Sociology 2: Class 14: World-System Theory Copyright © 2008 by Evan Schofer Do not copy or distribute without permission.

Sociology 2:Class 14: World-System

Theory

Copyright © 2008 by Evan Schofer

Do not copy or distribute without permission

Announcements

• Office Hours limited:• Today• May 29• Contact me about appointments…

• Topic: Theories of globalization• Plus, continuing discussion of governance…

Review: What is a Theory?

• Definition #1: A specific claim or argument that leads to empirical predictions

• Example: Economic law of “supply and demand”

• Definition #2: General imageries about how the world works

• Example: Marxist theory: not just a single prediction• This broader kind of “theory” is useful because it

generates a rich description of the world– Offers directives to guide research– And produces many specific claims to be tested– But, it isn’t easy to prove “right” or “wrong”.

Theories of Globalization

• Some major views on the international system:

• 1. Modernization theory

• 2. World Systems Theory• And “dependency theory”, a common variant

• 3. “World Polity Theory”• Also called “neo-institutional theory”

• 4. Realism

• 5. Various responses to Realism• “Complex Interdependence”, others…

World-System Theory (WST)

• Background: Modernization theory• An evolutionary theory predicting how societies develop• See Chirot and Hall article on WST…

– Argument: All societies naturally pass through certain stages of development

• All societies start out as “traditional” hunter-gatherers• Then, they develop agriculture; towns & cities grow• Eventually, they become “modern” industrial societies

– Movement from one stage to the next is driven by things like population growth & new technologies

• Society becomes more complex; greater division of labor.


• Modernization theory was based on analyses of European societies

• It was assumed that non-European societies would have the same experience

– Or modernize faster with aid & technology from the West

• Problem: Non-western countries weren’t modernizing as predicted

• Example: Argentina was as rich as many European countries in 1890… but hardly improved by 1960

• Example: Many former colonies in Africa were stagnant, or becoming more impoverished over time.

World-System Theory (WST)• World-System theory tried to explain the

failure of many countries to develop• Scholars: Andre Gunder Frank; Immanuel Wallerstein

• Claim: Underdeveloped/peripheral countries are not just like Europe, but at an earlier stage of development

• They have a very different history: colonization• And, they must compete with highly developed

countries

– Europe was undeveloped and became developed• Other countries were undeveloped, and now trapped in

a state of “underdevelopment”.


• Argument: Europe was able to prosper by exploiting resources from other places

• The great success of Europe and the failures in the non-West weren’t just a coincidence…

• Europe became wealthy by maintaining economic & military dominance over other nations

• Exploited nations will never “modernize” as long as they are oppressed by Western nations

– Example: Latin America traded a lot with Europe… and remained underdeveloped

• Whereas Japan avoided contact with Europe; did better…


• World-System Theory: We need to study the entire global economy as a world system

• We can’t understand the fate of a single country, without understanding how it fits into the overall system

• Countries aren’t poor because of their own specific history or internal characteristics

• Rather, they are poor because of their position relative to others in the global capitalist system.


• Key concepts:

• Core: the rich, developed countries • Also: west; metropolitan countries; developed world

• Periphery: poor, dependent nations• Also: underdeveloped countries; satellites;

dependencies

• Semi-periphery: semi-industrialized countries

• Dependency: The vulnerable state of being exploited by core countries

• They depend on the core for trade, investment, loans, technology, etc. (related term: underdevelopment).


• Classical economic theory (Ricardo) predicts that specialization & trade is beneficial for all

• Countries that can produce high-tech goods most efficiently should concentrate on that

• Countries that can produce bananas or coffee efficiently should concentrate on that

• Specialization leads to a “win/win” situation… everyone is more efficient; countries become more wealthy

• World-System theorists criticize this view…


• Criticism #1: Specialization in low-tech production (e.g., bananas) may produce profits in the short term…

• But, there is a cost: countries fail to develop industry and sophisticated technology that could lead to greater profits in the future

– Argument: In the long run, countries would be better off developing high-tech industry, rather than just producing coffee…


• Criticism #2: trade is asymmetrical• Rich countries don’t need coffee/bananas badly

– And, they can buy them from many sources

• But, poor countries critically depend on trade to get technology, machinery to develop their economies

• Thus: Poor countries are dependent on rich ones

• They need manufactured goods… and are forced to pay high prices

• And, they must sell their raw materials and agricultural products very cheaply.


• Economists argue that foreign investment is good for peripheral countries

• World system theorists criticize this, too:

• 1. “Core” capitalist countries tend to extract profits from the periphery

• This outweighs benefits of foreign investment

• 2. Foreign investment doesn’t really help a society industrialize

– Foreigners build plantations and mines to extract resources– They build roads & ports to extract; not to benefit the country

• In sum: They don’t build useful industrial infrastructure.

World-System Theory (WST)• More key concepts:• Trade concentration: When a peripheral

country trades with just a few core countries (or only one)

• Investment concentration: When investment comes from just a few core countries (or one)

• High concentration may make peripheral countries vulnerable

• If the core country decides to halt trade or investment, economic disaster would follow

• Peripheral countries must please core trading partners• They lose political autonomy to do what is best for its

people.


• Scholars such as A. G. Frank found evidence in studies of Latin America

• Key observation: Latin American economies and trade was unusual:

• They mainly produced “cash crops” and raw materials• Trade was almost entirely with the U.S.

– High “Trade Concentration”

• Foreign investment resulted in foreign-owned plantations, not expanded industry & “development”.


• Interpretation of Latin American situation:

• Global capitalism forced countries into a state of under-development– 1. They can’t to compete with industries from

high-tech economies• They do not develop high-profit industries: cars, etc.

– 2. Instead, they trade commodities (coffee)• They must compete with other poor countries for

sales… so they don’t make much profit

– So, they remain underdeveloped…

Investment Concentration

Country Concentration (%) Partner

Honduras 97.7 U.S.

Swaziland 96.6 Britain

Niger 95.7 France

Chile 91.3 U.S.

Saudi Arabia 90.4 U.S.

Tanzania 48.1 Britain

Iraq 37.5 Britain

Brazil 35.6 U.S.Source: Kentor and Boswell 2003


• Research literature on WST… Examines:

• Do countries with more trade, investment, and concentration fare worse in terms of:

• Economic growth• Poverty• Health and environmental well being• Democracy

• Results: Mixed… More on this later.


• Issue: Why don’t all the peripheral countries band together and overthrow the core?

• Example: In 1970s, Oil-producing countries created “OPEC”, and restricted the flow of oil to the core

• Result: High gas prices; OPEC countries got rich– Though eventually the West made friends with Saudi Arabia

and others… who lowered prices.

• Why doesn’t this happen all the time?


• Wallerstein’s explanation:• for stability of the world system

• 1. Military dominance of the West• Ex: US overthrew any Latin American governments that

tried to oppose the US

• 2. Ideological commitment to the system• People believe capitalism is “fair”, just• Similar to Marx: false consciousness

• 3. The existence of the semi-periphery• Most important, according to Wallerstein• Semi-periphery is doing OK, so they support the core• Prevents everyone from ganging up on the core…


• Question: How does WST differ from other analysis of economic globalization?

• Both agree that economics = important– But, economists often view the world economy

positively (or neutrally)• Ex: Ricardo thought trade was overall beneficial• Ex: Many economists think globalization reduces

poverty compared to a world without trade• WST argues that globalization perpetuates inequality.


• In contrast, WST argues that the global economic system is inherently unfair

• Economic power of core countries and MNCs is so great that the periphery will always be exploited

• The idea that governments and international institutions can make the system “fair” is an illusion

– Governments and international institutions (e.g., the WTO) will always reflect interests of capitalists

– Therefore, WST scholars are pessimistic about the role of global governance in solving social problems…

– Consequently, the system must be substantially reorganized… or overthrown.


• What should peripheral nations do?– According to WST scholars?

• 1. Peripheral countries must avoid exploitive economic relations with the core

• Beware of trade and foreign investment, which can lead to exploitation and foreign control

• 2. Try to nurture domestic industries• Don’t sell coffee and rely on core for high-tech• Try to develop advanced industries locally• Concept: “Import substitution” – developing local

industries to avoid importing products.


• What should peripheral nations do?– According to WST scholars?

• 3. Band together with other poor nations to fight against the power of the Core…

• Trade with each other– Perhaps create cartels to bargain with the Core

• And some argue: start a global anti-capitalist revolution.


• How does WST view international organizations?

• Answer: They do not affect the fundamental economic positions of core and periphery

• Claim: Most IGOs and INGOs are created by core countries, and will never fundamentally undermine the dominance of the core

– IGOs and INGOs tend to perpetuate core dominance– Example: WTO has not given big concessions to periphery

• The only thing that could help would be organizations representing the peripheral countries against the core!


• Question: Is world-system theory “right”?• WST makes many claims. There is no simple answer

• 1. Analysis of Latin America is generally thought to be compelling

• 2. Rapid industrialization of South Korea, Taiwan, etc = major exceptions to WST

• 3. Evidence on foreign/trade investment = mixed, but often contradict WST

• Some studies find effects consistent with WST, but many do not.


• Criticisms of WST:

• 1. Research findings are mixed at best• The specific WST predictions about sources of global

inequality/poverty have often been wrong• It is true that there is horrible poverty in the world…

– But: Are people worse off than if there was no global economy? That is less clear.


• 2. WST doesn’t make clear predictions• After the fact, almost any action can be interpreted as

“serving the interests of global capitalists”

– Example: The Montreal Protocol on CFC emissions

• First, the core didn’t sign it… WST scholars said: “See, the core is using its power to avoid the treaty!”

• Later, when the core signed it, WST scholars said: “See, the core has ensnared the peripheral countries in a treaty that will keep them in poverty”

– A theory that can fit any evidence is not so useful.


• 3. Reverse causality– WST argues: Countries that are dependent on

the core of the world capitalist system will be trapped into a state of underdevelopment

– BUT, maybe it works the other way around• Poverty produced “dependent” relations in the first

place• Poor countries can’t produce high-tech goods, so they

trade commodities (e.g., bananas)• But, this doesn’t necessarily mean that trading

bananas made those countries poorer or “trapped” them into poverty.


• My advice: WST is a useful theory that has some predictive power

• BUT: don’t become a conspiracy theorist– Don’t assume that the entire global economy is

conspiring to “keep the little guy down”– The real answer, as always, is that the world is

complex…• Some aspects of the global economy have been

beneficial, others not• Don’t judge without evidence.

Sociology 2: Class 14: World-System Theory Copyright © 2008 by Evan Schofer Do not copy or distribute without permission.

Documents

world polity theory

world systems theory

worldsystem theory copyright

dependency theory

evolutionary theory

marxist theory

broader kind of theory

neoinstitutional theory