We propose a different kind of periodisation. If we instead measure the du-
ration of each systemic cycle from its starting point, we can predict when the
current US cycle will end. This means starting from the creation of the institu-
tional bases of its hegemony following the wars of systemic chaos. That would
mean the US cycle began between 1945 and 1950. If we then add the aforemen-
tioned one hundred years but subtract from it the thirty-odd years of systemic
chaos, understanding it as a period of transition rather than hegemony, then
we can anticipate the US cycle ending between 2015 and 2020, when the task of
establishing a new world system will have reached the height of urgency.
3 Kondratiev Cycles
55 This was the year in which Van Gelderen published his work on long waves, Springvloed:
beschouwingen over industriële ontwikkeling en prijsbeweging.
56 Kondratiev’s periodisation is as follows: the first cycle consisted of an ascending phase
from 1789 until 1810–1817, and then a descending phase lasting until 1844–1851; in the
second cycle the upswing lasted from 1844–1851 until 1870–1875 and the downturn be-
tween 1870–1875 and 1890–1896. He also identified a third cycle whose ascent began in
1891–1896, giving way to a downswing in 1914–1920. He was unable to examine how this
last downswing ended because Stalin had him shot by firing squad in 1938.
57 Kondratiev did not have access to the data needed to make a detailed study of interest
rates, and so instead had to rely on quotations of interest-bearing securities, which vary in
inverse proportion to interest rates.
58 In these cases cyclical oscillations are based on absolute values.
d ependent on the economic cycle and its phases. He pointed out that techni-
cal and scientific discoveries are not random events and that new techniques
are available long before they are implemented, explaining their incorporation
into the economy in terms of the way cycles function. The same holds true for
new territories: they are discovered long before they are incorporated into the
capitalist world economy, as with Argentina, Canada, Australia and New Zea-
land. Neither are wars and revolutions random events, but an integral part of
upswing periods, which respond to the struggle for markets and raw materials
or the impetuous projection of new economic forces onto obsolete structures.
Richard Day (1976) provides a good analysis of the Kondratiev-Trotsky de-
bate, showing that it reflects two major perspectives on capitalist societies.
Kondratiev cites the existence of a moving equilibrium as evidence that capi-
talist development is governed by general laws, of which cycles are a specific
expression. Trotsky, on the other hand, points to the existence of non-periodic
phases of capitalist development as a result of internal and external factors
joining forces in its logic of accumulation. In his account, endogenous cycles of
capitalism (the so-called Juglar cycles) represent periodic phases.
Kondratiev’s position has clear advantages over that of Trotsky. It does not
reject the theory of general laws of capitalist development but enables us to
think about them dialectically, in the understanding that each moment of this
development is, at one and the same time, unique and subject to the general
laws governing it. Cycles revolve around an equilibrium with evolutionary ten-
dencies, in which each cyclical repetition represents a specific moment of
capitalist development. Trotsky’s approach makes it impossible to analyse this
development dialectically. In positing the centrality of non-periodic phases, a
result of elements internal and external to capitalism combining, Trotsky ren-
ders the very notion of the general laws of capitalist development that were
Marx’s chief concern in Capital and the Grundrisse fleeting and unrealisable.
Trotsky’s main mistake – his methodological separation of what is internal
from what is external to capitalism59 – has to do with the difficulty of distin-
guishing between two levels of analysis that have in practice been closely
intertwined ever since the Industrial Revolution: that of the capitalist mode
of production and that of historical capitalism. There is no law of the capital-
ist mode of production that does not act on elements external to it, an exter-
nality which describes the unique individuality of the elements that make up
the concrete conditions of existence. But one can only speak of a capitalist
mode of production once those elements are articulated by the logic of surplus
59 As we saw in Chapter 1, the methodological separation of economic from social and po-
litical reality is typical of liberal thought.
value production and appropriation. We saw that the capitalist mode of pro-
duction only exists because of the development of historical capitalism. This
relationship defines it but does not exhaust the irreducibility of the histori-
cal. It was this irreducibility that led Braudel to talk about a material civilisa-
tion embodying habits, gestures, food and millenary practices. Geography,
technology, products and values do not define capitalism individually but by
the way they are articulated with one another, which is what generates secu-
lar historical processes. The assertion that capitalist logic is powerful enough
to dominate this articulation creates an analytical and political obligation to
theorise the general trends of capitalist development in order to understand
their scope and organise forces capable of halting and overcoming them. His-
torical processes are a feature not only of long cycles but of any cycle repre-
senting capitalist development, and they do not necessarily negate its general
laws.
The Trotsky-Kondratiev debate brought to the fore a fundamental issue that
would go on to feature in subsequent debates around cycles: that of human
freedom, which appears to negate the existence of cycles. It arises in Trotsky’s
argument that the superstructure is relatively autonomous of economic phe-
nomena and can even influence them through wars or revolutions. Kondratiev
gave the key to the answer, although he failed to sufficiently develop it: wars,
revolutions and social upheavals form part of long cycles and are crucial to
their development. Long cycles may be governed by an economic logic during
their development, but they also embrace major social and geopolitical
processes.
However, Kondratiev did not go on to demonstrate that long cycles are pro-
cesses that articulate social and geopolitical factors through an economic log-
ic. They operate by economic logic taking command of relatively autonomous
elements of a technological, social, political and geographical kind. The con-
flicts between the latter’s autonomy and the tendency to control them play out
within the cycle’s time frame and can even lead to its break. We might say that
the economic logic of capitalist accumulation projects itself onto said ele-
ments and tries to make them a function of accumulation. The continuity of
long cycles depends on this succeeding, whilst the autonomy of the elements
in question can rupture the process. Class struggle is a core component of Kon-
dratiev cycles and can determine their continuity or rupture. Since the 19th
century, the global victory of the bourgeoisie in the class struggle has ensured
their expanded reproduction. The issue of human freedom cannot therefore
be deployed against long cycles, which have developed through class struggle
as part of the expansion of the structures of capitalist accumulation across the
world economy.
Whilst rich in ideas, Kondratiev’s thinking also suffers from many gaps. He
uses neither profit rates – the commonest measure of capitalist development
– nor gdp per capita – the chief measure of material expansion – as indicators
of cyclical phases. Furthermore he fails to create a hierarchy of indicators. This
makes it harder to register the change from one cyclical wave to the next, which
often takes too long (5–7 years) to be clearly identifiable. He repeatedly under-
estimates the part played by class struggle in the cycles without any theoretical
need to do so, and technological, political, geographical and territorial process-
es appear determined rather than conditioned by the economic logic of the
cycle. Finally, subdividing cyclical waves would make it easier to explain how
they function, particularly with regard to interest rate movements during the
decline.
Joseph Schumpeter makes an important contribution to the theory of long
cycles in Business Cycles (1989), despite taking some methodological steps
backwards compared to Kondratiev. In it he seeks to understand innovation
and come up with a more detailed model of cyclical waves, which he divides
into four phases (recovery, prosperity, recession and depression).
In order to define cycles, Schumpeter starts from a Walrasian model of static
equilibrium founded on perfect competition. This presupposes a society based
on an exact match of supply and demand and perfect mobility of goods and
factors of production. Such a society is stationary: it produces the same amount
of goods and services each year, enjoys full employment, and leaves no de-
mand unsatisfied. Cycles upset this equilibrium and then restore it in new
forms. But how can these new forms be generated if starting from a neoclassi-
cal definition of society as stationary?
Schumpeter argues that capitalism’s immobility is shattered by external fac-
tors in the shape of innovations and entrepreneurs. Entrepreneurs are agents
who introduce innovations. In principle they do not belong to any social class,
although successful ones attain the status of capitalists. Innovations on the
other hand mean new commodities, organisational forms and markets that
radically alter the combination of factors of production in ways that cannot be
assimilated by changes to the existing functions of production.60 For the firms
that introduce them, innovations generate a premium: profit. Schumpeter saw
this as differential income that cannot be attributed to any factor of produc-
tion (capital, labour or land) via a process of cost allocation. Profit triggers a
61 Schumpeter (1989, 175) sets out a 56-year model for the long cycle, divided into 28 years of
prosperity and 28 years of recession. During the upswing, expansion is greatest in years
1–5, 9–14 and 19–24, peaking in years 1–2, 10–11 and 19–20. During the downswing, the
decline is most pronounced in years 33–38, 43–48 and 52–56, with troughs in years 33–34,
said, his approach is rooted in an erroneous view of capitalism and its dynam-
ics. It sees profit only as differential income and not as a general phenomenon
structuring capitalism. That is why he attributes its existence to external forces
acting on capitalist society and not to its internal logic.62 This ends up blinding
him to capitalism’s secular trends and the role of the cycles in their develop-
ment. Schumpeter’s innovation cycles are unique events linked to the activity
of innovation clusters. Once they are exhausted, however, nothing guarantees
their resumption, because having failed to endogenise technological change
within capitalism the author is left with no theoretical means of providing
such an assurance. This limited Schumpeterian and neo-Schumpeterian
thought, which overstated the application of the concept of the technological
paradigm, its usefulness notwithstanding, whilst failing to articulate it with
the law of value as the factor that drives technological paradigms and explains
them historically.
During the post-war economic boom, thinking around cycles stagnated
amidst Keynesian attempts to eliminate the risk of recession via countercycli-
cal policies. But with the exhaustion of the ascending phase of the post-war
Kondratiev cycle it made a comeback. In Marxist literature it mainly reap-
peared through the writings of Ernest Mandel and Theotonio Dos Santos; in
neo-Schumpeterian literature through authors like Christopher Freeman, Car-
lota Perez and Luc Soete, and in world system theory through Immanuel
Wallerstein and Andre Gunder Frank.
Mandel returned to Kondratiev cycles in several works, including his two
classics, Late Capitalism (1985b) and Long Waves of Capitalist Development: the
42–43 and 52–53. As we discuss further on, these temporal patterns are only helpful as
indicators and should not be used mechanically.
62 Schumpeter’s definition of profit as a surplus that cannot be attributed to any production
cost is interesting. He fails however to point out that this situation is institutionalised in
capitalist society through the wage. The wage is the core regulator of the difference be-
tween the value of labour and the value of labour power, and furthermore enables the
latter to be appropriated in the productive process. Technological change is part of a so-
cialised labour process controlled by capital that systematically generates income not at-
tributable to production costs. The pursuit of profit is one of the main objectives of the
capitalist economy, which uses technology to generate the aforementioned difference in
value. Although Schumpeter undoubtedly represents an improvement on the neoclassi-
cal perspective, he still holds what is ultimately a very petit bourgeois view of capitalist
development, perceiving capitalist accumulation not as a socialised process but as relying
upon the initiative of individual entrepreneurs. That is why he predicted capitalism
would come to an end during the monopolistic competition stage, when innovations are
subordinated to the routine, socialised practices of corporate bureaucracy. This bureau-
cracy would undermine and eventually replace individual entrepreneurialism along with
bourgeois property. See Schumpeter (1950).
Marxist Interpretation (1980). His biggest contribution was to revive the con-
cept of rate of profit as an indicator for studying Kondratiev cycles. This
involved a methodological review of their causes and dynamics. In both Kon-
dratiev and Schumpeter, the chief driver of long cycles is the appropriation of
wealth via inter-capitalist competition. Innovation gives rise to extraordinary
profits or differential income, which are then threatened by the diffusion of
innovations. But although this is a key aspect of the way cycles operate, it does
not fully capture their dynamics. Extraordinary profit cannot unleash an ex-
pansive long wave unless it is accompanied by an increase in the average rate
of profit.
In Mandel’s analytical model of long waves the rate of profit takes centre
stage. The ascendant phase of the long wave is determined by radical innova-
tions that (a) substantially devalue fixed and circulating capital (raw materials
and low aggregate-value productive inputs); (b) increase the profit rate and
therefore the mass of surplus value by reorganising the labour process; (c) in-
tensify capital turnover, and (d) lower interest rates by centralising capital and
the availability of credit in abundance. But halfway through this expansive
phase the profit rate begins to decline due to rises in the organic composition
of capital, the employment rate and the demand for raw materials (Kondratiev
1992). The pressure on costs increases the demand for credit and boosts inter-
est rates and inflation. This leads to intensified class struggle and inter-capitalist
competition which within about ten years reduces profit rates to recession lev-
els. In its first stage, high interest rates and intensified class struggle continue
to feature in this recessive phase of the long wave due to the demand for credit
to pay off debts and working-class resistance to capital’s attempts to rationalise
and reorganise the labour process. Then in the second stage of recession, capi-
tal centralises finances, slashes interest rates and overcomes working class
resistance to the introduction of both technological innovations63 and organ-
isational innovations designed to rationalise the labour process. This phase
generates chronic subinvestment that, taken together with capital centralisa-
tion, the availability of new technologies, organisational innovations and the
increased rate of surplus value, frees up the resources needed for another long
expansionary wave.
Nonetheless, when it came to the concept of long cycles Mandel took a criti-
cal approach and preferred to use the term long waves, which he saw as less
deterministic. He starts from Trotsky’s thesis, critiqued earlier, that long waves
63 Mandel turns to the work of Mensch and Schmookler to suggest that, during the recessive
phase, capital focusses research and development on innovations to create processes that
save on labour, reduce the number of jobs and undermine working class combativity.
64 “If one believes that not just once every fifty or sixty years, but continuously, external
noneconomic forces determine the development of the capitalist economy, then one re-
jects out of hand Marx’s entire economic analysis” (Mandel 1980, 29).
65 Mandel is sceptical about the existence of such goods and their place in long wave theory:
“Our interpretation of the long waves, as compared with those of Kondratieff and Schum-
peter, has the advantage that it does not explain the long waves, their origins, and their
ends by the doubtful existence of ‘long-maturing investment projects’ twenty-five or even
fifty years in duration” (Mandel 1980, 24).
66 Technological paradigms and technological trajectories were developed as concepts by
Dosi (1982), techno-economic paradigms by Carlota Perez (1983) and technological systems
by Cristopher Freeman, John Clark and Luc Soete (1982). The notion of a technological
paradigm concentrates on the convergent and systemic character an innovation imprints
on products and processes. Techno-economic paradigms highlight the economic applica-
bility of a given technological paradigm thanks to its vastly reduced costs. A technological
trajectory designates an innovation path taken by a paradigm shaped by social determina-
tions. Technological systems combine radical and incremental innovations along with or-
ganizational and managerial innovations (Freeman and Perez 1988).
trajectories over the lifetime of a given paradigm, but whose convergence then
gives rise to a new technological model. Railways, cheap steel, assembly lines
and microelectronic chips were all introduced either at the end of an expan-
sive long wave or, at the very latest, in the early years of a recession.
These technological applications get outdated for both organizational and
managerial reasons. Transforming a new technological paradigm into a techno-
economic paradigm requires a series of managerial and organisational innova-
tions at the corporate, social, political and ideological levels that lowers
production costs and increases productivity and profitmaking opportunities
by enabling the broad application of new technologies. This neo-Schumpeterian
insight can be blended with the Marxist idea of including profit rates in long
wave analysis, as Freeman, Clark and Soete (1982) and Theotonio Dos Santos
(1994b) acknowledge.
Whenever a long wave enters into crisis windows of opportunity appear, of-
fering the chance to ‘catch up,’ i.e. to move up the international economic hier-
archy by combining the technological and organisational innovations the new
paradigm requires. This theme is developed in the neo-Schumpeterian litera-
ture, and by Carlota Perez in particular. Perez nonetheless exaggerates the
potential offered by such opportunities. She fails to articulate the concept of
technological paradigms with the secular trends of historical capitalism, which
presuppose an international division of labour and monopolistic competition
that limit such a possibility. Neither does she articulate them with systemic
cycles, which are more enduring than Kondratiev cycles and condition their
ruptures.
Theotonio Dos Santos began using Kondratiev’s cyclical perspective in 1971,
when he published La crisis norteamericana y América Latina (The North
American crisis and Latin America). He explains long cycles in terms of radical
technological innovations that transform capital’s organic composition, the
industrial reserve army, wage levels, institutional forms (entrepreneurial con-
centration, financial centralisation, the internationalisation of capital and
state investment), and, consequently, the rate of profit. Even before the term
systemic cycles was coined, Dos Santos warned that the US economic crisis
triggered by the Kondratiev cycle marked the beginning of its hegemonic
decline. He would later return to this issue in two works where he tried to inte-
grate the different Marxist analyses of the crisis with neo-Schumpeterian per-
spectives (1994b; 1999c).
For Dos Santos, the long-term crisis in the Kondratiev cycle can be explained
by the convergence of crises of accumulation, disproportionality and realisa-
tion with falling rates of profit. The crisis of accumulation is linked to the eco-
nomic boom. The diffusion of technologies reaches its upper limit, putting the
67 We have used Marx’s definition of fixed capital in Capital as capital which appears as
goods that depreciate over several cycles of production.
68 Depending on the degree to which our analysis needs to fit reality, we could use an even
more complex cyclical model made up of six sub-phases representing the primary, sec-
ondary and tertiary phases of innovations during the expansion and again during the
crisis. In this model, the long expansion consists of three medium-length periods of sta-
bility (resumption, prosperity and maturity) intermediated by internal adjustment crises.
Likewise, the long recession also consists of three periods of stability (recession, depres-
sion and recovery), similarly intermediated. See Martins (2008).
We think both Kondratiev and Mandel were right in this debate, but some
aspects need clarifying. Keen to highlight the reproduction of cyclical mecha-
nisms, Kondratiev emphasises tensions during the ascent, which are inherent
to the process of adjusting to the dynamic forces of a new pattern of capitalist
accumulation. Mandel, on the other hand, is at pains to highlight the potential
for breaking with capital accumulation, and so he emphasises crises that might
present such a danger, i.e. those that break out during the decline. But what
matters is not so much whether periods of heightened social tension occur
more in the upturn or the recession, but that they are stronger when one stage
succeeds another. That is when a working class at the high point of its subjec-
tive organisation confronts a situation of recession that compels it to go on the
offensive. The conflict between forces emerging from a new organisational
pattern of capital accumulation and the resistance they face from the forces of
backwardness is what concentrates major change.
We can therefore locate periods of accumulation of sociopolitical tensions,
some of which might be more intense than others. These tensions are most
concentrated during the transitions from maturity to recession and from de-
pression to prosperity. The other transition points are from recession to de-
pression and from prosperity to maturity.
The most explosive tensions are those that build up in the transition from
maturity to recession. But, with some exceptions, they do not always lead to
the greatest institutional change. This category includes German and Italian
Unification (1862–1870 and 1859–1870), the Meiji Revolution (1868), the Paris
Commune (1871), the start of the Mexican and Chinese Revolutions (1911); the
crises leading to World War i (1914–1918); the Russian Revolution (1917); social
struggles before and after May 1968; the Prague Spring; the Vietnam War and
its socio-political impact, the Third World offensive in the 1970s; the experi-
ence of socialist government in Chile (1970–1973), and Iran’s Islamic
Revolution. The tensions concentrated in the transition from depression to
prosperity, whilst powerful, are more likely to end in institutionalisation. Ex-
amples include the Opium War (1841) leading to the de facto annexation of
China, or the liberal containment of socialist movements in 1848, both of
which paved the way for European imperialist expansion; World War ii
(1939–1945), culminating in the creation of the United Nations (1945) or the
Indian decolonisation and the Chinese Revolution (1949), which were crucial
to overcoming nineteenth-century imperialism in the 1950s-1970s; and the fall
of the Berlin Wall (1989), breakup of the Soviet Union and Gulf War (both
1991), or the Washington Consensus and nafta (1992–1994), which cleared
the way for the further expansion of neoliberalism after it had conquered the
major western centres in the 1980s.
69 For Vânia Bambirra (1974b, 138–155), the Cuban Revolution should be understood not only
in terms of how the process of modernising rural relations was blocked by worsening
terms of trade for primary products, but also by looking at foreign capital-led industrial
development in the post-war period and how it was affected by the 1958 crisis with the US.
The current epoch combines the downward trend in the US systemic cycle
with the emergence of a new Kondratiev cycle. It represents a particular con-
junctural timespan whose historical character has permitted only limited eco-
nomic and sociopolitical gains – a prisoner still of the changes imposed during
the 1980s depression, when neoliberalism was at its peak. This explains the
apparent strength of the neoliberal ideological paradigm. However, let us make
the following observations. Firstly, the expansive phase of the current post-
1994 Kondratiev cycle is advancing in its transition towards maturity. This has
unleashed the forces of reform and revolution and hastened the political col-
lapse of the neoliberal forces that remain so ideologically powerful in today’s
world.70 In the six-subphase model, the global crisis that unfolded in late 2008
and lasted until 2010 represents the move into the last expansionary subphase
of the current Kondratiev cycle and its third interval following those of 1994–
2000 and 2003–2008. The 2008–2010 crisis took place during a long expansion
and signalled a much deeper crisis that will probably take hold in the second
half of the current decade. This new crisis could take us back to the bifurca-
tions associated with systemic chaos, such as those seen between 1914 and
1945–1950 when world war catapulted the capitalist world-system to a higher
level and a third of humanity ended up living under socialist regimes until the
1980s. The second and most crucial point to bear in mind is that the balance of
power between systemic and anti-systemic forces now favours the latter far
more than a hundred years ago. This gives socialist and democratic forces the
chance to exert a much stronger influence on the direction of the world econ-
omy and create the conditions for a relatively peaceful transition towards a
new world system as the expansive phase of the new Kondratiev cycle exhausts
itself. This will require the embryonic institutional forms of the new order to
take shape under the old order, so that they are ready to make a qualitative leap
forward as soon as the system enters a generalised crisis.
But it will not be easy for such a scenario to materialise. It will mean first
overcoming the tendencies of the systemic cycle that develop during the sys-
temic chaos between recession and depression and unleash ultrareactionary
70 Political and ideological leadership do not necessarily go together. Of the two, political
leadership in the orthodox sense of representing an ideological paradigm tends to decline
more quickly. This is because the consensus achieved by a hegemonic ideology is sup-
ported not just by orthodox thinking but also by a range of forces that was originally more
heterodox and distinguishable from their hegemonic counterpart. In a conjuncture in
which the hegemonic ideology is declining at an ever-faster rate, the support of heterodox
forces for the dominant ideological paradigm creates a space in which to combine wars of
position with wars of movement in building towards a major political and ideological
tipping point.
Marx attached great importance to the law of the tendency of the rate of profit
to fall, describing it in the Grundrisse as the most important law of political
economy. In Capital, too, he stressed its significance. In Marx’s account, the law
is central to the capitalist mode of production because it explains both the
development of capital accumulation and its collapse. This is because the
same factors that drive down the rate of profit can also help expand the mass
of profit. What is this law and how does it support the theory of the downfall of
capitalism?
Referring to the law in Capital, Marx distinguishes between two different
sets of circumstances. In the first, the magnitude of capital does not vary, and
the law acts only to diminish the profit rate. In the second, the magnitude of
capital does change, by means of various mechanisms which allow the mass of
profit to increase at the same time as maintaining the tendency of the profit
rate to fall.
Marx notes that capitalist competition for extraordinary surplus value
causes a continuous rise in the technical and organic composition of capital
that threatens to erode the rate of profit. This happens because machinery is
used to save on labour power by lowering the production costs of a given
commodity whilst increasing labour productivity. As a result, variable capital
decreases relative to fixed and constant capital. This occurs because (a) less
labour power is used in the productive process; (b) the rise in the technical
composition of capital increases the value of machinery; and (c) higher pro-
ductivity augments the value of circulating capital, providing the increased
consumption of raw and auxiliary materials is not accompanied by an equal-
ly intense diffusion of technical advances into the agricultural or mining
sectors.
If the degree of exploitation of labour power remains unchanged, then the
rate of profit will fall insofar as technical progress becomes more generalised,
because the same rate of surplus value applied to a smaller mass of living la-
bour valorises a larger amount of constant capital and dead labour. However,
Marx argues that the same causes which increase the proportion of fixed capi-
tal and raw materials in relation to the mass of employed living labour also
concentrate great masses of workers under the control of individual capitalists
(Marx 1959, 215). Once the technical composition of capital has been deter-
mined at a certain level, this concentration of workers makes it possible to vary
the magnitude of the individual capital and increase the mass of profit on it by
valorising it adequately. The laws of capitalist accumulation, founded on capi-
talist competition and the pursuit of extraordinary profit, combine the ten-
dency for the profit rate to decline with an increase in the mass of profit, which
dialectically supersedes it.
There are, howe v er, limits to how much the rising volume of profit can
outpace the tendency for the profit rate to decline in the absence of counter-
tendencies to the falling rate of profit that operate independently of the ex-
panding numbers of workers. Although capital’s goal is to accumulate surplus
value, the latter can only be realised when regulated by a rate of profit71 that
makes said accumulation proportionate to investment. Otherwise it tends to
be hoarded, which leads to crisis and greater competition among capitals to
destroy part of the accumulated capital.72
71 In the Grundrisse, Marx masterfully locates the rate of profit as the key measure of capital
accumulation, the purpose of which is to expand the rate of surplus value (the ratio of
unpaid labour to paid labour). Essentially, he argues that capital, proceeding from itself as
the active subject in its own process of reproduction, relates to itself as self-expanding
value. That is why “newly produced value” is not measured “by its real measure” – that is,
the ratio of surplus value to necessary labour – but by capital as the supposition of the
newly created value, as if surplus value were “posited and founded” by it. Having differen-
tiated the profit (as newly produced value) from itself (presupposed, self-realising value)
and posited it as a measure of its own valorisation, capital posits the profit in its identity
to itself in order to start the same process again on a wider scale. The product of capital is
profit, and the rate of profit is determined by the ratio of the value of surplus value to the
value of capital (Marx 1973, 672).
72 “In that the expansion or contraction of production are determined by the appropriation
of unpaid labour and the proportion of this unpaid labour to materialised labour in gen-
eral, or, to speak the language of the capitalists, by profit and the proportion of this profit
to the employed capital, thus by a definite rate of profit, rather than the relation of pro-
duction to social requirements, i.e. to the requirements of ‘socially developed human be-
ings’. It is for this reason that the capitalist mode of production meets with barriers at a
certain expanded stage of production (…) It comes to a standstill at a point fixed by the
production and realisation of profit, and not the satisfaction of requirements.
If the rate of profit falls, there follows, on the one hand, an exertion of capital in order
that the individual capitalists, through improved methods, etc., may depress the value of
their individual commodity below the social average value and thereby realise an extra
profit at the prevailing market-price.” (Marx 1959, 253).
In Capital, Marx lists the counteracting tendencies which can fully or part-
ly neutralise the falling rate of profit, even if they cannot stop its slow devel-
oping during the expansive phases of the long cycle or operating as a secular
tendency of capita l ism (Marx 1959, 227–235). These countertendencies in-
clude an increasing rate of labour exploitation, falling wages (closely linked to
relative overpopulation); a reduction in the value of the elements of constant
capital as productivity improves, and the role of foreign trade in cheapening
the elements of constant capital (mainly circulating capital) and means of
subsistence.73
Marx notes that while these countertendencies cannot stop the value of
constant capital from rising faster than variable capital, they can keep the rate
of profit’s tendency to decline in check as long as a potentially explosive con-
tradiction does not arise between the rising rate of surplus value and the mass
of surplus value. The rate of surplus value is boosted across the whole econo-
my by the falling value of labour power and corresponding increase in dead
labour in the form of constant capital. But this conflicts with the number of
workers per given and invariable aliquot part of capital. The increased value of
dead labour reduces the number of working hours available for production.
The reduced number of workers limits the total time spent reproducing labour
power and boosts the rate of surplus value. Keeping the same number of work-
ers prevents such an increase because more hours must be spent reproducing
labour power.74 In the long run, however, the more labour power is saved the
less sustainable capital valorisation becomes. Although capital as a whole
seeks to raise the rate of surplus value, it is really valorised by the mass of sur-
plus value, which in turn depends not just on the rate of surplus value but also
73 Foreign trade and the world market do this in three ways: firstly, through the expansion of
the scale of production; secondly, through the levelling of the general rate of profit be-
tween metropole and colonies, where profit rates are higher because of capital’s lower
organic composition; and lastly, through the sale of goods in backward countries at pro-
duction prices above the value of the goods of the higher composition capitals that have
migrated (Marx 1959, 232–233).
74 This is what leads Marx to assert that absolute surplus value is not a stage in capital ac-
cumulation but a tendency that capital will never abandon, thus limiting any scope for
reducing working hours as productivity increases: “The tendency of capital is, of course,
to link up absolute with relative surplus value; hence greatest stretching of the working day
with greatest number of simultaneous working days, together with reduction of necessary
labour time to the minimum, on one side, and of the number of necessary workers to the
minimum, on the other. This contradictory requirement, whose development will show
itself in different forms as overproduction, over-population etc., asserts itself in the form
of a process in which the contradictory aspects follow closely upon each other in time.”
(Marx 1973: 645).
the number of workers. The mass of surplus value is given by multiplying the
number of workers by the number of surplus hours. Therefore the point comes
when reducing the number of workers, who are the source of extraordinary
surplus value and the increased rate of surplus value, renders the capitalist
system incapable of producing enough value to valorise the capital invested.
But this contradiction between the rate of surplus value and the mass of
surplus value only risks becoming truly explosive for historical capitalism over-
all when the number of productive workers in the modern world system starts
to fall in absolute terms.75 As we show in the next chapter, this happened when
the techno-scientific revolution fanned out worldwide and brought us global-
ization in the 1970s. But before analysing that we should consider the concept
of productive labour, so crucial to Marxist political economy and the issue of
the falling rate of profit tendency.76
For Marx, productive workers have two distinct characteristics. Firstly, they
generate surplus value and valorise capital. This means they take part in com-
modity production by adding use values essential to said production.77 With
the development of collective labour, they can do this even without directly
putting their hand to the object. The second characteristic of productive work-
ers is their subsumption to capital, i.e. the labour process is under capital’s
despotic control. This describes the situation whereby productive workers are
subjected to the decisions of the capitalist command structure. They are em-
ployed by that structure and by the productive forces which end up owning it
and symbolising capital’s collective power.78
75 This can be seen in a pure form by the rise in unemployment and underemployment
rates. One empirically significant feature of this historical process is the decline of pro-
ductive labour as workers are displaced towards low productivity sectors. As competition
depreciates the mass of values these sectors produce, they make only a limited contribu-
tion towards producing the surpluses required to valorise the global mass of accumulated
capital.
76 We do not intend to examine this issue in detail here but just to note some of the points
relevant to our discussion made by Marx in The Process of Production of Capital, Draft
Chapter 6 of Capital (in Marx 1976), and over the three volumes of Capital (1959, 2013).
77 Upkeep and restoration activities should also be included in the production of use values,
as they represent an addition of value essential to physically preserving the commodity.
78 Ruy Mauro Marini rightly argues that the unpublished Chapter 6 of Capital cannot be
given the same weight as the rest of the work because it is a draft which was left out of
Marx’s definitive version. The problem with the chapter is that it treats the capitalist’s
duties as productive labour, whether performed directly or delegated, because they form
part of the collective labour process realised in the product. This appears in the well-
known passage where Marx counts supervisors and even capitalists themselves as pro-
ductive workers: “As the director of the labour process the capitalist performs productive
labour in the sense that his labour is involved in the total process that is realized in the
product” (Marx 1976: 1048).
Marx’s proposition here contradicts his more general statements on the subject,
which define productive labour as that which produces surplus value and is subsumed to
capital. Marini argues that we must distinguish between capital’s productive functions,
defined by Marx as direction, coordination and supervision, and the other functions of
the labour process, which represent what the working class does. With the development
of capitalist production processes, these functions of capital were allocated to individual
workers whose wage usually incorporates a portion of the surplus value produced by the
workers:
“Without ignoring the economy, a first step towards clarifying what the working class
is would be to go back to the wage labourer’s original role; in other words, whether it in-
volves performing the function of the capitalist, which Marx summarises as direction,
coordination and supervision. If so, then obviously wage labourers cannot be seen as part
of the working class, even if their salary, education, customs and social environment
make it look like they are.” (Marini, 1998).
However, with the socialisation of the labour process this work of direction, social
coordination and supervision is increasingly assigned to key segments of the working
class and its organisations (as with Toyotism) rather than to a specific group of workers
that acts on it. But as long as these workers are ultimately subjugated by a despotic capital
that determines what, where, when and how much to produce, their activity represents
productive labour. It would appear that the tendency for workers to take on capital’s
productive tasks will eventually lead to a crisis of productive labour under capitalism as
capital’s specific functions and the institutional framework regulating surplus value pro-
duction are eliminated. But such a process would require the working class to accumulate
enough power to threaten despotism. Until such a point is reached, the quantity and in-
tensity of the labour transferred to capital will continue to increase. For a perspective that
highlights the rise in labour exploitation see Antunes (1995, 2012).
appears when the value of labour power79 decreases, which happens in two
ways:
a. When labour productivity increases, it cheapens the products workers
must consume in order to reproduce their biological ability to expend
energy;
b. When workers’ duties are simplified by eliminating intellectual labour
and by making manual tasks less complex, their absolute or relative con-
sumption needs in respect of the education, culture and subjectivities
that go into producing labour power decline sharply, fast losing pace with
the increase in productivity. Simplifying the knowledge needed by the
labour force to work normally also helps create a large industrial reserve
army and adds to the downward pressure on wages.
This is why Marx always saw industrialisation as representing both the perfect
basis for capitalism as a mode of production and the limits of its productive
forces. By industrialising, capital develops a warped version of the division of
labour, in which the greater productivity achieved by planning and coordinat-
ing individual work is accompanied by the absolute or relative deskilling of the
labour power of the great mass of workers, who are excluded or marginalised
from the civilisational complexity of capitalist industrialisation.
The progressive elimination of predominantly physical labour puts capital
on a road to nowhere. It cannot replace this kind of labour en masse with
mainly subjective labour because that would imply going in the opposite di-
rection to industrialisation. In other words it would mean raising the value of
labour power and so bringing it closer to the value of labour, since bringing
the labour force up to its full capabilities, as defined in an abstract way by
subjectivity, would require full access to the productive forces unleashed by
humanity.
Marx was therefore right to limit productive labour essentially to physical
work. That is not to say scientific work cannot be subsumed to capital,80 but
79 To understand this it should be made clear that capitalism transforms labour power into
a commodity just like any other, whose price is equal to the cost of its production. This in
turn corresponds to the value of the elements needed to produce or reproduce it, i.e. what
it must consume in terms of food, housing, transport, education, health, recreation, etc.
80 Marx’s concepts of collective labour and the indirectly productive labourer or worker (Capi-
tal Volume 1, Chapter 16) open the way for the subsumption of scientific labour to capital:
“As the co-operative character of the labour-process becomes more and more marked, so,
as a necessary consequence, does our notion of productive labour, and of its agent the
productive labourer, become extended. In order to labour productively, it is no longer
necessary for you to do manual work yourself; enough, if you are an organ of the collective
labourer, and perform one of its subordinate functions” (Marx 1974, 476). But in the Grun-
drisse Marx is far more explicit on this issue. Sedi Hirano shows that he addresses the
subsumption of scientific labour to capital in his analysis of the work in “Política e econo-
mia como formas de dominação: o trabalho intelectual em Marx”(Hirano 2001).
81 The meaning of value of labour power is assumed in the Grundrisse and then fleshed out
in Capital.
82 “The kind that would cost nothing, but merely needed to be appropriated by capital,
would have the maximum value for capital. It follows from the simple proposition that
machinery is most valuable for capital when its value =0, that every reduction of its cost
is a gain for capital. […] Its use value is precisely that it increases the productive power of
labour, decreases necessary labour, and increases relative surplus labour and hence sur-
plus value.” (Marx 1973, 766).
The exchange of living labour for objectified labour – i.e. the positing of
social labour in the form of the contradiction of capital and wage labour –
is the ultimate development of the value-relation and of production rest-
ing on value. Its presupposition is – and remains – the mass of direct
labour time, the quantity of labour employed, as the determinant factor
in the production of wealth. But to the degree that large industry devel-
ops, the creation of real wealth comes to depend less on labour time and
on the amount of labour employed than on the power of the agencies set
in motion during labour time, whose ‘powerful effectiveness’ is itself in
turn out of all proportion to the direct labour time spent on their produc-
tion, but depends rather on the general state of science and on the prog-
ress of technology, or the application of this science to production. […]
Capital itself is the moving contradiction, [in] that it presses to reduce
labour time to a minimum, while it posits labour time, on the other side,
as sole measure and source of wealth. Hence it diminishes labour time in
the necessary form so as to increase it in the superfluous form; hence
posits the superfluous in growing measure as a condition – question of
life or death – for the necessary. On the one side, then, it calls to life all the
powers of science and of nature, as of social combination and of social
intercourse, in order to make the creation of wealth independent (rela-
tively) of the labour time employed on it. On the other side, it wants to
use labour time as the measuring rod for the giant social forces thereby
created, and to confine them within the limits required to maintain the
already created value as value. Forces of production and social relations –
two different sides of the development of the social individual – appear
to capital as mere means, and are merely means for it to produce on its
limited foundation.
marx 1973, 704–706
83 In probing the meaning of the French Revolution, Immanuel Wallerstein notes that it was
the modern world system’s first ideologically antisystemic force, but that the slogan of
“liberty, equality, fraternity” never became a substantive reality under capitalism. See
Wallerstein (2011a, 1995a, 1999a, 1999b).
84 The restricted consumption of material goods limits the decreasing rate of utilisation of
physical resources described by István Mészáros in Beyond Capital (2002) and which con-
cerns the underutilisation of resources to deal with the pressures of capitalist competi-
tion and its drive to sell commodities.
the general powers of the human head. With that, production based on
exchange value breaks down, and the direct, material production process
is stripped of the form of penury and antithesis. The free development of
individualities, and hence not the reduction of necessary labour time so
as to posit surplus labour, but rather the general reduction of the neces-
sary labour of society to a minimum, which then corresponds to the artis-
tic, scientific etc. development of the individuals in the time set free, and
with the means created, for all of them.
marx 1973 : 705–706
Marx’s theory of capitalist collapse rests not only on economic criteria but also
articulates other aspects of the production of human existence. The clearest
evidence for the falling rate of profit lies in the contradictions between the re-
lations of production and the productive forces, as manifested by capital’s in-
ability to fully incorporate the scientific and technological revolution.85 This
empirical fact has been clearly visible ever since the scientific-technological
revolution went worldwide in the mid-1970s, consolidating globalization. Per-
sistently high unemployment – even during the expansive phase of the new
Kondratiev cycle – and capital’s dogged resistance to shortening the working
day in the face of the absolute decline in productive labour both indicate how
hard it is for capital to reforge labour relations on a foundation of skilled and
intensive labour, education, and democratic relationships.
In the next chapter we tackle this issue from a broader thematic vantage
point, asking how globalization has acted on the modern world system and
historical capitalism in such a way as to bring about their crisis and final super-
session in the interval between 2015/2020 and 2045/2050.
85 The theory of the techno-scientific revolution developed by Radovan Richta in the late
1960s, discussed in more detail in the next chapter, is broadly supported by Marx’s theory
of the falling rate of profit. That is why we examine it in light of the crisis of the modern
world system.
We saw earlier that as a concept, globalization has yet to receive the treatment
it deserves. Rarely is it conceived of dialectically, as a process that both articu-
lates and confronts radically different productive structures and forces. Instead,
it is usually understood it as a process that has already been or is becoming
institutionalised. The most adventurous approaches portray globalization as a
new era dominated by capital, in which a global productive system driven by
financial capital is being consolidated under the guidance of networked busi-
nesses or capital in general. Others define it as the advanced stage in the long-
term development of the world system. It has also been seen as a new stage
that will be led by international regimes anchored in the shared hegemony of
the world-economy’s most powerful states. Alternatively, it is understood as
the globalization of financial capital as it submits the world economy to a re-
gime of permanent depression. But these approaches only account for mo-
ments or certain potentialities of the process and fail to reconstruct it as a
practical-theoretical totality.
In this work we understand globalization as a revolutionary process that
brings the capitalist mode of production and its legal, political and ideological
superstructure up against a new structure of productive forces that it cannot
fully absorb. In this sense globalization designates a civilisational transition
that exhausts the limits of capitalist existence but requires the foundations of
a planetary civilization to be built in order to complete its course.
Globalization picked up pace thanks to the worldwide diffusion of the
techno-scientific revolution. The techno-scientific revolution was a concept
developed in Eastern Europe and the Soviet Union. Its most paradigmatic ex-
pression was Civilization at the Crossroads (1969) by the Czech writer Radovan
Richta – a work with echoes of the Prague Spring and a socio-political envi-
ronment that encouraged people to question the bureaucratic restrictions on
socialist societies. Richta systematised Marx’s view of capitalism as a mode of
production whose productive forces have their basis in the Industrial Revolu-
tion. Theotonio Dos Santos did much to disseminate and develop Richta’s
1 Theotonio Dos Santos’s work on the techno-scientific revolution (1977b, 1979b, 1983, 1987,
1990, 1994c, 1995b) also led him to consider the role of the productive forces in the world to-
day in theoretical-methodological terms. See Forças produtivas e relações de produção (1984).
2 The English translation of Richta (1969) uses the term “aggregate worker” in this regard –
Trans.
3 We saw earlier that this is exactly the situation Marx describes in the Grundrisse when he
remarks that science becomes a productive force that cannot be measured by the labour re-
quired to produce it. This contradiction between science and value is what allows him to
claim for science the same condition of gratuitousness offered by nature. It is key to under-
standing the concept of social returns of innovation in the contemporary world economy,
which shows how the trend towards diffusion outweighs the innovator’s capacity for private
appropriation.
capitalism enters a new stage of seriously deviating from the law of value be-
cause, increasingly, appropriation has become a condition of surplus value
production, reflecting the axial shift in the relations of production towards
property relations. As we explain in the next section, the current crisis stage of
the modern world system and historical capitalism will probably rely on inten-
sified inter-capitalist competition and ever closer relations with the State to
enable the transfer of enough surplus value to valorise innovative capital. As a
result, accumulation is accompanied by a massive destruction of capitals that
slashes potential global economic growth, ratchets up unemployment, and
creates the conditions for the prices of labour power to fall below its value, in-
corporating skilled labour into the productive process – albeit to a limited
extent.
Richta locates the origins of the techno-scientific revolution in the conjunc-
ture lasting between the 1940s and 1960s but limits it to the central countries.
We would argue that in the 1970s/1980s it extended across the whole of the
global economy. Using the indicators used by the Groningen Growth and De-
velopment Center,4 and drawing heavily on Angus Maddison’s methodology,
we find that from those years onwards both the absolute and relative numbers
of workers employed in manufacturing began falling significantly.5
During the 1970s and 1980s the techno-scientific revolution generalised the
microelectronic paradigm, laying the material foundations for globalization.
The automatic principle took root in the world-economy and work moved
4 Available at <http://www.maddisonproject.net/>.
5 Between 1950 and 1970, the number of workers in manufacturing in the United States rose
from 79.6 to 100.4; in Great Britain from 146 to 161.3; in West Germany from 74.9 to 113.3; in
France from 107.9 to 120.8; in the Netherlands from 106.3 to 125.1; in Japan from 46.3 (1953) to
94.7; in Canada from 68.8 to 91.7, and in Spain from 59.3 to 101.1. From that point on the index
experienced a downward inflexion or else grew at a far slower pace, indicating either an ab-
solute or relative reduction of workers in manufacturing. Thus between 1970 and 2000 the
index fell to 96.4 in the United States; 82.6 in Great Britain; 79 in West Germany; 86.2 in
France; 93.9 in the Netherlands, and 88.9 in Japan. It grew but at a slower pace in Canada and
Spain, reaching 109.3 and 108.1 respectively.
Growth in the number of workers has also slowed considerably in semi-peripheral and
peripheral countries. If we take 1990 as the year when the value of the index stood at 100, we
find that in Brazil its value rose from 24.6 in 1950 to 82.2 in 1998; in China from 13.8 in 1952
to 95.1 in 1999; in Korea from 12.4 in 1963 to 81.6 in 1999; in India from 51.7 in 1960 to
100.1 in 1998, and in Taiwan from 19.4 in 1963 to 100.1 in 1998. In Mexico the index con-
tinued along an accelerated trajectory that rose from 27 in 1950 to 120.5 in 1999, although
it weakened in the first half of the 1990s. The Mexican case reflects the country’s ongoing
integration into the US system of production and the importance of the maquiladoras in re-
ducing the cost of producing US goods. Data available at http://www.rug.nl/research/ggdc/
data/icop-industrial-database-1987-benchmark.
6 Despite the growing number of strategic agreements between firms from the world econo-
my’s financial powerhouses, US companies, which lead the world in research and develop-
ment expenditure, made just 11% of their R&D investments abroad. See National Science
Foundation (2002, 4–92).
According to unctad (2005), companies have only internationalised R&D to a limited
degree, with expenditure abroad in this area rising from 10% to 16% of total investments
between 1993 and 2002. US firms register below-average rates of internationalisation, with
just 13% of their said expenditure going abroad.
7 In “Proceso y tendencias de la globalización capitalista” (1996), Ruy Mauro Marini argues that
the globalization of the world economy has extended super-exploitation – a form of repro-
duction of labour power typical of dependent countries – to the global economy as a whole.
In Chapter 6 we examine this more closely from a theoretical standpoint. It is hard to empiri-
cally verify such trends across the whole of the global economy. Wage indicators are limited
in their accuracy as they tend to include the wages of both workers and managers (oecd
2002). In the case of the United States, however, the Bureau of Labor Statistics indicators re-
ported in the Economic Report of the President are conceptually more reliable as they reflect
the wages of workers without supervisory or management responsibilities. This data backs
up our thesis. The US is a country whose per capita gdp growth between 1973 and 2001 was
higher in the United States than in the twelve leading European countries. It can therefore be
cited as a prime example of super-exploitation spreading to central countries.
Based on the dollar’s value in 1982, hourly earnings in the US peaked in 1972 at US$9.26.
After that they sank to their lowest level in 1993, when they fell to US$7.78. The economic
recovery failed to fully restore wage levels, and fifteen years of growth only brought hourly
pay up to US$8.90 (2009) – lower than in 1972. If we look at weekly wage packets the out-
come is even worse. Weekly earnings peaked in 1972 at US$341.80. They then declined sig-
nificantly, falling as low as US$266.40 in 1992. The new Kondratiev cycle in the US economy
then raised wages to US$294.30 in 2009, but this was still less than in 1964. Super-exploita-
tion is clearly present even before we factor in other indicators such as the workforce’s in-
creased years of schooling or the intensification of work over the period in question. See
Council of Economic Advisers (2010b).
For Europe and the oecd, one indicator pointing in a similar direction is the share of
wages as a part of gdp, although its very broad definition of wages makes it an insufficient
indicator by itself. Between 1980 and 1982, wages corresponded to 54.7% of gdp in the euro
area, falling to 48.7% by 2001. This collapse was especially notable in France, where earnings
fell from 52.9% to 42.4% (oecd 2002, 229).
8 Here we differ in our understanding from Robert Kurz (1992), for whom capitalism is already
in decline and depression owing to the irreversible tendency of the rate of profit to fall. Kurz’s
analysis is based on the fact that productive labour is in absolute decline, thus reducing the
amount of surplus value produced, which is then insufficient for valorising capital. This argu-
ment has the merit of pinpointing one of the biggest threats to historical capitalism: the de-
cline of productive labour. But he does not work into his account the countertendencies
capital has used to offset this decline by generalising super-exploitation and tying it to an
increase in the value of labour power, thereby expanding State intervention and integrating
the old Soviet bloc, Eastern Europe and China into the world market. These countertenden-
cies have allowed a new upswing period to develop in the world economy, but they will not
be enough to respond to the diffusion of automation in the decade ahead.
which lie at the heart of Marx’s vision of the new stage of organisation of the
productive forces and the constitution of the social individual, cannot fully
compensate for this decline. Since the late 1970s this situation has been re-
flected in the world-economy’s high rates of unemployment and underem-
ployment (precarious work concentrated in low productivity sectors), and in
the low rate of increase in skilled jobs.9 But the crisis of surplus value produc-
tion is also accentuated by another law discovered by Marx and described in
the Grundrisse and Capital: the lower the proportion of paid labour making up
the working day, the more modest the increase in the rate of surplus value. This
is how capitalist development sows the seeds of its own collapse. The valorisa-
tion of capital is based on the falling value of labour power, Therefore as labour
power shrinks as a proportion of the working day, the lower the rate of capital
valorisation relative to the increase in the technical composition. This occurs
because productivity increases act upon an ever-smaller denominator of the
fraction making up the rate of surplus value. If such a law worked in favour of
accumulation during the early stages of capitalist development, it has proved
a major obstacle to its expansion in its twilight years.10 It becomes even more
contradictory if we consider that capital moves around in pursuit of extraordi-
nary surplus value, which redistributes the global mass of surplus value to the
benefit of an individual capital but without that mass increasing.
The fight over extraordinary profit turns ferocious during this conjuncture
and demands a new institutional architecture. Individual capital confronts
this situation by increasing the mass of surplus value added over the working
day. It does this in two ways. On the one hand, it increases skill levels, work
intensity and the mass of collective labour, as well as encouraging new forms
of social combination and the concentrated monopoly power to assimilate
9 In 1998 researchers represented 0.6% of the workforce as a whole across the oecd, with
an annual growth rate of 3.9% (oecd 1998, 2001).
10 We can illustrate these trends through two hypothetical situations: A and B. In situation
A, a ten-hour working day is split into two hours producing surplus value and eight hours
reproducing labour power, and an increase in the technical composition of capital dou-
bles productivity over a given period of time (x). During that period, the proportion of the
working day devoted to surplus value production triples from two to six hours, rising at a
faster rate than the increase in the technical composition. In situation B the reverse hap-
pens: the ten-hour workday is divided into eight hours of surplus value production and
two hours of reproduction (of labour power). Here, if productivity were to double, the
part of the workday devoted to surplus value production would increase to nine hours, a
12% rise, while the technical composition would increase by 100%, forcing an increase in
the organic composition of the capital that would make it impossible to maintain the
same rate of profit.
them. On the other, it resists pressure to reduce the working day. That option,
however, is inadequate and limited.
As seen, workers formed by the techno-scientific revolution should resem-
ble the social individual, just as the logic of the productive forces dictates.
Hence the greater their productivity and reproduction costs, the more they
should partake of the wealth created. Increasingly, the value of labour power
includes access to symbolic goods, dense in immateriality and subjectivity, and
is determined by historical and moral factors. If supply and demand were
evenly matched, this situation would lead to a progressive decline in the rate of
profit. To avoid that outcome, capital restricts the demand for labour power,
and in so doing generalises super-exploitation in the world economy.11 The
forms of social combination that improve skills and intensify work limit its
generalisation, and their diffusion tends to undermine the profit rate. Benja-
min Coriat (1991) thought that Toyotism would replace Fordism as a means of
regulating labour power, but in practice it encountered serious limits on its
ability to expand quite as successfully.
Toyotism augments both the intensity of labour and the mass of value each
worker contributes. It consumes not just their physical strength but, increas-
ingly, their intelligence, initiative and creativity. In order to encourage this
tendency work must be reorganised around new business planning and man-
Under Toyotism employees are retained via consent rather than coercion.
The seniority-based wage system is the best way to achieve this because it cre-
ates an expectation among workers that they will stay with the same firm.
Workers who leave are penalised in the form of a large wage cut because of the
years of service lost when starting afresh elsewhere. Lifetime employment and
seniority-based wages become the basis of internal labour markets, which en-
sure continual progression up a wage and skills ladder. Seniority-based salaries
tend therefore to equate to age-based salaries. This fits with training structures
that enable workers to pick up skills and qualifications over time, either in the
workplace itself or through formal education. Finally, early retirement at 55–
60 years old facilitates promotions, fosters creativity and prevents individuals
from monopolising certain roles within organisations.
Nonetheless, there are limits to this democratised management structure. It
does not for example embrace financial administration within companies,
where strategic decision-making is concentrated. Coriat admits there is a lack
of wider participation in planning what to invest in and where, and what to
produce. Furthermore, Toyotism’s reach is limited – even in Japan it covered
just 30% of the labour force by the early 1990s. In Japanese Capitalism in Crisis
(Boyer and Yamada 2000), Coriat and other members of the Parisian regulation
school12 accept that the chances of Toyotism becoming the dominant mode of
management in the current stage of capitalism are limited. They argue that the
Japanese crisis is one of a mode of ‘régulation’ and cannot be resolved through
Keynesian anti-cyclical policies but by forging a new accumulation regime
that combines Toyotism with other forms of market-based labour regulation.13
They therefore posit a third way between a Toyotism founded on institutional
and social compromises and a neoliberalism based on market relationships:
12 The leading figures among the Parisian regulationists include Michael Aglietta, Robert
Boyer and Benjamin Coriat. Another group came out of Grenoble, led by Gerard de
Bernis.
13 As Boyer and Yamada put it in their conclusions: “Basically, a régulation mode enters into
crisis when existing institutional forms put forward economic adjustments that threaten
their stability and viability. This is precisely the process which the Japanese economy has
been undergoing since the early 1990s (…) The jwln (Japanese Wage-Labour Nexus –
C.E.M.] is unable to deliver a dynamic recovery of the profitability of the firms, nor does
it seem viable in the long term to an increasing number of firms and wage earners. The
discussions of the ‘end of life-time employment,’ the incompatibility of seniority wage
with a slow-growth economy or the inability of large corporations to nurture the talents
required by the information-led production paradigm, point out these limitations” (2000,
197–199).
The regulationists make the crisis of the financial regime the main focus of
their attention. Their analysis of the Toyotist production regime looks not only
at how the labour process is regulated but also at the regime’s financial under-
pinnings. They show that in relying on full employment, skills development,
and internal labour markets, Japanese capitalism prioritised planning and a
long-term approach. In order to institutionalise labour relations it had to radi-
cally reappraise the criteria traditionally applied to financial resources, which
were based on market practices and the competition to achieve immediate
results. A financing system was therefore developed in Japan whereby banks
lent to companies at artificially low interest rates in exchange for sharehold-
ings, which gave them a quota of investment profits. This created relationships
based on mutual trust. Firms were free to develop projects, but the banks mon-
itored their implementation and results. When such projects failed, the banks
would intervene to save enterprises with measures aimed at restoring them to
good operating health. That said, private banks could ultimately rely on a gov-
ernment safety net in the shape of anti-competition laws, as well as expansive
monetary policies, low interest rates and state help with risk management.
The regulationists argue that the disintegration of this financial regime be-
gan in the late 1970s and continued into the next two decades. This was a result
of both internal and external factors. Internally, slower economic growth in
the mid-seventies deepened the public deficit. The government responded by
issuing bonds, but this created a secondary market, which undermined the
intermediary financial role played by the major banks. Businesses were happy
to see this happen because of the high amounts that banks charged them in
return for long-term financial support for their projects. At a time of diminish-
ing long-term growth prospects, firms had started to view this support more as
an expense than a means of leverage. Externally, the US pressured into Japan
into deregulating its financial market and capital accounts. This all led to the
yen’s appreciation, a less competitive Japan, and falling profit rates (Nabeshi-
ma 2000, 104–116; Coriat, Geoffron, and Rubinstein 2000, 177–178).
The financial regime’s crisis triggered the decline of a Japanese system of
innovation better suited to catching up than to retaining technological leader-
ship. The Parisian regulationists revisited their theories to emphasise the obso-
lescence of a system that back in the early 1990s some, notably Coriat, had seen
as paradigmatic. They point to underinvestment in basic research, over-
reliance on private sector funding for R&D, an overemphasis on product devel-
opment and differentiation at the expense of lower production costs, and the
patent system’s failure to fully protect technological inventions and innova-
tions. In terms of the wage-labour relation, they note that less weight is now
attached to criteria such as lifetime employment and the seniority system and
more to personal performance and individualised salaries. This is justified by
the increase in average employee age and the need to incentivise individual
creativity (Coriat, Geoffron, and Rubinstein 2000, 175–191).
The regulationists make a key contribution to our understanding of the Jap-
anese crisis. But their analysis ignores the mode of régulation’s wage-labour
nexus with little by way of explanation. We would argue that a more careful
assessment of the Japanese crisis would identify its core determinants as being
wage-labour relations (on the domestic front), and the crisis of US hegemony
and the particular form it assumed in the mid-1980s (globally).
We saw earlier that Japan developed during the 1950s and 1960s partly by
invitation. It belonged to a strategically important region in Cold War terms
and experienced a ‘progressive’ US occupation, which promoted major agrari-
an reform and the formation of an industrialising local elite. This elite organ-
ised and negotiated a regional alliance in exchange for development being
imposed with conditions that went beyond what the US had planned for.
Japan protected its domestic industry from being penetrated by foreign capital,
built up an export-based economy by undervaluing the yen and earned foreign
exchange by hosting a US troop presence. The destruction of trade union op-
position in the 1950s, a development-friendly context and the precarious mate-
rial conditions of the working class helped the Japanese ruling classes achieve
high rates of profit. It was in this context of international support for Japan’s
efforts to restore its relative power in the world-economy, combined with
odest employee wage demands, that Toyotism took root. But as it was further
m
developed and perfected, so these initial conditions of compromise and low
wage demands broke down.
The regulationists’ own indicators illustrate the relationship between the
rate of profit and the relative growth of the wage mass as a share of output.14
The profit rate peaked between 1965 and 1969, rising from an index of 16.9% to
25.3%. During the same period the wage mass increased by 65% of the rise in
labour productivity. Then between 1969 and 1973 the profit rate began to slow,
hitting a low of 18.3% as the increase in the mass of wages outstripped that of
productivity by 139%. In 1973–1975 the rate of profit plummetted to 11.8%. This
was mainly due to the wage mass growing by 575% of the increase in produc-
tivity. The profit rate recovered between 1975 and 1980, albeit not to previous
levels. This increase was caused by the slowdown in the growth of the wage
mass, which reached just 59% of productivity growth. The economy then expe-
rienced sustained growth as the profit rate rose to 14.4% and continued to fluc-
tuate just below that figure for the rest of the 1980s. Thus between 1980 and
1985 it fell to 12.9% as the wage mass increased by 109% of the rise in productiv-
ity. Then in 1985–1988 it edged up to 13.4%, partly because wages expanded at
a lower rate than productivity (84%). Finally, the profit rate slumped once
again between 1988 and 1994, this time as low as 8.3%, thus triggering the crisis
which led to the collapse of the Japanese economy. The decisive factor in this
turn of events was the high ratio of wage expansion to productivity, which
reached 261% (Uemura 2000, 144).
Wage mass growth certainly did outstrip productivity growth and drive
down the profit rate as the Toyotist regime expanded from the late 1960s on-
wards. But that trend alone would not have sufficed to plunge the Japanese
economy into crisis and prolonged stagnation15 had it not combined with the
hegemonic crisis of the 1980s. Japan benefitted not only from the political
regulation of Asian capitalism during the Cold War but also from the finan-
cialisation of the world economy from 1979 onwards, which was fuelled by the
dollar’s overvaluation. Between 1978 and 1985, the yen depreciated against the
dollar and rose from 210.4 to 238.4 per dollar, peaking at 249 in 1982. But the
Reagan administration was compelled by its fast-rising current account defi-
cits, especially with Japan, to strengthen the mark and yen against the dollar
and tone down its financialisation strategy of ramping up interest rates and the
14 Hiroyasu Uemura (2000, 143) defines the profit rate as “net profits divided by the gross
capital stock at current prices.”
15 From 1991 until 2002 Japanese annual per capita gdp grew by 0.6%. It then recovered some
of its power to expand, and grew by approximately 2% p.a. in 2003–2008 (Maddison 2010).
value of its own currency. As it plunged deeper into crisis, US hegemony began
losing the political capacity for systemic organisation it had hitherto relied
upon to articulate its own interest with the general interest of bourgeois domi-
nation of the world-economy. Instead, it began imposing its individual interest
at the expense of that articulation, eroding its own ideological legitimacy in
the process. The result was a major shift in US policy towards Japan, whom it
now pressured into liberalising trade and its capital accounts in order to valo-
rise the yen and reduce its trade balances with the US. These circumstances
proved a tipping point for political liberalism, which had used neoliberalism to
channel the Cold War towards economic competition, and so the US withdrew
its invitation to Japan and other East Asian countries to develop (Arrighi 1997a;
Wallerstein 1997; Johnson 1995).
As a result, Japan became considerably less competitive, and the huge inter-
nal efforts it made from the mid-1980s onwards to reduce production costs
could not compensate for having to adapt to the way the world-economy now
functioned. As the rising exchange rate threatened international market pen-
etration, Japanese firms tried to salvage their trading position by slashing prod-
uct prices. As a result, internal wage pressure16 along with external pressure to
adjust to the world-economy seriously undermined the power of Toyotism to
generate economic growth and maintain the profit rate. Its promotion and dif-
fusion as an organisational paradigm in the Japanese economy had only been
made possible by Cold War-induced political regulation of the world economy,
and it was no coincidence that when the Soviet Union fell apart in 1991 the
Japanese economy entered a deep crisis.
Taking the exchange rate, relative export prices, relative labour unit costs
and share in world trade as our indicators, we can see how exchange rate and
wage pressures combined to squeeze the profit rate (oecd 2002).17 In the
years 1985–1990 the yen rose sharply against the dollar as a result of the ac-
tions agreed as part of the Plaza Accord. In 1985 alone it rose from 238.4 to
168.3 yen to the dollar, and in 1990 it hit 145 to the dollar. It was further strength-
ened when Japan applied a policy of financial liberalisation in the 1990s, peak-
ing at 93.9 to the dollar in 1995 before devaluation brought it back to 121.5 yen
in 2001, when the country was in the throes of the post-1998 depression and
spiralling unemployment. Export prices were driven up but much less so than
16 Between 1980 and 1982 the share of wages in the Japanese business sector was 66.1, falling
to 60.2 between 1990 and 1992. It did however reach higher levels between 1992 and 1995.
The figures for the oecd as a whole were a lot lower at 54.8 between 1980 and 1982 and
51.5 between 1990 and 1992 (oecd 2002).
17 See Brenner (1998) for an interesting analysis of the Japanese crisis.
the exchange rate. Thus between 1985 and 1995 they rose from an index of 71.8
to 100, and sustained their level with fluctuations until they reached 100.5 in
2001. Over the same period, relative labour unit costs rose from an index of
49.2 to 100. This was succeeded by a dip which nonetheless did not hold, and
the index bounced back to 80 in 1997 and 97.3 in 2001.
Of all these indicators the exchange rate presents the most variation, closely
followed by labour unit costs. Export prices show the least variation. Because it
tried to limit price variation, Japan was unable to keep its exports competitive.
Falling profits led to less investment and a widening technological gap. As a
result, Japan’s share of world exports fell from 10.5% in 1986 to 6.5% in 2001.
We would conclude at this point in our analysis that Toyotism did not fail
in Japan because it was too weak to generate technological progress and lead
the next stages of the productive forces, but rather the opposite: Toyotism’s
development was blocked because its profit rate was seriously eroded by hav-
ing to adapt to the dynamics of the systemic cycle and by the stronger bar-
gaining power it conferred upon the working class. Toyotism’s institutional
cornerstones – lifetime employment, internal labour markets and democra-
tised labour relations – are a powerful means of achieving technical progress.
But capitalism cannot entertain a sustainable relationship with such arrange-
ments, and so seeks a hybridised setup, which adapts them to the more old-
fashioned institutional relationships associated with the market and Fordism.
In this sense hybridisation represents a big step backwards theoretically for
the regulationists following their ground-breaking work in the 1980s and
1990s. Toyotism did not follow anything like the same course as Fordism be-
cause its progress was blocked and it was prevented from fulfilling its poten-
tial. Fordism took shape in the United States from 1910 onwards, maturing in
the thirties and developing across the world economy in the 1940s–1960s. It
lasted about sixty years as a regime of accumulation before reaching a turning
point. In contrast Toyotism took just thirty years from its beginnings in the
1960s to reach its own tipping point in the late 1980s.
The Japanese crisis is linked to the crisis of surplus value production and
the rate of profit’s renewed tendency to fall as the scientific-technological revo-
lution goes global. The decline in Japanese productivity is directly related
to lower rates of investment.18 During the 1980s investment stood at around
30% of gdp, reaching 32.4% in 1991. It then dropped to 28.1% in 1994 and
25.9% in 2000 because Japanese capital, took advantage of its prerogative over
18 Between 1980 and 1990, Japanese productivity expanded by 2.7% – well above that of the
United States (1.4%) and the oecd (1.8%). Between 1991 and 2002 it fell to 0.9% (oecd
2010).
into superprofits is the main force driving the expansion of historical capital-
ism, and its crisis, due to lack of demand, requires compensatory mechanisms.
One such mechanism consists of a political intervention by the State to trans-
fer values within the structural limits imposed by the dynamics of productive
capital. Although the current expansive phase of the Kondratiev cycle is regu-
lated by the rate of profit, it relies on the formation of fictitious capital to
generate superprofits. However, unlike in the previous recessive phase, when
financialisation predominated, fictitious capital can only be formed with the
help of the productive sector. The articulation of the two prioritises profit rates
over interest rates and ultimately needs the state to guarantee that productive
asset-related investments are valorised. The other compensatory mechanism
lies in the expansion of the international circulation of capital and commodi-
ties in search of new sources of demand and realisation. But such a process
implies serious contradictions.
Under capitalism, the pure logic of accumulation points towards consump-
tion becoming ever more concentrated in individual capitalists and private
enterprises – even when workers and the State account for a large share of the
market. This trend creates difficulties for surplus value realisation because it
places quantitative restrictions on exchange, leading to a risk of overproduc-
tion in the capitalist economy. Such a risk can only be averted if the volume of
exchanges involving business units and individual capitalists increases enough
to compensate for such restrictions.
This contradiction, which threatens surplus value realisation, threatens to
explode over the course of the emerging Kondratiev cycle. According to the
oecd’s classic study of the influence of the microelectronic paradigm on capi-
talist reproduction (oecd 1991), information technologies transform oligopo-
lies into globalising structures that dominate not just national markets but
international ones too. This process involves a battle between oligopolies ex-
pressed through their mutual capacity to penetrate different national markets
which propels capitalism towards a situation where the destruction of capital
has an impact on many of the monopolies themselves. The new ascending
phase of the Kondratiev cycle is marked by this fierce competition and capital
destruction. Inter-monopoly exchanges are consequently far less likely to off-
set the quantitative restrictions on exchange.
Historically, capitalism has responded to crises of realisation, production
and surplus value appropriation by ratcheting up state spending. But such a
response comes up against its own social, political, economic and ideological
limits. As capitalist reproduction comes to depend more than ever on politi-
cal interventions in the economy, so we see a weakening of the structural
asymmetry capital created between politics and the economy. Capital’s basic
20 To measure the importance of this phenomenon the oecd developed the concept of
the social returns from innovation, although it failed to draw out all of its theoretical-
methodological and prospective implications (oecd 1991).
21 “Incidentally, a distinction should be made between universal labour and co-operative
labour. Both kinds play their role in the process of production, both flow one into the
other, but both are also differentiated. Universal labour is all scientific labour, all discov-
ery and all invention. This labour depends partly on the co-operation of the living, and
partly on the utilisation of the labours of those who have gone before. Co-operative la-
bour, on the other hand, is the direct co-operation of individuals.” (Marx 1959, 103).
technology addresses this issue, and the notion of social rates of return from
innovation has been used to measure diffusion in the modern economy. This
concept was originally developed by Zvi Griliches and Edwin Mansfield in the
1970s and 1980s, and by the 1980s/1990s it had become highly influential. The
oecd devoted a chapter to it in the paradigmatic study of technology referred
to earlier, and later produced a selected bibliography on the topic (oecd 1991,
1998). The social returns from innovation refers to how the falling prices of in-
novations benefit consumers at the expense of innovators. This price move-
ment is a result of the competition’s ability to appropriate the technological
knowledge needed to innovate. In a diffusion-based economy both competi-
tors and consumers benefit from the sharp fall in innovators’ profit rates.
Surveys of the literature confirm that the social returns from innovation
have reached levels far beyond those predicted in the 1960s, 70s and 80s (Grili-
ches 1992, oecd 1991). These returns are concentrated in high technology sec-
tors, which are R&D-intensive and technically advanced, the prime example
being the electronics industry.
Diffusion is central to the political economy of modern-day capitalism, but
to take full advantage competitors must develop strategies aimed at closing
the technological gap. In this they are helped by the development of the pro-
ductive forces. At the same time the tendency towards diffusion must be
understood dialectically. Because it contradicts the logic of capitalist accumu-
lation, capitalism responds by trying to compensate for it. Thus enterprises at
the organic core of the world-economy develop strategic alliances that allow
them to expand the social foundations of their work by incorporating exter-
nalities into their competitive structure in order to preserve their capacity for
monopolistic expansion.22 Costs and knowledge are shared, and competition
is reduced to the realm of partnerships, putting even bigger obstacles in the
way of other competitors. Network management, as the literature calls it, has
led to a selective decentralisation of intra-company knowledge and limited
alliance-building to gain advantage in a competitive struggle that will lead to
market monopolies. Unless they involve mergers and acquisitions, these part-
nerships do not eliminate the differences between companies and limit them-
selves to specific activities (oecd 1991). Another response is for the State to
intervene by boosting funding for R&D activities.
Nonetheless, these measures tend to exhaust themselves. This happens for
two reasons. Firstly, because microelectronic trajectories and the technological
22 In 1995, strategic partnerships to develop, produce, distribute and market new technolo-
gies were concentrated in the central countries, mainly the United States, Japan and the
European Union (unctad 1997).
reconversion of the world economy make the social returns from innovation
more intensive and extensive. And secondly, because when peripheral and
semi-peripheral countries apply catching-up policies, they appropriate the in-
ternational diffusion of knowledge inherent to the techno-scientific revolution
by investing in raising labour power value and in its productivity and scientif-
ic/technological training.
Capital concentration develops not only by creating technological monopo-
lies, but also by appropriating the part of the value produced in segments with
a lower technical composition via surplus value appropriation. Capital accu-
mulates via the expansion of the most dynamic branches of production, which
increase their technical and organic compositions vis-a-vis the average across
the economy as a whole. If this sectoral expansion relied solely on its internal
capacity to extract surplus value then it would face problems of overaccumula-
tion, which would drive down the rate of profit. As seen earlier, when the tech-
nical composition of capital in sectors diffusing technical progress rises, so too
does the value of fixed and circulating capital, whilst the relative or absolute
size of the workforce shrinks. This contradiction is resolved by the formation
of prices of production, which allows capital from the more dynamic segments
of higher organic composition to migrate towards those with lower technical
composition and higher profit rates, thus overcoming the obstacles standing in
the way of its valorisation.
With this shift, capitals of a higher composition transfer some of their tech-
nological assets to segments with a lower composition, introduce or develop
the international division of labour, and compare values across sectors. In
higher composition sectors this ends up cheapening production costs and
boosting profit rates because technological decentralisation devalues and de-
preciates products from lower composition sectors, driving them towards
those of higher composition. The component parts of constant and variable
capital in higher composition segments can in this way be cheapened. Con-
versely, the lower composition sectors see an increase in production costs and
technological heterogenity and the devaluation and depreciation of their
products, and lose surplus value to the sectors which fuelled the formation of
prices of production. In addition, the integration of markets brought about by
prices of production enables capital of a higher composition to expand the
workforce. As a result, capital of a higher composition appropriates part of the
surplus value created by that of a lower composition.23
23 Henrik Grossman examined this issue in detail, arguing that capital exports from imperi-
alist countries should primarily be understood as a means of compensating for the rate of
profit’s tendency to decline. However we find no grounds to claim, as others have, that the
This migratory movement could not happen without capitals from the pe-
ripheral and dependent productive sectors resorting to super-exploitation as a
means of mantaining their profit rates, driving the prices of labour power be-
low their value to offset the rate of profit’s tendency to decline (Marini 1973,
1978, 1992a, 1992b, 1996; Martins, 1996, 2009). Super-exploitation plays a crucial
role in sustaining ever greater capital migration and the equalisation of profit
rates.
With its global scales and huge potential vis-à-vis its application to produc-
tive processes, the microelectronic paradigm allows capital to advance this
process. It can do so because it offers a material basis for the de facto levelling
of organic and technical compositions across different branches of production
during the ascending phase of the following Kondratiev cycle – providing the
management of production can be technically integrated, as we saw earlier.
However, this tendency towards the full development of the prices of produc-
tion, inherent to capital accumulation, is contradicted by super-exploitation
and the limits it places on equalising profit rates once the levelling of technical
and organic compositions has reached a certain point.
As Marx notes in Capital, as the organic and technical compositions of capi-
tals get ever closer, so the rates of surplus value in different sectors must gradu-
ally equalise in order to level rates of profit. Super-exploitation, in driving up the
rate of surplus value by dragging the prices of labour power below their value,
cannot compete generate as much as surplus value as technological innovation
and no longer serves to help level the compositions of the different capitals.
The fact that globalization extends super-exploitation to the whole of the
world economy does not stop this contradiction from developing. Neither the
tendency towards one regime of labour power reproduction nor the tendency
towards the technical levelling of production can be fully realised under capi-
talism. As seen, the modern world system is based on an international division
of labour that creates three zones in the world economy: core, semi-periphery
and periphery. This division guarantees the economic, social, political and
ideological conditions that enable surplus value appropriation and capitalist
development in the most technologically advanced regions. Even as super-
exploitation spreads to the central countries and institutes a single worldwide
regime of labour power reproduction, dependent and core countries are still
required to perform different functions in the world-economy.
In the centre, the trend towards super-exploitation affects a material and
symbolic structure designed to ensure competitiveness and leadership in the
world economy. The tendency to drive prices below the value of labour power,
which characterises super-exploitation, combines with a trend towards
training that same labour power to ever higher levels but at the same time
preventing it from fulfilling its potential. In the periphery, heightened global
competition forces local bourgeoisies to upskill their workers. At first, they are
helped in this by the fact they are starting from an extremely low skills base.
But the subordinate position of local bourgeoisies within the international di-
vision of labour and their limited relationship with technological innovation
then severely restricts the expansion of training. Today’s regimes of accumula-
tion, which consume workers’ subjective attributes and turn them into innova-
tors, quality controllers and waste reducers, stand as proof of how this stunts
and otherwise impacts upon productivity.
For the above reasons, labour super-exploitation in dependent countries is
unable to sustain the expansive movement of prices of production and the tech-
nological levelling of production set in motion by the techno-scientific revolu-
tion. The attempt to overcome the dependent countries’ productive insufficiency by
deepening labour super-exploitation does not solve their structural deadlock.
Aside from the expansive cyclical movements – when prices deviate above their
value – this is what tends to give super-exploitation its harshest features, which
are linked to wage and rights cuts and achieve meagre gains at a huge social and
political cost. Historical capitalism thus encounters in a dimension of its world-
economy serious limits to the development of the productive forces.
24 The postwar golden age, when US hegemony stabilised, saw average per capita growth of
2.9% p.a. between 1950 and 1973.
25 James Petras (2000, 137) describes the ‘third way’ in terms of three waves. The first was
based on a social-reformist approach and lasted from the late 19th century until the end
of the Second World War; the second was associated with postwar welfare capitalism, and
the third is “the one we are experiencing today, and which began in the mid-1990s.”
We saw that the latter crisis is characterised by crises of surplus value pro-
duction, appropriation and realisation. The crisis of surplus value production
typically manifests itself in the decline of productive labour and in the limits
on expanding the mass of surplus-value by raising the technical composition
of capital. In other words it is a crisis of capitalist labour relations which calls
its relations of production into question. Capital finds itself unable to develop
a new mode of labour power regulation and is forced to limit the development
of its more advanced forms such as Toyotism, which had increased the pace of
technological innovation in the name of maintaining its profit rates. It seeks to
appropriate the mass of surplus-value, which it has trouble producing, by devi-
ating price away from value. But capital’s high technical composition limits the
formation of demand by saving on the very labour power which makes it pos-
sible to turn extraordinary surplus value into superprofits. It thus requires
compensation mechanisms in order for superprofits to be made. Such price
deviations are encouraged by the State at the political level and by intensified
international competition, which combine with technical progress to transfer
much of the mass of surplus value produced in sectors with sub-average
organic compositions of capital into the hands of global monopolies.26
26 As Marx affirms in Capital, all labour is both abstract and concrete. It is abstract in the
sense that all concrete labour consumes human labour power in general, i.e. in the physi-
ological sense of consuming brain, muscles, nerves, hands etc; and concrete in as much
as any expenditure of human labour power assumes a specific form linked to the produc-
tion of particular use values and labour processes. To establish the value of commodities
we must identify what they have in common and what enables us to compare them with
each other. Treated as use-values, commodities cannot by definition be compared to one
another because they have different properties. What does allow us to compare them in
value terms is what they possess in common: a quantity of abstract labour. A commodi-
ty’s value is determined by the amount of simple labour it contains. That is, by the aver-
age amount of labour, skill and intensity, as determined by a society’s level of civilisation.
For Marx, value is created through the expenditure of abstract labour power and does
not include productivity, which belongs to the sphere of the concrete conditions of la-
bour. Nevertheless, competition leads to product prices deviating considerably from
their value. For simple labour power to actually equal average labour power, it must oper-
ate in average social conditions and under normal technological conditions. Only then
will it represent socially necessary labour. When simple labour power operating in sub-
average technological conditions is confronted in the market by superior technology, it
no longer equates to average labour power. Marx’s theory of value uses three categories
to describe and conceptualise these real-life deviations. The first is market value, where
the technological differential between a company and the average in its branch of pro-
duction is determined by a commodity unit price that is higher or lower than the quan-
tity of socially necessary labour incorporated into the commodity. The second is the price
of production, which levels profit rates across different branches of production through
the migration of capitals in search of higher returns, and devalues commodities in
I nternational competition is linked not only to world trade but above all to the
development of prices of production, which tend to technically level produc-
tion and allow international monopolies to plan their global business activity
in an integrated fashion. But the super-exploitation fuelled by this new inter-
national division of labour is unable to sustain the equalisation of profit rates
between core and dependent countries. It thus limits globalization and pro-
duces serious macroeconomic imbalances in peripheral countries. Widespread
capital destruction combined with intensified monopolistic competition in a
world-economy that has reached its geopolitical limits is proving a real barrier
to surplus-value realisation – as is the ongoing liquidation of strictly national
bourgeoisies and high structural unemployment. As a result, historical capital-
ism has produced a low rate of economic growth at its globalised stage.
It is not that capitalism is being led into a stage of permanent depression
by a financial capital increasingly detached from production, as neo-develop-
mentalists like François Chesnais, Samir Amin, Maria da Conceição Tavares,
José Luis Fiori, Luis Gonzaga Belluzzo and Pierre Salama argue. As we explain
below, neither the theory of value – their basis for claiming there is a suppos-
edly pure movement of capital towards the formula M-M’ – nor the historical
record support such a position. Instead, this new stage of capitalist develop-
ment should be understood by combining the perspective of the longue durée,
i.e. in terms of the articulation of structural and conjunctural times, using the
analytical tools needed to understand them, with an analysis of contemporary
reality. Therein lies the challenge to dialectical thinking.
Another sign of the crisis of surplus-value appropriation is the clash be-
tween the strategies used by capital and the new productive forces’ inherently
socialising characteristics. This conflict is expressed by the widespread diffu-
sion of scientific knowledge, whether or not it is incorporated into new tech-
nologies. We saw earlier how capital responds to this situation by developing
strategic alliances. These alliances are mainly between the biggest productive
and financial enterprises, which associate in order to improve their competi-
tive capabilities, exclude competitors, and retain a monopoly of strategic
knowledge. They frequently look to the State for R&D funding and protection
via mechanisms external to self-regulated markets, such as patent law. But
such responses have a limited effect. The development of new productive
branches of capital of lower technical composition and more intensive labour. The third,
extraordinary surplus value, can operate either in one single branch of production or, as
Marini asserts, across different ones, and designates the declining value of products in
relation to their price in one firm or sector. This has a negative impact on the other firms/
sectors, which consequently experience the opposite, i.e. a fall in prices in relation to
value, as the global mass of surplus value no longer increases.
f orces facilitates the diffusion of knowledge, and world economy growth rates
under a globalising historical capitalism have been minimal, as we show in the
next chapter. This weakens historical capitalism and cannot stop peripheral
and semi-peripheral countries pursuing catch-up policies.
The rise of China and its impact on the functioning of the world economy
has created a complex environment in which post-capitalist elements com-
bine and hybridise as the capitalist world economy expands and declines. The
Chinese model of accumulation without dispossession links technological
innovation to the proliferation of essential consumer goods and mass con-
sumption in Chinese society. This has had a positive impact on the world price
structure for primary product by boosting demand, whilst negatively influenc-
ing that of manufactured products by increasing supply and competition. Such
a context creates a contradictory conjuncture of both risks and opportunities
for peripheral countries. Thus, on the one hand it improves their balances of
payments, temporarily containing their financial imbalances and the decline
in the world system; but it also contributes to the reprimarisation of their ex-
port models and international insertion on poorer terms in the medium to
long term as the nature of Chinese consumer demand changes.
The modern world system is in deep crisis. It depends above all on neoliber-
alism, which rapidly diminishes its ideological power to keep articulating the
world-economy through its leadership. The prisons of the longue durée are no
longer secure in the material sense and are increasingly symbolic in nature.
Conditions are ripe for the continental countries of the periphery and semi-
periphery to start up a movement to restructure the international division of
labour from the bottom up. If in the past the more conservative dependency
theorists led by Fernando Henrique Cardoso argued that dependency on the
hegemonic powers of the modern world system was a necessary condition of
development, today it is clearer than ever that the opposite is true. For periph-
eral countries, breaking with dependency is not only a pre-condition of their
development but is a structural part of reorganising the world system and put-
ting the world economy back on the road to development.
We turn now to the crisis of the modern world system and the alternatives
facing the new antisystemic movements.
27 In Capital Volume iii Marx refers to the conditions that enable the law of value to become
generalised. These conditions are linked to the universalisation of the commodity form
and therefore of competition and the subsequent equalisation of profit rates:
“The incessant equilibration of constant divergences [between different rates of profit
– cem] is accomplished so much more quickly, (1) the more mobile the capital, i.e., the
more easily it can be shifted from one sphere and from one place to another; (2) the more
quickly labour-power can be transferred from one sphere to another and from one pro-
duction locality to another. The first condition implies complete freedom of trade within
the society and the removal of all monopolies with the exception of the natural ones,
those, that is, which naturally arise out of the capitalist mode of production. It implies,
furthermore, the development of the credit system, which concentrates the inorganic
mass of the disposable social capital vis-a-vis the individual capitalist. Finally, it implies
the subordination of the various spheres of production to the control of capitalists (…)
The second condition implies the abolition of all laws preventing the labourers from
transferring from one sphere of production to another and from one local centre of pro-
duction to another; indifference of the labourer to the nature of his labour; the greatest
possible reduction of labour in all spheres of production to simple labour; the elimination
of all vocational prejudices among labourers; and last but not least, a subjugation of the
labourer to the capitalist mode of production.” (Marx 1959, 192–193).
28 International capital flows grew by 15.9% p.a. from 1970 to 1980, climbing to 21.3% be-
tween 1982 and 1990. In 1993–2000 they expanded by an impressive 27.2% p.a., reaching
US$1,491,934 million (unctadstat, 2011). Accordig to Maddison (2001, 127) merchandise
exports as a proportion of world gdp rose in turn from 10.5 per cent in 1973 to 17.2 per cent
in 1998. Between 1999 and 2008 world trade grew at 6.9% p.a. (oecd 2010), outpacing
gdp, which grew by 4.2% p.a. between 1999 and 2006.
29 We saw that the general tendency of capital accumulation is the expansion of M into M’
through the formula M-C-C’-M’. This means (especially during globalization) capital con-
centration and monopoly, which block the introduction of individual private capitals and
increasingly restrict their mobility. The flipside of this process is that profit rates in the
world economy are largely levelled through labour super-exploitation – when capital of
lower technical composition is unable to migrate in order to share in the mass of surplus
value appropriated from it by more technologically advanced branches of production; or
if it is unable to migrate towards a branch of higher composition when it’s the profit rate
in its own branch declines. We further noted that in becoming a way to level the rate of
profit, super-exploitation represents a limit on its own full development because of its
relatively diminished ability to create surplus value, which restricts the levelling of the
technical composition of capital. We saw also that its subsumption to capital means la-
bour is converted by machinery into intensive labour power. This ultimately leads to it
being dematerialised, thus threatening productive labour. Finally, we noted that capital’s
appropriation of the techno-scientific productive forces involves developing the social
returns of innovations.
Morales (2005, 2008), Manuel Zelaya (2005), Rafael Correa (2006), Daniel Ortega
(2006), Fernando Lugo (2008) and Jose Mujica (2009).
In arguing that the golden age of neoliberal ideology ended in the 1990s we
are not saying that neoliberalism is no longer hegemonic or cannot enjoy brief
recoveries. The structural exhaustion of neoliberalism deepens over the course
of the expansive Kondratiev cycle and makes qualitative leaps forward at every
point of cyclical inflexion. If the Third Way emerged in the US and Europe as
the alternative to neoliberalism during the first cyclical phase of this Kondra-
tiev cycle, then the nationalist/regionalist resurgence in Latin America and
semi-continental countries such as Russia, the articulation of social move-
ments in favour of another kind of globalization and the Islamic offensive are
products of neoliberalism’s crisis and represent the structuring of the cycle’s
second phase. The transition towards the third cyclical phase of expansion has
helped fresh ideological alternatives emerge. This is most clearly visible in the
transnational political culture of the United States, which has given a sense of
identity to immigrants, blacks, workers and youth of Anglo-Saxon origin. Hav-
ing shaken up US social democracy and propelled Barack Obama to power,
this presents an opportunity to reinvent social-democratic thought and deep-
en its links to antisystemic movements in the US and elsewhere. But the gov-
ernment formed after Obama’s victory represented expectations and challeng-
es more than an alternative to the neoliberal era, and both monopolies and
antisystemic movements laid claim to it. Neoliberalism can only be overcome
by articulating global alternatives. Otherwise it will become more powerful,
but this time under forms that exacerbate its most regressive features. One
example of this is the fascistic ideological crusade embarked upon during
George Bush’s term in office (2000–2008), which stimulated the world econo-
my. Such developments are largely a consequence of the timid nature of the
social democratic experiment and stand as proof that we could see new neo-
liberal offensives led by its most orthodox, fundamentalist sectors.30
Neoliberalism should be understood not only as an ideological project, but
also in terms of its real, historical nature, which relates to the crisis and decline
of US hegemony and the modern world system. Seen thus, we find it often flies
30 Note to the English edition: As we noted in the Brazilian edition of this book, the fragile
nature of the alternative represented by third way policies could open the door to the re-
turn of neoconservative policies combining a neoliberal approach to taxation with pro-
tectionism in trade and social policy and rooted in a fundamentalist nationalism imbued
with neofascism. As we have argued, neoliberalism is the prequel to fascism: unable to
overcome and neutralise the socially disruptive competitive pressures it brings to bear, it
can produce an evolution towards neofascist forms.
in the face of its own founding principles. Hence we would define it in terms of
the following characteristics:
a. Greater state intervention in the economy, and higher public deficits, nation-
al debt, interest rates, and interest as a share of gdp. These were the core
features of neoliberalism up until the mid-1990s. They were then partly
modified by Third Way governments, who sought to generate fiscal sur-
pluses in order to reduce government liquid debt, thereby reducing the
share of the public budget consumed by interest payments.31 But electoral
failure in the first decade of the 2000s prevented them from continuing
with such policies. The gap between public spending and the population’s
well-being allowed neoliberalism to renew its attacks by demagogically
advocating tax cuts. Because George W. Bush’s new neoliberal offensive
came during the expansive phase of the Kondratiev cycle, when US hege-
mony was on a trajectory of accelerated decline, it could do little by
way of raising interest rates or practicing ‘strong dollar diplomacy.’ But it
did widen deficits and the national debt, which both continued to be
tied to imperialist and tax-cutting policies. Nonetheless, the resulting fi-
nancial imbalances failed to prevent a crisis of accumulation in the private
sector in 2008 and 2009. This crisis erupted because the state had partly
31 Between 1993 and 2000, the initial government balance rose from a deficit of -1.6% of gdp
to a surplus of 2.6% in oecd countries. This turnaround was largely due to the United
States transforming its initial result of -1.5% into a surplus of 4.1%. The total oecd govern-
ment financial balance, which includes interest payments, also showed a significant im-
provement, rising from -5% to 0% of gdp in the same period. oecd net debt also shrank.
Although it grew consistently in the 1980s, peaking in 1996, it then declined from 44.3% to
38.9% of gdp by 2000. The renewal of the neoliberal offensive announced by George W.
Bush’s controversial election victory then created a new imbalance in the governmental
sector.
Between 2001 and 2008 the oecd financial balance declined from 0.2% to -2.6% and
net public debt expanded from 38.9% to 42.4%. In the US this deterioration in public fi-
nances was even more pronounced, as net public sector debt jumped from 36.4% to 48%,
and the financial balance tumbled from 1.6% to -5.2%. With the 2008–2010 crisis, the
financial balance fell to -6.3% and -8.9% of gdp and net public debt rose to 57.7% and
66.6% of gdp in the oecd and the US respectively. These figures were particularly signifi-
cant because of the spike in state spending with the return of imperialism and war; the
expansion of the national debt to allow extraordinary fictitious profits to be made, and
tax cuts promoted by neoliberal demagoguery doing ideological battle with the Third
Way.
Although oecd tax receipts increased during the Third Way’s ideological offensive
from 38% to 39.3% of gdp, they declined again during the neoliberal onslaught that fol-
lowed, hitting a low of 37% whilst averaging 38%. In contrast, public spending fell during
the former period from 42.9% to 39.1%, and then rose to 40.7% in 2008 as the neoliberal
offensive restarted (oecd 2010).
32 The big difference between neoliberal and Third Way policies is that while the former
tends towards fiscal and financial imbalances, the latter seeks to balance the books, main-
ly by cutting state expenditure. Remarkably then, reality turns the classic ideological
positions held by neo-liberalism and social democracy on their head. The neoliberals pro-
mote a more active State, mainly in relation to the military and financial sectors. The he-
gemonic State’s undynamic productive sector is opened up to competition, leading to
deficits and financial sector growth in order to finance them. This is exacerbated by state
spending being orientated towards a military sector which is too obsolete to lead the new
IT-based technological paradigm. The military sector prioritises hierarchies and secrecy,
and its high levels of automation make state investment an ineffective way of stimulating
economic growth given the low dynamism of its Keynesian multiplier. Social democracy
pursues financial equilibrium in order to contain the negative effects of interest pay-
ments on social welfare programmes. But in so doing it takes on the burden of paying the
debt those payments represent, and so loses popular credibility.
It is a hard trick to pull off, and usually leads to defeat at election time. Containment
is achieved by cutting primary public expenditure. This generates the fiscal surpluses
needed to reduce national debt, and therefore the weight of interest payments. Such a
policy is easier to apply in countries where the military sector and state spending unre-
lated to the reproduction of labour power are large in size. In the US, state expenditure as
a proportion of gdp fell from 37% to 34.2% under President Clinton, whilst in Germany
it dropped from 48.1% to 47% during the Schroder administration, and in France from
54.5% to 52.6% under President Jospin. In Britain it fell from 40.7% to 38.3% of gdp
when Tony Blair’s term in office overlapped with that of President Clinton but then rose
to 45 per cent of gdp in 2005–2007, mirroring the Blair-Bush relationship, their imperi-
alist ideology and intervention in Iraq (oecd 2010). Although Third Way policies are not
identical to neoliberal ones, neither do they clash with them or represent a historical al-
ternative. Rather they form part of the neoliberal paradigm and are unlikely to overcome
its limitations and impose their own agenda.
33 Note to the English edition: The 2010 and 2014 elections showed how far Obama’s ratings
had fallen, with the Republicans taking majority control of both Houses. Furthermore,
the Democrats lost 4 million votes in the 2012 and 2016 elections compared to 2008. In
2016 they won the popular vote but it had shrunk enough to hand Trump victory via the
Electoral College. This poor performance can be explained by the Obama administra-
tion’s commitments to financial capital. Although he expanded workers’ health care cov-
erage and raised spending on human needs (health, education, social security and social
services) from 12.8% to 15% of gdp, poverty and inequality increased. The poverty rate
climbed from 13.2% in 2008 to 14.8% in 2014, and only slipped back down in 2016 (12.7%).
Inequality using the Gini coefficient rose from 44.4 to 45.4 and from 17.9% to 18.4% in
terms of the income share of the richest 10%.
34 Angus Maddison (2001, 235) estimates that at the outset of colonisation in 1500 the Ameri-
can population stood at 17,500,000. By 1600 it had fallen to 8,600,000, and by 1700 it was
still well below pre-Columbian levels at 12,050,000.
The crisis in the modern world system is expressed through each of its differ-
ent dimensions: hegemony; political and institutional frameworks; the inter-
national division of labour; ideology; and the relationship with nature. We can
thus describe it as unfolding through crises of (1) hegemony and the interstate
37 Authors such as Samir Amin (1997) differentiate between two laws of value under capital-
ism: that which operates in national spaces, where capital and labour enjoy a similar de-
gree of freedom of movement; and that which develops in the world economy, where they
do not. Amin cites the death of the Keynesian consensus and the Bandung Spirit as the
reason why the world economy’s law of value has projected itself onto national econo-
mies. But although he sheds light on a key feature of the world economy, namely the
difference in volume and speed between the global movement of capital and labour re-
spectively, we do not think that is an adequate basis for claiming that two laws of value
exist. And it becomes even less so given that he incorporates old developmentalist posi-
tions to argue that if these two types of circulation were equalised worldwide then the
world economy would be more balanced and convergent when it comes to the develop-
ment of its constitutent parts, and produce homogeneities similar to those found across
the national spaces of central capitalism.
As we saw earlier, historical capitalism needs an interstate system to serve as a politi-
cal superstructure. This superstructure is the global frame of reference that articulates
national and international spaces and allows the law of value to develop. Clearly, this de-
velopment is affected when nation states exert their power. But the primary cause of in-
equality under capitalism is not how much or how little labour power circulates, but the
productive, commercial and financial monopolies underpinning unequal capacities for
innovation. The movement of labour power acts on this reality – it does not change it per
se.
system, (2) the world-economy and the international division of labour, and
(3) ideology and the environment. We shall now look at each of these in turn.
But this time around it is unlikely there will be an ascendant state to support.
We can see this from the failure of Japan, which in the 1980s was hyped as a
new model for organising both work and institutions generally.
The bifurcation in the economy will therefore raise questions not about the
succession within the confines of the modern world system, but about wheth-
er the system itself will retain its privileges or be replaced by another system. It
will express a polarisation between two camps: one seeking to preserve un-
equal economic, political, and social power and access to productive forces,
and the other seeking to socialise all forms of power and democratise access to
the civilisational forces unleashed by humanity. We can expect the first camp
to unite the leading representatives of the global financial bourgeoisie as they
use their imperialist state apparatuses to forge a coalition in defence of oligar-
chical wealth, and they will approach the various national semi-peripheral and
peripheral bourgeoisies to convince them that their interest is systemic. But
the alternative they offer will not rest on hegemonic power. It will have to crush
self-determination and competition from national spheres and base itself on
imperial power and an imperial outlook. In contrast we can expect the second
camp to consist of the leading proletarian forces in the semi-periphery and the
periphery, who will turn to different popular sectors in the wider world econo-
my as well as non-monopoly segments of the bourgeoisie for support in build-
ing a new world system on democratic foundations.
The drive to articulate interests around building and maintaining a global
system based on oligarchic wealth will almost certainly be spearheaded by the
US neoliberal bourgeoisie. But such a project is unlikely to prosper, as it will be
weighed down by contradictions and clash with the productive forces and
their strong centrifugal pull on power relations. This latter tendency cannot be
contained through violence without endangering the very existence of the
productive forces that behind human life and their core component – humanity
itself. Furthermore, the new international division of labour tends to develop
key features of hegemonic decline in the core itself via the spread of super-
exploitation. As we saw earlier, core nations can only administer the world
economy with some degree of internal consensus. If that hegemonic founda-
tion is weakened then the social and political costs of mobilising the imperial-
ist apparatus increase multiply, reducing the chances of a new generalised war
among national states.
It is very hard for the interstate system to respond to the hegemonic difficul-
ties caused by the US crisis by reinventing itself. The medium to long-term
solutions to these problems would end up reintegrating politics with the econ-
omy and overcoming the structural asymmetry prevalent throughout histori-
cal capitalism. The imperial solution is an unlikely one in our view because it
international political bodies, which express not global interests but those
of superpower ruling elites. The imf and World Bank are guilty not only of
awarding countries unequal voting rights, but of a technocratic style of
management borne of specialisation. In these organisations it is finance min-
isters and heads of central banks make the decisions. They neglect their orig-
inal purpose – to ensure a stable world economy and remove barriers to its
growth – and act instead in the interests of the international financial com-
munity. The World Trade Organization uses a one-member, one-vote system
and consensus-based decision-making, but global interests are undermined
by institutional factors such as the influence of trade ministers on decisions
and conducting talks and negotiations behind closed doors. (Stiglitz 2002,
214–252). As a result, global governance has failed to keep pace with global-
ization and instead been appropriated by private interests, leading to deeper
global imbalances and the negative externalities that go with them.
imf-led capital account liberalisation may have helped globalize the law of
value, but it has not led to global economic stability. In fact the opposite has
happened, and in capital flow-receiving countries it has diminished their abil-
ity to compete with central countries and led to currency appreciation, current
account deficits and foreign debt. Stiglitz blames capital account liberalisation
for the 1998–99 Asian crisis. He also argues that the countries that subsequent-
ly experienced the most precarious recoveries, such as Indonesia, were those
that continued to apply it. Countries such as China that did not liberalise their
capital account escaped the crisis, and those that reestablished controls on
capital outflows or taxed them, such as Malaysia and South Korea, enjoyed
swift and intense recoveries.
If global governance is fragile when it comes to managing economic mat-
ters, it is also weak in the political sphere. As seen, the United Nations General
Assembly is simply an advisory body to the Security Council, and this in turn
merely reflects the strength of the five great world powers, which as perma-
nent members can veto any decision.
As the world economy grew in complexity, it fostered an irregular, discon-
tinuous, but ever expanding movement for democracy and popular sovereignty
in the modern world system. But this movement was widely restricted to na-
tional spheres, and at the global level the legal and political institutionality
built up by the hegemonic State still prevails. Nor do the more informal at-
tempts at interstate coordination appear to have committed the world system’s
organic core to processes that might lead to truly global administration. This
was clearly illustrated by the joint effort in 2008/2009 to protect fictitious wealth
creation, which has the United States and the dollar at its core. Previous hege-
monic transitions show there is never any serious reform of the institutional
38 Arrighi (2007) sees the tves as the key to establishing a model of accumulation without
dispossession, which does not separate the worker from ownership of the means of pro-
duction. The tves have tended towards using labour intensively, and this has increased
competitive pressure and the consumption of public goods, since more than half of their
profits are ploughed back into modernising enterprises or local circuits (schools, clinics,
social welfare, infrastructure and technological services).
In these examples from East Asia, the value of labour power typically rises
as it becomes a more competitive international asset and the State protects the
national productive apparatus from external competition.39 The higher quality
and value of said countries’ labour power attracts foreign capital interested in
having a competitive and cheap commodity in international terms. As we saw
earlier, the modern world system divided the world into regions and ensured
most of the wealth produced went to the centre. Consequently, the working
class in core countries enjoyed far higher per capita incomes than their coun-
terpart in semi-peripheral and peripheral nations. But when peripheral coun-
tries manage to close the skills gap between the two working classes through
policy measures, they vastly improve their ratio of productive capacity to in-
come and attract foreign capital in search of higher rates of profit than those it
can earn in the core. In taking this course of action and at the same time pro-
tecting their own scientific and technological capacity, peripheral nations
forge a developmental trajectory that reduces centre-periphery disparities and
enables the latter to appropriate the social returns of international innova-
tions by breaking with super-exploitation. The more this process deepens and
spreads to the periphery of the Western world the more it sets in motion a dy-
namic that threatens the international division of labour underpinning his-
torical capitalism, given the limitations of central capitalism when it comes to
fully incorporating the techno-scientific revolution.
Peripheral and semi-peripheral countries face a choice in this context. One
option is ever-deepening dependency combined with intensified super-
exploitation and marginalisation from the technological frontier. Alternative-
ly, they can choose the kind of national and regional development that
breaks with dependency and super-exploitation and brings them closer to the
39 According to Angus Maddison (1995), the average years of education per person aged
15–64 rose between 1950 and 1992 as follows: in China from 1.6 to 8.5; in India from 1.3 to
5.5; in South Korea from 3.3 to 13.5; in Taiwan from 3.6 to 13.8; in Japan from 9.1 to 14.8; in
the US from 11.2 to 18; in the UK from 10.8 to 14; in France from 9.5 to 15.9 and in Germany
from 10.4 to 12.2. In Latin America the increase was more modest than in Asian countries –
in Brazil from 2 to 6.4; in Mexico from 2.6 to 8.2; in Argentina from 4.8 to 10.7, and in Chile
from 5.4 to 10.9. Absolute figures do not always reflect the higher quality of Asian educa-
tional systems compared to those of Latin America, which has become better known
through the results of the educational Olympics between students with the same number
of years of formal schooling. As a result, Asian rates of labour productivity (gdp per hour
worked) have outstripped those of Latin America, increasing year-on-year between 1973
and 1992 by 4.1% in China; 5.2% in South Korea; 5.3% in Taiwan; 2.8% in India; 0.9% in
Brazil; 0.5% in Mexico; 0.5% in Argentina and 1% in Chile. Central countries also fared
worse than Asian ones in the same period, with productivity rising year on year by 1.1% in
the US; 2.2% in the UK; 2.7% in France and 2.7% in Germany.
40 Note to the English edition: China’s ascent in the world-system has involved it becoming
ever more closely articulated with a capitalist world economy. This could make it hard to
maintain the principle of accumulation without dispossession. Between 1994 and 2008
China’s economy was heavily marked by the privatisation of eams (albeit alongside
strong social commitments), the reduction of public land, the expansion of the private
labour market and widening inequality. However, the government has kept a robust pub-
lic enterprise and joint-venture sector under tight state control to guarantee foreign tech-
nology transfer and power over currency convertibility and most financial assets After
2008 it refocussed its economic policy on the internal market, promoting public spending
aimed at reducing inequality and using the brics and its policies towards peripheral
countries to build up a new axis of global alliances.
or dismiss the idea that they are equal. Universalism explains differences in
terms of differentiated performance in a meritocratic system with equal op-
portunities for all. Yet capitalism has always difficulties imposing such a sys-
tem. Universalism was originally needed as an ideology to promote the prin-
ciple of competition, which underpins the law of value, and it began to find
expression as soon as monopolies were consolidated. Nothing has developed
the competitive principle more than the growth of big industry and the tech-
nological monopoly that goes with it. The greater the deviation away from the
law of value, the more the principle imposes itself. Capital aims to concentrate
surplus value, not disperse it among a multitude of competitors, and so it re-
sorts to anticompetitive measures whenever there is any uncertainty about the
outcome of competition.
To stave off the threats hanging over accumulation, capital avails itself of
ethnocentrism, racism and sexism. Unlike universalism, which advocates a
system of equal opportunities, these ideological forms justify inequality by
claiming that certain social groups are culturally or biologically ‘inferior.’ By
imposing unequal rights, capital brings down the value or price of labour pow-
er and shields itself from the social pressures of competition and equality. The
most successful model of 19th century capitalism was not the French one –
sparked by a revolution that mobilised the peasantry around the ideals of lib-
erty, equality and fraternity – but the British version, where the bourgeoisie
joined forces with the aristocracy and the conservative forces of the Holy Alli-
ance to dilute the French Revolution’s radical principles.
Wallerstein argues that the ideological hallmark of capitalist civilisation
was always its zigzagging movement between universalism and inequality in
order to allocate a position to individuals and social groups. In times of politi-
cal and hegemonic stability these two movements complemented one anoth-
er. Universalism, which encourages change and transformation, justified or
provided a road map for the rise of groups and individuals, whereas ethnocen-
trism justified inequality.
That complementarity of universalism and inequality was shown by the
way capitalist civilisation proclaimed the universality of the ideology particu-
lar to the hegemonic power and imposed a Eurocentric and Anglo-Saxon
cultural model. According to the theory of comparative advantage and the so-
ciology of modernisation, if more backward regions wanted to replicate in-
come levels or social, political and ideological models in the central countries,
then they would have to copy the type of advanced and universal behaviour
already prevalent in the core.
When the hegemonic power enters into crisis, this complementary relation-
ship between hegemonic particularism and the universal risks falling apart.
The capitalist order can only be stabilised by rearticulating the two. Universal-
ist discourse seeks new forms that could endanger historical capitalism and
questions the monopoly rule and unequal opportunities inherent to capital-
ism. As Wallerstein points out, a meritocratic discourse can seriously destabi-
lise any form of domination by a class or social group on account of its radical
commitment to equal opportunities.41 Its unilaterality is unsustainable under
capitalism. Meanwhile, ethnocentrism is also breaking free from its commit-
ment’s universalism, threatening to become a predominantly racist and sexist
ideology and cut its links with the competitive order. This trend presents a risk
to the capitalist system if it becomes dominant globally.
The current hegemonic crisis has placed universalism’s relationship with
the United States and historical capitalism in mounting jeopardy. The ideologi-
cal crisis of neoliberalism is proof of this. Once the ideology of the Washington
Consensus and the end of history, neoliberalism now looks like a creed of dis-
sension and privilege and a threat to humanity. Despite efforts to stop it, a bi-
furcation now appears to be taking place, with universalism pursuing a new
post-hegemonic and post-liberal version of equality whilst ethnocentrism
looks for ways to deepen inequality. But as we have argued, just because neo-
liberalism is in crisis does not mean it is defeated. If the left continues to hesi-
tate about superseding neoliberalism then it could soon face a crisis of its own,
and that would leave the path clear for fascism to appear as an alternative to
the chaos sown by the ideological crisis.
The environmental crisis is an aspect of the capitalist crisis closely related to
its ideological dimension. Capitalist civilisation sees individuals as indepen-
dent beings who use nature to satisfy their wants. Nature is objectified and is
41 “Furthermore, it is said, not only is meritocracy economically efficient but it is also politi-
cally stabilizing. To the extent that there are inequalities in the distribution of reward in
historical capitalism (as in prior historical systems), resentment of those who receive
greater rewards by those who receive fewer is less intense, it is argued, because its justifi-
cation is offered on the basis of merit and not on the basis of tradition. That is, it is
thought that privilege earned by merit is somehow more acceptable, morally and politi-
cally, to most people than privilege earned by inheritance. This is dubious political sociol-
ogy. The exact opposite is true in fact. While privilege earned by inheritance has long been
at least marginally acceptable to the oppressed on the basis of mystical or fatalistic beliefs
in an eternal order, which belief at least offers them the comfort of certainty, privilege
earned because one is possibly smarter and certainly better educated than someone else
is extremely difficult to swallow, except by the few who are basically scrambling up the
ladder. Nobody who is not a yuppie loves or admires a yuppie. Princes at least may seem
to be kindly father figures. A yuppie is nothing but an overprivileged sibling. The merito-
cratic system is politically one of the least stable systems. And it is precisely because of
this political fragility that racism and sexism enter the picture.” (Wallerstein 2000a,
347–348)
wealth through private markets as opposed to the real economy triggered a big
new wave of state intervention starting in 2008–2009. This intervention is not
about ensuring financialisation prevails over the productive sector, but rather
adapting it to the needs of the latter, in so far as the conversion of surplus value
into extraordinary profit is limited by the stage reached in the development of
capitalism’s secular trends, and so can only be realised via fictitious valorisa-
tion and state coercion. To that end the state transfers its earnings to big oli-
gopolies that can guarantee the liquidity of its investments, cut interest rates,
expanded credit, and seeks to return growth to the central economies and the
world economy in general.
As noted, this Kondratiev cycle will probably be shorter and see less intense
economic growth than the previous one, especially in the decaying centres and
the geoeconomic space under their hegemony. Taking the length of the British
hegemonic crisis as our yardstick, the expansive phase of the current Kondra-
tiev cycle should last about 20 years. Since 2008–10 it has been transitioning
from prosperity to maturity, energising the world economy’s antisystemic forc-
es in the process. The more those forces advance during the Kondratiev cycle’s
mature phase, the more they will develop politically and equip themselves to
survive the systemic chaos set to succeed the expansive period. During the
chaos phase, everyday activity is freed from the structural prisons of the longue
durée and even the best efforts to organise it come to little. In contrast, when
systemic tendencies are at their most powerful the constraints on anti-systemic
activity irreducibly limit any concentrated effort to produce a rupture.
Chaos represents a time of freedom from predeterminations. In such peri-
ods the temporal dimensions of the conjoncture, l’evenement and structure are
levelled, allowing new patterns to establish themselves in one single system.
These new patterns either ensure the system’s cyclical continuity or else do the
opposite and replace it with a new one.
The decline of the modern world system compels us to examine the sys-
temic choices on offer.
Immanuel Wallerstein (1995b) outlines three alternatives beyond the de-
mise of historical capitalism: neo-feudalism, democratic fascism and socialism.
By neofeudalism he means a world of separate sovereignties and of regions
that are autarkic but ruled by local hierarchies. This resembles the long-term
alternative posited by Samuel Huntington (1996) as a means of preventing
Western civilisational decline from ending in a ‘clash of civilisations’. Demo-
cratic fascism is understood by Wallerstein as the imperial alternative origi-
nally envisaged by Hitler: a world divided into an upper and a lower caste, with
the former enjoying highly egalitarian distribution. Finally, socialism redraws
the limits of existing State frameworks and articulates them with radically
42 On the entropic nature of fascism and its radical negation of political freedom see Polanyi
(2007), the final chapter especially.
cannot usher in a new systemic reality by themselves because they are by na-
ture too circumscribed and therefore too weak to overturn historical capital-
ism’s new territorialist agenda. Only the mobilisation of globalizing forces can
stop destabilising ventures in their tracks.
Arrighi’s hypothesis that network-type organisation will make firms less re-
liant on state protection also seems rather implausible. As we have shown, this
type of organisation did not lead to enterprises severing their national connec-
tions. Despite the prevalence of technological agreements and international
mergers and incorporations in the world economy, their research and innova-
tion facilities are still concentrated locally. Furthermore, government interven-
tion has increased dramatically under Asian capitalism.43
In our view there are only two plausible scenarios. Either the world system
will descend into an endless chaos that threatens human existence, or a social-
ist world system will be built, becoming the backbone of a planetary civilisa-
tion. These bifurcating alternatives are consistent with the pattern of recurring
chaos established by the modern world system. As Arrighi, Silver and Waller-
stein demonstrate, periods of chaos have historically formed part of a cyclical
movement of successive hegemonic states, which, until now, has allowed the
modern world system to reorganise. Despite the anarchy, violence and horror
they bring, such periods allowed historical capitalism to expand. The chaos
may have led to global wars as a result of organisational bifurcations splitting
the modern world system into competing state projects, but it also restrained
imperial ambitions and developed the interstate system. This meant political
and military conflict would end with the system’s organisational axis shifting
from a decadent state to one that was built on stronger productive, demo-
graphic, financial and political foundations and was more strategically located
in geographical terms.
The coming systemic chaos is however unique in that it will engulf the
modern world system and historical capitalism rather than one particular he-
gemony. The bifurcation likely to emerge from this chaos will have its own
characteristics, because the nation-state as an entity capable of concentrating
world-economic organisation appears to be on the brink of permanent crisis.
This bifurcation will drive conflict not between different state projects disput-
ing hegemony but between one set of forces out to save historical capitalism
and another seeking to go beyond it by forging a new planetary civilisation.
43 Using government expenditure as our measure of state intervention, we find that be-
tween 1985 and 2008 Korea it rose from 18.8% to 30.9% of gdp in South Korea, and from
29.4% to 36.4% of gdp in Japan. Higher tax revenues are another indicator of greater
government involvement in the economy, and from 1985 to 2008 their share of gdp rose
from 17.6% to 35.7% in South Korea and from 28.8% to 35% in Japan (oecd 2002, 2010).
We saw that in the confrontations that took place during past periods of
systemic chaos the states who were defeated in their quest for domination
went on to develop markedly imperial and interventionist features. Such was
the case of Napoleonic France, whose expansionism on the European conti-
nent violated Westphalian principles. Its interventions were progressive in as
much as they took on Europe’s most feudal political forces. But at the same
time it imposed much tighter political controls at home and did away with the
universal suffrage introduced in the most radical moments of the French Revo-
lution. The expansion of historical capitalism and the destruction of feudal
powers in the world system would subsequently empty its interventionism of
any progressive content and lend new imperial projects like the fascist Nazi
Germany an avowedly reactionary character.
In the period ahead of us, projects aiming to salvage historical capitalism
will try and use the hegemon to articulate a whole range of oligarchic forces
through increasingly fascistic forms. This is clear from the reactions of the
George W. Bush administration to the 11 September 2001 attacks and its use of
foreign policy to drive an ideological offensive that did not end with the end of
this presidency, leading to fascist policies and regimes being imposed in pe-
ripheral countries such as Iraq, Libya and Palestine. We examine this further in
Chapter 4. As noted, whilst a fascist project is unlikely to succeed in replacing
the modern world system with its own new order, there is still a danger it might
block the progress of the planetary civilisational project. Should that occur, the
chaos would deepen, and humanity would suffer a series of vicious confronta-
tions between anti-imperialist forces incapable of taking the world system to a
higher level – who will find their expression in national chauvinism and eth-
nic/religious fundamentalism – and the fascist forces of the hegemonic na-
tions, who will be incapable of re-establishing any kind of order.
Such a prospect makes the planetary civilisational project absolutely im-
perative. The concept of a planetary civilisation was developed by Theotonio
Dos Santos to describe how a plurality of cultures and civilisations could all
converge in peaceful coexistence around a single planetary system. Such a
civilisation would require radically democratic international political institu-
tions to articulate the global with historical, economic, social and cultural plu-
ralities. It should not be considered unfeasible just because of the potentially
divisory effect of the different cultures and civilisations present throughout
human history.44 A planetary civilisation would integrate and preserve the
shows that civilisation does not exist in a static mode but involves process and move-
ment. It is a given group’s interpretation of its identity, which includes hierarchising and
excluding multiple aspects of a long and complex historical period. This construct is
heavily influenced by the kind of political leadership given to the group. Civilization does
not represent the weight of the past stunting the development of certain peoples, but is
primarily a creative process that both interprets and modifies the past and finds a unique
way to articulate it with the present, thus giving rise to a new history.
45 Obama’s triumph over the Republicans expressed the symbolic victory of this transna-
tional perspective, regardless of whether his government really represented a gain for
social movements.
46 In response to neoliberalism we propose a socialism rooted, in Octávio Ianni (2004: 35)’s
words, “in social diversity and inequality, not just locally, nationally and regionally, but
above all globally; and rooted too in a critical evaluation of socialist experiences in differ-
ent nations and in China and Cuba today, or indeed the many philosophical, scientific
and artistic contributions to it from the East, the West, Africa, Latin America, the Carib-
bean, Oceania, North America and the various Europes.”
1 The translation of Sections 1 and 2 of this chapter draws on Timothy Thompson’s translation
of the author’s earlier article “The Impasses of U.S. Hegemony: Perspectives for the Twenty-
first Century” (Martins 2007) – Trans.
Whereas in its expansive phase the hegemonic state plays a virtuous role in
the world system by helping develop its productive forces, during its crisis
phase it begins to hinder that development. It is commonly agreed that in 1950
we entered a systemic period of US hegemony, but what stage of that hege-
mony are we at now, and how does it affect the world system?
Because of their bearing on prospective analysis and on the kind of alterna-
tives to neoliberalism that social movements might formulate, these questions
have sparked one of the most crucial debates in the social sciences today. There
are many different positions, but they can be divided into two main groups:
one holding, as we do, that the US is currently at an advanced stage of hege-
monic crisis; and the other that US hegemony is stronger than ever and in an
expansive phase.
In this chapter we will first present our perspective on the issue before fo-
cusing on the debate with other positions in the last section. We argue that
since the 1967–1973 period the United States has been in hegemonic decline.
Despite maintaining its financial, ideological and military hegemony, it has be-
come increasingly vulnerable due to public and current account deficit pres-
sures on the dollar; the crisis of neoliberal legitimacy; the exhaustion of US
imperialism (revived after 11 September 2001),2 and the political and military
reactions to the latter, which threaten to raise the world-system’s protection
costs to unprecedented levels. To locate the trajectory of US hegemony in the
world system we must bring the longue durée into our analysis of the conjunc-
ture. That means taking into account analytical instruments discussed earlier,
which we can summarise as follows:
a. Systemic cycles: a concept developed by the world system school in au-
thors such as Arrighi, Silver and Wallerstein. They organise systemic cy-
cles into hegemonies, which in turn are divided into phases of expansion
and crisis. In times of crisis, the hegemon draws on its financial power to
keep leading global accumulation. But that strength cannot prevent the
decline of its productive and commercial bases. Hegemonic disintegra-
tion gives way to a stage of systemic chaos, and with it a bifurcation as
new power structures compete for hegemony. In historical capitalism
Nation-states may partly lead the way in this confrontation, but it will also
have a significant transnational dimension. This dimension has already made
itself felt in the mass protests against US imperialism and the oligarchic coor-
dination of the world economy. It is also present in attempts to organise social
movements on a global scale. These efforts are very much expressed by the
World Social Forum, – an attempt to administer the life of humans and the
planet by creating new forms of power. Transnationalism is developing on
three fronts: Firstly, through the internationalisation of social movements;
secondly, as national governments institutionalise demands for international
solidarity and cooperation; and thirdly, as emerging peripheral and semi-
peripheral states begin to press for the democratisation of the world system’s
regulatory forms. These three dimensions are still unfolding in a rather autono-
mous and under-articulated way. But if transnationalism does prevail, then
humanity will be able to get through the systemic chaos without succumbing
to a new war that puts its very existence in peril. In this scenario, transnational
forces will create transmission belts that cut across national states, keeping
them free from the control of global oligarchies. But if strict nationalism pre-
vails, then the slide into fascism, barbarism and the use of the State for coer-
cive purposes will be hard to stop.
Let us now turn to the empirical basis for the theses outlined above.
Others do not share our view that a new Kondratiev cycle has been fanning out
from the United States across the world economy since 1994. For some, the
world economy is in the grip of a long depression that began in the late 1960s
due to increased international competition among national states and conse-
quent chronic overproduction (Brenner 2003). A more common position con-
curs with the description of a long depression but attributes it instead to a new,
post-1979 financialised regime of global accumulation (Chesnais 1996, 1998a;
Fiori and Tavares 1993, 1998; Fiori 1999; Fiori and Medeiros 2001; Strange 1997).
We recognise the increased competitiveness in the world economy and the
tendency towards overproduction, both of which ultimately derive from the
crisis of US hegemony. They lead to a financial bubble forming in the world
economy, partly because of the need to finance the US balance of payments.
This bubble is also generated by the need to transform extraordinary surplus
value into extraordinary profit. As the secular trends of capitalist accumula-
tion advance, so fictitious wealth and State intervention are increasingly relied
upon to achieve this transformation, with the United States as the hegemonic
power at the heart of this type of wealth creation. The financial bubble acts as
an engine that powers the expansion of the world economy. But it also creates
major contradictions for the US as its national debt deepens, its saving rates
decline, and it increasingly resorts to super-exploiting labour and boosting
capital exports to generate profits in regions where labour power’s value: price
ratio is more favourable to US corporate accumulation.
However, since 1994 increased competitiveness and the aforementioned fi-
nancial bubble have coincided with renewed economic growth, a restored rate
of profit and US leadership over interest rates in the accumulation process.
What indicators allow us to make this claim? Let us take two: the gdp per
capita growth rate, which is the chief indicator of the phases of the Kondratiev
cycle, and the rate of profit, which is their chief determinant.3
If we observe these indicators in the United States, we can clearly make out
the shape of the Kondratiev cycle. Between 1938 and 1966, gdp per capita
growth averaged 3%. We only have profit rate data for the years 1959–1966,
when it averaged 10.3%. But the strong convergence between per capita growth
rates means we can assume the profit rate was very similar in the preceding
interval (1938–59). Then between 1967 and 1993 the rate of profit fell by 35%
and gdp per capita growth fell by 33% compared to the previous phase. This
was a period in which national debt outstripped gdp, thus expressing the
strength of interest rates in the US economy and accumulation’s shift towards
financial hegemony. In 1993 the picture changed again. The rate of profit sud-
denly shot up and for the first time in 25 years managed to consolidate over a
six-year period. Between 1994 and 1999 it averaged 9.0%, peaking at 10.3% in
1997. This movement in the profit rate was enough to influence annual per
capita income growth, which reached 2.9% between 1994 and 2000 – 45%
higher than during the Kondratiev cycle’s B-phase (Figures 4.1 and 4.2).
We lack data on the rate of profit for the world economy. But for method-
ological reasons that we explain further on, per capita growth rates provide
clear evidence for our claims. During the inter-war period, the world economy
entered a very long Kondratiev A-phase. It began in the late 1930s and was driv-
en by US hegemonic expansion. It lasted 35 years, with per capita growth of
2.3%.4 During its golden age between the end of wwii and 1973 it registered
3 The rate of profit represents profits as a percentage in relation to the gross product of non-
financial corporations. Concerning profits, we refer to their value after taxes and adjustments
for inventory evaluation and fixed capital consumption. With regard to gross product, we re-
fer to its value after deducting profits for the period.
4 The A-phase of the Kondratiev cycle in the postwar period was longer for the world economy
than for the United States. For the former it lasted from 1939 until 1973, but for the US it ended
when its profit rates plummeted in 1967. The difference reflected the shift in dynamism in the
world economy towards other regions.
14.00%
12.00%
10.00%
8.00%
6.00%
4.00%
2.00%
0.00%
1959
1961
1963
1965
1967
1969
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
Figure 4.1 US rate of profit
Note: For the year 2010 only the first quarter is included
Source: CEM, BASED ON Council of Economic Advisers (2010a, 2010b)
12.00%
10.00%
8.00%
6.00%
4.00%
2.00%
0.00%
1959–1967 1968–1993 1994–2010
Figure 4.2 US rate of profit
Source: CEM, BASED ON Council of Economic ADVISERS (2010A, 2010B)
per capita growth of 2.9%. The B-phase of the cycle lasted from 1974 until 1993.
During this period, per capita growth fell 48% to 1.2% per annum. Between
1994 and 2000 it took a new turn. Per capita income resumed its accelerated
expansion and rose to 2.2%, signalling the emergence of the next Kondratiev
cycle. This trend became more pronounced during the sub-phase of prosperity
3.5
3
2.5
2
1.5
1
0.5
0
1900–13 1914–49 1950–73 1974–93 1994–2010
Figure 4.3 Per capita gdp annual growth in the World economy (%)
Source: CEM, BASED ON Groningen Growth and Development
Centre (2010)
and reached 2.4% between 1994 and 2010, a figure that will probably have to be
adjusted downwards to account for the impact of the crisis of the transition to
maturity that took hold in 2008 (see Figure 4.3).
The second thesis we assert above is that this new emerging Kondratiev cy-
cle is influenced by the downturn in the US systemic cycle. One consequence
is that the United States will no longer lead the world in economic growth and
its expansion rates will probably tail those of the world economy during this
period. Another consequence is that the expansive phase of this Kondratiev
cycle is likely to be shorter and less pronounced than in the last cycle. This will
especially be so in the area still under the hegemony of the declining power,
with the ascendant region offsetting this tendency in the world economy.
Some authors deny that the United States is losing its hegemonic position in
the world economy. To prove their point, they highlight the dollar’s conversion
into the world currency and its role since the 1980s in financing the US eco-
nomic recovery. The keenest among them claim the United States has not just
recovered its hegemonic and financial power but is actually approaching em-
pire status.
According to world system theory, we can only properly analyse the con-
juncture by putting history back at the heart of our methodology. Giovanni
Arrighi and Beverly Silver (2001) argue that we can use the longue durée to
identify repetitive and evolving patterns in the modern world system’s cycles.
These patterns can then help us understand the nature and consequences of
the transformations we are seeing. When a hegemony’s productive and
commercial bases deteriorate, the dominant power attempts to preserve its
leadership by developing a regime based on financial accumulation. It uses its
control of high finance to drain resources from the world economy and finance
1.6
1.4
1.2
1
0.8
0.6
0.4
0.2
0
1870–1900 1900–1913 1870–1913
Figure 4.5 Annual variation in per capita gdp of the World economy, 1870–1913 (%)
Source: CEM, BASED ON maddison (1997)
3.50%
3.00%
2.50%
2.00%
1.50%
1.00%
0.50%
0.00%
1967/82 1983/2000 2001/08
US World
Figure 4.6 US and World gdp per capita annual growth
Source: CEM, BASED ON maddison (2010)
Asia as a whole, which remains ahead thanks mainly to the economic dyna-
mism of China and India (Figure 4.7).
The main planks of this strategy to reverse hegemonic decline, consolidated
between 1967 and 1982, have been the appreciation of the exchange rate and
the liberalisation of trade and investment. The US government and bourgeoi-
sie acquired a significant amount of international liquidity by valorising their
assets in order to invest and stimulate growth. At the same time, they sought
through competition and with varying degrees of aggressiveness to offload the
weaker sectors of their economy. In the 1980s, the national debt was used as a
source of financing, but its unfettered expansion hit a limit when it began to
threaten social provision and the welfare state. In the 1990s, their strategy com-
bined the restructuring and expansion of the productive sector, but by 1998 it
started looking like it had run its course.
7.0
6.0
5.0
4.0
3.0
2.0
1.0
0.0
China East Asian-16 India US Japan
Figure 4.7 gdp per capita annual growth (1983–2000) (%)
Source: CEM, BASED ON maddison (2001), Council of Economic
Advisers (2010b)
Despite its apparent strengths, the US strategy for growth presented serious
imbalances. One of these, noted earlier, was the trade deficit. This was the flip
side to acquiring international liquidity and meant that the big US capital had
lost its wager, above all with East Asia, to compete its way back to competitive-
ness. Between 1979 and 1987, the trade deficit expanded at a rate of 24.5 per
cent per annum.
In this period, external savings were mainly achieved through financial in-
struments that raised interest rates and discouraged investment, which was
largely directed towards the military sector. But a military founded on secrecy
and hierarchy proved too obsolete to lead the microelectronic paradigm. Be-
tween 1990 and 1993 the constraints on military spending, lower interest rates
and cheaper working hour – all a product of the recession at the decade’s
outset – combined to raise the rate of profit. This turned the productive sector
and stock exchange into means of attracting external resources. The crisis of
1990–1991 and the external funding of the Gulf War provided some relief for
the balance of payments. But the return to growth fuelled an expansion of the
deficit. Between 1992 and 2000, the trade balance deficit grew by 21.3% per an-
num to reach 3.8% of gdp (Council of Economic Advisers, 2010b). In 2001–
2002 the economy slowed down and faced crisis and stagnation.
By analysing the crisis of 2001–2002 we can shed light on the contradictions
of the US model of development as the country entered the A-phase of the
new Kondratiev cycle. The main determinants of the US crisis were the trade
deficit and wage increases caused by accelerated growth. Let us take a closer
look at this.
4
gdp (%)
0
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Figure 4.8 US trade deficit (%)
Note: Trade deficit in goods
Source: Council of Economic Advisers (2010b)
5 This is one of the factors explaining why, despite reaching new heights, profit rates during
this period of growth failed to return to those of the years of postwar expansion. Between
1959 and 1966, interest payments reduced the mass of profit earned by non-financial US cor-
porations by 14%, while in the 1994–1999 period they took up 41% (Council of Economic
Advisers 2003). Between 1994 and 2007 these corporations enjoyed an average rate of profit
of 8.2%.
6 Robert Brenner (2003) stresses this point, but we do not share his conclusion that the US and
world economies have been suffering a deep depression since the late 1960s.
8
7
6
5
4
3
2
1
0
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
–1
–2
Figure 4.9 Producer price inflation in the United States (%)
Source: Council of Economic Advisers (2010b)
and less room for negotiation in the face of wage pressures (see Figure 4.9). In
such a context, the leading sectors of the US economy are unable to compen-
sate for wage increases by raising prices. This represents a huge obstacle to
economic expansion. Although in 1979 US average wages fell below 1972 levels,
they began increasing again in 1996. This brought the rate of profit down by
29.5% between 1997 and 2001, causing the crisis of 2001–2002.7
This pattern of development means the US economy can no longer perform
at high rates of growth in the medium or long term. Exposed to external com-
petition, it will be unable to accomodate the trend towards wage growth stimu-
lated by lower unemployment without seriously affecting the rate of profit. To
get back to growth it has increased unemployment and reined in wage expan-
sion (see Figure 4.10).8 But US development will continue to be seriously
blocked in this way as long as the country’s bourgeoisie resists a major
340
330
320
310
300
290
280
270
260
250
240
1964
1966
1968
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
Figure 4.10 US real weekly wages (1982–1984 in constant usd)
Source: Council of Economic Advisers (2010b)
r eadjustment in the value of its wealth relative to that of the world economy
(see Figure 4.11).9 The aforementioned public policies already displayed seri-
ous contradictions when they were enacted by George W. Bush, and these con-
tradictions have only sharpened over the course of an expansive phase of the
Kondratiev cycle.10
The fall in the value of wages in the US national product, together with the
decline in the savings rate (in keeping with trade deficit-induced indebted-
ness) has led to serious bottlenecks blocking the realisation of extraordi-
nary surplus value at home. The mass of value appropriated through savings
in labour power achieved by technological innovation has suffered a rela-
tive decline as automisation has advanced. Furthermore, the demand thus
trade deficit, despite the protectionist rhetoric, and put new pressure on the rate of profit
and wages.
9 Ever since the Reagan years US exchange rate policy has zigzagged between a belle
époque and the privileges of seigniorage. During the belle époque the dollar appreciates.
But this increases accumulated debt and deepens trade deficits considerably, to which
the government responds by devaluating the currency. In doing so it exploits the privi-
leges of seigniorage to contain trade deficits by wiping out some of the debts held by ex-
ternal creditors. But there are limits to this approach, as the dollar cannot be devalued to
the point of losing credibility as an international measure of value.
10 The George W. Bush administration’s policies of cutting taxes on the rich and increasing
military spending deepened the national debt and trade deficits. The recovery was cen-
tred on a technologically stagnating military sector. It brought back trade deficits by tying
recovery to the state, and deepened those deficits by transferring income to families with
very low rates of saving.
1.4
1.2
0.8
0.6
0.4
0.2
0
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
Figure 4.11 Value of the dollar
Note: In 1973, the dollar was worth the same as the currencies of the United
States’ main trade partners
Source: Council of Economic Advisers (2010b)
t ransferred to higher income segments – i.e. those associated with capital and
surplus value consumption – has been part-absorbed by the expansion of the
international market and has increasingly proven insufficient to maintain na-
tional commodity prices and the value of associated financial assets.
The 2008 crisis, which has spread from the United States to the world econ-
omy, can be explained in terms of the above process. Its sheer scale relates to
the fact that so many sectors of the world economy exploit the US market as a
source of extraordinary profit because the overvalued dollar boosts interna-
tional prices when they produce goods with local currencies and then sell
them in dollars. However, the flip side of this process is that it stifles the expan-
sion of the US productive sector. US firms respond to it by increasing the in-
vestments and the mass of profit they make overseas.11 The internal squeeze on
realising extraordinary surplus value leads to asset prices and investment rates
plummeting and the need for state intervention to prop them up, leading to an
unbridled expansion of the national debt. This debt is mainly linked to specu-
lation and maintaining fictitious prices. It increasingly relies on foreign credi-
tors because of falling US saving rates, and has kept US rates of investment at
depressed levels (see Figure 4.12). It therefore represents an obstacle to US
25
20
15
10
0
1960
1963
1966
1969
1972
1975
1978
1981
1984
1987
1990
1993
1996
1999
2002
2005
2008
Figure 4.12 US investment as a percent of gdp
Source: Council of Economic Advisers (2010b)
12 Between 1982 and 2000, the US per capita gdp grew by 2.2% and the world economy by
1.5% per annum. Between 2000 and 2006 they expanded by 2.1% and 3.2% per annum
respectively. This gap widened in the post-2000 period if we take into account the crisis
that broke out in 2008, which mainly affected the United States and Europe.
13 Thesis presented at the meeting of the World Economy Studies Network [Red de Estudios
de la Economía Mundial – redem] in Rio de Janeiro (August 2001).
60
50
40
30
20
10
0
70
72
74
76
78
80
82
84
86
88
90
92
94
96
98
00
02
04
06
08
19
19
19
20
19
19
19
19
20
19
20
20
19
19
19
19
19
20
19
19
US to World World to US
Figure 4.13 US/World direct investment flows (%)
Source: unctad (2010)
its national debt and trade deficits expanded too fast to sustain such a large
share, and in the 1990s it sank below 20%. Meanwhile China has been closing
in on the US, and in the 2000s actually overtook it if we combine its figures
with those of Hong Kong.14
The US economy’s loss of dynamism and its limited growth have also dimin-
ished the importance of its internal market to the world economy. The volume
of Chinese domestic market imports is fast approaching that of US internal
market imports and will soon outstrip it if current trends continue (see Figure
4.14).
As for the question surrounding the intensity of growth of the new Kondra-
tiev A-phase, it is worth examining some of the evidence. The period from 1994
to 2008 registered a per capita gdp growth rate of 2.6%. If we exclude the post-
1939 period of systemic chaos in the Kondratiev cycle then this is less than the
2.9% achieved between 1950 and 1973. However, such a periodisation overesti-
mates the new cycle’s growth because it excludes its 2009–2010 crisis of transi-
tion to maturity. Two contradictory factors will make this average fluctuate
slightly upwards or downwards in the coming years: the dynamism of East Asia
14 In the 1980s, the US captured between 22% and 45% of worldwide foreign investment,
while China attracted between 0.1% and 3.5%. In the 1990s, the US share ranged from 11%
to 23% and China’s from 1.7% to 13%. Then in the 2000s the US absorbed between 9% and
22% of direct foreign investment and China between 2.9% and 9.5%. In 2009, China and
Hong Kong together absorbed 12.8% of international capital flows and overtook the US,
which received just 11.8% (unctad 2010).
20.0
18.0
16.0
14.0
12.0
10.0
8.0
6.0
4.0
2.0
0.0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
China usa
Figure 4.14 China and US/World imports (%)
Source: oecd (2010)
and counterhegemonic forces; and the relative decline of the hegemonic cen-
tre and its ideological areas of influence (Groningen Growth and Development
Centre, 2010). Geopolitical growth has shifted to East Asia and low growth is
concentrated in the United States and its regional ideological allies in Western
Europe, Latin America, Eastern Europe and Africa, all of whom have applied
the neoliberal policy package and in doing so forced down average growth
rates. Meanwhile China has continued to expand globally, especially since
2000, and this has benefitted the peripheries.15 Political and social conflicts in
such regions could draw them even more quickly into the axis of world growth,
currently located in China and East Asia, as they constitute new centres of
15 Taking 1979 (the first year of the belle époque in the United States) and 1994 as the start of
two different periods in the world economy, we find that per capita gdp increased by
1.8% between 1979 and 2008 and 2.6% between 1994 and 2008. The individual figures for
China and India are far higher: 6.7% in both periods for China; 4.1% and 5.1% respectively
for India. The US matched the world economy between 1979 and 2008, but the latter over-
took it by some distance in the post-1994 period, attaining per capita gdp growth of 1.9%.
The 12 highest-ranking Western European countries in per capita income terms experi-
enced rather modest per capita gdp increases over the two periods of 1.6% (1979–2008)
and 1.8% (1994–2008). Latin America and Africa performed poorly: the former growing by
0.7% (1980–2008) and 1.8% (1994–2008), and the latter by 0.6% and 1.9% over the same
two periods. Meanwhile Eastern Europe was hit hard by the fall of the Berlin Wall and
Russia by the collapse of the ussr, registering growth of 1.8% and 0.8% since each event
respectively (Groningen Growth and Development Centre, 2010).
16 According to Maddison, the 2006 per capita income of 16 East Asian countries (China,
Japan, South Korea, Taiwan, India, Malaysia, Thailand, Hong Kong, Singapore, Pakistan,
Indonesia, the Phillipines, Nepal, Myanmar, Bangladesh and Sri Lanka) averaged
US$5,266, four times more than in 1967 using 1990 Geary-Khamis dollars. This figure ex-
ceeded every other region in the world economy, thanks largely to the first four countries.
But taken as a whole, East Asia’s per capita income is typical of peripheral zones. See
Maddison (n.d.).
17 One sign of East Asian countries’ greater technological dynamism is the reduction in the
differentials of per capita aggregate value in manufacturing compared to the United
States. In 1967, Japan’s per capita aggregate value in manufacturing stood at 39% of the US
value. This rose to 79% in 1992, dropping to 70% in 2000. In South Korea it shot up from
7.8% in 1967 to 39.6% in 1999. In Taiwan, it climbed from 11% in 1967 to approximately
27% of the US figure in 1999. China and India started from much lower levels but with an
upward trajectory. China’s per capita aggregate value in manufacturing was 4.5% of US
value in 1987, but this almost doubled to 7.9% in 1998. In India, it rose from 6.4% in 1982
to 9.5% in 1998 (Groningen Growth and Development Centre, 2010).
18 By 1998 the joint population of China, India, Japan, South Korea and Taiwan was almost
2,439,700,000, or 41.2% of humanity.
This prevented the global majority from controlling and distributing the
wealth. The inversion now taking place brings with it the promise of full social
control over the wealth produced and the dissolution of asymmetries between
politics and the economy (Maddison 2001).
Thirdly and finally, the new division of labour introduced by so-called glob-
al enterprises is undermining working class allegiance to national states. As
Ruy Mauro Marini observed in his later writings (Marini 1996), this is
because the growing interpenetration of markets has extended labour super-
exploitation to the very heart of the world economy. This has the effect of level-
ling down different regimes of labour power reproduction, but it also creates
the objective conditions for the development of a proletarian international-
ism. Ever since the 1990s this process has been fostered by a range of modifica-
tions and articulations that have been taking place in the world system. As
noted earlier, it has been driven by the organisation of social movements on a
planetary scale with the participation of forces traditionally subservient to the
imperialist interests of their national bourgeoisies, who have seriously revised
their approach upon witnessing the spread of super-exploitation to their own
countries. The best example of this is the role played by US trade union federa-
tion the AFL-CIO in organising protests against social and ecological ‘dump-
ing’ at the wto’s third ministerial conference in Seattle and takes part in the
World Social Forum.19
These three indicators point to a potential alliance of antioligarchic forces
uniting periphery and centre, East and West, in the pursuit of a planetary civili-
sation. But these economic forces alone are not enough to create a historical
bloc capable of founding a new world system: they need to be complemented
by the emergence of political and cultural elements who can drive global
19 The AFL-CIO advocates sweeping changes not just to international trade but also to inter-
national financing and investment. Its proposals address themselves to the wto, imf and
World Bank and, in respect of international trade, include basic labour standards such as
banning child labour, slave labour and workplace discrimination, and the right to collec-
tive agreeements and freedom of association. It also seeks a review of the World Bank and
imf’s loan conditions for developing countries, arguing that borrowing should reward
economic growth, democratic institutions, basic employment rights and environmental
protection. It stresses that developing countries need the resources to improve their pop-
ulations’ quality of life and enforce appropriate employment and environmental stan-
dards. To that end it advocates creating development funds and relaxing the specifically
financial conditions attached to foreign debt repayment. Likewise, each country should
be monitored to ensure it meets minimum employment and environmental standards,
and should be penalised and even excluded from the aforementioned international insti-
tutions if it violates said norms.
The attacks of 11 September 2001 were the first sign of an impending period of
systemic chaos that threatens to seriously unsettle the world system. As we saw
earlier, for a country to achieve hegemony it must concentrate world leader-
ship on the productive, commercial, financial, military and ideological levels
to the extent that its power is seen as unchallengeable and consensual. Since
1967 each of these hegemonic dimensions has been going through a process of
decline and exhaustion, albeit at differentiated and unequal rates. In terms of
trade and production, the crisis of US hegemony has been expressed by the
shift in economic dynamism towards East Asia: in the 1970s mostly towards
Japan, Taiwan and South Korea; then into China and to a lesser extent India as
the trend consolidated in the 1980s and 1990s.
In the 1980s, the US bourgeoisie backed the Republican strategy of dealing
with the country’s altered financial position in the world economy by reassert-
ing its great power status. Their strategy was based on overvaluing the dollar,
which served to fund a new arms race and second Cold War. The United States
20 Note to the English edition: The coups in Honduras (2009), Paraguay (2012) and Brazil
(2016), the neoconservative offensive that has isolated radical Bolivarian nationalism in
Venezuela, Ecuador and Bolivia and the defeat of Kircherism in Argentina have all rein-
forced the tendency towards decline, underdevelopment and peripherisation in Latin
America, reducing the influence it had gained in the years 2000–2015. However, these
trends have also deepened social and political conflict in what is a key region in global
geopolitical terms and one that will be disputed over the coming decades.
consequently grew faster than the world economy average and was able to em-
bark on a major ideological and military offensive. However, this offensive
brought huge contradictions in its wake. ‘Strong dollar diplomacy’ suffered its
first setback with the dramatic growth of the national debt, which sustained
widening current account deficits. The Republicans were forced to abandon
their unilateral economic initiatives and seek joint solutions. This led to the
Plaza Accord, where it was agreed to appreciate the yen and the mark in order
to limit the extent of the dollar’s devaluation. A contradiction arose between
warfare and welfare and the process ended in economic crisis and Republican
electoral defeat.
In the 1990s the Democrats turned to a new strategy to wrest back unilateral
control of the dollar, although they adopted a more flexible imperial policy.
Fiscal surpluses were generated by cutting military spending and interest
rates, and in addition supranational mechanisms for jointly managing the
world economy were strengthened. As the dollar continued to be overvalued,
a fresh devaluation of the yen was negotiated between 1990 and 1994 in order
to control US trade deficits. The failure of this policy exposed the structural
flaws preventing the US from coordinating world monetary policy with Ger-
many and Japan under its leadership. The situation helped China to increase
its influence in the world economy through the devaluation of the yuan (fill-
ing the gap left by the Japanese), and its efforts to make technological progress
(thus simultaneously opening up internal, regional and US markets). Renewed
economic growth widened US current account deficits again, this time bene-
fitting China, and they were financed by the expansion of productive capital
via mergers, acquisitions and the sale of shares to foreign capital. But by the
end of the 1990s the Democratic strategy for speeding up economic growth
showed signs of exhaustion, and when the Republicans regained power in the
midst of economic crisis they once again made the imperial project their top
priority.
We can also identify signs of hegemonic crisis in the military dimension.
Hegemony cannot thrive on technological leadership alone: its leadership
must also be dissuasive enough to avoid having to use force to preserve the
geopolitical relationships established by the hegemon. It must guarantee mili-
tary victories whenever called upon to do so, but not at the expense of the le-
gitimacy of the hegemonic project being called into question internally.
From this perspective, the first sign of military crisis was the defeat in the
Vietnam War, in which 57,605 North Americans died. Domestic public opinion
played a crucial part in that defeat. Although the public initially supported the
war, by 1968 it was motivated by the sheer scale of loss of life and limb into
pushing for the US to withdraw, which it finally did in 1973.
The United States could only restore the credibility of its imperial policy by
reworking its military strategy. This took the form of the Star Wars project,
which ushered in a new kind of military intervention. Instead of engaging in
ground wars with heavy casualties, ultra-sophisticated technology was used to
wage war from the skies. This new strategy met with success in the Gulf and
Kosovo Wars, but it harboured a contradiction: although the US was able to
achieve its military aims, it was unable to overthrow the governments in ques-
tion, who were ultimately responsible for political conflicts. That could only
be achieved through land battles, occupation costs and the risk of major
losses.
The terrorist attacks on the World Trade Center and the Pentagon vividly
brought back memories of Vietnam – not just because of the numbers killed
but because of the failure of imperial policy to guarantee the safety of the US
population. In the final analysis the attacks were a manifestation of an interna-
tionally coordinated civil society and simmering resentment towards imperial
oppression across the world. They were also a consequence of Republican at-
tempts to relaunch a hegemonic offensive under increasingly unfavourable
conditions. The targets of the 11 September attacks were precisely symbols of
US financial and military power.21
It has been difficult for the hegemon to control this new enemy by military
means. Firstly, the enemy is diffusely located throughout the global territory.
Secondly, its diffuse presence is articulated through a powerful symbolism in
respect of how social, cultural, ideological and economic identities are per-
ceived in the world. And thirdly, destructive technologies have proliferated to
the degree that they can be used by unconnected cells belonging to a
network.
These factors have made the hegemon more insular. A violent show of force
might bring it some immediate results, but in the medium term might also cre-
ate a breeding ground for said factors, triggering conflict on an unprecedented
scale and a new fascist ideological offensive. It is up to popular forces to isolate
those sectors both inside and outside the United States who are encouraging
such a prospect.
21 Far from dismissing the notion, we think it highly likely that far right sectors of the Bush
government played a role in the 11 September attacks, just as Michael Moore suggests in
his documentary Farenheit 9/11. Their motive in doing so would have been to produce
their own ‘Reichstag fire’ as the excuse to launch a political offensive. However that does
not preclude the attackers’ relative autonomy and the role of external factors.
The George W. Bush presidency and the 11 September 2001 attacks provoked
major changes in US public policy, and especially foreign policy. Whereas dur-
ing the Cold War the paradigm of US foreign policy was containment and the
peaceful coexistence between the capitalist and socialist worlds which that
implied, the paradigm introduced under George W. Bush is premised on the
US achieving its objectives by force. This new model is a product of accelerat-
ed hegemonic decline and a conservative understanding of how to stop it.
During the Cold War the US had hoped to defeat the Soviet bloc by peaceful
means, using a dissuasive strategy aimed at turning its enemy capitalist by
combining military competition with either confrontation or detente. The
arms race, associated with confrontation, received a stimulus whenever ten-
sions mounted. This happened in 1947–53, when the US restricted any trade or
financial links with the socialist world. Then, during the period of detente fol-
lowing Stalin’s demise and consolidated under Nikita Khrushchev, the arms
race slowed down and commercial and financial ties were strengthened. In the
1980s neoliberalism became the dominant ideology of the world system and
inverted this relationship by combining the arms race with detente in the early
part of the decade. For the most part, the US limited its strategic use of force to
the Cold War’s ‘hot zone’ in the Asian periphery because of the inroads being
made there by socialism in association with nationalist movements linked to
the overthrow of old European colonial empires.
With its new foreign policy paradigm the US hopes to achieve its post-Cold
War goals of maintaining international leadership, preventing the rise of re-
gional powers, and facing down security threats by destroying its enemies.
Combined with new internal policies, this new model reflects an imperial
desire to manage international relations. Its fascistic approach threatens dem-
ocratic regimes and the principles of national sovereignty adopted at Westpha-
lia and later developed through the Concert of Europe, the League of Nations
and United Nations Organisation.
This evolution towards empire represents a historical tendency of the mod-
ern world system, but one that has never managed to fully materialise. It devel-
oped during periods of intense competition, associated with powers that were
unable to maintain their hegemonic status through free competition over the
long term and therefore resorted to violence, expansionism and empire. In the
20th century this violent tendency turned fascist in nature, as it was no longer
acting upon an archaic, precapitalist world, but one characterised by an exten-
sive global market, highly developed social organisations and postcapitalist
states.
The current rise of fascism in the world system derives from the explosive
combination of four factors: (1) the accelerated decline of US hegemony;
(2) the crisis of the nation-state as a means of managing the world economy;
(3) the subsequent inability of the US to support another state as its hege-
monic successor (unlike the United Netherlands and Great Britain previously),
and (4) the Republicans’ unilateral foreign policy. It can only be stopped by
creating the political conditions for a transfer of state power from the US
to forces representing a multilateral approach centred on international institu-
tions and interstate cooperation. Only then can the transition from US hege-
mony to a post-hegemonic and democratic world system be achieved. The
election of Barack Obama represented a step in that direction, but only a lim-
ited and temporary one.
result of hegemonic crisis. This response was reflected in the new foreign poli-
cy paradigm promoted by US political hawks for whom national decline flowed
directly from restrictions preventing it from using military superiority to settle
conflicts.22 The Bush Doctrine represented this new mindset. It prioritised ‘se-
curity’ and the defence of US interests at the expense of democracy and turned
eliminating the ‘axis of evil’ into its core foreign policy goal, i.e. getting rid of
regimes that according to the US government were either developing or ac-
quiring weapons of mass destruction or else supporting international terror-
ism. States run by governments belonging to the ´axis of evil´ included Iraq,
Iran, Syria, Cuba, Libya, North Korea and Sudan.
The Bush Doctrine asserted the right of the United States to carry out pre-
ventive military attacks and invasions based on its own ad hoc judgments. Not
only was force used against the ‘axis of evil,’ but civil rights, individual free-
doms, and democratic institutionality all came under threat, as the passing of
the Patriot Act showed. National sovereignty and international agreements
were also targeted. The high point in this process came with the international
effort, led by Bush with backing from Blair, Berlusconi and Aznar, to invade
and occupy Iraq, where a US-led coalition government was imposed.
How far can this process go? As far as praxis allows it to. As Wallerstein
notes, the hawks are wrong. The 11 September 2001 attacks exposed US military
vulnerability and the use of force can only hasten the end of its hegemony. The
risks are real and have up to a point restrained the hawks. But US leadership
will have to be replaced by a new way of organising the world system if its de-
cline is not to degenerate into a chaos that endangers humanity very survival
and its civilisational achievements. It is therefore crucial that democratic forc-
es in both the State and civil society combine globally to carry out the
transition.
Despite the initial triumphalism, the invasion of Iraq thoroughly exhausted
imperialist policy and gave the newly elected Barack Obama the chance to
overhaul US foreign policy. The Obama government faced the challenge of cre-
ating fresh paradigms and a new public policy agenda for the US. Its failure to
do so should not blind us to the fact that this challenge responded to an ongo-
ing structural need on the part of the world system, as a return to territorialism
could lead to US hegemonic power collapsing in the years ahead. There are
several reasons why this might happen:
a. Once the Star Wars Project is definitively dropped from the centre of con-
flict strategy the risk of large-scale US troop casualties could again be-
come a real possibility.
23 Beverly Silver, Giovanni Arrighi and Melvyn Dubofsky (1995) use quantitative indicators
to measure antisystemic mobilisations by workers in the world system between 1870 and
1990 (see Chapter 2). One of their main conclusions is that mobilisations reach their high
points in postwar periods. Thus the index rose from 98 in 1917, to 276 and 242 in 1919/1920,
and from 86 in 1945 to 195 and 206 in 1946/1947. Ironically, renewed military territorialism
on the part of the US has done much to stimulate antisystemic movements in the modern
world system.
24 The 2008–2010 crisis reduced the US trade deficit significantly. But once it is out of depres-
sion the country will almost certainly get back on a trayectory of accelerated expansion,
just as it did after the crises of 1991–1992 and 2001–2002. In 1992 the trade deficit fell to
0.6%, after increasing from 0.9% to 3.2% between 1980 and 1987. In the year 2000 it rose
to 3.8% before falling to 3.5% during the 2001–2002 crisis. In 2006 it rose to 5.7%. The 2009
depression reduced it to 2.5% but it picked up the pace of growth again in 2010, reaching
3.3% of gdp. Between 1992 and 2006, the US trade deficit/gdp experienced annual
growth of 17.4%. If that rate is maintained in the 2010s and its gdp oscillates between 19%
and 16% of the world economy, then in the following decade the US will absorb between
1.4% and 1.6% of world gdp.
Note to the English edition: The US trade deficit remained stable between 2011 and
2016, rising from US$740 billion to US$752 billion after the 2009 depression slashed it
from US$832 billion in 2008 to US$509 billion. However, this stability is illusory and was
only achievable because the oil trade deficit shrank significantly from US$325 billion to
US$58 million thanks to falling hydrocarbon prices and the use of shale gas to substitute
for imports. It is now hitting its limits, both because the oil deficit is unlikely to shrink any
further and also because of the fast-rising non-oil deficit. Between 2010–17 the non-oil
goods trade deficit rose by 11.4% p.a. to US$720 billion, much higher than the 2006 pre-
crisis figure of US$557 billion. The 2017 US global trade deficit of approximately US$811
billion signals the end of stability and points towards expansive tendencies that the
Trump administration is set to boost by strengthening consumption, reducing taxes for
the rich, and strengthening the dollar through interest rate rises.
The sharp increase in the trade deficit between 1999 and 2006 expressed the com-
bined speed-up in growth of the oil and non-oil deficits. In this period, the total deficit
increased by 14% p.a, the oil deficit by 24% p.a and the non-oil deficit by 11% p.a. The
reduction of the non-oil deficit represents the temporary victory of imperialist over na-
tionalist forces in the world economy. But as long as this particular deficit continues along
its accelerated trajectory, with China the main beneficiary, it will only serve to deepen the
crisis of US hegemony.
25 Between 1980 and 2010 the ratio of federal national debt to US gdp grew by about 3.5%
per annum. If that ratio is maintained over the next ten years, the debt could surpass
120% of gdp.
subservient to the declining power where the effects of such a downturn would
be felt most keenly.
The Obama government´s failure to achieve its campaign goals showed just
how hard it is to make substantive changes to US public policy. Whereas Clin-
ton slashed military expenditure by up to 10%, Obama not only broke his elec-
tion promises to cut it, but expanded it by 8% per annum until 2010, compared
to the Bush government´s 9.6% (Council of Economic Advisers 2010b). He also
redoubled military intervention in Afghanistan and went back on his pledge to
withdraw troops from Iraq, leaving around 50,000 in place. Furthermore, his
attempt to close Guantanamo Prison was defeated in Congress. Domestically,
he reinforced George W. Bush’s policy of protecting extraordinary profits by
running up huge public deficits. This dented his popularity and led to a huge
defeat for the Democrats in the 2010 mid-term elections.26 The policy trans-
ferred a significant share of the public saving to big capital without the benefit
of increased productivity in return, which led to lower rates of investment, per-
sistently high unemployment, a greater share of the national budget going on
interest payments and negative pressure on the expansion of social
spending.27
Any serious attempt to overhaul US public policies would have to transform
their class basis and tailor them to the social majorities and entrepreneurs
linked to the internal market.
26 The military budget was increased from 3.8% of gdp in 2008 to 4.7% in 2011. Only then
did it begin falling in relative terms thanks to Congress-imposed limits aimed at tackling
the enormous public deficit, dropping to 3.8 % in 2013 and 3.5% in 2014. Obama withdrew
US troops from Iraq in late 2011 but did maintain a staff of nearly 20,000 in the US Em-
bassy, the vast majority of whom were non-diplomats, military personnel and mercenar-
ies. Their number dropped to around 5,000 by the end of his mandate. Between Septem-
ber 2012 and the end of 2014 he withdrew US troops from Afghanistan, leaving behind a
10,000-strong contingent under the command of nato forces.
27 The Economic Report of the President 2010 (Council of Economic Advisers 2010b), estimat-
ed that in 2011 federal budget expenditure including interest payments would rise from
US$180 billion to US$250 billion, and that social spending would be reduced from US$685
billion to US$595 billion.
its own initiatives. Poverty levels increased from 13.2% in 2008 to 15% in 2012
and remained high until they began to fall in 2014, dropping to 12.7% by 2016.
The electorate expressed its disenchantment with the Democratic Party es-
tablishment by widely backing Bernie Sanders, the independent senator from
Vermont who joined the party in a bid to be nominated as its presidential can-
didate on an advanced social democratic agenda. However this popular sup-
port was not enough to win the Democratic primaries, where the still-powerful
party aristocracy prevailed. Trump’s candidacy encouraged a demagogic right
populism that looked to the State to protect jobs. This populism threatened
immigrants (above all Mexicans); firms that had undercut US jobs by relocat-
ing production; free trade agreements (both existing ones such as nafta and
those in the making such as the Transpacific Alliance); wto-agreed tariff regu-
latory frameworks, and countries in technological competition with the Unit-
ed States, such as China, or with access to US market niches. Trump’s fanatical
racist crusade against multiculturalism, Mexicans/Central Americans, Islam
and, it would seem, corporate globalism did not win him the popular vote
against Hillary Clinton, but was enough to secure a majority in the Electoral
College. Clinton won the popular vote by 3 million votes, less than the 10 and 5
million obtained by Obama in 2008 and 2012 respectively.
Despite his rhetorical support for protecting local jobs, Trump has seriously
deepened the US trade deficit by going back to cutting taxes, raising interest
rates and strengthening the dollar. These policies, along with the retaliatory
measures they have provoked worldwide, have undercut his unilateral tariff and
para-tariff restrictions. The US is increasingly using force as an international
policy instrument. It has also abandoned its universalist discourse, as evident
from slogans like America First. These factors combined with rising US military
expenditure and an increase in international conflicts and disputes have served
to destabilise the global system and bring the risk of systemic chaos closer.
Earlier we described how there are two main positions in the US hegemony
debate. For some, US hegemony is in crisis. For others, it is getting stronger or
is en route to becoming an empire. We are among those who defend the hege-
monic crisis perspective. As with its counterpart, this perspective comes in
many different and theoretically heterogeneous versions. Ours is based on the
analysis of systemic cycles found in the world system theories associated with
the Fernand Braudel Center. We aim to articulate this perspective with the
28 For Joseph Nye (2002, 8–12), soft power represents the set of values that makes a country
admired by others and allows it to set a political agenda favourable to its own interests.
Nye argues that the soft power of the United States is based on values such as democracy,
personal freedom, social mobility, liberalisation and the power of popular culture and
media.
29 Maddison (2001) highlights Latin America’s growing participation in oil and natural gas
production as a result of large deposits being discovered in very deep areas and the devel-
opment of technology to extract them. In 1973, Latin America produced 9.5% of the
world’s oil and natural gas, increasing to 14.7% by 1999.
30 The Puebla-Panama Plan aims to build a strategic corridor in the Isthmus of Tehuantepec
to allow goods to flow between the Atlantic and Pacific Oceans.
31 Note to the English edition: Obama sought to restore the United States’ hegemonic lead-
ership in international politics, replacing the Bush Doctrine’s unilateral imperialism
based on pre-emptive strikes with a centrist liberal imperialism tied to a nato-backed
coalition and an alliance with Western European powers. In order to reduce global and
local protection costs and create more space for negotiation, this liberal imperialism
combined with either insurrectionary forces to destabilise and overthrow ‘enemy’ govern-
ments or with political oppositions amenable to US-led multilateral negotiations. This
created an opportunity to minimise certain historic conflicts, as seen in Obama-era initia-
tives in respect of Iran, Cuba and the Israel-Palestine conflict.
Whilst Obama’s liberal imperialism contained the expansion of military spending pre-
viously driven by the unilateral imperialism of George W. Bush, it did not seriously reduce
it. Neither did Obama fully break with the Bush Doctrine. In fact he continued to rely on
certain concepts associated with it, such as the ‘axis of evil,’ and on some of Bush’s staff.
Although his administration oversaw the withdrawal of US troops from Iraq and Afghani-
stan, it also led military intervention in Libya and Syria, failed to close Guantanamo, and
declared Venezuela a threat to US security. It supported acts of espionage: under General
Keith Alexander – who was appointed by Donald Rumsfeld in 2005 and remained in of-
fice until 2014 – the National Security Agency (nsa) spied on Petrobras. In addition, it
supported coups in Paraguay, Brazil and Ukraine, where it promoted insurrectionary
movements, and imposed sanctions on Russia. Finally, the Obama administration devel-
oped initiatives aimed at expanding neoliberal regulation of the world economy. These
included the Trans-Pacific Partnership (tpp), which harmed the brics by seeking to iso-
late China and weaken its political support in Brazil, South America and Russia.
In the Middle East, North Africa and Asia, Obama’s liberal imperialism relied on nato
troops, local allies such as the United Arab Emirates, Jordan and Qatar, jihadist and
ercenary groups, and the use of advanced military technology such as drones. In this
m
way it sought to reduce the economic, political and social costs of US intervention. Its
strategy consisted of continued attacks on the so-called axis of evil, including the over-
throw of some regimes (Libya and Syria); opening up spaces for the liberal institutionali-
sation of Islamism in territories conquered through war (Iraq) or through resistance and
insurrection (Egypt, Tunisia, Yemen, Algeria and Palestine), and destroying radical anti-
American and anti-European Islamism by making Al Qaeda its main target. However, its
strategy was riven with contradictions. For one, its support for emerging political forces
clashed with the interests of old powers allied to the US, preventing the advance of polit-
ical-institutional forces such as the Muslim Brotherhood in Egypt and the strengthening
of the Palestinian Authority and encouraging jihadism. In addition, the failed economic
and social restructuring of occupied states such as Iraq exacerbated internal conflicts and
led to renewed civil war after US troops left. Lastly, in a context of systemic chaos, US
support in the form of finance and arms sales to unstable insurrectionary groups via in-
termediaries (Turkey and Qatar) rather than directly only favoured the spread of new
anti-American jihadisms such as Islamic State.
Obama’s foreign policy produced poor results. His nuclear deal with Iran was undone
by Trump. So too was his attempted rapprochement with Cuba, which had also lacked
support from the Republican majority in Congress. The Trans-Pacific Partnership was
abandoned in favour of unilateralism and tariff protectionism; support for the liberal in-
stitutionalisation of Islam met stiff resistance from Israel, the Egyptian military and re-
gional oligarchies, and attempts to forcibly dismantle the Iraqi, Libyan and Syrian states
caused even greater political instability, leading to civil wars and chaos. Trump’s election
has brought an explosive combination to bear on the US government: the return of the
Republicans, who ever since the Reagan era had always expanded military spending far
more than the Democrats; the turn towards unilateralism and the use of force, and a char-
ismatic political leader whose unpopularity leads him to seek confrontation with external
and internal enemies. All this makes international conflict more likely, and in a context of
declining US economic power, such conflicts are increasingly difficult to control.
32 In a more recent work the author does draw closer to world-system theories, albeit with
contradictions. On the one hand she asserts that “As a source of Western and/or capitalist
systemic legitimacy, US hegemony is visibly decaying” and that “the limits of US hege-
mony are the limits of capitalist hegemony, and they coincide in their decline” (Ceceña
and Sader 2002, 246). But she also affirms that “US hegemony in the world today is an in-
disputable fact, and no other power can challenge it, even though it develops in a context
of permanent contradiction and competition at every level” (Ceceña and Sader 2002,
245–246).
The crisis of historical capitalism is not just a crisis of its mode of production, but also
of every dimension that ensures its historical existence, such as an interstate system or-
ganised by hegemonies and the power of each hegemonic state.
33 According to Chesnais, “The fact that the unification of the three cycles of capital in the
differentiated moments of a single cycle under the aegis of productive capital was and
remains (in ‘strictly theoretical’ terms) a pre-condition of capitalist relations of produc-
tion putting down national roots (first in England and later in every country that has un-
dergone a real process), does not make it a realistic prospect in the circumstances of late
20th century world capitalism. To wait “for the world economy to become fully formed”
through the spread of productive capital or industrial capital (“the only mode of exis-
tence of capital in which not only the appropriation of surplus-value, or surplus-product,
but simultaneously its creation is a function of capital”) is a little like waiting for Godot
[…] Our response is that the world economy is constituted not according to the model set
out in Volume 2, whatever prestige it might enjoy, but to models much closer to the meth-
odological discussions around financial capital held in the first thirty years of the 20th
century” (Chesnais 1996, 316–317).
surplus value to be distributed under the rules of competition and labour pro-
ductivity to capitals engaged in commercial and financial activity. In analysing
systemic cycles we saw that when articulated, these capitals can temporarily
shift the axis of accumulation to the financial sector. This serves to eliminate
surplus production and lower the price of labour power so that productive
capital can kickstart a new cycle of surplus value production. Debtors’ insol-
vencies limit the accumulation of financial capital, but they reduce the econo-
my’s real assets, and this creates the conditions for a new technoeconomic
paradigm to drive up profit rates and form the basis of a fresh cycle of
development.
The claim that the axis of capitalist accumulation has permanently shifted
towards the financial sector presupposes one of two possibilities: (a) the falling
rate of profit tendency has reached a point of terminal crisis and productive
capital cannot generate a new cycle of development, as Kurtz argues; or (b)
competition has been superseded, and so productive capital is incapable of
challenging financial capital with a set of innovations that cheapens goods and
raises the level of surplus value production. These possibilities lead the au-
thors cited to link the power of finance to the power of the gun and, from there,
to theoretically construct their empire analogy or perspective.
In Ciclo e crise: o movimiento da industrialização brasileira (Cycle and crisis:
the recent movement of the Brazilian economy),34 Maria da Conceição Tava-
res argues in favour of separating the theory of capital valorisation from the
theory of labour exploitation, describing their association as a theoretical trap
set by neomarxists and one of progressive thought’s biggest equivocations (Ta-
vares 1978, 47). As technological and financial development gradually becomes
more autonomous of wage labour and the use of living labour, so, in her view,
capitalism progressively separates labour valorisation and exploitation.35 Valo-
risation becomes arbitrary, and capital, mediated by la raison d’etat, increas-
ingly assumes the form of M-M’ as it valorises itself with state support.36
34 Originally a thesis presented to a contest for Full Professorship at the Economics and
Management Faculty of the Federal University of Rio de Janeiro.
35 Whereas Chesnais sees a conflict between Marx and the financialisation thesis, Tavares
cites him in her support, drawing on his thought in her own unique way. Thus she refes to
the classic passage in the Grundrisse where Marx points to waged labour’s “narrow foun-
dation” for valorising the productive forces of science as evidence that Marx imagined
capitalism would overcome the limits imposed by the rate of surplus value, when in fact
he was illustrating its historical limits (Tavares 1998, 60–61).
36 Navigating in these same waters, Luiz Gonzaga Belluzzo (1999, 116) asserts that M-M’ ex-
presses the real substance of capitalist accumulation and expression of its development
and maturity: “Capitalism is the regime of production in which accumulated wealth in
the form of money is ready to turn inwards in its quest to reproduce itself. M-M’, not
Fiori suggests that a future collapse of the US imperial system could open the
doors to a new wave of capitalist expansion, following the historical pattern
seen in the way resistance to the Spanish Empire led to the creation of mercan-
tilist states and resistance to the British Empire brought forward late capital-
isms (Fiori 1998, 1999, 2004, 2008). In O mito do colapso americano (The myth of
American collapse), he partly reworks his approach to provide his own version
of the shared hegemony thesis. In this account, the emergence of China and,
less so, Russia point to rising global competitive pressures and the relative de-
cline of US power, possibly leading to a shift in the structural axis of world
power. But this new and drawn-out imperialist contest, which has barely be-
gun, is unlikely to threaten the central role of US financial wealth and the dol-
lar. Instead, and despite the rivalries, it will probably increase the degree of
M-C-M’. represents this process in its pure form, one that befits the idea, free from the
inconveniences and impediments represented by the material forms it assumes. This
is not a deformation, but the perfect expression of its substance, insofar as money is
both the precondition and the result of the process of wealth accumulation under
capitalism.”
fusion with said wealth. For Fiori, this period began in 1970 and resembles the
secular periods of 1150–1350, 1450–1650 and 1790–1914 (Fiori 2008).
We would respond to the above approaches by making the following points:
a. Theories arguing that capitalist accumulation has been structurally
displaced towards a financialised regime cannot be sustained. They ulti-
mately end up envisaging the global suppression of competition – a sce-
nario bereft of any historical or empirical basis. There are no signs of
suppression of the modern world system and interstate system, and there
is nothing stopping other states or regions from introducing more pro-
ductive technological trajectories that endanger or impose limits on the
concentration of wealth in the states dedicated principally to surplus
value appropriation. Because Marx located competition as an indispens-
able part of capitalist accumulation, he cannot be used to defend the idea
that capital is able to use political power to self-valorise. Self-valorisation
is necessarily limited to the realm of capital accumulation, which was
only able to globalise once it rooted itself in its own mode of production.
It is a mistake to see the M-M’ formula as representing the substance
of capital and its highest stage of development, and Marx explicitly
rejects such an analysis. In the Grundrisse, he highlights the dialectical
relationship between the financial and productive forms of capital accu-
mulation, effectively showing that whilst the former are relatively
autonomous, they cannot become fully independent of the development
of fixed capital.37 Tavares’ critique of the neomarxists, in which she seeks
37 In the Grundrisse Marx points to what he calls a “pretty contradiction” between the mate-
rialisation and fluidity of capital. It is in its aspect as fixed capital – when capital loses its
fluidity and becomes identified with a given use value – that developed capital most
clearly presents itself. Machinery then appears as fixed capital, and fixed capital as the
most adequate form of capital in general. Fixed capital, however, is immobilised, and
capital is indifferent to every specific form of use value, circulating capital being the most
adequate form of capital, rather than fixed capital.
“Precisely in this aspect as fixed capital – i.e. in the character in which capital has lost
its fluidity and become identified with a specific use value, which robs it of its ability to
transform itself – does developed capital – to the extent we know it so far, as productive
capital – most strikingly manifest itself, and it is precisely in this seemingly inadequate
form, and in the latter’s increasing relation to the form of circulating capital in No. 2 [the
small-scale circulation between capital and labour capacity – c.e.m.], that the develop-
ment of capital as capital is measured. It’s a pretty contradiction. To be developed. […]
Machinery appears, then, as the most adequate form of fixed capital, and fixed capital, in
so far as capital’s relations with itself are concerned, appears as the most adequate form of
capital as such. In another respect, however, in so far as fixed capital is condemned to an
existence within the confines of a specific use value, it does not correspond to the con-
cept of capital, which, as value, is indifferent to every specific form of use value, and can
adopt or shed any of them as equivalent incarnations. In this respect, as regards capital’s
external relations, it is circulating capital which appears as the adequate form of capital,
and not fixed capital.” (Marx 1973, 679, 694).
This dialectic between fixed and circulating capital is a permanent feature of capital-
ist development, and it is incorrect to identify capital’s “substance” with one or other of its
forms.
38 Here we are not considering the theories of crisis and cycles that base themselves on the
fact that this convergence does not always take place, and that it is just an average of the
swings deviating away from it, as we saw in Chapter 2.
39 The growth of the world economy has led some neo-developmentalists to take a certain
distance from theories of a long global depression and to try instead to weld together
theories based on a stronger usa and shared hegemony. They belatedly recognise world
growth whilst asserting the centrality of financial accumulation and the flexible dollar
and their convergence with new centres of accumulation of power of equal weight. See
Fiori (2008).
40 This analysis coincides with that of researchers of the stature of Orlando Caputo (2000b,
2001a, 2001b).
That could trigger a worldwide run on the dollar and the loss of its ability
to act as the vehicle currency for international transactions. The effects of
zigzagging between appreciating the dollar in the belle époque and then
depreciating it to assert the privileges of seigniorage are wide-ranging but
still subject to the limits imposed by the currency’s credibility among pri-
vate investors and the political and social costs which these transfers im-
ply for the foreign public creditors who underwrite them.
d. US-backed gunboat diplomacy as mentioned above is not viable in the
long term and is unlikely to bring about a new international order. We
noted that the centrifugal tendencies in the world economy are extreme-
ly powerful and a coercive central power would struggle to contain them.
Concentrating enough military, financial and ideological resources to de-
fend an imperial order is so difficult as to make the costs incalculable.
The international isolation experienced by the US when it went to war
against Iraq and the exhaustion that George W. Bush’s Republican gov-
ernment suffered domestically show just how far the imperial project
and US hegemony have come up against their own limits.
e. Finally, there is the theory of shared hegemony, which posits that the
convergence of China and US financial hegemony since the 1990s has a
long-term future despite the growing rivalry between the two. But it can
only last in the short or medium term and is unlikely to survive the next
30–40 years of systemic chaos. The modern world system offers no his-
torical precedents of secular periods of shared hegemony. It is rather a
situation that occurs during the stages of hegemonic crisis. Thus the pe-
riod we expect to open up in 2015/2020 is far more likely to resemble that
of 1790–1815 or 1914–1945/1950, when the hegemonic crisis reached break-
ing point and the fight to overhaul the institutional foundations of the
world economy began. It was during those periods that almost every
Iberoamerican country achieved independence and a third of humanity
began to live under socialist regimes. The crisis of 2008 showed how
much shared hegemony had already broken down. Whilst in 2005–2008
China bought 49.3% of the bonds in public debt the US needed to sell; in
2009, when Chinese growth rates dropped, that figure fell to 19.6% of the
Treasury’s financing needs. It escaped recession by launching a US$500
billion aid package to stimulate internal demand and promoted the first
meeting of the brics (Brazil, Russia, India and China), which publicly
raised the possibility of a common alternative to the dollar.41 The process
of creating a geopolitical alternative to US hegemony has only just come
In the post-war period development became a key issue for the world econo-
my. This reflected a consensus at the international level to cater to different
interests and needs. The systemic chaos produced by the crisis of British hege-
mony had broken the back of the modern world system, leaving a trail of de-
struction across the centre (Western Europe), semi-periphery (Japan and the
ussr) and periphery (Eastern Europe). The non-European peripheral regions
were also badly hit. The crisis of the world market had impacted upon the in-
ternational division of labour and spurred the decline in primary commodity
prices. This led to major social tensions and the birth of revolutionary move-
ments that in varying degrees confronted agrarian oligarchies and imperialism
in the name of nationalism and development.
With the end of the Second World War the recovery of the world economy
that had begun in the late 1930s reached a cul-de-sac. Based on the expansion
of military spending and centred on the United States, it could only be sus-
tained by resolving the problems associated with the end of British hegemony,
which were now preventing the world market from expanding. It was therefore
crucial to (a) establish a new world monetary standard to reactivate interna-
tional credits and payment systems; (b) rebuild European economies and im-
port capacities ruined by war and the loss of colonial rents following the crisis
and collapse of the European empires; and (c) address the demands for devel-
opment and/or self-determination coming from various nationalist move-
ments in the periphery who were threatening the international division of
labour organised by historical capitalism.
Development would become crucial to the way the United States organised
hegemony, and together with self-determination it served as the ideological
glue holding together its systemic power to coordinate the peripheral coun-
tries. Meanwhile in the core and semi-peripheral countries the ideological ba-
sis for its systemic activity was the defence of freedom and its irreducibility to
equality, which drove a wedge between social democratic and socialist move-
ments on the one hand and communists on the other. Modernisation theories
were to play a key role in the spread of US ideological influence throughout the
peripheral countries, and were used to try and reconcile local nationalisms
with the world system’s new power structures. Meanwhile, in the centre and
semi-periphery, liberalism and military Keynesianism were its chief ideologi-
cal tools of hegemonic persuasion as it combined warfare and welfare in the
Cold War to militarily occupy Western Europe.
From the 1950s to the 1970s, politics and social sciences in Latin America
and the wider world debated their responses to the results achieved by the
peripheral development proposals borne of and inspired by US hegemony.
Then in the 1980s and 1990s the world economic crisis and the defeat of anti-
systemic movements relegated these arguments to the sidelines as stabilisa-
tion and anti-inflationary policies took centre stage. But since the world
economy began expanding once again it has triggered a new antisystemic of-
fensive and revived the discussion around national, regional and global paths
of development. And this time round the development debate has been en-
riched by ecological and democratic questions, which are understood not just
in environmental and political but also social, economic and cultural terms.
With globalization and the historical evolution of the modern world system
as its context, this chapter takes stock of development proposals that are based
on the main theoretical approaches to articulate the periphery with global
capitalism. These approaches include modernisation theory, national-
developmentalism, dependency theory, endogenism, neo-developmentalism,
neoliberalism and world system theories. We do not intend to give a detailed
assessment of the debates around them – a task beyond the scope of this
work – but rather to address some of their main arguments. And given that
dependency and modern world system theories are in our view so crucial to
the organisation of antisystemic movements, it is their contributions to which
we will pay most attention.
roducing goods that offer a comparative advantage, and through trade they
p
then all benefit from the resulting higher labour productivity.1 In his perspec-
tive, capital and labour’s international mobility is residual and limited, and so
trade represents the only way to spread the rise in productivity. This supposed
lack of mobility leads Ricardo to posit that the theory of value does not apply
to international economic relations. This limitation seriously reduces compet-
itiveness between different capitals, as long as they specialise. If production
costs fall in one state this does not put the other national productive structures
in danger because they complement one another. If British producers manage
to cheapen the unit cost of cloth relative to wine, then the Portuguese will
share in the benefits because the wine they export to the English market will
become relatively more expensive. The fruits of technical progress can then be
shared by setting a price for cloth that allows the English to obtain more wine
just as it allows the Portuguese to obtain more clothing. Specialisation makes
countries either industrial or agricultural without any prejudice to countries
that perform activities representing less intensive technical progress.
Although Ricardo, an advocate of Britain’s industrialisation, allowed for a
degree of ambiguity and doubt in developing his principle, neoclassical theory
turned it into an abstract model with scant regard for historical reality.2 The
Ohlin-Samuelson model took its generalising claims a step further to argue
that national specialisation should be based not on comparative advantage in
commodity production but on the provision of factors of production. The
model explicitly proposes that countries with high capital concentration
should specialise in industry and those with plenty of land and workers should
specialise in agriculture (Vilarreal 1979).
Comparative advantage theory henceforth became an axiom of economic
liberalism. It was used to justify the spread of the gold standard, trade and
capital account liberalisation,3 and orthodox monetary policy across the
world-economy. But the bright and harmonious future it promised never
aterialised. Instead said policies caused a slow but ongoing decline in the
m
prices of primary products in relation to industrial products which accelerated
during the world economy’s crises. From 1876–1880 to 1911–1913, the price ratio
of primary commodities to manufactured goods fell from an index of 100 to
85.8. During the interwar crisis it declined even further, hitting a low of 64.1 in
1936–1938.4
The income lost by peripheral countries in this way made it ever harder for
them to sustain economic growth.5 The orthodox solution applied to the
balance-of-payments crisis was deflation and reduced internal demand. Social
tensions piled up and gave birth to revolutionary movements that sought to
turn national states’ attention towards industrialising Latin America (or Asia
or Africa), winning the right to self-determination and state-led modernisation
of their countries. These revolutionary processes brought uneven results. They
depended on national bourgeoisies exploiting the space opened up by the cri-
ses of imperialism and the agro-exporting oligarchies to push economic devel-
opment. That meant restructuring the State and turning the public policy
paradigm into one centred on building infrastructure and creating the institu-
tional conditions for industrialisation. This issue was examined in depth by
Vania Bambirra, Theotonio Dos Santos, Fernando Henrique Cardoso and Celso
Furtado in Latin America, and in Africa by Frantz Fanon.
Lasted throughout the 1940s and 1950s, this process of State and public pol-
icy restructuring went hand in hand with a new theoretical paradigm which
brought a new understanding to international economic relations and Latin
America’s place within them and proposed new pathways to global insertion
based on countries redefining their internal policies. Known as national-
developmentalism, it was best expressed and most widely disseminated by the
United Nations Economic Commission for Latin America and the Caribbean,
ecla (cepal in Spanish).6 In its initial phase the main architects of the
4 See Raul Prebisch’s classic work, The Economic Development of Latin America and its Principal
Problems (1950), written as an introduction to ecla’s Economic Survey of Latin America 1948
(ecla 1948) and later included in the organisation’s 50th anniversary anthology (eclac
2016, 109–128).
5 In Argentina, an example par excellence of adherence to British hegemony and the gold
standard, per capita annual economic growth plummetted from 2.9% in 1900–11 to 0.7% in
1912–29 before falling into negative figures in 1930–38. In contrast, Brazil achieved better re-
sults by using its monopoly control over the international coffee supply to defend interna-
tional prices as a policy, purchasing surplus coffee by printing and devaluing the national
currency. Hence it suffered less in terms of economic dynamism, with per capita annual
growth falling from 1.9% between 1900 and 1911 to 1.4% in 1911–29. (Maddison 1997, 280).
6 In 1984 the organisation’s English acronym was changed to eclac – the Economic Commis-
sion for Latin America and the Caribbean. It is referred to herein as ecla or eclac (as ap-
propriate) and cepal where referring to Spanish-language sources. – Trans.
cepalista school of thought were Raul Prebisch and Celso Furtado.7 They
launched a blistering attack on liberalism and the theory of comparative ad-
vantage, and advocated industrialisation as the way to break through the im-
passes of peripheral development. With the national bourgeoisie too weak to
take the path of Schumpeterian enterprise alone and foreign capital uninter-
ested in industrialising the periphery, the process had to be led by the State. It
did this by implementing import substitution policies. These policies sought to
internalise the manufacture of goods consumed that were hitherto imported,
i.e. to produce those same goods domestically. This meant the State had to ac-
tively intervene in foreign trade and ensure foreign exchange export earnings
were no longer used to pay for luxury imports but to finance national
industrialisation.
The import-substituting industrialisation process consisted of three main
stages: the substitution firstly of light consumer goods, then of durable con-
sumer goods and finally of producer goods. But as each of these stages elimi-
nated the need to import products now made internally, so they also created
new import needs relating to the inputs required to internalise production. As
the process unfolded these new import needs became ever more rigid, shifting
away from consumer goods towards intermediate and capital goods. Striking a
balance between foreign exchange earned from primary commodity exports
and the resources needed to import machinery, intermediate goods and manu-
factured raw materials became ever harder and required expert State
planning.
How did Prebisch and Furtado expect to achieve that equilibrium between
a primary product-intensive export pattern and an industrial component-
intensive import pattern when, pointing out the worsening terms of trade be-
tween primary and industrial products, they were so critical of the theory of
comparative advantage? To answer that, we must pause to consider their ex-
planation for the declining terms of trade. They identified three main contrib-
utory factors:
a. The low income-elasticity of primary products. The supply of primary
products was limited by greater rigidity of demand once industrialisation
7 Prebisch formulated the ideas at the heart of cepalista thinking between 1943 and 1949. This
followed his experience as the Argentine under Secretary of Finance in the 1930s, when he
found his neoclassical background to be inadequate to the task of tackling a national crisis in
the form of a major balance-of-payments crisis, which was linked to the declining volume
and value of Argentina’s commodity exports. According to Octavio Rodriguez (1981), he first
proposed a conscious industrial policy in 1943, and used the core-periphery concept for the
first time in 1946.
Industrialisation appeared as the solution to these problems, but one that re-
quired considerable planning.
Prebisch and Furtado identified a natural tendency for the periphery to in-
dustrialise which they called spontaneous industrialisation. They observed
that it was stimulated by cyclical crises and inflation, but produced disequilib-
ria in the balance of payments and unfulfilled wants among the population.
During lean periods of the cycle, primary product prices declined quicker than
those of manufactured products, resulting in a balance-of-payments crisis.
Governments found it hard to correct these imbalances through deflationary
processes and so sought an alternative in currency devaluation and import
substitution. This alternative protected the internal market and helped local
industry to develop. Local industry expanded during export sector crises, as
Celso Furtado noted in his first article on economics, Características gerais da
economia brasileira (General characteristics of the Brazilian economy) (1950).
In periods of cyclical growth the price relation was inverted as primary com-
modity prices outstrip those of manufactured products. This encouraged mon-
etary illusions and export spending levels that were unsustainable on the basis
of the overall cyclical trend, because over its full course the prevailing tenden-
cy was one of declining primary commodity prices. Industry developed in ‘stop
and go’ style and tended to stagnation due to the lack of foreign exchange to
pay for imports.
In their view these barriers to peripheral development could only be over-
come by a State-led process of import-substituting industrialisation. This was
vital because of the lack of savings available to import the supplies needed to
internalise industrialisation in the periphery. Planning needed to focus on at-
tracting and suitably allocating resources, reducing waste and setting priorities
that factored in rising productivity and wages in peripheral countries. It was
also crucial to change the composition of imports during the spontaneous in-
dustrialisation process. That would involve tightly restricting luxury consumer
imports and putting available resources into whichever investments would
maximise production and income, thereby creating surpluses with which to
purchase machinery and equipment. Prebisch presented the core elements of
this approach in The economic development of Latin America and its principal
problems (1950), written as an introduction to the Economic Survey of Latin
America (ecla 1948). In it he tried to find a path through the impasses stand-
ing between peripheral countries and the fruits of technical progress in the
world economy. The key points of his proposal were:
a. Planned industrialisation would both increase labour productivity in pe-
ripheral economies and, at the same time, largely resolve the problem of
8 As Prebisch argues in The Economic Development of Latin America: “Though the level of pro-
ductivity achieved by some Latin-American countries is such that, by means of a judicious
policy, they would be able to reduce the amount of foreign capital needed to supplement
national savings to moderate proportions, in the majority of them this capital is admittedly
indispensable […] If this capital is effectively used, the increase in productivity will, in time,
allow savings to accumulate which could be substituted for foreign capital in the new invest-
ments necessitated by new technical processes and the growth of the population […] Until a
solution to the fundamental problem of foreign trade is found, care must be taken that dollar
investments, where they cannot be used to further dollar exports, shall contribute, directly or
indirectly, to the reduction of imports in that currency, in order to facilitate future payment
of services.” (eclac 2016, 69,72).
eriphery. The only way to correct these imbalances was by further protecting
p
the national economy. Capital goods had become more expensive as a result.
Producing them internally now required a substantial increase in the national
economy’s relative prices in order to compensate for the high cost of importing
the domestic inputs that made it possible to produce them and the narrowness
of internal markets, which meant they were underutilised in production. All
this had increased the capital–output ratio in the economy as a whole, driving
down the rate of profit and leading to stagnation. The flipside to this process
was the formation of a rentier oligarchy that had taken over the administration
of the State and exploited its active presence across the economy to boost its
income without any matching rise in productivity.
Other cepalistas such as Maria da Conceição Tavares also recognised a crisis
in the import-substitution model. In her 1964 classic, Da substituição de impor-
tações ao capitalismo financeiro (From import substitution to finance capital-
ism), Tavares argued that whilst this particular model had broken down in
Latin America, capitalism had not.9 In her view, ever since the start of the third
period of import substitution in 1954 the growth of industrial output had re-
quired rates of capital formation at a level obtainable only from foreign capital
inflows or through an increase in the purchasing power of exports. Trade rela-
tions could only be improved by resolving the surplus labour absorption issue
and by diversifying exports to include more manufactured products. Tavares
proposed agrarian reform as the key to absorbing surplus labour, as it could not
be achieved with the capital-intensive technologies used to produce capital
goods and consumer durables. She exposed the Achilles’ heel of cepalista
national-developmentalism – it’s silence on the agrarian issue because of the
need to finance import substitution with foreign exchange earned by the agri-
cultural sector. The model she proposed was based on (a) foreign capital in-
flows to overcome the limits placed by trade balances on obtaining foreign
exchange; (b) agrarian reform as a means of absorbing surplus labour and
boosting domestic value added, and (c) a more active foreign policy aimed at
penetrating core country markets, establishing regional integration agree-
ments and diversifying exports.
These dead ends in national-developmentalist thinking left it vulnerable to
attack from modernisation theory, which to some extent shared cepalista criti-
cisms of liberal theory, and opened up an opportunity for foreign capital to
9 She then developed this perspective in Más allá del estancamiento, first published in 1971.
Co-authored with José Serra, it critiqued Furtado’s stagnationist theses. See Tavares and Serra
(1998, 569–588).
play a far more active role in the development of peripheral countries. The
leading exponent of modernisation theory was Walt Rostow.10
Rostow saw his contribution to modernisation theory as part of a collective
endeavour along with Rosenstein-Rodan, Charles Kindleberger and others at
the mit Center for International Studies in the 1950s. The best synthesis of
their work in this period can be found in A Proposal: Key to an Effective Foreign
Policy (1957), where they set out their priorities for the US foreign policy agen-
da. Above all, they argued, the West needed to show that underdeveloped na-
tions could develop from within the free world’s sphere of influence and resist
the temptations of communism. Left to themselves, developing societies
would become the foci of tension and instability as modernisers confronted
traditionalists. It was in US interests for them to modernise as quickly and
peacefully as possible, and so it should assist them by providing the external
capital they needed to achieve their savings and investment goals (Rostow
1990, 436–440).
In 1960 Rostow published his leading contribution to modernisation theory,
The Stages of Economic Growth: A Non-Communist Manifesto. In it he analysed
the trajectory of human development in terms of successive phases of devel-
opment (traditional societies; pre-conditions for take-off; take-off; maturity,
and mass consumption). These stages fitted into what he called a dynamic
theory of production. In his view one universal path to development narrrowly
dictated the way every society evolved. This path was defined by the technical
needs of production, and politics, culture and diversity had to adapt to these
needs in order to raise per capita incomes and investment to the levels re-
quired by each stage of development.
Rostow’s impoverished theory of history came in for harsh criticism from
Latin American thinkers. In the words of Theotonio Dos Santos (1998), it was
one of the worst examples of methodological violence that ever saw the light.
Rostow forged his theory of history under the methodological pretext of coun-
tering the economicism supposedly inherent in Marx’s historical approach.
But the outcome was quite the opposite as he missed the whole point Marx
and Engels make in their writings – that technologies are a product of social
relations and culture, which heavily condition their invention and use. The
social, economic, political and cultural consequences of applying technology
to different social relations vary considerably. As dependency theories and
world system theories would later argue, modernisation theory’s claim that
10 Other authors, such as Bertz Hoselitz, also made noteworthy contributions to modernisa-
tion theory. In Latin America the biggest contribution to this approach came out of the
work of Gino Germani.
different national societies could follow the same path of development was
patently absurd. National societies do not exist in different stages or time-
periods but occupy different positions within one temporal and geographical
space: the modern world system.
Rostow’s approach characterised Latin America as a region in search of the
means of take-off. It needed to create socio-political conditions that would at-
tract enough investment to support sustained growth on per capita produc-
tion. That meant drawing together an elite made up of business owners, politi-
cians, intellectuals and military figures to organise the region on a moderately
nationalist basis. Whilst they should avoid xenophobia and resentment, it was
up to them to harness the State to (a) unify national markets; (b) set up taxa-
tion systems to divert resources into expanding fixed capital; (c) participate in
the international market, applying import-substitution policies if needed, and
(d) allow the participation of foreign capital to stimulate internal saving (Ros-
tow 1960, 1967, 1990).
For modernisation theory, Latin American underdevelopment and its diffi-
culties in achieving take-off could be explained in terms of internal resistance
to the actions of modernising elites influenced and led by the central coun-
tries.11 It was up to states in those central countries (principally the US) and
foreign capital to overcome that resistance. There were both left and right ver-
sions of modernisation theory, which linked it to either mass movements or
economic liberalism. Gino Germani (1981) developed a more left-wing ap-
proach which saw the pressure exerted by social movements as the most dy-
namic factor in Latin America’s transition from a traditional to a modern
world – a shift characterised in his view by the use of mass democracy as a po-
litical instrument. Roberto Campos, on the other hand, linked the issue of de-
velopment to liberalism, mixing pragmatism with eclecticism in the process.
Unlike the liberal Eugenio Gudin, advocate of an agrarian Brazil, Campos
saw industrialisation as a necessary means of development in most of Latin
America.12 Although he accepted the Prebisch/Furtado theory of the deterio-
ration of the terms of trade in various writings, he parted ways with the struc-
turalist perspective on the issue of fighting inflation, which is central to his
104–132).13 In his view the purpose of public policy was (a) to tax luxury con-
sumption, mobilising resources to support savings and investment; (b) to elim-
inate the inflationary mentality that, whether for paternalistic or ideological
reasons, manifested itself in expansive monetary policies or price controls on
basic services and foodstuffs, and (c) to attract and mobilise external resources
to complement national efforts. He attacked as inflationary import substitu-
tion policies designed to relieve consumption pressures through a combina-
tion of exchange overvaluation and quantitative import controls, claiming
such measures reduced exports and competitiveness and discouraged inflows
of foreign savings.
In his classic 1950 article “Lord Keynes e a teoria da transferência de capi-
tais” (Lord Keynes and the theory of capital transfer), Campos criticised
Keynes’ theory of the relative immobility of the factors of production. He chal-
lenged the idea that capital outflows drive up interest rates in the exporting
country, pointing out that as long as hoarding and underinvestment continue
then capital can leave without producing such an effect, and concluded that
“during periods of weak domestic activity and a growing tendency to hoard, it
is clearly to the investor country’s advantage to export capital” (Campos 1963,
119). This understanding of capital mobility, whilst limited, nevertheless en-
abled him to bring recourse to external capital fully into his argument14 as the
key to overcoming inflation and the technical limitations on planning in un-
derdeveloped countries. By increasing national saving, foreign capital would
soak up the consumption pressures inherent to underdevelopment, enable
incoming private capital to fund investments that were short of local capital,
and as a result narrow the scope of state intervention, thus avoiding inefficien-
cies and possible deviations in price formation.
13 Campos’ concept of ‘full capacity’ is not the same as Keynesian full employment. It is
measured by inflation and places an obligation on the State to adopt growth contain-
ment policies whenever it detects inflationary pressures, regardless of employment
levels.
14 The circulation of capital is determined by its power to generate surplus value and ex-
traordinary profits, not by its effect on local interest rates. Capital tends to move when-
ever doing so means it can increase its global rate of profit and the mass of surplus value
from which it is appropriated. In this way national planning is subordinated to global
planning whilst being integrated into it through the international division of labour.
Although Campos questioned the principles underlying the relative immobility of the
factors of production, he still relied on them in making mobility conditional upon the
effects on the national economy. As such he was unable to perceive or theorise the ex-
portation of capital and economic growth as occuring simultaneously in exporter
countries.
Faced with nationalist criticisms of the 1962–1967 crisis that succeeded the
foreign investment boom of 1955–195915 and pressure to limit profit remittanc-
es, Campos set out to prove that foreign capital did indeed represent a force for
development in underdeveloped economies. To do so he devised a theoretical
model to analyse the impact of foreign capital. With this model he sought to
measure the effect of foreign capital on domestic savings by counting not just
the surpluses that capital inflows produce (the concept of ‘restricted ex-
change’) but also their effect on the current account (‘amplified exchange’) and
on rising net national output (‘overall exchange’). The positive role played by
incoming foreign capital would be made evident by its multiplier effects on
national income, the current account surpluses it produced, and the fact that
it outstripped profit remittances and repatriation, although he stressed that in
the latter case he was not comparing like with like, i.e. he was comparing capi-
tal stock increases to capital flows. He predicted an “increase in the capacity
for domestic saving and, therefore, the economy’s autonomous capacity for in-
vestment” (Campos 1963, 274; italics added). And to attract foreign capital in-
flows he proposed using the automatically functioning mechanism of the free
market and the fluctuating exchange rate (Campos 1963, 271–303).
Campos’ model was theoretically confusing. His criticism of the comparison
between capital flows and stock increases did not hold up because such in-
creases could only take place through flows.16 Furthermore, he dissolved for-
eign capital’s influence on national saving into the much broader dimension of
the expansion of net national income. Instead of first measuring net balances
of foreign capital and then analysing their effect on national earnings, he did
the opposite and prioritised a dimension influenced by a range of other
elements in addition to foreign capital, such as national actors, State policies,
labour super-exploitation and their effect on saving and investment. But the
empirical evidence the model needed flew in the face of its assumptions. For-
eign capital inflow balances were negative except during some short periods;
their influence on the current account were also negative, and the effect on
net national earnings was that the external debt and its service payments
15 Between 1962 and 1967 per capita gdp in Brazil and Latin America grew by 0.3% and 1.6%
per annum, and between 1956 and 1961 by 5.1% and 2.5% per annum respectively (Mad-
dison 2001).
16 This is the criticism Orlando Caputo and Roberto Pizarro would make of the method used
to analyse balances of payments which finally prevailed in international bodies and
ecla. By separating capital inflows from interests, profit remittances and payments for
other services related to incoming capital (technological services, royalties and freight
charges), the balance of payments obscures the actual contribution foreign capital makes
to national savings. See Caputo and Pizarro (1973).
outstripped gdp, leading not to the national autonomy envisaged but to ever
deeper dependency.
The crisis of national-developmentalism was overcome by modernisation
associated with an foreign capital-led alliance of national capital and the State
that sought to lead the region. But the legitimacy of this alliance was seriously
undermined by the 1962–1967 crisis and the offensive launched by Latin Amer-
ica’s mass movements, which would last until 1973. It was in this new conjunc-
ture that dependency theory offered a fresh interpretation of the regional and
global situation.
3 Theories of Dependency
Dependency theories were first formulated between 1964 and 1973. They re-
tained considerable influence in Latin America up until the late 1970s, when
US-backed liberals and conservatives asserted their leadership of the redemoc-
ratisation process. The dependency paradigm was developed through two dif-
ferent methodological approaches. The Marxist approach was influenced by
the Cuban Revolution, the regional limits to developmentalism, and the social,
political and cultural offensive gathering pace across the Third World. It set out
to analyse the Latin American social formation in a creative Marxist fashion
free of Communist Party dogma, and is best represented by the works of Theo-
tonio Dos Santos, Ruy Mauro Marini, Vânia Bambirra and Orlando Caputo.
This dependency perspective influenced intellectual and political circles and
leading thinkers such as Florestan Fernandes, although in other respects their
approach would differ. Fernando Henrique Cardoso and Enzo Faletto were at
the forefront of developing the other view of dependency. Whilst taking ecla’s
theses as their starting point, they also aimed to subvert them. Their Weberian-
influenced approach gained prominence both regionally and internationally.
Theories of dependency represented a leap forward in understanding Latin
American reality. As we saw, both modernisation theorists and cepalistas
viewed backwardness and underdevelopment through the prism of method-
ological nationalism, which sees the world as an aggregate of independent na-
tional economies connected mainly through trade. For them, Latin American
and peripheral countries were backward for historically inherited reasons such
as colonisation, and because of poor internal decision-making that benefitted
parasitical groups over the nation. Upon achieving nationhood, they needed to
rectify and overcome these problems. Rectifying them, however, did not mean
clashing with international structures but rather with internal social groups
and mentalities. It was about going beyond specialised production, so harmful
17 In Brazil, both advocates of State planning and those emphasising the role of foreign capi-
tal claimed to be nationalists. This would trigger nationalism’ s theoretical and method-
ological crisis as an analytical tool, dramatically expressed when Hélio Jaguaribe left the
Instituto Superior de Estudios Brasileños (iseb) after proposing to separate nationalist
means from nationalist ends. Even authors such as Roberto Campos saw themselves as
true nationalists because they considered themselves to be committed to national devel-
opment despite believing it would require a major influx of foreign capital. See Biel-
schowsky (1988).
18 Theotonio Dos Santos pinpoints what relations of dependency consist of in the following
statement:
“As we can see, dependence is not a relationship between an autochthonous national
economy and another one to which it is subordinated, but a basic relationship that con-
stitutes and conditions the internal structures of the dominated or dependent regions
themselves.
We understand dependence, then, as an economic, social and political situation where
the structure of certain societies is conditioned by the needs, actions and interests of
foreign nations that dominate those structures. As a result, those societies are defined by
the conditioning situation in which they develop and by how they respond to the stimuli
produced by the dominant society. Ultimately, however, their response is determined not
by this conditioning situation, but by the internal forces that make up the dependent so-
ciety. The nature of these internal forces explains both its subordinate position and its
capacity to challenge the external impulses which condition that position.” (Dos Santos
1978e, 13–14).
For Dos Santos, dependency is built on compromise. This notion of compromise runs
through the three levels of analysis that constitute dependency: the international struc-
tures of capital; international economic relations, and the internal structures of countries
targeted by expanding international capital. Compromise or combination of interests is
necessarily linked to a composition of sociopolitical forces in dependent countries who
accept international integration within the limits of the conditioning situation. In Depen-
dencia y cambio social (1972), later included with some modifications in Imperialismo y
dependencia (1978a), he notes that
“A third aspect essential to understanding dependency refers to the articulation between
the dominant interests in the hegemonic centres and the dominant interests in the de-
pendent societies. ‘External’ domination is impractical in principle. Domination is only
possible when it finds support in national sectors which benefit from it […] In showing
the necessary correspondence between the interests of the external dominators and the
interests of the ‘dominated dominators’ (it is from this that the specific character of the
dominant classes in dependent countries emanates), we will show that, despite internal
conflicts which exist between these interests, their interests are fundamentally in com-
mon. The concept of compromise or combination of the diverse interests which com-
prise the situation of dependence is an essential element for the elaboration of a theory
of dependence.” (Dos Santos 1978d, 309). [Above translation based on excerpts cited in
Dos Santos (1973) – Trans.]
19 “We must therefore settle on an interpretative approach that highlights the structural
links between the situation of underdevelopment and the hegemonic centers of the cen-
tral economies, but without crediting the latter with being able to fully determine the
dynamic of development. In effect, whilst it is right to assert that in situations of colonial
dependency history – and, therefore, change – appears as a reflection of what happens in
a metropolis, social dynamics ‘in the underdeveloped nations’ are far more complex.
There, almost from the start, we find a doubly linked historical process that creates a ‘situ-
ation of ambiguity,’ that is, a new contradiction. For once local forces decide to create a
nation […] they focus on securing a degree of political autonomy by controlling the mar-
ket situation, but objectively speaking economic links with external markets still limit
autonomous decision-making and action. From a sociological viewpoint, this is perhaps
the core of the problem of national development in Latin America.” (Cardoso and Faletto
1984, 30).
[In translating this and other quotes from Dependency and Development in Latin Amer-
ica, I have drawn on the original Portuguese (Cardoso and Faletto 1984). This is in addition
to reproducing as far as possible the language of the English translation (Cardoso and
Faletto 1979b), and has been necessary because the latter features extensive editing/re-
writing. For simplicity’s sake the former is the source cited throughout – Trans.]
20 We of course acknowledge that Cardoso and Faletto are complex thinkers with diverse
influences, among them Marx, Lenin, Sweezy, Keynes, Kalecky, Schumpeter and Sombart.
But they all they rely on the Weberian device as the paradigm through which to articulate
these influences.
21 “Our basic theoretical problem is how to determine what forms the structures of domina-
tion will adopt, because through these structures the dynamic of class relations can be
understood” (Cardoso and Faletto 1984, 22; direct translation from 1979b).
(…) in the face of the challenge of modemity and of the impression that
reason and the market are closely entangled notions, the political con-
cem in vast areas of the South is that the reaction against inequality can
only occur through the strengthening of the national will based upon the
fortress of the state. (…) In many areas of the South, despondency seeks
sublimation in new salvationist theses which substitute for the blind
faith in the inevitability of revolution (which was an attribute of the in-
dustrial world until the coming of the ‘informational societies’), through
the idea of a union of the whole nation against imperialism (or whatever
name is now given to advanced capitalism) (…) These movements create
nothing but matrixes for the local ‘counter-culture,’ with isolated reper-
cussions in the hegemonic centres. Countries (or parts thereof) that are
unable to remake the revolution of the contemporary world and at the
same time to find a niche in the international market, will end up in the
‘worst of all worlds’; they will not even be exploited (…) They will be un-
important and uninteresting for the development of the globalised
economy.
cardoso 1993b, 160–161
import substitution model, the new dependency enabled the organic compo-
sition of peripheral economies to increase at a quickening pace and shifted
Latin American capitalism towards producing relative surplus value, albeit at
the expense of deepening technological and financial dependency.
Cardoso and Faletto proposed ‘negotiated dependency’ as an economic and
political model for Latin America. The region’s authoritarian turn in the 1960s
and 1970s did not reflect any structural need on the part of bourgeois rule, but
was rather a response to attempts by popular movements and their leaders to
pursue autonomy using political means. Their efforts represented a challenge
to economic dependency and sectors with a stake in it, and so various bour-
geois and middle class fractions united with the military in a single block to
contain any risk to the capitalist order. They built an authoritarian state that
reassured capital whilst taking away the forms of political expression available
under the competitive democratic system. As a result, the bourgeoisie ended
up hostage to state bureaucratic corporatism. It conducted its relationship
with this corporatist setup through what Cardoso (1975) called ‘bureaucratic
rings,’ but they proved to be a contradictory and inadequate device. The state
bureaucracy threatened to expand and to subordinate the bourgeois order to a
resurgent and authoritarian nationalism tied to the expansion of state enter-
prises and dreams of achieving economic and military power by internalising
Department i. From that point on most sectors of capital, which had formed
part of the semi-formal structures of bureaucratic rings, would join civil soci-
ety movements aimed at restoring democratic legality.
For Cardoso and Faletto, democracy could be compatible with dependent
capitalism. They gave several reasons for this. Firstly, it represents a better way
for capital to organise its interests. Secondly, technical progress displaces ac-
cumulation towards relative surplus value, allowing the bourgeois order to
accommodate working-class demands. Thirdly, in the medium to long term
the deepening social inequality resulting from the limits imposed by depen-
dency is offset by the model’s economic dynamism. Social leaders must devel-
op an ethic of responsibility that adapts political action to the economy’s
structural limits and stops it from falling into the trap of adventurism, ex-
pressed mainly in Latin America by guevarismo, which cannot change reality23
(Cardoso 1975, 1995; Cardoso and Faletto 1979a; Cardoso and Serra 1978).
In the 1970s Cardoso and Faletto would come up against the Marxist under-
standing of dependency, which had also been developing since the 1960s based
23 Cardoso and Faletto note in Dependence and Development in Latin America that although
authoritarian-corporative regimes were needed from capital’s standpoint to resolve the
crisis of developmentalist populism, they did create something of a paradox. For whilst
the big industrial-financial corporations guaranteed the State’s central role in the nation-
al economic structure and the overarching system of domination, they failed to create a
on the work of Theotonio Dos Santos, Ruy Mauro Marini and Vânia Bambirra.
In order to assess the different contributions made by dependency theorists
and situate the debate between them, we shall now look at the main theses
associated with the Marxist perspective.
political model to go with their structural domination: “The passage from the democratic-
representative regime to the authoritarian-corporative regime […] is achieved through
revolutions in which large national organizations like the army and the public bureau-
cracy (rather than the national or internationalised bourgeoisie) take action and reorga-
nise. Of course, the structural system that makes the action of these groups meaningful is
the same one described herein, and therefore the internationalised bourgeoisies contin-
ue to be the basis of the system of domination” (Cardoso and Faletto 1984, 134).
Cardoso develops this point in Autoritarismo e democratização, where he attributes Bra-
zilian authoritarianism to sectors whose power comes from their particularist use of the
national state. He therefore advocates what is effectively an estado de compromisso virtual
or virtual compromise state consisting of an alliance between the internationalised bour-
geoisie and non-totalitarian sectors of the state apparatus keen to legitimate Brazil’s po-
litical model and halt the country’s slide into fascist and obscurantist totalitarianism and
global isolation. See Cardoso (1975).
Societies divide their resources between those meant for consumption and
those put into savings and investment, which make up the surplus. But for Ba-
ran, surpluses in underdeveloped countries are appropriated by foreign invest-
ments and the whole trade and financial system built around them. Foreign
investments are linked to the creation of an export-focussed production and
services apparatus that is precariously articulated to the internal market. They
represent an initial contribution, which is partly disbursed for the purchase of
local assets – like mineral deposits – but then they are discontinued, and the
assets are maintained through the reinvestment of internally generated prof-
its. The precarious nature of the link to the national economy leads to over-
importation – a trend accentuated by price manipulation involving parent
companies and their subsidiaries. Financial support becomes yet another
cause of decapitalisation. As a result, underdeveloped countries must choose
between subservience to the capitalist world order or a socialist revolution
that makes development possible through the internal control of surpluses.
Andre Gunder Frank (1969, 1980, 2011) develops a systemic conception of a
world divided into metropoli and national, regional and local satellites. An
area is a metropolis or a satellite depending on whether or not it can appropri-
ate globally produced surpluses via international economic relationships that
involve not only trade but also the circulation of capital. Frank’s model works
through a complex system of relationships whereby nations are made up of
internal metropoles that seize the surpluses from their own satellites but can
themselves be subjugated and decapitalised by foreign metropoles.
Such has been the fate of Latin American nations. They were capitalist ever
since they were conquered through colonisation, and the outcome of this pro-
cess of insertion into the world system was the development of underdevelop-
ment. Only through autonomy and socialism can they escape this iron logic
and develop. Illustrating this logic, Frank observes that Latin America has al-
ways developed most when the metropoles influencing them have been hit by
a crisis. Such crises allow it to control more of its surpluses and industrialise,
but this progress is then fully or partly wiped out by the subsequent offensive
of a recomposed metropolitan order. For Frank Latin American development
reached its high point during the crisis of the 1930s and 1940s, before metro-
politan restructuring once again raised the spectre of stagnation.24
Although these ideas did much to advance understanding of the interna-
tional question, Baran and Frank failed to go beyond the perspective devel-
oped by Mariátegui and others when the first shoots of dependency theory
24 “A second hypothesis is that the satellites experience their greatest economic develop-
ment and especially their most classically capitalist industrial development if and when
their ties to their metropolis are weakest […] A corollary of the second hypothesis is that
when the metropolis recovers from its crisis and reestablishes the trade and investment
ties which fully reincorporate the satellites into the system, or when the metropolis
expands to incorporate previously isolated regions into the world-wide system, the previ-
ous development and industrialization of these regions is choked off or channelled into
directions which are not self-perpetuating and promising.” (Frank 1969, 9–11).
25 Frank, for example, plays down the contradictions between historical capitalism and the
capitalist mode of production, which very much limits the scope of his analysis of depen-
dent capitalism.
value in question can be partly wiped out, affecting also the sectors which
monopolise the introduction of foreign technology.26
c. Labour super-exploitation becomes a generalised way of regulating la-
bour power in order to maintain the rate of profit.27
Marini’s view of the relationship between surplus value/value appropriation
and productivity makes for a powerful critique of ecla’s theory of unequal
exchange and the deterioration of the terms of trade. He argues that contrary
to cepalista assumptions the tendency under capitalism is for higher produc-
tivity to transfer to prices. This occurs because of the competition that nour-
ishes the system and imposes the general laws of capital on each individual
capital. For Marini, falling prices and deteriorating terms of trade should be
understood in terms of competition. The key element in the process is the mi-
gration of capitals with a higher organic composition towards the export sec-
tors of dependent countries. This migration leads to the devaluation of the
latter’s commodities, which now incorporate a smaller amount of abstract la-
bour per unit, whilst at the same time an increase in the consumption of the
industrial inputs used to produce them – inputs which incorporate an increas-
ing amount of abstract labour. The establishment of extraordinary surplus
value in the export sector also forces a reduction in the commodity prices of
the average capital in the sector with no productivity increase in return. Both
situations lead to a fall in the profit rate and to super-exploitation being used
26 To understand this, it should be noted that extraordinary surplus value can be established
either within a sphere of production or between spheres of production. When established
within a sphere of production, it represents the productivity differential of a group of in-
dividual capitals with above-average productivity. But when established between spheres,
it means that productivity in one sphere is higher than the average across the economy,
benefitting it at the others’ expense via unequal exchange.
If competition intensifies within a sphere and its average productivity rises, eliminat-
ing the aforementioned differential, then the extraordinary surplus value is eliminated
and the capitals which were previously earning superprofits also lose surplus value.
Whereas to eliminate extraordinary surplus value between spheres of production, pro-
ductivity would have to level out across the whole of the economy. As we saw, the social
and economic imbalances caused by the introduction of foreign technology in depen-
dent countries restricts the potential for social mobility and limits competition to the
monopoly segments. Extraordinary surplus value can only be eliminated in these seg-
ments if certain spheres of production become obsolescent, but that would lead to capi-
tal migrating towards the production of other, more dynamic, commodities. However,
crisis situations and restricted demand can still reduce the average rate of surplus value
in a sphere and impact upon the extraordinary surplus value previously obtained, to the
point even of eliminating it.
27 In Chapter 6 we examine more fully the concept of super-exploitation and its place with-
in the Marxist theory of value.
as a means of increasing it. The low wages ecla observed in Latin America and
highlighted as a theoretical problem for development do not stem from under-
industrialisation, but are actively produced by technological dependency.28
Marini notes that another cause of the deterioration in the terms of trade
lies in the power of extraordinary surplus value to act across productive sectors
in the world economy, especially in the centre-periphery relationship. He
points out that the dynamism of technical progress is linked to the luxury
consumer goods-producing sector. This is the only sector that can expand pro-
duction without reducing the price of goods. To do this it uses the savings gen-
erated by replacing labour power with fixed capital and the effect of this on
demand, transferring value from the wage mass to the mass of surplus value.
Such a process affects the price structure and produces deviations that depress
prices in the essential consumer goods sector and raise them in the luxury con-
sumer goods sector. In dependent countries, the power of technological mo-
nopoly puts extraordinary surplus value at the very centre of accumulation
processes, leading to their hypertrophy, resort to super-exploitation in order to
compensate, and the relative decline of the essential consumer goods sector.
In the central countries, intense technological competition limits extraordi-
nary surplus value and lowers prices, tying them to necessary consumption
and the development of relative surplus value. International surplus value ap-
propriation to the benefit of the central countries contributes to this by in-
creasing internal demand and investment potential. Marini however points
out that as a result of the changes globalization has made to the international
division of labour, extraordinary surplus value is now a structural feature of the
central countries too, bringing super-exploitation to their shores.29
For Dos Santos and Marini, dependent capitalism is based on a specific form
of the expansion of productivity and extraordinary surplus value, which leads
to outcomes quite unlike those achieved in the central countries. Although
they draw on Baran and Frank, they also go beyond them and construct their
own distinct theoretical framework. The appropriation of surplus value and
economic surpluses does not hinder the technical progress and industrialisa-
tion of dependent countries, but it does give their development a particular
28 “The truth is that whilst ecla captured the deterioration in the terms of trade correctly
in empirical terms, they interpreted it wrongly. Sooner or later rising productivity and the
lower costs it brings must be transferred to prices, except where there are abnormal situ-
ations in the world market, such as those that give rise to monopoly (configuran monopo-
lio) or derive from wars or natural disasters […] Nonetheless, despite framing it wrongly,
ecla showed remarkable insight in drawing attention to the issue of labour remunera-
tion, as life itself would demonstrate” (Marini 1994b, 141–142).
29 In Chapter 6 we look at the relationship between extraordinary surplus value, relative
surplus value, and the super-exploitation of labour or labour power.
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Dependency and Development in the Modern World System 225
30 Dos Santos highlights the cyclical character of foreign investment in the development of
dependent countries. During upturns, the foreign capital entering their internal markets
is a factor of capitalisation, but when the limits on demand imposed by super-exploitation
are reached it creates a deficit in the balance of payments. Foreign debt and inflation be-
come the means to finance the outflows or artificially expand internal demand. But these
devices have their own limitations and lead to serious macroeconomic imbalances that
require super-exploitation to generate trade surpluses in order to restore equilibrium at
another level of dependency. See Dos Santos (1972, 1978a). For a classic analysis from this
perspective of the Latin American balance of payments during the 1950–67 period see
Caputo and Pizarro (1973).
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226 Chapter 5
financing or trade surpluses. Dos Santos points out that although i nternational
capital prioritises investment in luxury consumer goods, the more the world
economy’s productive forces are socialised as a function of their own develop-
ment, the more interdependent countries become. This prevents international
capital and its national bases from avoiding the trend towards the internation-
alisation of heavy industry and Department i indefinitely. The process industri-
ally integrates dependent countries to a level where dependency is no longer
materially necessary, but can only be concluded under the leadership of the
working class, both urban and rural.31
The rising organic composition of capital in dependent countries is a topic
examined by Marini. He notes that industrialisation and technical progress
create a contradiction between Latin American countries’ expanding scales of
production and their limited internal markets. State demand and luxury con-
sumption go some way towards compensating for the restrictions on mass
consumption, but not enough to satisfy rising productivity.32 This contradic-
tion underpins what he calls ‘sub-imperialism.’ He uses the term to describe
how dependent countries overcome internal market limitations by increasing
their commodity and capital exports. For Marini, this is not an absolute ten-
dency but a relative one. In other words the internal market continues growing
in a concentrated form, but the dynamic of commodity realisation shifts in-
creasingly towards the international market.
In their analysis of the Latin American political model that grew up along-
side industrial development in dependent capitalism, both authors observe
that a mass self-organised proletariat subjects dependent capitalism to a struc-
tural instability, which heavily influences cycles. Democratic regimes struggle
to meet mass consumption demands, and when growth gives way to crisis that
is the time for popular forces to launch a major offensive. For Dos Santos, this
is when big capital and the sectors united under its leadership respond with
fascism.33 He defines fascism as a regime of terror during the imperialist phase
of big capital, which craves institutionalisation on a permanent basis. Fascist
31 This issue is addressed in Dos Santos (1978d), notably in Part 3, Chapter iv, “La recuper-
ación y la gran crisis.” (Recovery and the big crisis).
32 Although Kaleckian-influenced neo-developmentalist thinking played down the effects
of income concentration on realisation crises, consumption cannot actually be separated
from use value and from individual needs. The way the income mass is distributed very
much conditions commodity realisation.
33 Deepening recessions offer fascism the opportunity to turn themselves from political
movement into institutionalised political regime – unless centre-left and left leaderships
prove themselves capable of resolving the socio-economic crisis by subordinating the an-
archy of the market to planning. See Dos Santos (1978d, 1991).
34 Dos Santos distinguishes between a fascist State and a fascist movement. In so doing, he
raises the theoretical and/or historical possibility of either a fascist state that has not been
generated by fascist movements, such as those established by military occupation in Eu-
rope between 1939 and 1945; or, conversely, fascist movements winning elections without
destroying the existing institutional-democratic structure. He notes that the social base
of the fascist State is different to that of the fascist movement. The fascist State is pro-
duced by a fusion of the petty bourgeois movement, decadent sectors of the bourgeoisie,
the lumpen proletariat and the big capitalists. It represents a regime of terror on behalf of
big capital that is expansionist and antiliberal in terms of people’s rights. Its chance to
establish itself comes when big capital is threatened by the prospect of proletarian revo-
lution but the objective and subjective conditions for the proletariat to impose its hege-
mony on society are absent. The fascist regime begins to conflict with the apparent social
base of the fascist movement. Big capital, which willingly helped create the conditions for
fascism to take power, then urges the destruction of the anti-monopolist wing of the
movement and opens up the path to a political and ideological settlement with conserva-
tive sectors who are willing to ally with fascism. See Dos Santos (1978a, 1978d, 1979a: 13–33,
1991).
from the national to the regional level can allow for greater scales of p
roduction
and organisation of collective labour, and the prospect of sustained techno-
logical progress.
Let us examine their arguments. The following passage draws out the prob-
lem of realisation or overaccumulation:
But they suggest the periphery can escape the problems of the crisis of
realisation:
the previous examples illustrate. The same is not true, however, when
considering the political aspects of the problem and especially the
politico-economic consequences of monopoly capitalism in dependent
economies.
cardoso 1972, 19335
The question here is this. If Cardoso doubts the adequacy of Baran and Sweezy’s
understanding of internal forms as the basic means of capital realisation, as
globalisation processes have proven him right in doing, then why return to it in
the political and economic reinterpretation of dependent capitalism? His
analysis seems to slide into inconsistency and ideology. It overemphasises the
periphery’s internal dynamism, despite provisos about balance-of-payments
problems, which are apparently overcome by the permanent movement inher-
ent to said dynamism. Cardoso and Faletto decouple the cyclical phases of ex-
pansion and crisis in favour of the former in order to argue that whilst foreign
capital-led development processes decapitalise dependent countries, they also
continually recapitalise them. Developmentalism creeps into the gaps at the
heart of their theoretical problematic. That is why they are only too happy to
counter the notion of underdevelopment with that of dependency and develop-
ment, and to decry the former despite using it as an analytical tool in their cri-
tique of modernisation theories.36
Viewing the cycle as a whole allows us to see clearly the decapitalisation
that takes place when foreign capital leads the accumulation process in depen-
dent countries. Figures 5.1 and 5.2 illustrate the decapitalising effect of foreign
capital on dependent countries. Decapitalisation is cyclical, taking effect when
capital outflows during the recessive period overcompensate inflows during
2500
2132
2000
1347
1500
1000
500
0
Remittances Incoming
Figure 5.1 Remittances of profits, interest and non-factor services vs. incoming foreign
capital in Latin America – 1956–2009 (in usd billions)
Source: CEM, BASED ON cepal (1985, 1992 and 2010). Excludes non-
factor service travel
1200 1131.5
1000
800
600 522.5 R I
498.3
381.8 420
400
226.5
200 171.4
85.3
9.3 6.8 18 6.8
0
1956–1960 1961–1967 1968–1981 1982–1990 1991–1998 1999–2009
Figure 5.2 Remittances of profits, interest and non-factor services versus incoming foreign
capital in Latin America
Source: CEM, BASED ON cepal (1985, 1992 and 2010). Excludes non-
factor service travel
37 From 1956 to 1960 foreign capital inflows expanded. This is not apparent from Figures 5.2
and 5.6 as they show outflows outstripping inflows. That, however, was due to the still
relatively low flows of industrial or financial forms of capital in that period compared to
commercial forms. If we consider the net difference in payments for freight and other
services in 1956–1960 and 1950–1955, rather than their absolute value in 1956–1960, we find
that foreign capital inflows were higher than outflows in the latter period, coming to
US$6.8 billion as opposed to US$5.4 billion in outflows. Inflows amounted to 126% of
outflows, a was one of expanding similar figure to other expansive periods. In later peri-
ods flows of the industrial and financial forms of capital increased, and so cyclical move-
ments are more visible.
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Dependency and Development in the Modern World System 233
f ollowed one step behind the expanding or contracting movements of the cen-
tral economies. The internal market subsequently developed and e xpanded
with industrialisation, but not enough to absorb rising productivity. As a result,
industry has ended up focussing on luxury goods production in order to meet
a highly concentrated demand. The internal market has become the chief de-
terminant of cyclical expansion. Meanwhile crisis sends realisation back
abroad to find new markets, and national and international markets combine
to determine the phases of the cycle.
Because of factor and non-factor service deficits and the negative capital
flows they cause in the medium run, economic growth relies on large trade
surpluses. These deficits are made a lot bigger by the sharp rise in foreign capi-
tal inflows produced by industrialisation. External debt is used to extend
expansive cyclical phases, but this creates a financial dependency that increas-
ingly conditions technological dependency and further exacerbates the need
to obtain trade surpluses. Once financing comes up against its limits in the
form of debtor insolvency, super-exploitation must be promoted as the way to
generate surpluses large enough to equalise the balance of payments. But these
are bogus trade surpluses founded on cheaper labour power or a devalued cur-
rency. The balance of payments is equalised but at a higher level of indebted-
ness. The result is a secular and relative tendency towards stagnation on the
part of dependent capitalism. This is manifested by lower economic growth
rates, rising foreign debt and a decline in the quality of foreign capital, which
keeps arriving because of its increasingly financial nature. Figure 5.3 illustrates
this declining quality of foreign capital.38
60
50
40
30
20
10
0
1955–60 1961–67 1968–1981 1982–1990
Figure 5.3 Direct investment as a percentage of foreign capital (flows) in Latin America
Source: cepal (1985, 1992, 2002)
38 Since the 1990s direct investment has risen as a proportion of foreign capital flows. How-
ever, it often does not represent new machinery or equipment but rather debt conver-
sions or mergers and acquisitions that serve to denationalise the Latin American econo-
my. Because we lack Latin America-wide data for this denationalisation process, we have
extended the series shown in Figure 5.3 to the end of the 1980s. We return to this issue in
Chapter 7.
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234 Chapter 5
The secular trend towards stagnation does not of course preclude growth
altogether.39 It just means that as financial imbalances deepen, temporary sta-
bilisation at a higher level requires ever-greater efforts to boost economic
growth by shifting accumulation onto the rate of profit. Such efforts and the
difficulties they involve represent a spiralling social cost and a structural deep-
ening of dependent capitalism’s crisis of legitimacy, and usually result in weak-
er periods of expansion. Relative and growing economic limitations fuel social
and political tensions and create an opportunity to break with this model of
development.
The economic limitations in question can be viewed from the standpoint of
the productive forces. Dos Santos notes that dependency only makes historical
sense from the standpoint of the organisation of the productive forces when
there is external capital accumulation. If the economy lacks a fully developed
Department i then it needs foreign capital inflows to ensure expanded repro-
duction. In this context imperialism plays an integrating role in spite of the
huge inequalities it produces. But world-economic expansion takes the logic of
integration a step further and spreads Department i to dependent econo-
mies. This does away with the need for dependency, which having lost its
economic base must rely on political support alone (1968, 1978a, 1978b). This
was Dos Santos’ intuitive masterstroke, which he formulated in the late 1960s.
But ultimately Department i was internalised not by being physical integrated
into the dependent economy – although we cannot altogether disregard that –
but associated with a major national system of innovation that established
physical integration into the world economy as an input to develop internal
capacity.40
The internalisation of Department i implies a level of integration of the pro-
ductive forces that makes scientific and technological interdependence in the
world economy possible. This is clear from tendencies in the diffusion of in-
novation, which reflect how much the world economy has managed to i ntegrate
39 Dos Santos suggests that the idea of a secular tendency towards stagnation is comparable
to that of the tendency for the rate of profit to fall. Marx highights the latter tendency’s
secular nature and claims that whilst there is a point at which it becomes irreversible, its
secularity allows for countertendencies that imply a sharp rise in profit rates.
40 This formed the basis of Marxist dependency theory’s critique of ecla’s import-
substituting industrialisation project, which understood the incorporation of industrial
technology as an external matter that foreign trade would resolve. This only created an-
other, technologically more intensive level of dependency. Peripheral countries cannot
break with dependency by industrialising per se but by internalising the drivers of tech-
nological innovation, which are intangible and demand upskilling and scientific and cul-
tural development. This is why in the early 1970s Dos Santos was already concerned with
the scientific revolution.
the productive forces. But international capital resists lending any support to
this internalisation and even tries to prevent it. The integration of national
markets into the international market alters dependent country patterns of ac-
cumulation and destroys part of the industrial and capital goods sector geared
towards their internal markets. Dependent countries suffer because of the
competition they face from core country commodity exports. On a very limited
scale, the foundations are laid of an international division of labour that artic-
ulates dependent countries’ participation in the production of machinery and
equipment parts and microelectronic components. And when this process
happens it faces macroeconomic constraints that delink its internalisation
from the construction of a techno-scientific infrastructure that might syner-
gise with said material base in order to develop it. One example of this is Mex-
ico. It overhauled its trade model in order to incorporate electro-electronic
components, vehicles and vehicle parts and components into its export offer,
but it has no control over the underlying science and technology. This
‘secondary-exporting’ model (Valenzuela 1990) is closely linked to maquila-led
industrialisation, and represents what Marini called ‘economic annexation.’ In
this model, an industrial sector is created which is characterised by its lack of
links to the internal market, high import/export volumes, and reliance on su-
per-exploitation for competitivity. The result is a manufacturing sector that
can add very little value and which despite growing can neither compensate
for the destruction of internal market-facing industrial segments, nor increase
secondary sector participation in the overall economy, nor improve the Mexi-
can economy’s terms of trade. Mexico’s macroeconomic performance remains
poor and subject to powerful cyclical swings because it has adopted a neolib-
eral approach, and that means an intensive export model.
Both in countries that have risen from peripheral to semi-peripheral status
(South Korea and Taiwan) and those clearly heading in that direction (China),
the national state played the lead role in laying down the internal foundations
of productivity. They focussed their efforts not just on internalising the indus-
trial sector – essential as that was to building national or regional systems of
innovation – but on developing a skilled workforce. This brings us to one final
point of comparison between the two perspectives on dependency.
Where there is the deepest inequality there should be the most growth, and
the political model should guarantee the democratic freedoms that allow dif-
ferent social groups to negotiate the distribution of the fruits of technical
progress.
This perspective goes some way towards explaining Cardoso’s approxima-
tion to neoliberalism during the 1990s, when, following the collapse of a devel-
opmental model that had combined globalised production processes with
protectionism, the hegemonic centre used the Washington Consensus to pro-
mote the neoliberal model across Latin America. This meant countries in the
region had to accept the new structural frameworks originating in the domi-
nant centres in order to insert themselves within them as best they could.
Adopting this approach, in 1994 Lidia Goldenstein wrote Repensando a de-
pendência (Rethinking dependency) in defence of opening Brazil up to the in-
ternational circulation of capital and commodities.
Analysing globalisation, Cardoso (1998) revises his previous emphasis on
negotiated dependency. He points out that globalisation universalised depen-
dency, which is no longer about the relationship between some states and oth-
ers but between states as a whole and global financial capital. National policies
become hostage to their own demands because this kind of capital, whilst emi-
nently speculative, affects the real economy through international financing
and new technological scales. In isolation, governments have no choice but to
accept this new dependency until they agree to forge a new institutional order,
which regulates global financial capital via international regimes.
The autonomy of peripheral states is reduced to a minimum in this context.
Rendered all but politically irrelevant by their inherited dependency, they have
no option but to accept international finance overseeing their economies and
support efforts to build international regimes under the leadership of the cen-
tral countries. Denationalisation becomes the price to pay for development.41
Dos Santos, Marini and other Marxist dependency theorists proposed build-
ing socialist economies, or ones that would aid the transition to socialism, as
41 “In every country, exchange rate rules, interest rate rules, and all measures of economic
performance become linked to the movements of this speculative market. And that has to
happen, because that market, which would be unimportant if it did not affect the real
economy, really does affect it […]. On the edges, what is happening as a consequence of
this globalisation, is that you have lost your authority […]. There is no national solution to
the matter. As I have always said: globalisation is not a value, it is not something you want.
It exists. And it needs controlling, because it is going down a dangerous path […] the cri-
tique of globalisation must be all-encompassing. And it’s a critique I put forward when-
ever I can.” (Cardoso 1998, 85–87).
42 In Cuba, per capita income in 1950 stood at US$3,390 following stagnation and crisis in
the 1930s and 1940s. Its highest level in the post-revolutionary period was US$3,203 in
1985. (Maddison 1995, 289).
s ocial development, its own unconvertible currency43 and control over capital
accounts, but used the advantageous quality/price ratio of its labour power to
attract foreign capital and thereby access the technological frontier. China has
taken advantage of capital’s impasses to restructure the international division
of labour from the centres of the world economy, and under the dynamic of
the techno-scientific revolution it is projecting itself towards its organic core
despite starting from peripheral per capita income levels. In doing so it has
included its population in the development process, raising their consumption
levels and impacting global trade, in particular the price ratio between primary
and manufactured products.
Latin America is at a critical juncture. This is due to the secular tendency
towards stagnation, which crystallises into high levels of financial dependency,
and the region’s exposure to neoliberalism, which tends to combine capital
flow deficits with trade deficits. This pattern was established with the appre-
ciation of the exchange rate and has not been altered structurally by fluctuat-
ing rates. It is much more than a form of crisis management. During expansion,
incoming capitals increase the value of the currency. As a result the trade sur-
plus shrinks and tends towards deficit, which must then be financed by fresh
inflows of capital. When crisis breaks out, capital outflows start to predomi-
nate and the currency depreciates. This generates trade surpluses, but also a
rise in external borrowing and factor services in the current account which are
payable in dollars. As capital movements are more dynamic than international
trade, the exchange rate alone cannot produce the surpluses needed to finance
capital flow deficits, and so super-exploitation must be intensified. A return to
expansion and capital inflows means appreciating the currency and places a
question mark around the trade surplus and the sustainability of economic
growth.
As a result, the choice facing Latin America appears to be the opposite of
the one confronting it during the heyday of US hegemony. As we saw, social
development back then was divorced from economic development and the
two represented distinct alternatives. In the current context the choice seems
to be between socio-economic development guided by socialism, or the social,
economic and political decline produced by dependent capitalism. We return
43 Ever since 2005 China has been appreciating the yuan in order to reduce exposure to the
US market and divert production towards the internal market. En 2016, the imf admitted
the yuan into its Special Drawing Rights (sdr) basket of reserve currencies, which in-
creased its market convertibility and broadened its margins of fluctuation. However the
Chinese state closely controls these fluctuations under a banding system backed by the
huge national reserves it has built up through trade surpluses and its success in narrowing
the technological gap between it and the central countries.
to this question in the last section of this chapter, when we discuss the contri-
bution made by world system theory.
At the same time, we should recognise that the influence of an ascendant
China on international trade has mitigated the negative effects of neoliberal-
ism on Latin American expansion and softened the impact of foreign capital
outflows between 1999 and 2009. China has raised the level of international
competition in the high technology sector, cheapening manufactured prod-
ucts, and has increased demand for basic products and strategic raw materials,
thus raising their prices. This opens a window of opportunity for peripheral
countries to develop in so far as it improves their terms of trade with centre
countries and acts as a counter-cyclical factor sustaining trade surpluses in the
region. Nonetheless, this window is temporary and carries risks of its own. Ris-
ing primary product prices provide local bourgeoisies with a source of extraor-
dinary profit, and could lead to national economies being reprimarised and
social contradictions subsequently deepening should they control the State
politically. During the boom the rising cost of basic products will affect neces-
sary consumer items. That could erode workers’ wages, unless they rise as a
result of the reversal in trade terms pushing up primary product prices. But the
latter scenario is unlikely to be sustainable, for the following reasons:
(a) Rising incomes will probably lead to a relative decline in the Chinese
population’s consumption of basic goods. In addition, technological de-
velopment tends to relatively reduce consumption of industrial raw ma-
terials and energy input per unit of gdp. Thus between 1980 and 2006
China’s gdp increased by 9.8% p.a. and its energy consumption by 5.6%
p.a. A 20% drop in energy consumption per unit of gdp was predicted for
2005–2010. The likelihood of a slowdown in Chinese gdp growth over the
next 10–40 years further reinforces this tendency.
(b) China is unlikely to give up self-sufficiency in food and energy given the
risk to its internal social and political stability should it cede control over
their supply to the international market. Although it has lost arable land
as a result of urbanisation, China has made great strides in using science
and technology to raise agricultural productivity and save energy. Food
self-sufficiency is a typical feature of continental-sized countries or re-
gions in the organic core (the United States and the European Union)
and is integral to the Chinese longue durée. At the turn of the new cen-
tury China was 95% self-sufficient in food, with the figure dropping be-
low 90% by the end of the 2010s due to increased soya imports.
(c) China could use a variety of strategies to reduce the international prices
of primary products such as strategic minerals. In particular, it could de-
velop new materials to replace them; raise its currently low level of global
productive investments by diversifying its supply base, and use the stra-
tegic power of the Chinese state – a major source of global demand from
extremely dependent countries – to lower the world market price of pri-
mary products.
The rise of China throws up both opportunities and challenges. If it is articu-
lated through a system of world power associated with the reproduction of
oligarchical wealth, abandoning the accumulation-without-dispossession
model, then some peripheral nations might drop down the international hier-
archy in compensation for the increase in population at the system’s centre
and organic core.44 But that is just one possible outcome once the periphery’s
window of opportunity disappears between 2015–2020 and 2050, and is far
from being the most likely or sustainable. At the same time, building a multi-
polar, democratic and cooperative post-oligarchical world system over the
next forty years represents a huge challenge for humanity, and the paths ahead
remain ill-defined, even if we can make out their outline.
44 Arrighi notes how in the late 1990s the Chinese government lost control over eams and
their hitherto State-regulated forms of property and resource allocation. This made it pos-
sible to change their local and socialising nature. The growth in Chinese foreign direct
investment since the late 2000s has made this easier still. See Arrighi ( 2008).
45 Octávio Ianni, seen by many as Florestan Fernandes’ leading disciple, freely used the con-
cepts of dependency and labour super-exploitation in writings published between 1970
and 1980 such as Sociologia da sociologia latino-americana (1976) and Ditadura do grande
capital (1981).
In the late 1970s, however, the influence of dependency theory began to wane
considerably. The crisis of the socialist movement, culminating in the coup in
Chile, produced the socio-political context in which dependency theory would
itself enter into crisis. Its socialist version no longer offered alternative solu-
tions to the region’s needs and the compromise of negotiated dependency
proved unable to satisfy the thirst for development among the middle seg-
ments typical of Latin American academia. And so once again analysts looked
within nations to locate the barriers and gateways to development.
This path was first trodden by endogenism, a tendency best articulated by
Agustín Cueva, Francisco Weffort and Ciro Flamarion Cardoso.46 Endogenism
46 Leading examples of the endogenist approach include Weffort’s Notas sobre a teoria da
dependência: teoria de classe ou ideologia nacional (1971), Cueva’s Problemas y perspectivas
de la teoría de la dependencia (1974) and Cardoso and Brigñoli’s História econômica da
América Latina (1979).
47 Karl Marx, “Theses on Feuerbach” (1845), in Marx and Engels (1989, 121).
48 This is the approach defended by João Manuel Cardoso de Mello in the Tavares-influenced
O capitalismo tardio (1990), originally presented as a doctoral thesis to Unicamp in 1975.
Brazilian economy so autonomous that it could import less and generate trade
surpluses which could be used to service the external debt.
Given the history, there is no need for us to dwell on these formulations.
With the crisis of the 1980s, neo-developmentalist pessimism towards income
distribution extended to the success of industrialisation itself. Where previ-
ously it claimed that democratic control of the State was needed to steer indus-
trialisation towards the production of mass consumer goods, it now argued
that the very process of industrialisation must come under State control in
order to establish an organised form of capitalism.
This thesis is defended most notably by José Luis Fiori (2003), whose many
writings from the 1990s are distilled in his 1994 doctoral thesis, O voo da coruja
(The flight of the owl). Focussing on Brazil, Fiori argues that its development
problems stem from a financial sector that is not sufficiently centralised to fi-
nance the development of local industrial capitalism. As a result it is finan-
cially dependent and shackled by external constraints because of its failure to
develop a model geared towards financing national development. To explain
that failure Fiori points to an oligarchic pact. Although the terms of this pact
were redefined after 1930, it still exerts a controlling influence over the state
and prevents the concentration of property and savings that results from com-
petition destroying and centralising capital and always precedes financial cen-
tralisation. In this view, our underdevelopment is caused by the preservation
of patrimonial traditions.
The question remains, however: what was the secret behind the power of
this oligarchical pact? Fiori (2001, 2003) and Tavares (1999, 2001) point to the
enlargement of national territory, which pushes back the agricultural frontier,
and to the ideological use of economic growth. These two factors alleviate so-
cial tensions and allow the country to forge ahead regardless.
Yet other Latin American countries such as Chile and Argentina lack an ex-
tensive agricultural frontier and suffer the same financial dependency. Accel-
erated economic growth exhausted itself in the 1980s and under Cardoso the
Brazilian state centralised financial resources to an unprecedented extent by
raising state revenues. But not even that tore the pact asunder. Fiori and Tava-
res’ explanation would therefore appear to be insufficient. In our view, the
reason for financial dependency lies in the ‘superprofits pact’ between local
entrepreneurs and foreign capital. The former have no intention of pursuing
financial centralisation independently. The neo-developmentalist search for a
non-existent national bourgeoisie only leads to the thinly-disguised pessimism
displayed by Fiori, who spends far more time highlighting the inadequacies of
the neoliberal model than setting out alternative ways forward.
The crisis of the 1980s engulfed neo-developmentalism too. In Brazil its
leading representatives contributed decisively to this through their disastrous
49 An example of this shift in eclac’s thinking is its proposal for an open form of regional
integration, which sees financial, technological and commercial integration into the
world market as the key to boosting competitiveness and reducing local monopoly para-
sitism. Limits should be put on customs duties, and the State should intervene less in the
economy and focus on promoting investment in education and infrastructure along with
productive transformation, technological innovation and social equity. See cepal (1990b)
and “El regionalismo abierto en América Latina y el Caribe. La integración económica al
servicio de la transformación productiva con equidad” in cepal (1998b, 903–924).
Goldenstein takes a similar line in her writings. She argues for the deregulation
of capital and commodity flows, privatisation and monetary stabilisation in
order to thus boost external capital flows, especially of the productive kind:
a. They see foreign capital contributions strictly as the flows that are estab-
lished in the financial account, without including them in the factor ser-
vices balance or in payments for freight and technological services, which
are heavily articulated with foreign capital but included in non-factor
services. Hence they advocate wide-ranging liberalisation of the national
economy and see foreign capital as a means of financing subsequent defi-
cits. But as we have shown, foreign capital does not operate in that way at
all.
b. The combination of economic liberalisation and exchange rate apprecia-
tion leads to far deeper current account deficits than those envisaged by
Franco or Goldenstein. When Franco was president of the Brazilian Cen-
tral Bank (1994–1998) they grew at 106% per annum – enough to dispel
any illusions about their sustainability. Maintaining such an anchor re-
quires a situation of deep depression and asset liquidation, of which the
Argentine economy is the best example. That is incompatible with the
sustained increase in productivity Franco dreams of.
c. It is a big mistake to make productivity increases the main goal of periph-
eral economies. As seen, although the periphery has increased its pro-
ductivity during the new phase of dependency, income patterns have still
not converged with those of the central countries. On the contrary, if an
economy does not control the sources of technological innovation, rising
productivity leads to a deterioration in the terms of trade. Increasingly,
globalisation and the advancing techno-scientific revolution are building
an economy in which the ability to add value depends on the quality and
use value of goods produced rather than productivity. The Latin Ameri-
can economy clearly illustrates this: in the early 1980s it hugely increased
the ratio of foreign trade to gdp, but only by reducing the purchasing
power of its exports. Chile provides the most striking example of this
phenomenon. We return to this topic in Chapter 7.
Following some ephemeral successes, neoliberalism entered into crisis in the
latter half of the 1990s amidst a deepening Latin American balance-of-
payments crisis. Politics took a left turn as the accelerated growth of the US
economy ground to a halt and social movements went on the offensive both
regionally and globally. Movements demanding another kind of globalization
developed through the World Social Forums, and alba helped spread the Bo-
livarian revolution from Venezuela to Ecuador, Bolivia, Nicaragua and Hondu-
ras, breaking Cuba’s isolation in the process. At the same time movements of
indigenous peoples and against the social and economic impact of neoliberal-
ism took off. A space opened up for world system theories to go beyond their
early stage of development in the region.
the income of the organic core into equal parts in order to locate the main
zones and mark the limits of the transition zones between them. For example,
if we assign a 10% width to each transitional zone, then the periphery com-
prises countries with up to 27% of the per capita income of the organic core;
the semi-periphery represents those with 37–64%, and the organic core, those
exceeding 74%. Applying this measure to Arrighi’s figures, Latin America can-
not be considered part of the semi-periphery. If we use Maddison’s indicators,
which calculate per capita income according to domestic consumption capac-
ity, we find that Latin America was in the transition zone between the periph-
ery and the semi-periphery for most of the 20th century before descending
towards the periphery in the 1980s (see Figure 5.4). But indicators should not
replace qualitative analysis, which should take into account a region’s ranking
in the international division of labour and how it relates to geopolitical fac-
tors.51 When Latin America was closer to the semi-periphery it formed part of
its lower rung and therefore depended on the world economy. Conceptually
speaking this made its condition more peripheral than one resembling a state
of equilibrium.
50.00%
45.00%
40.00%
35.00%
30.00%
25.00% Maddison
Arrighi
20.00%
15.00%
10.00%
5.00%
0.00%
1900 1913 1929 1938 1950 1973 1980 1998 2002 2008
Figure 5.4 Latin America gdp per capita (as a percentage of the organic core of the World
economy)
Source: cem, based on Maddison (2010) and Arrighi (2002)
51 The cases of Argentina and Uruguay are illustrative here. Although their gdp per capita
levels were similar to those of the core countries in the 1920s/1930s, they formed part of
the periphery. In the decades that followed, these levels sank far below those in world
capitalism’s organic core because of their need to retain their position as agro-exporting
countries in the international division of labour and the difficulty of developing
industry.
The dependentistas were very radical politically. When one looked at the
economic program recommended by the dependentistas, however, it was
disappointing; it was simply one more proposal for state action, with per-
haps a greater insistence on “delinking” than in other variants.
wallerstein, 1996c, 356
For Wallerstein, the prolonged crisis of the world-economy and the concomi-
tant exhaustion of its secular trends have plunged liberal ideology, and with
it the nation-state, into permanent decline. The struggle for human emancipa-
tion has broken out of the prison of the nation-state and gone global. 1968 was
the first sign of this process: a worldwide movement that took up the French
Revolution’s demands for liberty, equality and fraternity and turned it on im-
perialism, technocracy, inequality and intolerance. Conservative recomposi-
tion does not disprove Wallerstein’s postulates. Quite the opposite. Liberalism
is a centrist ideology of negotiation, and its displacement by neoliberal funda-
mentalism shows just how hard it has become for the system to negotiate. The
fall of the Berlin Wall and collapse of the Soviet Union in 1989–1991 further
exhausted liberalism by ending the prospect of socialism in one country or
region. Conservatism in the guise of neoliberalism has been followed by social-
ism in the form of globally articulated social and political movements, and the
two now compete to fill the void left by liberalism. More than ever, global
struggles are now at the centre of social struggles and are increasingly crucial
to winning national and regional victories.
6 Drawing a Balance
What can we learn from the world systems approach that might help us situate
Latin America within the world system’s current stage of development?
The concept of systemic cycles shows us how certain patterns repeat them-
selves in different structural contexts determined by the level of development
of the system’s secular trends. Applying a cyclical analysis and emphasising
recurrent patterns, it is not hard to prove our assertion in Chapter 4 that if
Latin America takes the neoliberal path of remaining the periphery of a deca-
dent hegemon intent on delaying its own descent by wielding regional power,
then it risks playing the same role in the world system as Asian colonies previ-
ously did under British hegemony.
When ideologically hegemonised British colonies or quasi-colonies such as
India and China applied policies borne of decline, they achieved the worst out-
comes imaginable: negligible or negative growth rates, mounting social tensions
and sedition. Meanwhile, the protection costs associated with the world-system
began to outweigh the hegemon’s military capacity and its need to earn legiti-
macy at national and regional levels in order to project itself as a world leader.
This meant there was little resistance to British Empire’s decolonisation pro-
cess, unlike in the cases of smaller powers such as France and Portugal.
Looking at Latin America and its place in the world, we find both similari-
ties and differences. Its growth was restricted by secular processes that between
1980 and 2003 took the form of financial dependency. As the region submitted
to neoliberalism in this period, the macroeconomy that had previously sup-
ported growth was torn asunder. As a result it was plunged into deep economic
decline, which saw its growth rates fall behind those of the central countries
and the world economy. Any illusions of semi-peripheral status were shattered
as it sank further into the periphery. In 2003, however, Latin American articula-
tion with the Chinese economy and its dynamic of accumulation without ex-
propriation helped to equalise the region’s balance of payments and contain
the decline without actually reversing it, as a function of the tendency towards
positive terms of trade (Figures 5.4 and 5.5). But as we saw earlier, this window
of opportunity is temporary and can hardly be kept open if it strengthens
agrarian and primary-exporting bourgeoisies within the power structures of
Latin American states.
Yet history is not merely a series of repetitions; nor can it be determined at
a theoretical level alone. Decisions are taken concretely, in practice. Historical
time and the hegemon’s power of systemic aggregation are facing mounting
difficulties. The current crisis is not just hegemonic, but a crisis of historical
140.00%
120.00%
100.00%
80.00%
60.00%
40.00%
20.00%
0.00%
1900 1913 1939 1950 1973 1980 1998 2002 2008
Figure 5.5 Latin America gdp per capita (as a % of World economy gdp per capita)
Source: Based on Maddison (2010) and Arrighi, Brewer, and Silver
(2002)
52 Note to the English edition: The coups in Paraguay (2012) and Brazil (2016), along with the
defeat of Kirchnerism at the polls in Argentina in 2015 have played a key part in the neo-
conservative offensive in Latin America’s Southern Cone during the 2010s.
economy. Many of the forces leading nation-states have historical ties to social
movements, which are now increasingly united against super-exploitation. As
their mobilising power expands, new leaderships could seek to channel this
demand politically. Furthermore, attempts to formulate an imperial response
to the crisis of historical capitalism are increasingly being resisted by bour-
geois fractions in the central countries, who fear a fortified US dirigism. Lastly,
enterprises and the State are becoming more autonomous from each other due
to the ever more complex nature of the world economy and hegemonic crisis.
This explains why Communist Party-led China is now challenging US leader-
ship in attracting international resources. The increased value of dependent
country labour power makes for a productivity-cost ratio that, viewed in isola-
tion, favours investment. Big international capital’s reluctance to accept this
rise in value might not be shared by other sectors of capital who, less global but
competitively driven, could seek to occupy such a space.
As for the debate over whether the antisystemic movement should be na-
tional, regional or global, we think world systems theorists are absolutely right
to argue that the present conjuncture has brought these dimensions much
closer together. There is now much less space for them to exist independently,
and socialism cannot last unless it is a global process. Nevertheless, these di-
mensions still enjoy a degree of autonomy, and it would be very mistaken to
deny that in the name of world revolution. Antisystemic movements cannot
project themselves globally without winning clear national, regional and inter-
regional victories, which feed off each other. As dependency theory and some
neo-developmentalist currents posit, a continentally sized peripheral state
with average productivity levels is still a key site of policy implementation. The
example of China shows that such states can play a crucial economic and po-
litical role. In Latin America, Brazil and Mexico’s technological, economic, so-
cial, political and cultural foundations are heterogeneous, and both countries
are also heavily populated. But their populations and internal markets have
never been sufficiently integrated into locally available productive forces. They
should therefore embark upon major projects of national integration that
alone would raise their growth rates well above the levels achieved under the
neoliberal model. By socialising the productive forces among the population,
this integration would transform Brazil and Mexico’s productive capacities vis-
à-vis science, technology and culture. At the same time it would represent a
major source of regional and even global articulation by politically and materi-
ally influencing the countries most crucial to driving forward the trend towards
multipolarity, such as the brics.
Today Latin America has reached a crossroads. It emerged from its 1999–
2009 balance-of-payments crisis, which it mitigated by reversing the decline in
140 132
119
120
100
80 73.1
60
46.1
40 37
22.3
20
0
1956–1960 1961–1967 1968–1981 1982–1990 1991–1998 1999–2009
Figure 5.6 Foreign capital inflows as a percentage of payments for utilities, interests and
factor services
Source: cepal (1985, 1992, 2010). Non-factor services travel
excluded
its terms of trade, and in 2010 embarked on a new cycle of expanding foreign
capital inflows. During this new period the axis of global economic growth has
shifted from the central countries towards East Asia (notably China) and the
periphery. This offers the region a window of opportunity and new hope. It
could take advantage of the potentially unique convergence of the period of
cyclical capital inflows with the reversal of the decline in terms of trade to re-
ally boost its global influence. But to seize this opportunity it must confront
the structural problems of exclusion, which can be both internal (poverty and
misery in various guises) and external (peripherisation). This is a necessary
pre-condition for Latin America’s expansion to be given sustainable founda-
tions that rely ultimately on the economic, social, political and cultural em-
powerment of its peoples. Conversely, however, if this favourable period for
terms of trade and incoming foreign capital ends and said foundations are not
in place, then the region could be plunged into a profound crisis, which would
see its production and export model reprimarised during the window of
opportunity.53
53 Note to the English edition: In 2014 the cycle of foreign capital inflows was interrupted,
and the commodity boom has entered into decline ever since. This has triggered a serious
political crisis in the region. The crisis has severely reduced the space for centrism and put
enormous pressure on centre-left and left governments who, despite making varying de-
grees of progress, have failed to dismantle the financial and productive structure of de-
pendent capitalism, thereby facilitating a neoconservative backlash.
s uperexplotación del trabajo (1972), based on his intervention at the gathering of Latin Ameri-
can and Italian economists in Rome.
and of workers increasing their purchasing power and achieving a partial re-
distribution of the surplus through struggle. But enhanced productive capacity
can also generate extraordinary surplus value – the overriding aim of individu-
al capitalists – thus prompting capitals unable to neutralise its effect via tech-
nological innovation to resort to increasing the rate of labour exploitation.
Because of the way they are inserted into capital’s cycle of expanded repro-
duction, dependent bourgeoisies occupying a subordinate position in the
international division of labour often exploit workers more in order to com-
pensate for the surplus value transferred to the core on account of its techno-
logical monopoly. These transfers relate to different historical contexts and
patterns of capital reproduction. For Marini, the greater labour exploitation in
dependent countries is a function of the following factors:
(a) the pursuit of extraordinary profit by ruling oligarchies in the old prima-
ry-exporting economy. Their quest is driven by the world market but hin-
dered by low productivity, and leads them to lengthen the working day in
order to meet the demand from central countries;
(b) the introduction of technological development linked to foreign capital
into the export sector. This can involve the devaluation of commodities
primarily destined for consumption not by the local working class but by
bourgeoisies/workers in the core and local oligarchies/middle layers. It
can also involve the mass of surplus value in the export sector being dis-
tributed unequally, in keeping with the greater technological heterogene-
ity imposed by fixed prices of production. Thus on one hand, the rising
organic composition of capital combines with the devaluation of com-
modities, with marginal effects on the rate of surplus value, to help re-
duce the rate of profit; on the other, technological monopoly distributes
the mass of value unequally to the detriment of capitals with a lower
technical composition;
(c) the introduction of foreign technology and technological monopoly into
an industrial sector geared towards luxury consumer goods. This estab-
lishes only a weak relationship between the devaluation of commodities
and devaluation of labour power, and moves market value towards the
capitals with the highest technical composition in the segment in
question;
(d) extraordinary surplus value establishing itself as an internal structural
component of dependent capitalism in service of the technological mo-
nopoly imposed by the introduction of foreign technology. Extraordinary
surplus value is established not only within branches of production, but
also at the intersectoral level, ‘violating’ prices of production by replac-
ing labour power with machinery in order to transfer value to the luxury
consumer goods sector. This converts part of the workers’ demand into
unaccumulated surplus value, i.e. into demand from those who consume
by spending the economic surplus;
(e) foreign enterprises in dependent countries sending capital remittances
to their parent companies – a practice encouraged by global strategic
planning at the corporate level, lack of competitiveness locally, and in-
vestment restrictions imposed by labour super-exploitation.
(f) extraordinary surplus value in international trade being fixed to the ad-
vantage of corporate monopolies based in central countries. Along with
the growing international division of labour, this is a function of the con-
tradiction between increasing technological transfer to dependent coun-
tries in order to produce parts, components or less complex products,
and the relative economy made on this consumption by technological
monopolies and consumers in the central countries.
Essentially then, labour super-exploitation arises as a means of compensating
for intrasectoral and intersectoral value transfers, resorted to by capitals with
below-average production conditions both internally and internationally.
These capitals are the biggest employers of labour power in their countries and
so determine the general framework of the labour market. For Marini, super-
exploitation tends to hinder the transition from absolute to relative surplus
value as the dominant form of accumulation and produces its own form of
relative surplus value: an increase in the intensity of work without extra remu-
neration to match the greater exhaustion of labour power. Once it becomes
generalised, this diminishes labour power’s moral-historical value and increas-
es surplus labour time. Super-exploitation requires on the one hand high rates
of unemployment and underemployment in order to level down the prices of
labour power below their value; and on the other, restricted democracies or
dictatorial political regimes to impose those prices.
Dependent patterns of capitalist accumulation are marked by heavy con-
centrations of income and property and led by those factions of the bourgeoi-
sie located in the primary-export, consumer luxury, or financial sectors.
Productive investment in the domestic market is limited in the sectors produc-
ing essential consumer goods. These sectors experience premature concentra-
tion and monopolisation and their dynamism relies in part on the i nternational
market.
Marini notes that an internal market reliant on luxury goods consumption
and State demand cannot satisfy the dynamic of industrial investment in de-
pendent countries that have attained an average organic composition and are
at the financial capital stage. Hence they are drawn into subimperialist expan-
sion, as manifested by commodity/capital exports, the pursuit of raw materials
or market control, and geopolitical projects targeting peripheral countries and
Marini’s ideas have been challenged from various quarters. The strongest
attacks have their origins in Weberian dependency theory, neo-developmen-
talism and endogenism. Other critiques have emanated from those within
Marxist dependency theory itself who have been encouraged to sharpen Mari-
ni’s paradigmatic conceptual frameworks by the rise of the Latin American left
in the 21st century. These frameworks are located at a high level of abstraction
and are of a general and introductory nature. They are therefore open to be
developed, as the author recognises in his postscript to Dialéctica de la
dependencia:
The leading critique to come out of the Weberian approach to dependency was
formulated by Fernando Henrique Cardoso, both individually and in his joint
work with the Brazilian neo-developmentalist José Serra. Cardoso dismisses
the idea put forward by Marini and supported by Theotonio Dos Santos and
Vânia Bambirra that dependent capitalism has its own laws of motion, arguing
that this can only be so if it represents a specific mode of production (Cardoso
1972, 1975, 1993a). For Cardoso, industrial capitalism is based on relative sur-
plus value and expanding productivity. It conditions the new forms of depen-
dency to have emerged in Latin America since the 1950s, which internalised
industrial capitalism or its technologies. Super-exploitation can occur inde-
pendently of the dynamics of modern dependent capitalism. Specifically, it
can arise either from political determinations that act on the latter’s structural
frameworks and weaken working class struggle; or else as an expression of
modes of production stuck between precapitalist economic forms and capital-
ism, limiting the latter’s development. Cardoso argues that at the heart of any
analysis of the dynamics of dependency must lie the notion of development
and the understanding that it is conditioned by the expansion of international
capitalism (Cardoso 2010). Instead of a theory of dependency, he prefers to
elaborate a global theory of capitalist development that can accommodate the
articulation of internal and external forces comprised of social classes and po-
litical groups whose interaction determines the concrete and particular forms
assumed by capitalist development in the periphery. Although dependency
analysis can interpret these concrete and particular forms, their conjunctural
and determined nature means its predictive ability is limited to more general
developmental factors (Cardoso 1972).
autonomy4 (Cardoso and Serra 1978). Gabriel Palma goes down a similar route
in a text where he contrasts ceso’s approach to dependency with Marx and
describes Cardoso and Falleto’s Dependencia y desarrollo en América Latina
(1984) and its “Post-scriptum” (1979a) as the first analytical framework capable
of identifying dependency’s inner dynamic (Palma 1978). According to Palma,
Marx had argued that development would only take place in countries within
the Asiatic mode of production and lacking internal dynamism where it was in-
troduced by European capitalism; and that having surpassed the primitive ac-
cumulation phase they would be able to incorporate themselves at the highest
levels of capitalist development, regardless of whether the initial agent of that
development was external or internal. In stark contrast, according to Palma,
the ceso school denied the possibility of development within dependency.
Agustín Cueva argues in Problemas y perspectivas de la teoría de la depen-
dencia (Problems and perspectives of dependency theory) that Marini stylises
the differences between classic and dependent capitalism and works with
models rather than laws. For Cueva, whilst the presence of imperialism and
combined modes of production do modify capitalism’s general laws, the differ-
ences are quantitative rather than qualitative, offering no basis for a theory of
dependency. The differences between social formations should be located
more in their own internal relationships than the relationships between de-
pendent and industrial countries.5 He argues that underdevelopment explains
restrictions on working-class consumption better than the concept of super-
exploitation, and is applicable to central countries (e.g. 1940s France). Although
suggestive, the idea of super-exploitation suffers from historical inconsisten-
cies. For example, it underestimates the Argentine population’s high meat con-
sumption and the popular consumption of industrial products across Latin
America (Cueva 1974). Cueva would later qualify his claims in Las democracias
restringidas de America latina (The restricted democracies of Latin America)
where he revisited the issue of super-exploitation, acknowledging its histori-
cal, if not theoretical, relevance as a deviation away from the pure laws of the
development of capital imposed by imperialism. Nonetheless, despite recog-
nising super-exploitation’s importance, he maintained that the weight of
neoliberal imperialism had historically prevented subimperialism from ever
materialising (Cueva 1989).
4 The influence of Cardoso and Serra (1978) on how Marini and Marxist dependency theory
were read in Brazil can be seen in Luiz Carlos Bresser Pereira (1982), Guido Mantega (1984)
and Lidia Goldenstein (1994).
5 Hector Diaz Polanco (1979) takes a similar position in his comments on El ciclo del capital en
la economia dependiente (Marini 1979).
6 See Sobrexplotación y dependencia, published months after Marini’s death (Valenzuela Feijóo
1997). In one of his various inexplicable misreadings of Marini, Valenzuela attributes to the
former the idea that the rate of surplus value in peripheral countries is higher than in the
core, with a higher rate of labour super-exploitation – arguments completely alien to Mari-
ni’s way of thinking.
Marini left behind a rich and creative body of work that follows Marx’s dialecti-
cal method in proceeding from the most abstract level of analysis towards the
most concrete. He analyses the social formations making up the capitalist world
system and dependent ones in particular by progressing from a general plane,
which starts from the capital production assumptions and extends as far as
actual surplus value production, to the more complex plane of inter-capitalist
circulation and competition, where price-value deviations and surplus-value
transfers between capitals of different technical and organic compositions are
established. Marini is also innovative in his treatment of the more abstract
sphere of inter-capitalist competition at which Marx addresses the general de-
terminants of value transfers in Capital, postulating that extraordinary surplus
value not only functions within the different branches of production but also
between them, thereby violating the prices of production. He shows that tech-
nical progress and extraordinary surplus value are compatible with the as-
sumption of equalised reproduction patterns in Capital Volume 2 by pointing
out that technical progress saves on labour and transfers demand to the luxury
consumer goods sector, thereby articulating Department i to the fraction of
Department ii represented by the latter (Marini 1979b).
(…) Thus the laws of the production of value are only fully realised for the
individual producer, when he produces as a capitalist, and employs a
number of workmen together, whose labour, by its collective nature, is at
once stamped as average social labour.
marx 1974, 306–307
The average value of labour power lies at the core of Marx’s theory of surplus
value and the general laws of capital accumulation, which is founded on price
equalling value when it comes to major numerical quantities. When we talk
about prices falling below the value of labour power in the context of Marxist
theory, we mean the average value of labour power. Where labour power of
average skill and intensity operates below average conditions of productivity,
then it cannot be sold at the value of labour power in general if the price im-
posed on it by competition violates its use value.
Historically, the average value of labour power has been determined in the
capitalist world economy either in a similar way to capital in general, i.e. as a
synthesis of the multiple particularities of the price of labour power, regardless
of its specific concrete expression; or by the value of labour power in average
conditions of production. But in the monopoly situations that predominate in
the current world system our calculations must take into account that (a) the
average conditions of production are established by capitals of a higher com-
position which produce most commodities; (b) the market value of products
tends to move closer to the individual value of commodities produced by this
segment; and (c) conversely, the prices of labour power tend to be determined
by the vast number of workers who sell their labour power at rates below the
average conditions, which pushes its average price below its average value.
The theory of labour super-exploitation should therefore take the system-
atic decline in the price of labour power compared to its average value in the
world economy as its chief indicator. But super-exploitation is not only charac-
terised by its apparent form, i.e. labour power prices deviating from their value.
It is also characterised by the greater exploitation that determines those prices
as a function of value transfers. The integration of social formations into the
capitalist world economy is mediated by dominant classes who enjoy relative
autonomy in managing the national State and establishing spaces of commod-
ity circulation and production. We can therefore describe super-exploitation as
a structural phenomenon that typically occurs when said processes of accumu-
lation are determined internally and externally by monopoly situations which
insert most labour power into conditions of capital productivity well below the
national and international average, with the gap widening rather than closing.
When capitals of average and lower composition are hit by a fall in the rate of
surplus value they respond with the greater exploitation of workers. Thus we
8 In 2015, income per capita ppp, years of schooling and working hours in Brazil, Mexico, Ar-
gentina and Chile compared to the United States as follows: Brazil had 59% of US years of
schooling, 27.5% of its per capita income and income, and the same working hours; Mexico
65% of schooling, 33.5% of per capita income, and 27% more hours worked, Argentina 75%
of schooling, 36% of per capita income, and the same working hours; and Chile 74.4% of
schooling, 41.7% of per capita income and 13% more working hours (undp 2018 and Confer-
ence Board 2017).
9 Marini notes that the key factor in surplus value transfers and wage differentials in the world
economy is the productivity asymmetries resulting from technological monopolies, and not
the restricted international circulation of labour as authors such as Claudio Katz (2018) and
Samir Amin (1993) have it.
However, Marini is not clear about what level of analysis he is using to describe
intensity of labour as the form of relative surplus value specific to super-ex-
ploitation – whether he is talking about the mechanisms via which a pure and
abstract category (labour super-exploitation) operates or whether he is direct-
ly analysing concrete reality.
In some passages he appears to propose another methodological approach.
He notes that in dependent countries super-exploitation hinders the transi-
tion to relative surplus value as the dominant form of capital-labour relations.
This opens up the possibility of incorporating relative surplus value in a way
that subordinates it to the greater exploitation of workers:
which it limits the expansion of relative surplus value. Just because we suggest
relative surplus value might be consistent with the centrality of labour super-
exploitation does not mean we see it as progressive or integral to the most
advanced stages of dependent capitalism. The rise in productivity and the
technical and organic compositions of capital is accompanied by an increase in
the concentration and centralisation of capital and inter-capitalist transfers of
value. In Capital Volume 1, devoted to capital in general, Marx makes some key
points about these processes. His observations cast doubt on the notion that
relative surplus value represents a capitalist future based on technical progress,
and are of a piece with certain formulations in The Communist Manifesto.
For example, in Chapter 32 of Capital Volume 1, Marx notes that the stage
succeeding primitive and prehistoric capital accumulation develops through
the interplay of the immanent laws of capitalist production itself. This new
stage sees the inter-related growth on an expanding scale not only of the coop-
erative form of the labour process, the conscious technical application of sci-
ence, the planned exploitation of the soil, the entanglement of all peoples in
the net of the global market, and the international character of the capitalist
regime, but also of the concentration and centralisation of capital. He goes on
to point out that,
Hitherto, every form of society has been based, as we have already seen,
on the antagonism of oppressing and oppressed classes. But in order to
oppress a class, certain conditions must be assured to it under which it
can, at least, continue its slavish existence. The serf, in the period of serf-
dom, raised himself to membership in the commune, just as the petty
bourgeois, under the yoke of the feudal absolutism, managed to develop
into a bourgeois. The modern labourer, on the contrary, instead of rising
with the process of industry, sinks deeper and deeper below the condi-
tions of existence of his own class. He becomes a pauper, and pauperism
develops more rapidly than population and wealth. And here it becomes
evident, that the bourgeoisie is unfit any longer to be the ruling class in
12 A comparison of per capita income (ppp) levels in Brazil, Argentina and Mexico as a
percentage of those of the United States gives us the following figures: Brazil/US: 1950:
25.5%; 1980: 39.9%; 2003: 24.8%; 2013: 30%; 2017: 25.7%. Argentina/US: 1950: 61.7%; 1980:
52.2%; 2003; 28.7%; 2013: 37.5%; 2017: 34.2%. Mexico/US: 1950: 35%; 1980: 48.9%; 2003:
32.6%; 2013: 33.9%; 2017: 33.5%. Chile/US: 1950: 38.5%; 1980: 30.1%; 2003: 33%; 2013: 42.5%;
and 2017: 41.3% (author’s calculations based on Conference Board 2018).
13 During its 1992–98 cyclical boom, incoming foreign capital exceeded outflows in the form
of remittances of benefits, interests and other services by US$27 billion, while the trade
balance was 89,000 million dollars in the red. During the next boom in foreign capital
inflows (2010–2014), they were outstripped by outflows to the tune of some US$34 billion
and the trade balance was US$136 billion in surplus (Cf. cepalstat 2018).
and downturns in the foreign capital inflow cycle then marked the beginnings
of a new historical phase for Latin America, in which the forces of neoliberal-
ism, its fascist versions and imperialism have taken centre stage, exploiting the
centre-left’s weaknesses and the disarray within the historical bloc that
emerged in the first decade of the new century. The post-1994 expansive Kon-
dratiev’s likely exhaustion by the end of the 2010s, the chronic slowdown in the
expansion of international capital flows and foreign trade, the structural in-
crease in remittances together with the rise in direct investment stock, and the
further concentration and centralisation of capital all point to a sharp rise in
rates of super-exploitation under Latin American dependent capitalism that
will restrict even further the potential for relative surplus value.
One of the drivers of super-exploitation under modern capitalism is the fi-
nancialisation of capital. This produces fictitious capital, which is essentially
supported by the State and public debt expansion in particular. The impact of
fictitious capital production on contemporary capitalism is closely tied to the
techno-scientific revolution and automation, which, in significantly reducing
the mass of value represented by labour power, ensures that the rising rate of
surplus value and economies in labour power are increasingly too low to sus-
tain extraordinary surplus value. It seeks to resolve the contradiction between
increased productivity and value creation in the accumulation of capital. This
hypothesis has also been advanced by Adrián Sotelo Valencia (2010) and Carlos
Eduardo Martins (2011). The creation of fictitious capital, whose basic formula
is M-M`, carries with it the expectation that surplus value can be produced
without labour’s mediation, and its realisation transfers demand and value out
of the sectors producing basic consumer goods and into the luxury consumer
goods sector.
Despite highlighting the linkages between internal and external debt in his
analysis of the crisis of associated development, Marini paid insufficient atten-
tion to the issue of financialisation and its implications for subimperialism.
Nonetheless, in La política de fomento a las exportaciones y el déficit público en
Brasil (The policy of promoting exports and the public deficit in Brazil, 1988)
and El experimento neoliberal en Brasil (The neoliberal experiment in Brazil,
1992), he did draw attention to the existence of a ‘transfer economy’ that makes
it impossible for the Brazilian economy to function effectively as an export
economy. The transfer economy operated on the basis of two key mechanisms:
(a) protectionist regulation of substituting imports, which guaranteed the do-
mestic, foreign or joint industrial bourgeoisie a market share and monopoly
prices; and (b) running up a large internal public debt. This latter mechanism,
originally designed for making external debt interest payments in dollars, be-
came a key component of the local bourgeoisie’s accumulation process and
1 Note to the English edition: The 2016 coup in Brazil marked a rupture with the experience of
centre-left governments and the end of the New Republic, which since its inception in 1985
had overseen the transition from the military dictatorship of big capital to democracy. A new
regime is now taking shape; it combines political liberalism with fascism in order to limit the
former without formally eliminating it and violating popular sovereignty.
compensatory policies, and industrial policies such as the one Brazil pursued
via the bndes.2
In the first two periods the structuring of Latin America took its cue from
the hegemonic centre. During the 1980s neoliberalism in the region was main-
ly experienced through the effects of US policy on the world economy. Actual
neoliberal experiments took place in isolation in authoritarian fascistic envi-
ronments such as Chile and Argentina, and for the most part a sturdy protec-
tionist structure was maintained to help generate the surpluses needed to
service and pay interest on the external debt. But in the 1990s the regional mac-
roeconomic architecture began to change. Protectionist structures were dis-
solved in favour of trade and financial liberalisation and exchange rate fixing
or appreciation. A new and unsustainable macroeconomic architecture trans-
formed surpluses into deficits. The crises in Mexico (1995), Brazil (1998) and
Argentina (2001) led to fixed (or semi-fixed and strengthened) exchange rates
being replaced by fluctuating rates in the neoliberal political economy. In cri-
ses during the cyclical movements specific to dependent capitalism, when
capital outflows predominate, this serves to encourage extreme currency de-
valuation as a means of restoring trade balances and equilibrium in the balance
of payments. Over the decade fluctuating exchange rates became a dominant
feature both where neoliberal policies prevailed (Mexico, Colombia, Peru) and
where Third Way policies were implemented (Brazil, Chile, U ruguay). At the
2 Note to the English edition: We can also identify a fourth phase of the neoliberal offensive –
one ushered in by the coups in Paraguay (2012) and Brazil (2016); the earlier coup in Hondu-
ras (2008); the electoral defeat of Kircherism in Argentina (2015); the dismantling of UN-
ASUR; the isolation of national-popular experiences in Venezuela, Bolivia and Ecuador, and
the election of Piñera in Chile or Bolsonaro in Brazil. This fourth phase is linked to the desta-
bilisation strategies pursued by US imperialism and local oligarchies, and to the cycles of the
world economy. Key factors include the oil price-cutting policies accompanying OPEC’s ex-
pansion of production; the development of shale gas and the transformation of the US into
an oil power; capital flight; the falling price of raw materials since 2014; the reversal of the
2010–15 cycle of foreign capital inflows to the region, causing a balance-of-payments bottle-
neck in countries such as Venezuela and Argentina; the limitations of centre-left policies in
countries like Brazil, which adopted stabilisation policies at the expense of popular support,
and of national-popular policies like those of Venezuela, which paved the way for large-scale
capital flight by failing to intervene in the financial sector and centralise the exchange rate;
and the limited application of sovereign regional integration policies, as seen in the failure to
to set up the Banco del Sur or create a stabilisation fund or regional anchor currency. The
fourth phase articulates neoliberalism with the mobilisation of a fascist mass base in order to
overthrow democratically elected centre-left governments and legitimise new ones based on
violence against an internal / external enemy (Latin American communism, Bolivarianism,
workers and minorities). The 2018 victory of Manuel Lopez Obrador in Mexico with a large
Congressional majority gives an idea of the extent of political polarisation and the strength
of the Latin American left.
same time, countries that took a nationalist stance and pursued a new public
policy paradigm were able to increase their autonomy. Such was the case of
Venezuela, Ecuador, Bolivia, Argentina, Paraguay and – until it suffered an oli-
garchical coup at least – Honduras.
In the opening decade of the 21st Century, the turnaround in the terms of
trade thanks to Chinese demand in the world economy was a crucial factor in
sustaining Latin America’s macroeconomic architecture. China became a ma-
jor importer from the region, but its share of foreign investment in Latin Amer-
ica remained derisory until it began to pick up from 2010 on. This has increased
the elasticity of the fluctuating exchange rate and restricted its procyclical ef-
fects, because in periods of capital inflows change of this type, economic growth
tends to be less sustainable, threatening to upset the balance-of-payments
equilibrium by promoting exchange rate appreciation and the return of trade
and current account deficits.
The rise of China as a major financial, productive and commercial centre
reveals a complex world economy that articulates three key patterns of accu-
mulation: central capitalism, dependent capitalism, and Chinese-led accumu-
lation with little or no dispossession, in which the technological dynamic is
linked to the population’s peripheral-type consumption patterns. Latin Amer-
ica’s relationship with the Chinese economy presents serious contradictions: it
temporarily reverses the decline in the terms of trade between basic and man-
ufactured products; deepens export primarisation, and offers a window of op-
portunity harbouring both risk and potential that will probably remain open at
least until the end of this new expansive Kondratiev phase in the world econ-
omy. But whether this opportunity for catch-up is grasped, or whether it disap-
pears from view with a resumption of the decline that so clearly set in during
the 1980s and 1990s, depends on the State and public policy.
This chapter seeks to get the measure of the impact on Latin American
development of the new types of articulation with the world economy intro-
duced by neoliberalism. Whereas regional development between 1950 and
1970 produced both economic growth and inequality, the neoliberal period
of 1980–2002, which coincided with the Kondratiev B-phase in the region,3
dismantled the architecture of growth and deepened peripheralisation and
inequality. The outcome was poor economic growth; denationalisation and
destruction of the productive apparatus’ higher value-added segments; deep-
ening super-exploitation, and environmental decay. The post-2003 period has
3 In keeping with dependency, Latin America suffers a certain delay in articulating itself with
the cyclical movements coming out of the hegemonic centre. The Kondratiev B-phase began
taking hold in Latin America in 1980, exhausting itself in the region as a whole by 2002.
since r estored growth in the region to world economy levels, thus stalling its
drift towards peripherisation. But this process rests on shaky foundations,
namely the reversal of declining terms of trade, primarised exports and the
continuation of fluctuating exchange rates in many countries. Furthermore,
the financial sector has retained the foothold it secured during the years of
recession and held down investment rate growth in Latin America as a
whole, with the latter remaining well below 1970s levels despite national sav-
ing increasing at a faster rate than in the 1990s and the expansion of the
communications, transport and storage sectors. Regional economic dynam-
ics are now linked to the internal market, thus favouring those countries that
promoted it via major social reforms and state investment; and to the Asian
market, boosting the region’s Pacific coast. The coming decades will un-
doubtedly test the sturdiness of the foundations of Latin America’s econom-
ic growth and see a conflict between an expanding internal market and
increasing investment rates, and the limits of a political system linked to the
power of a monopolistic financial bourgeoisie that produces luxury goods
and/or exports commodities.
We shall now describe the new stage of dependency, before then sketching
out what a sovereign version of international articulation might look like.
decision-making processes were by then seen more as a tool of the big powers
than a guarantee of self-determination, and the crisis of global models of
development.
As we saw, hegemonic crises begin with the economy. The United States was
compelled by its growing current account deficits to start capturing interna-
tional savings instead of providing liquidity to the world economy. These defi-
cits first appeared in 1971–1972, and were kept under control until 1976, but
from then on imposed themselves in systematic fashion. This had a devastat-
ing effect on peripheral patterns of development. Latin America was hit espe-
cially hard as it had run major trade deficits during the 1970s, relying on the
availability of international capital to finance its ever deepening current ac-
count shortfalls.
The United States responded to its loss of international competitiveness by
strengthening the dollar and using its regional power to delay its decline. Neo-
liberalism, meanwhile, provided the ideological cover it needed to launch an
offensive throughout Latin America. This had three aims: to reduce its trade
deficits with the world through trade surpluses with Latin America; to create
the conditions for US investors to make money and incorporate assets through
speculation and bargain, and to minimise restrictions on the circulation of
capital and goods, thereby enabling it to reduce production costs and increase
the competitiveness of its enterprises by reorganising the regional division of
labour.
The difficulties it had in consolidating itself meant that only in the 1990s did
this US offensive finally manage to take hold across the whole of Latin Ameri-
ca and dismantle the protectionist structures previously enacted by import-
substitution policies. The resource drain imposed on Latin America in the
1980s meant resources could only be financed by obtaining significant trade
surpluses. This created a bond between the neoliberal experiment and author-
itarian regimes, as the latter encouraged labour super-exploitation as a means
of offsetting the negative effect of trade liberalisation on their ability to achieve
the balances needed to finance their current account deficits, which along
with their external debts were deepening. This neoliberal process found fullest
expression in Chile, where fascism brutally imposed super-exploitation on
workers. But Chile was a comparatively isolated case, and the Argentine and
Uruguayan dictatorships failed to survive the recession of the 1980s.
Despite being boosted by the key role it played in redemocratising the
Southern Cone, US leadership was seriously undermined in the 1980s by its
failure to offer a programme for development that would expand the Latin
American economy just as it had in the 1950s and 1960s, albeit with major so-
cial contradictions. Along with the crisis and dissolution of the dictatorships,
As neoliberalism took its place as the hegemonic ideology, we find that Latin
America became articulated with the world economy in two main stages: fi-
nancialisation, which began in the late 1970s and whose influence waned in
the first decade of the 2000s; and productive accumulation, which from that
point on established itself more globally, although some countries had already
4 Ever since the Zapatista rebellion broke out in the mid-1990s neoliberalism has been on a
trajectory of decline in Latin America. That decline manifested itself more clearly towards
the end of the decade through a series of political defeats. The rise of Hugo Chávez in Vene-
zuela, Lula in Brazil, Rafael Correa in Ecuador, Evo Morales in Bolivia, Daniel Ortega in Nica-
ragua, Lugo in Paraguay, José Mujica in Uruguay, the Kirchners in Argentina, and Ollanta
Humala in Peru, together with the PRI’s defeat in Mexico and the quasi-election of López
Obrador, are all part of the same crisis of the neoliberal paradigm and the search for alterna-
tives. In the Chilean case, the Christian Democrats attempted to regain ground at the ex-
pense of their Socialist Party partners in the Concertación through the candidacy of Eduardo
Frei, who ended his term in office with very low ratings. This opened the way for the victory
of the right in the 2010 elections.
entered this stage in the 1990s. Such was the case of Chile and Mexico – the
latter following the crisis of 1994–1995.
The first moment of financial accumulation lasted from the late 1970s until
the 1980s, when rising US interest rates led to capital outflows in their different
guises outstripping capital account inflows. To part-finance these outflows the
trade balance had to be restored. Its second moment came at the outset of the
1990s, when international interest rate cuts, external debt renegotiation and
continued positive trade surpluses up until 1991 provided the basis for building
up international reserves that would underwrite a policy of trade deficits and
attracting foreign capital via high interest rates and national currency appre-
ciation. The biggest macroeconomic contradiction faced by financialisation
during its second moment in Latin America was between the explosion of na-
tional debt securities and private sector financial instruments, and national
public and private sector reserves and their ability to pay (Dos Santos 1995b,
1995c).
Financialisation caused a sharp decline in the higher value-added segments
developed by import-substitution policies in the region, such as capital goods.
Eventually it created a need to generate large trade surpluses and led to whole
swathes of national public and private sectors being transferred into the hands
of international capital, helping to finance the negative current account bal-
ance and public and private debts once the cycle of financial investment was
exhausted.
The productive accumulation phase began as financialisation displayed its
first signs of exhaustion in the second half of the 1990s, notably in Mexico. Dur-
ing this period neoliberal policies were overhauled and replaced fixed ex-
change rates with fluctuating ones as the cornerstone of exchange rate policy.
Four factors eased the crisis caused by the cycle of foreign capital outflows in
between 1999 and 2009 and allowed for a relatively smooth and accelerated
transition to the Kondratiev A-phase: (a) the reversal of declining terms of
trade thanks to Chinese demand for basic and primary products; (b) the for-
eign currency inflows resulting from mass Latin American emigration to the
United States and Europe in the 1990s and 2000s; (c) Third Way policies that
exploited the favourable international conjuncture to attack extreme poverty,
stimulating economic expansion, and (d) nationalist income and property dis-
tribution policies or partial destruction of fictitious capital, which strongly
boosted domestic demand.
The first two factors allowed relative macroeconomic stability to coexist
with fluctuating exchange rates by taking maximum advantage of their coun-
tercyclical results in the period of foreign capital outflows (1999–2009). The
terms of trade rose to their highest levels since 1950, sustaining very positive
trade balances, and the absolute value of emigrant remittances tripled be-
tween 1998 and 2006 from 32% to 67% of the revenue deficit, contributing to
current transaction surpluses between 2003 and 2007 on a scale unseen since
1950 or 1984, when the current account balance was marginally positive.5 This
made it possible to accumulate reserves and reduce external debt.
Improved terms of trade and domestic demand became the main drivers of
renewed economic growth in the region. The nationalisms that emerged in this
period in tandem with mass mobilisations designed more aggressive policies to
stimulate domestic demand and confront the prerogatives of capital, exploit-
ing the deep-seated crisis of oligarchical legitimacy. Countries like Venezuela,
Bolivia and Ecuador transformed the bourgeois democratic political model,
introducing direct democratic mechanisms and sustained anti-oligarchic pub-
lic policies by giving institutional support to popular mobilisation. Although
these processes developed amidst raging social and political conflicts, the oli-
garchies and big capital had lost so much moral authority that they could not at
the time end them through civil-military coups.6 For that, they would have to
wait for said processes to lose legitimacy, and so they used ideological, eco-
nomic and political terrorism in conspiring towards that goal.
Latin America’s post-2003 economic expansion saw it match world econo-
my per capita growth for the first time since 1980.7 The geopolitical axis of
growth shifted towards China and the Pacific as that linked to the United States
lost its dynamism. At the same time, it is unclear whether the results of this
shift are at all sustainable. The process has seen a major reprimarisation of
Latin American imports. This is not, however, a consequence of Chinese de-
mand per se, but rather of how our dependent productive structures relate to
it. Around 70% of Chinese imports are concentrated in the medium and high-
tech manufactured products segment (Figure 7.1). To get a proper foothold in
that market our countries need to invest in increasing the added value of our
100
90
80
70
60
50 Primary
40 Manufactured
30
20
10
0
2000
2001
2002
2007
2008
1990
1991
1992
2003
2009
1993
1997
1998
1994
1995
1996
1999
2004
2005
2006
Figure 7.1 Chinese imports: type of goods
Source: China Statistical Yearbook 2010 (National Bureau of China
2011)
a proportion of that of the world economy fell from 246% in 1913 to 182% in 1980, and
142% in 2000, where it remained in 2008. See the Maddison Database at the Groningen
Growth and Development Center, available at http://www.ggdc.net/MADDISON/oriin
dex.htm.
12 After five years of surpluses from 2003 to 2007, the current transactions balance went into
the red again in 2008, 2009 and 2010. Brazil’s deficit alone stood at US$47 billion by 2010,
almost doubling the 2009 figure of US$24 billion. In the same year it hit US$6 billion in
Colombia; US$4 billion in Mexico, and US$2 billion in Peru. For their part, Chile, Argen-
tina and Venezuela’s balances fell sharply in 2010 compared to 2009. See CEPAL (2009a)
and central bank reports.
13 Between 1970 and 1981 international capital flows expanded at a rate of 16% per annum.
Between 1981 and 1985 they contracted, falling in 1983 to 72% of their previous highest
level. Between 1985 and 1990 they rose by 30% p.a. before contracting again from 1990 to
1992, dropping to 74% of their previous high in 1991. Between 1992 and 2000 they expand-
ed by 30% p.a. before falling to 40% of their previous high in 2003 during the 2000–2005
period of contraction. Between 2005 and 2007 they expanded by 45% p.a., falling to 53%
of 2007 levels in 2009. See UNCTAD, Unctadstat (s.d.), available at http://unctadstat.unc
tad.org.
the hinterland will play a big role in the way the world-system is organised
in the 21st Century. The growing extent to which the brics are coordinating
international policy and addressing strategic issues at their annual summits –
creating alternatives to the dollar, democratising international organisations,
support for peaceful and diplomatic solutions, reducing international trade
asymmetries – suggest that the multipolar tendency is here to stay and that
scientific-technological cooperation is increasing as a result. If Brazil plays a
leading role in this process, Latin America could become a major centre of
accumulation in the world economy. However, that would require both de-
cisive State action and popular participation, because as we saw earlier,
transnational corporations still tend to centralise R&D investment in their
national parent companies.14
Sovereign regional integration can only advance if we overcome the organ-
isational limits placed on it by local oligarchies wedded to dependency, neolib-
eralism and sub-imperialism. Their relationship with dependency is most
acutely expressed by their adherence to neoliberalism and subordination to
the hegemonic decline of the United States. This has produced a hegemonic
financial sector and a revival of the primary-export and service sectors linked
to it at the expense of manufacturing. Here, regional integration is seen as de-
viating from integration into the world market. Nonetheless, the industrial sec-
tor still has some power in Latin America and particularly in countries like
Brazil or Mexico, even if in the latter case it is essentially integrated with the
United States. The resumption of the expansive Kondratiev phase and rising
profit rates have led industrial bourgeoisies to use the regional space to assert
their national power, thus limiting the scope and potential for sovereignty and
supranationality in regional integration processes. This is most notable in Bra-
zil. The Brazilian industrial bourgeoisie accumulates large trade surpluses with
the rest of South America. Throughout the region it relies on bndes to support
its activities (limiting the Banco del Sur’s reach) and maximises revenues
through the profit it obtains from financial operations. For sovereign regional
integration to develop in a sustainable fashion inequality and asymmetries
must be reduced in order to give it suitably solid macroeconomic foundations.
This represents a formidable challenge for the emergent left and centre-left in
the region.
Having presented our main theses regarding Latin America’s developmental
trajectory under neoliberalism, we shall now turn to its empirical foundations.
transactions balance once again went into deficit..15 The 2003–2007 current
transactions surplus helped improve terms of trade and massively expand cur-
rent transfers. Such a state of affairs was however only temporary. The terms of
trade rose from an index of 95.9 in 2001 to to 119.2 in 2008, but with the global
crisis in 2009 they declined to 113.2. Such a long expansive trajectory is unlikely
to ever be repeated. Current transfers expanded in the context of the socio-
economic crisis that got underway in the 1980s, triggering large-scale Latin
American emigration to the central countries. Thus they grew by 18% p.a. in
the 1980s, 8.3% p.a. in the 1990s, and 21% p.a. from 2000 to 2008.16 But from
2006 onwards the pace of this increase slackened and even went into negative
figures under the combined impact of anti-immigration policies in the core,
rising unemployment in the US and Europe, and improved social conditions in
Latin America.
Although the US$130 billion-odd current transaction surplus achieved in
2003–2007 was crucial to the ability of countries to build up reserves and re-
duce external debt, it was a one-off and its determining factors have deterio-
rated since entering the 2010s. The global crisis has eaten into the trade surplus,
the terms of trade have declined and lost dynamism due to Chinese invest-
ment, and migrant remittances have been hit by unemployment in the core – a
enduring legacy of the crisis despite renewed US economic growth. In addi-
tion, payments on income (profit remittances and interest payments) expand-
ed notably by 8.4% p.a. between 1999 and 2008, far outstripping gdp growth
rates over the last thirty years. This trend looks set to continue in keeping with
the new wave of international investment that has entered the region since
2010.17
Over the coming decade it is therefore highly likely that should the region
be dominated by moderate governments applying a left-wing version of the
Third Way approach that rests on core neoliberal political-economic princi-
ples such as fluctuating exchange rates, then current account deficits will wid-
en considerably, financed by large inflows of foreign capital. This will lead
15 Available at www.eclac.org.
16 In their peak year of 2007, current transfers were concentrated in Mexico (39.4%), Guate-
mala (7.4%), Brazil (6.2%) and El Salvador (5.6%).
17 Profit remittances and interest payments expanded by 6.3% p.a. between 1980 and 2008.
They expanded by 6.2% p.a. during the period of capital outflows (1980–1990); 6% p.a.
between 1991 and 1998, when inflows again predominated, and 9% p.a. between 1999 and
2006, when outflows were once again higher. Latin American GDP expanded by 2.7% p.a.
between 1980 and 2008, 3.3% p.a in 1994–2008, and 4.3% in 2003–2008 – its golden age in
terms of growth. See CEPAL (2009c) and Angus Maddison’s data, available at http://www
.ggdc.net/MADDISON/oriindex.htm (last accessed December 2017).
i nternational financing was made available when this occurred, as seen when
the US and international agencies backed out of managing the Argentine cri-
sis. Ultimately, these financing limits were set not only by the needs of US capi-
tal, for which reason the hegemon had given up strengthening multilateral
economic institutions, but also by the spread of imbalances throughout Latin
America under neoliberalism to the point where by 1998 the current account
deficit reached US$87 billion as outflows began to dominate external capital
flows.
Meanwhile, the world market’s influence on cyclical oscillations in the re-
gion grew. Its weight within regional gdp almost doubled between 1990 and
2000. In 1990, foreign trade represented 24.7% of regional gdp. This index shot
up to 33.2% in 1995 and 38.6% in 1997, and by the year 2000 it had reached
44.4%. But Latin American exports only increased from 4% to 4.9% of the
world economy between 1990 and 1998, indicating their relative decline (Mad-
dison 2001).
One outcome of cycles being articulated through the world economy is that
Latin America’s close trade links with the US and Western Europe, both areas
of relatively low growth during the post-1994 Kondratiev, have limited its po-
tential for growth. This makes it even more imperative for the region to culti-
vate stronger ties with the internal markets of the East, and Asia in particular.
2002. In Brazil, external debt fell from 27.8% in 1991 to 20.4% in 1995 as the ex-
change rate appreciated, but the economic downswing in 1998, the currency
devaluation that followed and the external financing of balance-of-payments
disequilibriums put it back on a non-stop upward trajectory, reaching 41.6% by
2002. Of all the countries under discussion only Mexico actually reduced its
external debt, slashing it from 33.9 % in 1991 to 19% in 2002 after having peaked
at 52.8% in 1995. But it did this through barely sustainable currency apprecia-
tion. These conflicting trends meant that Latin America’s overall external debt
edged up from 36.2% to 39.9% between 1991 and 2002. From 2003 on, positive
balances on current transactions began to reduce regional external debt, bring-
ing it down to 17.3% by 2008. It then rose again to 20.2% in 2009 as current
transactions went back into deficit.18
In terms of our second indicator, mergers and acquisitions, Central Bank of
Argentina data shows that, between 1992 and 2002, 59.7% of the country’s di-
rect investment inflows were used to purchase local assets. Elsewhere, based
on a sample of 350-odd companies in their 2001 study of the evolution of lead-
ing Brazilian firms during the 1990s, Kupfer and Rocha (2001) estimate that
transfer of ownership transactions came to US$117.3 billion and foreign capital
accounted for 62.5% of this total, which corresponds to 44.5% of the financial
account balance over the period in question.
As for foreign capital participation in local assets, Kupfer and Rocha show
that between 1991 and 1999 foreign capital’s share of profits in Brazil leapt from
14.8% to 36.4% of leading firms’ returns. At first this was due to the declining
participation of state enterprises, whose share of returns fell from 44.6% to
24.3%. But from 1996 to 1999 multinational expansion would also affect local
private enterprises, whose share of profits diminished from 44.1% to 39.3%.
Foreign ownership was concentrated in two areas: the service sector and in-
dustry. In the former, its share of profits grew from 9.4% (1991) to 26.1% (1999),
whilst in the latter it rose from 36% to 53.5%, whilst that of local private enter-
prises shrank from 43.5% to 34%.
The destruction of the region’s higher value-added segments is made evi-
dent by two indicators: the share of manufacturing industry in gdp, and the
participation of the metal-mechanical sector in manufacturing. As Fernan-
do Fajnzylber notes, the metal-mechanical industry is the strategic sector of
18 The expanding national debt of Latin American countries is partly internationalised, as-
suming the form of disguised or invisible external national debt. In the case of Brazil, the
region’s leading economy, foreign interests held approximately US$120 billion of internal
government debt in March 2011. This figure represented over 30% of the country’s gross
external debt.
19 Between 1980 and 1990, the financial sector increased its share in Latin American GDP
from 12.9% to 16.7%. This level remained constant during the 1990s before rising to 17.4%
between 2000 and 2007, reaching 18.3% in 2009. ECLAC estimates of gross national debt
in Latin America show a sharp reduction from 2003 onwards. Between 1999 and 2002 it
jumped from 48.6% to 64.6% of regional GDP, subsequently falling to 33% in 2007. How-
ever, ECLAC overestimate the decline because their data is based on the Brazilian federal
government’s liquid debt, which unlike gross debt shrank over the latter period. Gross
debt increased its share of GDP from 12% in 1994 to 46% in 1999, reaching 54.1% in 2008.
In October 2009 it hit 64% as liquidity was injected into the economy to prevent the crisis
from deepening. The countercyclical and compensatory measures that followed then saw
it drop down to 51% in 2011. See Banco Central del Brasil data at www.bcb.gov.br (accessed
in 2011).
20 Gross domestic investment made up 27.6% of GDP in 1980 and fell to 18–22% in the 1980s
and 1990s. Its share remained steady into the 2000s, reaching 22.7% in 2008. There was
however an increase in national saving as a proportion of gross investment, from 18–20%
in the 1990s to 22.7% in 2008. There could be a sharp rise in investment when the next
cycle of foreign capital inflows begins in the first half of the 2010s. See the different vol-
umes of CEPAL’s annual series Estudio económico de América Latina y el Caribe at www
.eclac.org.
case, these are very limited, referring only to workers covered by social and la-
bour laws in six metropolitan areas. In contrast, dieese data, despite only cov-
ering São Paulo, covers a broad spectrum of wage earners in the labour market,
and its series is more consistent with general economic trends between 1980
and 2002. Based on an index where 1985 = 100, it shows that wages rose from
60.1 in 1991 to 72.3 in 1998, but then fell to 56 in 2002 as a result of currency de-
valuation. This decline is not fully reflected by fluctuations around the poverty
threshold, partly because high levels of informal employment allow an
extremely precarious service sector located outside direct capital-labour rela-
tions to serve as a bulwark against unemployment and falling wages. Nonethe-
less, poverty levels will almost certainly increase again as Brazil heads further
into stagnation and crisis.
Staying with Brazil, the disparity between rising education levels and fluctu-
ating income levels reveal the intensified nature of super-exploitation. The
128% increase in the population’s education levels as measured by years of
schooling between 1980 and 2001 can be contrasted with the 14% reduction in
poverty identified by the ipea or the 10% increase in wages indicated by eclac
figures for the same period. Alternatively we might contrast it with the 46%
reduction in workers’ wages in the metropolitan area of São Paulo between
1985 and 2002 identified by the dieese. Meanwhile, in Colombia, poverty lev-
els rose from 39% to 45% between 1980 and 1997 (cepal 1998b), at the same
time as workforce education levels increased by 53% (undp 2010).
The 17% reduction in regional poverty levels from 44% to 33% between
2002 and 2008, thanks to improved global trade terms and centre-left and left
governments, suggests an inflexion in the tendency towards deepening super-
exploitation. But if we take the last thirty years, we find that poverty in Latin
America has decreased far more slowly than education levels have increased.23
Poverty may well continue to decrease in our region in the 2010s thanks to a
more moderate rise in commodity prices and the advance of left and centre-
left governments. However, this trend could be hard to sustain given the
chances of the world economy’s long cycle of expansion exhausting itself in
the second half of the decade. In such an event, maintaining and increasing
the income levels of our populations will rely far more heavily on political
action.
23 The biggest reduction in poverty was seen in countries governed by the left or centre-left.
Between 2002 and 2008, it fell by 43% in Venezuela, 53% in Argentina, and 31% in Brazil.
In Bolivia it fell by 21.1% between 2005 and 2007.
5 Ecological Decline
One of the trends driven by the dependent integration of Latin America is eco-
logical decline. It translates into using ecosystems for social and economic pur-
poses in ways that consume renewable natural resources at a faster rate than
they can be ecologically regenerated, and represents the super-exploitation of
ecosystems. The main causes of ecological super-exploitation lie in the social,
economic and cultural marginalisation of broad swathes of the population in
those regions whose ecosystem is exploited to satisfy the needs of another re-
gion, with no regard for its internal balance (Herrera et al. 1991, Leff 2001).
For Leff, planning is sustainable if it integrates ecological, technological and
cultural productivities. Ecological productivity refers to the ecosystem’s ability
to produce natural resources, and it relies on conserving the core structures
that ensure long-term productivity (diversity of biological populations, cli-
mate and soils). Technological productivity relies on a set of techniques that
modify the ecosystem’s productive structure by converting its resources into
products and introducing selective regeneration processes. Cultural productiv-
ity refers to the ability to acquire and use empirical knowledge of the ecosys-
tem’s resources with the help of science, education and democratisation.
Sustainable planning puts cultural development at the core of technological
and ecological productivities. On the one hand, the scientific and educational
development of a given culture leads to technologies being introduced that
raise the ecological productivity of a given ecosystem. On the other hand, the
democratisation of sensitivities, preferences and meanings multiplies the ways
in which an ecosystem can be used, broadening the range of components
(biotic and abiotic resources) that support its core structure and long-term
productivity. Resources are managed in an integrated fashion, encouraging the
ecological and technological recirculation of products, by-products and waste.
Leff thus identifies a need for ecosystems to organise production by dividing
it into production for local markets, national markets and international mar-
kets. His approach is by no means a defence of technological stagnation. In
international markets, new technologies would mainly develop economies of
scale and productive integration. In local markets, information technology
would generally develop economies of scope. And national markets would
combine economies of scope and of scale in ways that would vary from one
country to another.
By culturally marginalising and excluding local populations, dependent
capitalism encourages unsustainable and environmentally unsafe develop-
ment in Latin America. It does this in several ways:
(a) By polarising society between poverty and luxury consumption. In this way,
dependency stimulates the kind of consumption that puts pressure on
ecosystems’ material resources. Luxury consumption encourages indi-
vidualism and waste and encourages forms of consumption with few im-
material inputs of the kind associated with culture, leisure time, science,
art and aesthetics. Consumption of the kind linked to scarcity also priori-
tises the consumption of material goods, but for different reasons. The
concentration of agrarian and urban land ownership, to which scarcity is
related, encourages predatory land use. Large estates and export-based
agriculture use land in a way that reduces its biotic and abiotic diversity
and pushes back the agricultural frontier in order to supply the internal
market, upsetting local ecosystems in the process. Similarly, monopolis-
tic economies lead to spatially concentrated populations where land is
used inappropriately, with no thought for the expansion of public service
infrastructure and the diversity that upholds environmental balance in a
region.
(b) By encouraging patterns of consumption and technology use that mimic
those of central countries. These imitative patterns de-diversify markets
and unduly emphasise the role of scales in developing productive sys-
tems. As a result, technological integration and the international division
of labour develop at the expense of the preservation and diversity of
ecosystems.
(c) By excluding local populations from scientific and educational develop-
ment, and so underdeveloping their capacity to familiarise themselves
with and use local biotic and abiotic diversity to generate new products
and technological processes.
The development of dependent capitalism along neoliberal lines accentuates
these drivers of ecological decline. Neoliberalism deepens international tech-
nological asymmetries and reprimarises dependent countries’ patterns of ex-
ports, linking their trade surpluses to agricultural or mineral products. The
ecological consequences of this model are devastating.24 The proportion of
forest covering Latin America fell from 51.9% to 47.2% between 1990 and 2010,
24 In Brazil, the region’s most industrially and technologically advanced country, the trade
surplus depends entirely on revenues from agribusiness, which supplanted it between
1994 and 2009. In 2002–2009 the trade surplus jumped from US$20.3 billion to US$54.9
billion, whilst the Brazilian Association of Electric and Electronic Industries (ABINEE)
forecast a US$27.5 billion deficit in the electroelectrónics balance for 2010, 59% higher
than in 2009. UNCTAD’s R&D Innovation Capability Index for Latin America fell from
0.375 to 0.360 between 1995 and 2001, despite rising in Brazil from 0.459 to 0.478 over the
same period. See UNCTAD, World Investment Report, 2005.
and from 69% to 62.4% in Brazil. Much of this deforestation process is related
to the expansion of soybean cultivation, which by 2008 took up 35% of arable
land in Brazil and 52% in Argentina, up from 22% and 18.5% respectively in
1990.25 Deforestation is one of the chief signs of ecological decline in Latin
America, along with species extinction, desertification, the loss of soil nutri-
ents and the carbon dioxide emissions contributing to global warming. Con-
servative estimates suggest 100–350,000 tropical species will become extinct by
2030 (Herrera et al. 1991).
The situation is clearly unsustainable and must be turned around. The next
technological paradigm, which should emerge in a mature form in the mid-
2020s, is biotechnology. To take advantage of the possibilities biotechnology
offers the region and humanity, Latin America must supersede the patterns of
dependent development that have so far structured its social and historical
formation. Less than 2 million out of an estimated 5–10 million species of or-
ganisms are known to mankind. Of the known species, 35% are in the tropics,
where an estimated 74–86% of all living organisms live (Herrera et al. 1991).
Preserving these species and creating the technological and scientific means to
articulate them with human development represents an ethical imperative,
which demands the mobilisation of Latin American subjectivity in order to
bring a new regional development pattern to bear upon the world system.
25 The numbers affected by floods, the main cause of death by natural disaster along with
storms and earthquakes, increased from 710,000 to 1,700,000 a year between the 1990s and
the 2000s. See CEPAL (2009c).
overty. By increasing tax revenues thus, the State will be able to expand
p
spending and use different mechanisms to ensure that the mass of the
population has access to food, clothing, housing, health and sanitation.
g. The land ownership issue should be tackled through an agrarian reform
that eliminates large unproductive property and prioritises agricultural
production for the internal market. Such a reform would replace the big
farm/small farm dichotomy with a landowning system based on small
and medium-sized property. It would also increase agricultural produc-
tion for internal or regional consumption, provide for a fairer distribution
of income in the countryside, and guarantee food security.27 To achieve
this the State should structurally promote agricultural externalities by
guaranteeing cheap credit, technological support, insurance against crop
failure, etc. The postwar experiences of South Korea and Taiwan testify to
the efficacy of such measures.
h. Environmental policies should be integrated into development. Such poli-
cies should promote the use of biotic and abiotic diversity, integrated
resource management, and economies of scale and scope to suit produc-
tion for local, national/regional or international markets. They should
also focus on replacing fossil and non-renewable fuels with renewable
energy inputs such as biomass and solar energy, taking advantage of the
natural potential of the tropics and the imminence of the biotechnologi-
cal paradigm, which is expected to mature in the next twenty or thirty
years.
i. These development policies should first be implemented nationally but aim
towards regional integration. By integrating, Latin American countries
can expand productive scales, broaden internal markets, raise capacity
and develop diversity and complementarity across science, technology,
education, ecology and culture.28 Regional integration should not be
27 As the CEPAL report Quince años de desempeño económico: America Latina y el Caribe,
1980–1995 reveals, the main obstacle to agricultural production in Latin America is access
to land. Thus in 1990, productivity per hectare of land farmed in Latin America and the
Carribean outstripped that of the United States and Canada: 428 dollars per hectare com-
pared to 317. But the ratio of hectares cultivated per worker was 3.7 in Latin America and
the Carribean and 71.3 in the US and Canada (CEPAL 1996, 96).
28 Integration is not a prerrequisite but a product of new patterns of development and a
moment in their evolution. The changes discussed here could therefore be implemented
in a ‘first moment’ in national states – mainly continentally sized states such as Brazil,
Mexico and to some extent Argentina, as scientific, technological, educational, social,
economic and cultural heterogeneity mean that the integration of scales and scopes with-
in national frameworks can play a big part in the new pathway to technical progress. This
is achievable because productivity would be boosted by suppressing these heterogeneities
and natural resources would be used in accordance with a sustainable policy that sup-
ports national interests.
Conclusion
When we began work on this book, our aim was to gauge the impact of the
neoliberal model on Latin America. That quest took us on a very long journey.
We could have taken more direct and safer routes, but our path was deter-
mined by very specific concerns: the huge global transformations that have
touched the innermost corners of our lives and still demand an explanation,
and our awareness that all of the deeply flawed interpretations advanced in
respect of Latin America seek to isolate the region from the wider world and
treat it as a separate reality. In contrast, we chose to include the world system
within our object of study and articulate Latin America to three concepts
which are crucial to understanding the conjuncture it is currently in: globaliza-
tion, dependency and neoliberalism. We shall now review this endeavour by
summarising our main points.
When we looked at globalization we found that social thought has come to
a wide and disparate range of conclusions, which we divided into five or six
different approaches. We proceeded to fashion our own analytical instrument
located at the point of convergence between world system theories and Marx-
ism. We interpreted globalization as a revolutionary transformation of the pro-
ductive forces that has failed to fully revolutionise its material and institutional
base. Its origins lie in the emergence and diffusion of the techno-scientific
revolution. But that revolution conflicts with the capitalist mode of produc-
tion and its political-institutional expression: the modern world system. And
so globalization heralds not a new era, but rather a period of transition whose
destination will be decided by social struggle.
Our interest lies in the nature of that clash and its short, medium and long-
term impacts. On that basis we set out to define the current conjoncture and
how it fits into the longue durée. We did so by considering the origins and chief
determinants of historical capitalism, as expressed in secular trends and cy-
cles. We discussed the rise of historical capitalism and argued that it estab-
lished itself via the formation of the modern world system followed by the
development of the capitalist mode of production. The former gave historical
capitalism its political superstructure and the latter gave it a material base.
Historical capitalism exhibits secular and cyclical trends whose origins lie in
this superstructure and base. The secular trends we highlighted include unfet-
tered accumulation, the declining tendency of the rate of profit, and the State’s
need to broaden its demographic, territorial and legitimatory bases in order to
coordinate the modern world system. We described systemic cycles and Kon-
dratiev cycles as two of historical capitalism’s leading cyclical tendencies.
We affirmed that the specificity of a conjuncture resides in the particular
way it combines secular trends and cycles. This methodology not only enables
us to determine the specificity of different conjunctures, but also to articulate
them with each other, drawing out their similarities and differences. We theo-
rised that the current conjuncture combines a crisis of the secular trends of
historical capitalism with the downward phase of the systemic cycle and the
rise of a new Kondratiev.
The crisis of secular trends is caused by the gradual exhaustion of counter-
tendencies to the declining rate of profit. Their exhaustion is a result of science
becoming a central force within the productive process and eliminating the
chief source of surplus value–the expenditure of mainly physical labour. This
is a key feature of the techno-scientific revolution. But contra Robert Kurtz, the
exhaustion of countertendencies to the falling rate of profit is also compatible
with a long ascendant phase, as we show in Chapter 4. However, the new Kon-
dratiev will lack the splendour of its postwar counterpart, most notably in the
core countries. This is because it will be influenced by weaker secular trends of
accumulation and the downturn in the systemic cycle. The axis of develop-
ment will instead shift towards East Asia, opening up new opportunities for
the peripheries.
The coming together of these trends has a wide range of economic, political,
social and ideological consequences. The most far-reaching one is that the
current crisis, which the ascending Kondratiev will be too weak to end, is a ci-
vilisational one: it calls into question the capitalist mode of production, the
modern world system, hegemony, imperialism and occidentalism. The pro-
gressive exhaustion of capitalism’s secular trends has left it incapable of over-
coming the systemic crisis. With knowledge diffusion, another core feature of
the techno-scientific revolution, it is no longer possible to concentrate the
amount of technological, economic, ideological, political and military power
required to maintain or revive hegemony. The tendency of the rate of profit to
fall renders capitalism too obsolete to foster new technologies and diminishes
its power to generate growth and economic leadership. We expect the crisis to
develop in the context of the current systemic cycle and therefore, by our reck-
oning, between 2015–2020 and 2045–2050.
This context of decline will severely weaken the revolutionising impact of
the new Kondratiev’s ascendant phase. We argued that there are two revolu-
tionary periods in the Kondratiev cycle: the ascent, highlighted by Nicolai Kon-
dratiev, when capitalism’s secular forces are re-energised and destroy the old
structures blocking their expansion; and the descent, emphasised by Mandel,
when popular forces dispute capital’s political, social, economic and ideologi-
cal leadership in order to reorganise society and save it from the decline capital
has condemned it to. This new period of expansion is so weak that any major
social change is highly unlikely during its lifetime. It resembles other, similar
historical moments such as very last expansive period of British hegemony,
which was economically mediocre and politically sterile. The imperial struc-
ture in place in the 1870s, 1880s and 1890s prior to British hegemony unravelling
remained intact right up until the crisis of the 1910s, whence it began its long
process of disintegration. The Ottoman and Russian Empires fell apart and the
Chinese and Mexican revolutions first began in this period. But the moment
was still one of secular strength for historical capitalism. The ascendant phases
provided the key to renewal, which reached completion with the transition to
a new Kondratiev in the 1940s. Today we are in a different moment. The secular
and systemic trends are weaker and the Kondratiev’s revolutionising impact is
being felt during the transition from maturity to recession.
Therein lies the reason why neoliberalism has become so powerful in the
current historical context. The ascending Kondratiev phase did not come to
destroy it. Faced with a secular and systemic crisis, big capital is increasingly
resorting to state dirigisme and imperialism to solve its economic and political
problems. Neoliberalism is bound up with a return to territorialism, just as
Spanish anti-mercantilist colonialism and British liberal imperialism did in
the past. But there is a crucial difference: neoliberalism directs territorialism
inwards towards the world system and calls the core principles of the interstate
system into question. Only thus can big capital impose the ideology of compe-
tition onto the four corners of the world and appropriate the surpluses
produced by less competitive countries. But that alone is insufficient: neoliber-
alism must also prevent national and regional sovereignties from establishing
alternative developmental patterns and interfering with control over unfairly
distributed strategic natural resources.
Neoliberalism’s evolution in this direction is not inconsistent with its chief
ideological tenets, as we demonstrated by looking at the work of Friedman and
Hayek. Both men privileged economic over political freedom and saw national
sovereignty as limiting global economic competition. In this way the most con-
servative segments of the US bourgeoisie have become the vanguard of global
fascism. Their dilemma resembles that of the Spanish and Genoese bourgeoi-
sies upon the outbreak of the crisis that engendered the modern world system.
Bound to imperial political structures, they failed to find an heir in the new
systemic structure being forged in their midst, and used up all their strength in
fighting against it. Later hegemonies did not go down the same path. Instead
the hegemon in decline dealt with the brewing crisis by choosing a successor,
with whom it then enjoyed a privileged relationship in the new systemic cycle
that was consolidated once the battle for the hegemonic throne was over.
As the last bastion of a decaying system, the US bourgeoisie cannot find an
economically powerful enough successor with whom to strike up a relation-
ship. For a time Japan looked a likely candidate, but the country found itself
unable to combine a sustained rate of profit with higher productivity. China,
for its part, lacks the characteristics of a hegemon. Instead, its peripheral/
Asian origins, demographic and territorial base and political model make it
more of a hinterland. A huge crisis has gripped historical capitalism and its
Western European/North American version in particular, and for the first time
ever it has proven too obsolete to lead the global development of the produc-
tive forces.
The problem of hegemonic leadership has made the international division
of labour under this civilisational form extremely vulnerable. It is increasingly
clear that subservience to neoliberalism is holding back the economic devel-
opment of peripheral countries. The relationship between dependency and
development, forged in the postwar years when socialist experiments in the
periphery were isolated, has become precarious and constrained. But even this
victorious model was built upon serious contradictions. In the end foreign
capital influxes failed to boost peripheral development, neither raising its rate
of saving nor financing its balance-of-payments disequilibriums. Instead they
decapitalised the periphery, and in socio-economic terms this led to labour
super-exploitation.
We embarked on a wide-ranging theoretical and empirical survey in de-
fence of our perspective. We examined the main arguments of national-
developmentalism, modernisation and dependency theories, endogenism,
neo-developmentalism, neoliberalism and world system theory and held them
up to the empirical record. We paid particular attention to the concept of
super-exploitation, demonstrating its theoretical relevance to Marxist political
economy and its historicity.
In discussing the neoliberal model we distinguished it from other models
that have regulated dependent capitalism in Latin America and contrasted it
with the types of development established under US hegemony. We argued
that the main difference between them is that neoliberalism brings a much
higher level of international competition to the region and tends to turn its
historical trade surpluses into deficits.
Latin America suffers secular outflows of foreign capital. These outflows
represent balance-of-payments disequilibriums, which are paid for through
financial dependency and trade surpluses. Because of its deepening financial
dependency, the region has experienced a secular tendency towards s tagnation,
as the limitations imposed by mounting foreign debt in the 1980s clearly illus-
trate. But the neoliberal model adds a conjunctural limitation to this structural
one. The elimination of trade surpluses during economic growth diminishes
the region’s ability to finance outflows. This, at a time when the hegemonic
crisis of the United States prevents it from injecting liquidity into the world
system. This has led to economic expansion being prematurely interrupted;
the denationalisation of productive assets; intensified super-exploitation in
the form of ever-tighter wage squeezes, and the destruction of branches of pro-
duction geared towards the internal market, such as the capital goods sector.
The crisis of neoliberalism began to unfold in the 2000s. Slow and prolonged,
it has lasted the course of the expansive Kondratiev phase. Internationally it is
expressed by the Chinese and East Asian economies becoming the central axis
of global economic expansion, and regionally by the decline or collapse of the
neoliberal political leaderships that hegemonised Latin American states in the
1980s and 1990s. The crisis has opened windows of opportunity for Latin Amer-
ica. China’s influence has helped the region to temporarily reverse the deterio-
ration in the terms of trade, and new centre-left governments have helped grow
the internal market, reducing or containing the rise of super-exploitation. Yet
there are still numerous reasons to doubt whether this conjuncture can be sus-
tained. Many of the core components of neoliberal political economy remain
in place. This has the effect of further reprimarising the region’s exports; keep-
ing the extent of financialisation at its current level, and preventing productive
restructuring towards more advanced systems of innovation, which leaves us
at the mercy of cyclical price oscillations in primary and basic products.
Earning foreign exchange from primary product exports should not be seen
as a structural means to achieving international insertion. Instead it should be
subordinated in the pursuit of the latter to promoting advanced productive
specialisation at the techno-scientific level. This is vital if Latin America is to
become a major centre of accumulation and exercise a sovereign role in the
international division of labour amidst powerful multipolar tendencies in
the world. Such a project would have to articulate the State with socialised
decision-making and better living standards and training. But under the lead-
ership of dependent bourgeoisies the upturn in the primary product price cy-
cle could open the doors to an assault on social conquests and rising levels of
super-exploitation, as basic products resume their secular trends and are nega-
tively affected by superprofits.
Latin America stands at a crossroads in the coming decades. It can either
bolster a decaying hegemony that has lost economic, political and ideological
leadership by submitting to its public policy model, thereby suffering the
same fate as Britain’s Asian colonies; or else it can strike out on the path of self-
determination and development. But that path ought not to lead to isolation-
ism. The region will have to find new ways forward, reconciling national and
regional realities with global ones. Ideally it will obtain resources for develop-
ment from regional integration and invert its historical relationship with
foreign capital, subordinating it to accumulation’s internal dynamic. We are
talking about a far-reaching process in search of a new geometry: a process
that is not merely deductive but grounded in the time-old urge to end the op-
pression that fragments the world into hegemonies, empires, and social class-
es, and rebuild it in the name of universal fraternity.
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Africa xiii, xv, 8, 42, 53–54, 85, 131, 151, 168, Brzezinski, Zbignew 5
185, 199, 277 Bukharin, Nikolai 14
Aglietta, Michael 107 Burke, Edmund 125
alba xx, 247, 288 Bush, George W. xii–xiii, 128–30, 144, 164,
Amin, Samir 6, 35, 122, 133, 269 173–74, 176–79, 182, 187, 194, 284
Anderson, Perry 22, 28, 125, 132
Antisystemic xviii, xxvi, 13, 14, 17, 18, 25, 35, Campos, Roberto 207–12, 245
40, 95, 120, 123, 128, 145, 180, 195, 197, capital, centralising 79, 244
225, 310 capital accumulation 8–9, 15, 20, 34, 42, 45,
movements 13, 128, 195, 197, 255 55, 84, 87–89, 113, 115, 118, 120, 124–25,
Antunes, Ricardo 91 152, 185, 189, 192, 222, 229, 258, 268
Argentina 74, 140, 171, 199, 227, 244, 250, 254, capital flows 124, 210, 232, 293, 301, 308
269, 271, 275, 279–81, 284, 286, 288, 290, international 35, 124, 166–67, 275–76,
294, 297, 299, 301–3, 306 290–91
Arrighi, Giovanni 31–33, 38, 43–47, 49, capitalism 2, 6, 8, 10–11, 13–15, 17–20, 24,
51–52, 56, 58–62, 65, 69–70, 111, 139, 148, 26–27, 29–35, 37, 39, 41, 43–45, 53,
153, 240, 249–50, 254 71–75, 77–79, 87, 89, 91–93, 95, 100–103,
Asia 32, 42, 48, 50–54, 67, 120, 131, 160, 177, 114–16, 130, 133, 142–44, 153–54, 189–91,
187, 199, 297 204–5, 221, 241–42
Asiatic mode of production 27–28, 264 monopoly 229–30, 241
capitalist development 2, 11, 14, 19–20, 26,
Bachelet, Michele 127 32, 35, 74–76, 78, 103–4, 118, 122, 193, 212,
balance-of-payments crisis 175, 199, 202, 255 232, 262, 264, 270–71, 275
Bambirra, Vânia 85, 211, 219, 225, 262–63, 278 Caputo, Orlando 8, 67, 193, 210, 219, 225, 275,
Baran, Paul 219–21, 224, 228–30 293
Belluzzo, Luiz Gonzaga 122, 189–190 Carcanholo, Marcelo 266, 271
Bernstein, Edward 14 Cardoso, Ciro Flammarion 241
Berr, Henri 12 Cardoso, Fernando Henrique 51, 207, 214–19,
Blair, Tony 127, 179 228–30, 236, 244, 262, 271, 275
Bloch, Marc 12 Cardoso, João Manuel 189
Bolivarian Revolution 171, 247 Castañeda, Jorge 243, 265, 269
Bolsonaro, Jair xiv, xx Castro, Antonio Barros de 242–43
bourgeoisie, local 119, 217, 239, 241, 285–86 Ceceña, Ana Esther 8, 24, 138, 184–86, 188
Boyer, Robert 107–8 cepal 199, 231, 233, 245, 256, 288, 290–91,
Braudel, Fernand 7, 9, 12–13, 18, 20, 30–33, 294–95, 300–303, 306, 309
43–44, 75, 119 Challenges of Globalization 1, 4–5, 7, 9, 11,
Brazil 4, 6, 61, 140–41, 185, 187, 194, 199, 208, 13, 15, 17, 19, 21, 23, 25
210, 212, 217, 236, 241–42, 244–45, 249, Chávez, Hugo 127
254–55, 261, 264, 269, 275–80, 284–86, Chesnais, François 6, 55, 102, 155, 184,
288, 290, 292, 294–95, 297–99, 301–3, 189–90
305–6, 308–9 Chile 84, 140, 241, 244, 247, 254, 269, 279–80,
Brenner, Robert 111, 155, 162 283, 286–88, 291, 294, 296–97, 299, 302
brics xiii, xv, 141, 187, 194, 255, 277, 289, 292, China 3, 8, 26, 53, 62, 66–67, 100, 103, 120,
310 123, 137, 139–41, 151, 167–69, 171–72, 181,
Brigñoli, Hector Pérez 51, 198, 241 183, 187, 191, 194, 232, 235, 238–40, 253,
British hegemony 49–58, 64, 134, 159, 175, 201 255–56, 277, 281, 286, 288–91, 296
circulating capital 4, 35, 37, 79, 87, 89, 117, eclac 199, 204, 245, 300, 302
159, 192–93, 203 ecological crisis 141, 144
civilisation xviii, 75, 94, 95, 121, 138, 141–143, economic growth 57, 71, 99, 111, 122, 126, 130,
148, 150, 170 136, 138–39, 158–59, 166, 170, 172, 177–78,
class struggle 75–76, 242, 265, 199, 206, 209, 225, 232–34, 237–38,
269 244–45, 281–82, 286, 293, 295, 302, 306,
Clinton, Bill 39, 127, 130, 136, 176–177, 308, 310, 316
182–183, 284 ecosystems 150, 304–5
Clinton, Hillary 183 Edquist, Charles 37
Clinton-led 39 Eichengreen, Barry 57
Cold War 12, 61–62, 110–11, 139, 174–76, 197, Engels, Frederick 14, 17–18, 20–24
251 European World-Economy 27, 30, 53
Colombia 185, 254, 279, 280, 291, 303 expansion, long cycle of 300–301, 303
commodities, devaluation of 259, 273 expansive phase 43, 64–65, 79, 83, 86, 89,
contradictions 7–9, 42, 44–45, 90, 93–94, 96, 96, 129, 145, 153–54, 158, 164, 237, 290,
99, 114–15, 117–19, 124, 127, 130, 135–36, 302
138, 161, 164, 171–73, 176, 188, 192, 212, exploitation 190, 193, 258, 265, 268–69,
215, 221, 226–27, 232, 257, 260, 273, 272
275–76, 281
Coriat, Benjamin 56, 105–07, 109 Fajnzylber, Fernando 298
Correa, Rafael 128, 286 Faletto, Enzo 214–19, 228–29, 232
countries, semi-peripheral 38, 61, 63, 117, Fanon, Frantz 199
123, 139–40, 196, 249 fascism 59–60, 66, 85, 128, 132, 143, 147, 155,
Couto e Silva, Golbery 277 175, 226–27, 279, 283
crisis, systemic 2, 24, 39–40, 313–14 Febvre, Lucien 12
cycles, long 2, 17, 71–73, 75–77, 79, 81, 89, 302 Feijoo, Jose Valenzuela 265, 268
Cuba 151, 179, 187, 188, 216, 237 Fernandes, Florestan 195, 211, 240–41, 249
Cueva, Agustin 241, 264, 271 feudalism, crisis of 27–28, 31, 33, 146
fictitious capital xvii, xix, xxi, 114, 129, 130,
Day, Richard 74 137, 145, 155, 165, 182, 275, 277, 287, 288
De Bernis, Gerard 107 financial capital 4, 33, 97, 122, 131, 189–90,
decapitalisation 220, 230 229, 277–78, 300
dependency 1–3, 14, 16, 24, 30, 123, 195, 197, financial dependency 217–18, 228, 232–33,
203, 211, 213–19, 221, 225–26, 228, 230, 238, 244, 253, 277, 294, 315
232, 234–36, 240, 247–48, 257, 261–65, financial liberalisation 111, 277, 280
267, 270–71, 275, 278–79, 281–82, 285, Fiori, José Luis 6, 122, 242, 244
292, 311–12, 315 fixed capital 82, 88, 93, 192–93, 224
political economy of 3, 257, 259, 261, Fordism 22, 56, 105–6, 112
263, 265–67, 269, 271, 273, 275, 277 foreign capital 38, 67, 109, 140, 172, 175, 200,
dependency theory 1, 8, 14, 16, 24, 184, 195, 203–5, 207, 209–10, 212, 217, 225, 227–28,
197, 206, 211, 220–21, 228, 240–42, 248, 230, 232–33, 238, 244, 247, 259, 277, 285,
252, 255, 262, 264, 315 287, 289, 293–98, 315, 317
dependent capitalism 141, 217–19, 221, France 12, 49, 52, 55–58, 62–63, 100, 103, 130,
224–26, 230, 232–33, 237–38, 240–41, 140, 184, 253, 264, 299
256–59, 262–64, 266–67, 272, 276, Franco, Gustavo 245–47
280–81, 304–6 Frank, Andre Gunder xvi, 34, 48, 53, 60, 82,
dollar, overvalued 162, 165 200–201, 217, 219–21, 224, 263, 271
Dosi, Giovanni 80 Freeman, Christopher 37, 54–55, 78, 80–81
Dreifuss, René 5, 102 Fukuyama, Francis 55
Dutch hegemony 40, 49, 51 Furtado, Celso 7, 51, 200, 202, 204
Latin America 1, 3, 67, 127–28, 140, 168, 171, modernisation theories 196–97, 205–7, 230
197, 199, 202, 204–7, 210–12, 214–18, monopolies 20, 31, 35–36, 43–45, 48, 50,
220–21, 224, 227, 231, 233, 236–38, 240, 113–14, 122, 124–25, 127–28, 142, 221–22,
242, 248–50, 253–55, 257, 261–62, 264, 224, 261, 274
275–76, 279–307, 309–12, 315–16 monopolising 107
laws of capitalist accumulation xvii, 15–20, Morales, Evo 128, 286
35–36, 79, 81–84, 87–96, 103, 125, 144, movements, fascist 147, 227
154, 190–92, 209, 266–278 Mowery, David 56
Leff, Enrique 150, 304 Mujica, José 128, 286
Lenin, Vladimir 14, 214, 216, 243 multipolarity 169, 255, 310
liberalism xii–Xiv, Xvi, Xviii, 10, 11, 17, 39–42, Mussolini, Benito 16
45, 49–52, 56, 59, 62, 67–70, 111, 120, 125,
126, 130, 131, 197 national-developmentalism 197, 199, 205,
List, Friedrich 11 211, 315
long waves 54, 71, 79–82 Negri, Toni 5
Lugo, Fernando 128, 286 neoliberalism 1, 3, 6, 9, 84–86, 102, 107, 111,
Lula da Silva, Luiz Ignacio 127, 286 123–29, 131–33, 138, 141, 143, 146, 174–75,
Lundvall, Bengt-Åke 37 177–78, 236–40, 245, 247, 252–53, 258,
Luxemburg, Rosa 14 276, 278–81, 283, 286, 292, 297, 302, 312,
314–15
Macri, Mauricio xiv, xx neoliberal model 3, 177, 236, 244, 255,
Maddison, Angus 39, 51, 53–55, 57, 63–64, 257–58, 275, 277, 279, 296–97, 299,
67, 110, 124, 139, 160–61, 169–70, 185, 199, 301–2, 312, 315–16
210, 237, 250, 254, 294, 297 Novais, Fernando 36
Maduro, Nicolas xx, 127 Nye, Joseph 5, 146, 184
Mandel, Ernest 55, 73, 78–80, 83–84
Mansfield, Edwin 116 Obama, Barack xiii, 128, 130–31, 146, 151, 163,
Mantega, Guido 263–64, 278 175, 178–82, 187–88
Mariátegui, José Carlos 220–21 Obrador, Manuel Lopez 280, 286
Marín, Barreda 184 oecd 63, 102–4, 111–16, 124, 129–30, 148,
Marini, Ruy Mauro 91, 118, 122, 170, 217, 168–69
221–24, 226, 235–36, 257–67, 269–71, Ohmae, Kenichi 5
276 organic core 116, 137, 238–40, 249–50, 275,
Martins, Carlos Eduardo 55, 83, 118, 152, 265, 307
275–76 Ortega, Daniel 128, 286
Marx, Karl xxvi, 3, 8, 14, 15, 17, 18, 20–24, 26, Osório, Jaime 266–267
36, 56, 87–96, 99, 101, 104, 115, 118, 121, overproduction 89, 113–14, 155
124, 125, 154, 184, 189, 190, 193, 214, 242,
257, 264–268, 270–274 Palma, Gabriel 264, 271, 278
Marxism 11–14, 17, 24, 66, 312 Paraguay xiv, xx, 171, 254, 281, 286
Marxist theory of dependency 232, 257, 267, Parry, John H. 48
270 Perez, Carlota 54–55, 78, 80–81
Mello, João Manuel Cardoso 189, 242–43 Piketti, Thomas 274
mercantilism 49–51 Pinochet, Augusto xviii, 132
Mészáros, István 95, 150 Plekhanov, Georgi Valentinovich 14
Mexico 61, 100, 140, 185, 235, 249, 254–55, Polanco, Hector-Diaz 264
269, 275, 279–80, 286–88, 291–92, Polanyi, Karl 147
294–96, 298–99, 302, 309 Popper, Karl 125
Mises, Ludwig Von xviii, 125–26 Prebisch, Raul 200, 202, 204
surplus value 20, 36, 42, 88, 91, 93, 95, 100, use values 37–39, 44–45, 54, 90, 93, 95, 150,
103, 113, 117–18, 124–25, 141–42, 145, 186, 192, 226, 247, 268
189–90, 193, 209, 221–24, 258–59, 268, US hegemony 2–3, 38, 40, 42, 59, 61, 63–67,
273–74, 276, 313 109, 111, 113, 120, 128–29, 136, 138, 151–55,
absolute xxi, 89, 270 157, 159, 161, 163, 165, 167, 169, 171, 173,
appropriation of 42, 147, 189, 219, 224, 175–77, 181, 183–85, 187–89, 193–95,
273 237–38
extraordinary xvii, 87, 90, 99, 104, 113, US troops 109, 182, 187–88
121–22, 147, 155, 164–65, 222–24, 258–61, ussr 62, 66, 168, 196
266, 271, 274, 276
rate of 23, 87–90, 104, 118, 190, 259, 263, value 22, 35–37, 72–73, 75, 87–90, 92–94,
265, 268, 273–74 98–100, 111, 113, 117–19, 121–22, 132–33,
relative xxi, 89, 93, 105, 218, 224, 232, 258, 139–40, 142, 156, 164–65, 184, 192–93,
260, 262–63, 265–66, 270–76 221–23, 225, 235–36, 238, 254–55, 258,
surplus value production, crisis of 23, 103–4, 260, 263, 265, 267–69, 271–74, 288
112, 121 law of 8, 23–24, 42, 78, 100, 124–25, 133,
surplus value transfers 37, 269, 273 137–38, 142
systemic cycles 7, 18, 24, 35, 38, 40, 43–46, Venezuela 171, 185, 187, 247, 280–81, 286, 288,
50, 56, 59, 62, 64, 68–71, 81–82, 85–87, 303
102–3, 112, 123, 153–54, 158, 183–84, 190, Vietnam 66, 68, 84, 151, 172–73, 175–76, 186
249, 253, 313
Wallerstein, Immanuel 7, 10–11, 13, 19–20, 22,
Taiwan 38, 66–67, 100, 139–40, 169, 235 24, 26–34, 37–42, 44–47, 51, 60–61,
Tavares, Maria da Conceição 155, 190–91, 68–69, 95, 111, 119, 141–43, 145–46, 149,
193, 205, 242–44 153, 179, 249, 251–52
techno-scientific revolution x, xii, xvi, xvii, Weber, Max 34, 45, 211, 214–15, 261–62
xxi, xxvi, 8, 14, 22, 25, 63, 90, 96–100, Weffort Francisco 241
105, 113–119, 134, 140, 141, 154, 184, 235, welfare state 42, 59, 66, 69, 131, 133, 160
238, 247, 249, 276, 289–291, 307, 312, 313 Westphalia 29–30, 33, 48, 69, 174
technology, foreign 222–23, 259 working day 89, 95–96, 104–5, 113, 258–59,
Thatcher, Margaret 127 263, 271, 274
Third Way 120, 128–30, 177, 279 world system 2, 8–9, 13, 30, 34–36, 38–39,
Tocqueville, Alexis de 251 42, 44–45, 64, 68, 70, 97, 120, 123, 131–34,
Toyotism 91, 105–8, 110–13, 121 136–38, 147–49, 151, 153–55, 169–71,
Trotsky, Leon 73–74 174–75, 178–80, 197, 220, 248–49, 253,
Trump, Donald xiii–xvi, 131, 163, 181, 306, 311–12, 314, 316
183, 188 world system theories 23, 70, 78, 82, 158, 183,
197, 206, 239, 247–48, 312, 315
unasur xix–xx, 280
underdevelopment 171, 204, 208–9, 211–14, Yamada, Toshio 107–8
219, 228, 230, 240, 243–44, 264, 278
Zelaya, Manuel 128, 288