A Formulation of the Problem

June 8, 2010

As part of my preliminary research for the Brief History of Capitalism project, I’ve been reading (among other things) Immanuel Wallerstein’s The Modern World-System. To cut a long story short, I’m extremely impressed. There are some things in the book that strike me as problematic, so I’m not signing on the dotted line to endorse every one of Wallerstein’s positions here – but I would unhesitatingly recommend his work as an unusually acute analysis of capitalism as a global dynamic. In fact, I’d go so far as to say that Wallerstein’s stuff is the best published analysis of capitalism-as-system that I’ve read outside of Marx. (And I’m also a bit puzzled as to why Wallerstein isn’t more widely used or praised within the recent Marxist tradition. He has some noteworthy disagreements with prominent Marxist theorists (e.g. the Brenner school, w/r/t the transition), and he’s obviously no activist; but still, he strikes me as both quite orthodox and very good, so I’m a bit puzzled as to why he’s not more popular in Marxist circles.) I’m planning to read more of the world-systems folks (Arrighi next), and will report back as and when. [NB: Preliminary assessment of Arrighi – nowhere near as good.]

Anyway, this post isn’t really about Wallerstein, but is about a line of thought that Wallerstein’s stuff helped me to pin down more cleanly. Apologies if the following is a bit simplistic & schematic – as I say, this post is really just the jotting down of a thought, and more detailed analysis will hopefully one day follow. But: one of the simple but extremely useful schematisations in Wallerstein’s book is the distinction between an empire and a world-system. Wallerstein points out that there have been plenty of extremely large-scale and tightly interconnected economic structures in the world before the European economy turned capitalist and starting swallowing up everything else in the 16th century (by his periodisation). Wallerstein is of the opinion, however, that large-scale and tightly interconnected economic systems prior to capitalism tended either
– to be unified as a single political entity;
– to become unified as a single political entity pretty sharpish; or
– to fall apart pretty sharpish, because they weren’t unified as a single political entity.
What’s historically unique about the capitalist world-system, in Wallerstein’s opinion, is that it functions as a single tightly interconnected large-scale economic system while being composed of a great many different (and generally antagonistic) political entities (= nation states).

This is central to capitalism’s ‘success’ as a social form, Wallerstein argues. I’m not sure quite how much of the following is Wallerstein and quite how much is my own opinion / reconstruction. But I at least would make the argument that one of the most significant events (or series of events) in the history of the development of capitalism is the creation of national debts (which was a long and pretty troubled process), because this subordinates (at least in one extremely significant way) the political decision-making of sovereign political entities to a global economic dynamic that cannot be controlled by any given political entity (or even by a number of such entities acting in concert). [On all this see the quote from Marx below the fold.] (And of course we can see this playing out now, w/r/t the ongoing economic crisis.) The ‘political’ is subordinated to the ‘economic’ here in a way that has had massive ramifications. (Not that national debts are the only way this happens; more straightforward global competition for economic resources between state actors is another notable way in which capitalist dynamics influence political decision-making, for instance.) (Of course, what the ‘dynamic’ of capitalism consists in matters a lot here – none of this is meant to be a real analysis, just gestures towards one; I aim to elaborate this stuff more adequately in the series of historical posts I’m planning (though hopefully it’s mostly obvious and intuitive).)

Anyway, one of Wallerstein’s points, I take it, is that given the way the capitalist system as a whole functions, if any given political entity aims to set itself up in opposition to the imperatives imposed by the system as a whole, sooner or later it’s probably going to get bulldozed. Mostly it doesn’t come to that, of course, because the powerful political actors in any given political entity see which way the wind’s blowing, make policy accordingly, and suppress dissent from those within the political entity who’ll be hurt by the consequences. There’s a double class dynamic, in Wallerstein’s schema – a global opposition between core and periphery (with semi-periphery in the middle); and an opposition within political entities between those who call the shots and those who suffer the consequences. It’s important w/r/t the way the system works, however, that even the ‘core’ political entities are subordinated to the general dynamic – made ‘core’ by their participation in this dynamic. A failure of the core to play its coercive and exploitative role adequately is likely to result, under capitalism, not in the collapse of the system (as it would if we were dealing with a truly centralised empire), but in a (slow but powerful) reconfiguration of the system, and a shift in the location of the system’s ‘core’. (Though of course like all historical processes this is anything but inevitable.)

So far so blah. The noteworthy point for me, in all this, right now, is what it means w/r/t the possibility of non-capitalist political alternatives: how to get them, and what they might be. W/r/t the former, we’re dealing with the old problem of the apparent long-term untenability of ‘socialism in one country’; these are the features of the capitalist system that lead so many communists to insist that a world revolution is necessary for the project to work. I’m going to bracket questions of what forms of political action are best suited to emancipatory transformation, however, to ask the related question: what’s the goal? What are we actually envisaging that could be a global economic system of comparable complexity and productive potential to capitalism (which isn’t what every critic of capitalism wants, of course – but it’s necessary if a lot of people aren’t going to starve), without capitalism’s coercive dynamics and constant recreation of poverty?

To begin to answer that, I think, you’d need a better analysis of how capitalism actually functions than anything I’ve offered on this blog so far (and this is hopefully what I’m working towards in the historical project). I think Wallerstein is right, however, to suggest how difficult it is to envisage anything of this sort being implemented simply via sovereign political entities making policy decisions applicable only to their own spheres of ‘legitimate’ political action. The same applies, but even more so, to more local political change. (Which obviously isn’t to denigrate either national government policy or, especially, local political battles; I’m just saying that you also obviously need a global transformation if you’re going to get a non-capitalist system out the other side.) One of Wallerstein’s central points is: if you’re part of the global capitalist dynamic, you’re part of capitalism – the dynamic itself needs to be transformed, and that’s going to mean a transformation of the economic institutions that bind together political entities at the level of the world-economy (along with a corresponding transformation of the nature of those entities themselves, perhaps).

Wallerstein’s answer to this problem is straightforward (and may be one of the reasons he’s not better liked): he wants a single world government. I’ve got enough anarchism in my Marxism not to find that intuitively very appealing. But Wallerstein’s thinking is, I think, pretty clear: under capitalism, political decision-making is subordinated to a global economic dynamic; we need to reverse that, and make our economic activity subordinate to political decision-making (which could be driven by social need rather than the drive to accumulation); ergo, we shift from capitalist-world-economy to non-capitalist world-empire. Bing bang bosh.

This serves, I think, to frame the question of political alternatives quite clearly. Assuming we don’t want a single world government, what global economic institutions can keep the world economy functioning while not reproducing capitalist dynamics of exploitation and poverty-production? (Alternatively, if we choose to go with Wallerstein on the world government thing – how would such a world government be achieved and democratically structured such that its policies are egalitarian and not tyrannical?) This seems to me to be a question the answer to which would require a lot of detailed analysis. I’m not planning to even try to answer it any time soon. But I think this is a formulation of the problem that I’ll probably return to.

NB: Before I got round to posting this, I was sent back to Volume I of Capital by a citation in Arrighi’s The Long Twentieth Century. It is a sufficiently remarkable and under-discussed passage that I’m going to cite it at length. To understand the role this passage is playing in the architectonic of Capital‘s argument you need to understand that the book is structured ‘backwards’ – its organising principle is a series of embeddings, in which economic structures are systematically placed back within their historical conditions of production – a kind of Russian doll structure, if you like. This passage – from the chapter entitled The Genesis of the Industrial Capitalist, comes after the discussion of ‘primitive accumulation’. My inclination is to see this section as causing real problems for a lot of self-identified Marxist historical discussions of the origins of capitalism. But anyway, here’s the quote:

The system of public credit, i.e. of national debts, the origins of which are to be found in Genoa and Venice as early as the Middle Ages, took possession of Europe as a whole during the period of manufacture. The colonial system, with its maritime trade and its commercial wars, served as a forcing-house for the credit system. Thus it first took root in Holland. The national debt, i.e. the alienation [Veräusserung] of the state – whether that state is despotic, constitutional or republican – marked the capitalist era with its stamp. The only part of the so-called national wealth that actually enters into the collective possession of a modern nation is – the national debt.

[FOOTNOTE: William Cobbett remarks that in England all public institutions are designated as ‘royal’; in compensation, however, there is the ‘national’ debt.]

Hence, quite consistently with this, the modern doctrine that a nation becomes the richer the more deeply it is in debt. Public credit becomes the credo of capital. And with the rise of national debt-making, lack of faith in the national debt takes the place of the sin against the Holy Ghost, for which there is no forgiveness.

The public debt becomes one of the most powerful levers of primitive accumulation. As with the stroke of an enchanter’s wand, it endows unproductive money with the power of creation and thus turns it into capital, without forcing it to expose itself to the troubles and risks inseparable from its employment in industry or even in usury. The state’s creditors actually give nothing away, for the sum lent is transformed into public bonds, easily negotiable, which go on functioning in their hands just as so much hard cash would. But, furthermore, and quite apart from the class of idle rentiers thus created, the improvised wealth of the financiers who play the role of middlemen between the government and the nation, and the tax-farmers, merchants and private manufacturers, for whom a good part of every national loan performs the service of a capital fallen from heaven, apart from all these people, the national debt has given rise to joint-stock companies, to dealings in negotiable effects of all kinds, and to speculation: in a word, it has given rise to stock-exchange gambling and the modern bankocracy.

Along with the national debt there arose an international credit system, which often conceals one of the sources of primitive accumulation in this or that people. Thus the villanies of the Venetian system of robbery formed one of the secret foundations of Holland’s wealth in capital, for Venice in her years of decadence lent large sums of money to Holland. There is a similar relationship between Holland and England. By the beginning of the eighteenth century, Holland’s manufactures had been far outstripped. It had ceased to be the nation preponderant in commerce and industry. One of its main lines of business, therefore, from 1701 to 1776, was the lending out of enormous amounts of capital, especially to its great rival England. The same thing is going on today between England and the United States. A great deal of capital, which appears today in the United States without any birth-certificate, was yesterday, in England, the capitalized blood of children.

As the national debt is backed by the revenues of the state, which must cover the annual interest payments etc., the modern system of taxation was the necessary complement of the system of national loans. The loans enable the government to meet extraordinary expenses without the taxpayers feeling it immediately, but they still make increased taxes necessary as a consequence. On the other hand, the raising of taxation caused by the accumulation of debts contracted one after another compels the government always to have recourse to new loans for new extraordinary expenses. The modern fiscal system, whose pivot is formed by taxes on the most necessary means of subsistence (and therefore by increases in their price), thus contains within itself the germ of automatic progression. [This Hegelianism is Marx’s sardonic way of naming the drive to accumulation.]

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5 Responses to “A Formulation of the Problem”

  1. Mike Beggs Says:

    Hi Duncan,
    I’m finding all of this so interesting, and have been wanting to find time to comment for a while. (Ten weeks to thesis submission!)

    I think the national debt thing is really important, another way in which pre-capitalist M-M’ opened the channels towards the capitalist circuit. And you’re right, it hasn’t had so much attention.

    A history of the Bank of England would surely be a useful thread to trace here re: the origins and development of capitalism – from private but chartered organiser of the national debt to bank of banks, to lender-of-last resort, to instrument of policy, to co-ordinator of policy…

  2. duncan Says:

    Thanks Mike – I hope the final straight of the PhD marathon is going well…

    Yes – I’m really interested in this stuff (still very ignorant though – hopefully I’ll be able to address some of that before too long), and I agree about the importance of the material. I think it’s done a lot of damage to the tradition of Marxian economics that Marx chose to organise Capital in the way he did – putting so much emphasis on the capital-labour relation in the site of production in Volume I, and postponing an in-depth analysis of debt relations to Volume III (though I think it’s clear even from Vol. I that he regards the issue as a really important one). I think there were sound political reasons for making the choice he did – and obviously the role of labour is central economically speaking – but I think it’s skewed a lot of analysis of capitalist dynamics within the tradition in an unhelpful way (especially given that a lot of the Volume III material was never worked up for publication by Marx.)

    I think you’re right too about the history of the Bank of England as a good way in to these issues. My plan at the moment is to fairly systematically (if superficially) read my way through economic history starting about 900 – which is obviously quite a bit earlier than most people who are interested in these things start, but I want to have a sense of the development of the economic institutions out of which capitalism emerges in the period of the transition. Marx is right, I think, to mention the importance of Genoa and Venice in the middle ages, as incubators of merchant-banking practices that would later enable the development of national debts – and there’s other stuff from the period that’s relevant too I think (e.g. my understanding is that there are forms of organisation of large-scale (cloth) production in Flanders in the 13th & 14th centuries that are interestingly similar to later properly capitalist factory production – though I’ve hardly read anything about this yet). In other words, I think it’ll be some time before my reading takes me to the Bank of England, but I’m really eager to get there. (The section of the Marx passage above that I excised for length reasons discusses the Bank of England.)

    Speaking of which – I’m sure you’ve seen in the news, but the role of the Bank has been transformed again by the new Tory/Lib-Dem coalition. The still independent bank will now control most of the regulation of the financial sector. The shamelessness of these people is quite something.

  3. Mike Beggs Says:

    Hey Duncan,
    Did you see that Cambridge University Press have just published a brand new two-volume ‘Economic History of Modern Europe’? Only goes back to 1700 but still should be interesting.

  4. Mike Beggs Says:

    Actually having a quick scan it looks pretty thin, certainly no replacement for the earlier books. Short, no chapters on money/finance, and worst of all the social/political history looks like it’s been replaced by a flat neoclassical institutionalism.

  5. duncan Says:

    Oh that’s a shame. But thanks for pointing to this – I hadn’t seen it – it should at least be useful as a place to find an up-to-date bibliography? One of the problems I’m facing is figuring out what books to read, since (given the very small amount of material I can realistically expect to read (given I mean the completely non-rigorous and highly time-constrained nature of the project)) it doesn’t work to just grab a heap of texts and submerge oneself in a period. I need to be absurdly selective – and I need to do my best to make sure I’m making a relatively sensible selection. For the medieval period I’ve found myself often going back to what seem to be canonical but dated older texts – Pirenne; Bloch; Duby – because a) even when these figures are treated with great scepticism, their work still often seems to be a central reference point, continuing to set many of the terms of discussion among contemporary scholars (as far as I can tell), and b) no one seems to be writing comparable works to replace these texts. I think this is probably because large-scale history has gone so decisively out of fashion, but this is a problem for the dilettante reader like myself, who simply doesn’t have the time to piece together a picture of what’s happening across Europe in the 13th century (or whatever) by reading dozens of micrologically-focussed monographs. And of course things will only get more out of hand as I move forward to the early modern period, because the amount of historical material expands like crazy. Anyway, what I’m saying is that an up-to-date bibliography will be really useful, since so many of the texts I’ve been looking at are a bit old. So thank you! And I hope the PhD’s treating you well…


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