Sociology 2:

Class 14: World-System

Theory
Copyright 2008 by Evan Schofer
Do not copy or distribute without
permission

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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 isnt 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.

World-System Theory (WST)

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 werent

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.

World-System Theory (WST)

Argument: Europe was able to prosper by
exploiting resources from other places
The great success of Europe and the failures in the
non-West werent 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 (WST)

World-System Theory: We need to study the
entire global economy as a world system
We cant understand the fate of a single country,
without understanding how it fits into the overall
system
Countries arent 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.

World-System Theory (WST)

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).

World-System Theory (WST)

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

World-System Theory (WST)

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

World-System Theory (WST)

Criticism #2: trade is asymmetrical
Rich countries dont 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.

World-System Theory (WST)

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 doesnt 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 dont 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.

World-System Theory (WST)

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.

World-System Theory (WST)

Interpretation of Latin American situation:
Global capitalism forced countries into a
state of under-development
1. They cant 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 dont 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

World-System Theory (WST)

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.

World-System Theory (WST)

Issue: Why dont 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 doesnt this happen all the time?

World-System Theory (WST)

Wallersteins 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

World-System Theory (WST)

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.

World-System Theory (WST)

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.

World-System Theory (WST)

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

Dont 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.

World-System Theory (WST)

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.

World-System Theory (WST)

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!

World-System Theory (WST)

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.

World-System Theory (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.

World-System Theory (WST)

2. WST doesnt 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 didnt 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.

World-System Theory (WST)

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 cant produce high-tech goods, so they
trade commodities (e.g., bananas)
But, this doesnt necessarily mean that trading
bananas made those countries poorer or trapped
them into poverty.

World-System Theory (WST)

My advice: WST is a useful theory that has
some predictive power
BUT: dont become a conspiracy theorist
Dont 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
Dont judge without evidence.