World System Theory

World Systems theory;
Wallerstein
• Dependency theory and 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: colonisation
• And, they must compete with highly developed
countries
– Europe was undeveloped and became
developed
• 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 “modernise” 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 (WST)
• WST: 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 (some of these are similar
to dependency theory)
• Core: the rich, developed countries
• Periphery: poor, dependent nations
• Semi-periphery: semi-industrialised
countries
• See Figure 2.3 of photocopy from Moore
textbook
• Classical economic theory predicts that
specialisation & 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
• Specialisation leads to a “win/win” situation
• everyone is more efficient; countries become
more wealthy
• WST criticize this view…
Criticism #1: Specialisation 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
• 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
• Dependency theorists 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”.
Frank’s interpretation:
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 90.4 U.S.
Arabia
Tanzania 48.1 Britain
Iraq 37.5 Britain
Brazil 35.6
Source: Kentor and Boswell U.S.
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 globalisation?
• Both agree that economics is important
– But, economists often view the world
economy positively (or neutrally)
• Eg: Many economists think trade was overall
beneficial and that globalisation reduces poverty
compared to a world without trade
• WST argues that globalisation perpetuates
inequality.
In contrast, WST argues that the global
economic system is inherently unfair
Economic power of core countries and multi-national
corporations 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 reorganised… 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?
1. Peripheral countries must avoid

exploitative 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
organisations?
• Answer: They do not affect the
fundamental economic positions of core
and periphery
• Claim: Most International Governmental
Organisations (IGOs) and International Non-
Governmental Organizations (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
• 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 industrialisation of South Korea,
Taiwan, etc = major exceptions to WST
• 3. Evidence on foreign/trade investment
is mixed, but often contradict WST
• Some studies find effects consistent with WST,
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.
• WST is a useful theory that has some
predictive power
• BUT:
– 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.

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World Systems theory;

• 1. Peripheral countries must avoid

1. Peripheral countries must avoid

• 3. Band together with other poor nations

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