II.3 Systemic cycles of accumulation of capital



II.3 Systemic cycles of accumulation of capital

Systemic cycles of accumulation … are … inherently capitalist phenomena. They point to a fundamental continuity in world-scale processes of capital accumulation in modern times. But they also constitute fundamental breaks in the strategies and structures that have shaped these processes over the centuries. … [They] highlight the alternation of phases of continuous change with phases of discontinuous change. (Giovanni Arrighi 1994: 8-9)

II.3.1 The MCM’ economic cycle

Assume the existence, in a given region, of surplus capital. Within Arrighi’s framework (Arrighi 1994), such a starting point of a systemic cycle of accumulation of capital (SCA) can be located in the northern Italy city-states of the second half of the fourteenth century. This capital is then available to be invested in a material expansion: MC in Marx’s general formula (Marx 1995 (1867): 93), where M is money capital (liquidity), and C is commodity capital (industry and commerce). The group of capitalists, better positioned than the others for some reason, that is able to lead this expansion and govern the rules of its developmental path, attains a predominant position in the world system (hegemony[7]).

However, such expansions have historically had built‑in limits: the same features that make a group of capitalists prevail over others also create the conditions for their eventual decline and supersession. Moreover, ‘endless’ expansion of production and trade leads to increased demand for the required inputs, increasing their price, and, since it draws on a limited pool of available labour, increases its cost as well, with an ensuing decrease of the rate of return of invested capital. At a given point, the profit that can be obtained from investing in commodities is surpassed by the return obtained from investing in the financial market[8]. This bifurcation point marks the signal crisis of the current system of capital accumulation, and leads to the transfer of capital from commodities to liquidity according to CM’, where M’ means expanded liquidity:

The switch is the expression of a “crisis” in the sense that it marks a “turning point,” … when the leading agency of systemic processes of capital accumulation reveals, through the switch, a negative judgement on the possibility of continuing to profit from the reinvestment of surplus capital in the material expansion of the world‑economy, as well as a positive judgement on the possibility of prolonging in time and space its leadership/dominance through a greater specialization in high finance. This crisis is a “signal” of a deeper underlying systemic crisis, which the switch to high finance none the less forestalls for the time being. (Giovanni Arrighi 1994: 215)

A new model or regime of accumulation starts to emerge, growing in the interstices of the old one, thriving on its inefficiencies and reinforcing them, competing with the old regime and exacerbating its problems (Arrighi 1994: 329). This is a period of systemic chaos: two discontinuous regimes of capital accumulation coexist, and conflict escalates until the new regime supersedes the old in a terminal crisis.

The new leading agencies of capital accumulation that emerge at the end of one MCM’ cycle start a trade expansion that results in demand for different inputs and consumption of new outputs. Further, the increase of scale of the new regime both opens up new markets and increases the pool of available labour, and hence the rate of return of invested capital is restored to high levels.

While the MC phase is one of continuous change, with growth proceeding along a single developmental path for all capitalist agencies, that follow the hegemon’s lead, the CM’ phase is one of discontinuous change (Arrighi 1994: 9).

II.3.2 Systemic cycles of accumulation as ‘long centuries’

Each of these systemic cycles of accumulation of capital is encompassed by what Arrighi, following Braudel, calls a ‘long century’, during which the rise, full expansion, and eventual supersession of the leading agency of accumulation happens (Arrighi 1994: 214-216). All the long centuries so far have had the same basic underlying structure. Their dating and main instants are made explicit in Table II and in Figure 3a.

Figure 3. Long centuries and systemic cycles of accumulation (adapted from Arrighi 1994: 364, 367).

Each long century starts with a period of financial expansion (Sn-1 to Tn-1) during which the new regime of accumulation coexists with and develops within the previous one, being part and parcel of its contradictions. Sn-1 is the signal crisis of the old regime, whose ensuing financial expansion often leads to a ‘golden age’ or ‘revival’ (Rn-1), which is however a ‘sign of autumn’ and is followed by an event or series of events (often war) that mark the final supersession of the old regime of accumulation of capital – its terminal crisis (Tn-1).

The new hegemon then leads the second phase of its long century, of material expansion (Tn-1 to Sn), which it promotes, monitors, and from which it is the main beneficiary. It does so through a set of related elements: It controls a strategic commodity that becomes the bedrock of its economic power, it innovates in some crucial way the economic process, it enlarges the geographic foundations of the capitalist world-system, and, not least, it provides a political stabilising framework for the whole system[9], often by developing further the state system, and by exercising intellectual and moral leadership, normally embedded in some ‘universal’ idea. Indeed, “capitalism only triumphs when it becomes identified with the state, when it is the state” (Braudel 1985: 68).

The full development of the new regime of accumulation, however, carries with it its own internal contradictions that in the fullness of time lead to its demise and supersession. The third and final phase of a long century is a second period of financial expansion (Sn to Rn to Tn), during which these contradictions are deepened by increased economic and inter-statal competition and by the emergence of alternative regimes, one of which will eventually become hegemonic. The increased competition normally fuels the financial expansion as demand for capital increases in order to finance armies and war[10].

Successive long centuries are then intimately related to each other. They partially overlap in time, as the final CM’ expansion of one is at the beginning of the next. Further, in these periods of systemic chaos when the two[11] regimes of accumulation coexist, the finance capital at the disposal of the previous group of capitalists, who cannot invest it profitably in their own regime, is invested in large amounts in the material structures being created by the emerging regime. This results in a transfer of capital from one (decaying) region to the next (rising) one, leading to ‘ceaseless accumulation of capital’, which according to Wallerstein is the main distinction between the capitalist world-system and the previous world-systems (Wallerstein 1993: 293).

Another connection is that, after long centuries based on a massive expansion of the system, come long centuries based on the exploitation to the full of the possibilities opened during the previous one[12]. Each two SCAs can hence be seen as being related and forming a single structure (see section II.3.8). This widening/deepening cycle is reflected in the political system by an alternation between empire-based hegemonies, well‑suited to lead an expansion towards control of other territories, and more pluralist ones[13], better‑suited for trade, particularly if they adopt a monopolistic form of capitalism, hence gaining control of accumulation primarily through trade without the need for direct control of other areas.

We will now briefly describe the main characteristics of the systemic cycles of accumulation so far, which are also summarised in Table II.

II.3.3 The first (Genoese/Iberian) SCA

The period 1250/1300-1450 AD has been described in section II.2.3 as a B phase of economic downturn and increased competition/rivalry (see Table I). Some European cities began to grow (which in a context of global Asian hegemony corresponded to increased rivalry), including the northern Italian city-states (Bosworth 1993; 219), that increased their share of world trade and reached their apogee around 1340. Following this period of (regional) trade expansion, a (regional) financial expansion took off, with, for instance, no renovation of harbour facilities until the fifteenth century indicating the shift from trade to finance[14] (Abu-Lughod 1989: 127-127).

The increased inter-state rivalry led in 1381 to the military and commercial defeat of Genoa by Venice. Deprived of her traditional trading routes by the regional hegemon, Genoa was left with an ‘embarrassment of riches’, i.e. surplus capital that could find no profitable investment within the existing (Mediterranean) world-system[15]. This marks the beginning of the first (Genoese) systemic cycle of accumulation of capital (Arrighi 1994: 88-91).

The main innovation of the Genoese was to ally themselves to the territorial empire-driven Iberian states, whose overseas expansion they financed (Diffie 1977: 209-212), thus externalising protection costs. The ‘Great Discoveries’[16], whose purpose was to bypass the Mediterranean trade routes (which it eventually did, strongly reducing the relevance of the Mediterranean trade), led on one hand to the incorporation of African and Indian coastal regions (which were part of the larger world system already for millennia) into the European capitalist world-system[17], and on the other hand, to the incorporation of the New World into the world system, widening it dramatically.

This massive increase of geographic scale was based on spices (mostly Asian pepper, controlled by the Portuguese) and silver (from America, controlled mostly by the Spanish) as strategic commodities, and was carried through by the Christian Iberian empires. These were medieval in nature, as their driving force was “to win gold and spread Christianity” (Bowle 1982: 320), and we can say that Christianity was the political stabilising framework of the Genoese SCA, and its spread to the ‘pagans’ was its ‘universal’ idea.

The internal contradiction of this alliance between the Genoese cosmopolitan capitalism and the Iberian territorial imperialism involves several aspects and can be summarised as a Genoese free ride on protection together with an Iberian counterproductive aggressive Christianity. Indeed, the Portuguese, who were merely primus inter pares in the Indian Ocean (Chaudhuri 1985: 78-79), were prone to fight uneconomical wars for religious motives, over which the Genoese had no control: The Iberian ‘universal’ idea that sustained Iberia’s expansion also led to its downfall.

The signal crisis of the Genoese SCA was the financial and trade crisis of 1557-62 that followed the Habsburg (Spain’s Charles V’s) default on debt servicing (Prada 1966a: 346-350) and “shook the European financial and trading system to its foundations” (Arrighi 1994: 124). The Genoese merchant bankers switched to high finance, which they came to dominate in the following seventy years. Inter-state conflict increased, leading to the Thirty Years war, which was the terminal crisis of the Genoese SCA (Arrighi 1994: 124-125). The first SCA is defined as Genoese because

[T]he Genoese-led financial expansion of the late sixteenth century … constituted the high-point of a pattern of capital accumulation that was both systemic in scope and homogeneous in agency and structure. In this pattern, a major material expansion of the European world‑economy, through the establishment of new trade routes and the incorporation of new areas of commercial exploitation, was followed by a financial expansion that tightened the dominance of capital over the enlarged world-economy. Moreover, a clearly identifiable capitalist class (the Genoese) encouraged, monitored, and benefited from both expansions in virtue of a structure of capital accumulation which for the most part had already come into existence when the material expansion began. (Giovanni Arrighi 1994: 126)

The question arises whether the Iberian overseas expansion and the subsequent advent of the capitalist system in Europe was inevitable[18]. “Everywhere, from Egypt to Japan, we (could) find … genuine capitalists” (Braudel 1984: 486), and yet they did not expand. Further, China had seafaring technology that arguably could allow them to undertake similar voyages of ‘discovery’ in the beginning of the fifteenth century (Frank 1998: 197), however, there existed no European product in which China was interested safe for bullion, that they already received in exchange for silk and porcelain.

We argue that the main reason behind Iberian expansion is that no one else combined the technical capability to expand with a vital interest in doing so. As mentioned before, the Iberian Imperial drive was medieval in nature, while for the capitalist Italian city-states the more profitable “manufacturing and commerce displaced seafaring” (Tilly 1995: 146-147). An answer can then be found in the crowding-out of Genoa’s capital from Mediterranean trade, allied to the crowding-out of Portugal’s war- and nation-making abilities from Europe: cut from the mainland by Spain, the Portuguese were forced to turn their backs to it, and look elsewhere, while the Spanish followed on the steps of success[19].

II.3.4 The second (Dutch) SCA

While Genoa had to rely on the Iberian powers to fights its wars, the Dutch[20] merchants allied to the House of Orange, fusing territorialism and capitalism, as had already been the case with Venetian state capitalism, but now in a much enlarged and more effective scale (Arrighi 1994: 135). They could thus do what the Genoese could not, that is, fight their own wars, which they did only when it was strictly for direct or indirect business reasons and without regard to religious issues (Wolf 1982: 239), and the main Dutch innovation is internalisation of protection costs.

The primary source of Dutch wealth and power was their tight control over the Baltic trade on grain and timber, which were essential to the conduct of war by land and sea, and of which the Mediterranean supplies were exhausted. It was the profits obtained from trade in these strategic commodities that first enabled the Dutch to bid for hegemony. Further, from the onset of the Dutch independence war in 1566 until the Peace of Westphalia in 1648, the Dutch imposed an “inverted fiscal squeeze” on Spain through piracy and privateering, thus ensuring transfer of capital from the Genoese to the Dutch SCA (Arrighi 1994: 132). The Westphalian inter-state system was the political stabilising framework of the Dutch SCA, and Enlightenment humanism was its ‘universal’ idea[21].

The Dutch overseas expansion was based on large-scale, geographically specialised, joint-stock chartered companies[22], operating a system of state monopoly capitalism, backed by the entrepôt capitalism based in Amsterdam. These companies brought the capitalist logic to bear on all their actions overseas, and their (extensive) military campaigns in the East Indies were aimed not at conquering or discovering territory, but at creating favourable market and trade conditions for them. In the MC Dutch expansion phase, “the system expanded only modestly” (Sanderson 1995b: 99). In this respect, we can say that the Dutch traded with the world ‘discovered’ by the Portuguese, deepening the world system (Wolf 1982: 237-239, Arrighi 1994: 152-155).

The internal contradiction of the Dutch SCA was exactly their reluctance to acquire territory. This had grounds, to some extent, in incapacity of doing so: While the Dutch performed very well in the Indian Ocean, where all the structures of the world system were already in place and functioning for millennia, they were not able to establish those structures in the sparsely populated New World, where the money-based economy was at best incipient. The extremely high cost of doing so could not be met by a nation that had based its whole strategy on cost-economising (Arrighi 1994: 201-202). Further, the Dutch, by demonstrating the enormous profits to be realised from extra-European involvement, drew other powers, mainly the much larger England and France, to its developmental path, enhancing competition. Holland never governed the system it created (Arrighi 1994: 29, 47, 203).

The signal crisis of the Dutch SCA can be taken as 1740, when European inter-state struggle escalated, but also and most importantly when a massive flight of capital from Amsterdam to London started (Arrighi 1994: 205-206). After the War of American Independence, the British destroyed what was left of Dutch seaborne power. The financial crisis of 1780-83 ended Amsterdam’s supremacy in world finance, which was taken over by London (Prada 1966b: 145-146). After this, and during the whole CM’ phase, Dutch high finance profited by investing in the activities of the emerging hegemon; in 1762 the Dutch held a quarter of the English debt (Arrighi 1994: 207). Finally, the terminal crisis of the Dutch SCA was the Napoleonic wars.

Once again, and on a grander scale, one capitalist class had successively promoted and financed, monitored and profited from, and, in the fullness of time, withdrawn from, a commercial expansion that encompassed a multiplicity of trade networks. Capitalism as a world system was here to stay. From now on, territorialism could succeed in its objectives by “internalizing” capitalist techniques of power. This, as we shall see, was to be the central feature of the third (British) systemic cycle of accumulation. (Giovanni Arrighi 1994: 144, emphasis in original)

II.3.5 The third (British) SCA

Where the Dutch had only reluctantly acquired overseas territory, the British embarked wholeheartedly on territorial conquest, not least in the Indian subcontinent: Imperial UK ‘conquered’ the world that imperial Iberia had ‘discovered’, in what was the second dramatic widening of the capitalist world-system. The British thus brought production activities within their colonial empire into the organisational domain of capitalist enterprise, internalising the production costs, which allowed them to take systemic processes of accumulation much further than the Dutch could (Arrighi 1994: 177, 199). This went hand in hand with the Industrial Revolution, whereby Britain externalised environmental costs simply by overlooking them[23] (Ekins 1992: 36-37), and which made the globe a single interaction economy through steamships and railways (Arrighi 1999b: 61-62).

“Just as the most strategic supplies of Baltic trade were grain and naval stores, and those of the Indian Ocean trade were fine spices, so the most strategic supply of Atlantic trade were African slaves”[24] (Arrighi 1994: 201). Britain could relatively easily take over Atlantic triangular trade, where British manufactures were exchanged for slaves, slaves for American tropical products, and these for British manufactures. This boosted the demand for British industrial products as well as British capital resources, and it led to the transfer of European entrepôt trade from Amsterdam to English ports. As a result, this Atlantic trade became Britain’s ‘mother trade’, as Baltic trade had been Holland’s (Arrighi 1994: 199).

The main beneficiaries of the Dutch-led expansion, in terms of (military and political) power were Britain and France, who vied for world supremacy until the end of the Napoleonic wars. Both of them synthesised the capitalist (heretofore Dutch) and territorialist (heretofore Iberian) logics[25], with three major components: settler colonialism to incorporate the sources of wealth, capitalist slavery to counter labour shortages, and economic nationalism uniting war-making, state-making and national-economy-making in a single activity.

Britain, however, had a decisive geopolitical advantage, namely its island position between two worlds, which allowed it to distance itself from the European land struggles into which its competitors were locked, and to channel its undivided energies towards overseas expansion (Arrighi 1994: 49-51). The British political stabilising framework was hence the European balance of power formalised in the Treaty of Vienna of 1815, “the foundation deed of the nineteenth-century international order” (Roberts 1996: 396) whereby France (that had extensively infringed other states’ Westphalian rights), as well as the other continental powers, were contained. Britain thus became “a lion in the World, and a sheepdog in Europe” (Parker 1998: 4).

Culturally, Britain established its dominion through the ‘universal’ idea of Progress, associated with the Industrial Revolution, modernity, and the future, and displayed in the Great Exhibition of 1851 (Taylor 1996: 88-91, 124, 134). This was also connected with the “utopian belief ‘in man’s salvation through the self-regulating market’” (Arrighi 1994: 256).

The British overseas expansion was done initially with joint-stock chartered companies according to the Dutch model, but once they had opened up the way for overseas trade and investment, they were liquidated and replaced by a system of small and medium-sized companies specialising in high value-added activities, held together by a web of commercial transactions. The profitability of this system of vertical fission of production activities depended critically on the unilateral free trade policy practised by Britain, as British capital goods found demand from all over the world[26], that also had to step up production (mostly of raw material inputs) to pay for them. Britain became the marketplace of the world, linked to and regulated by a cosmopolitan web, controlled by the Rothchilds, of finance capital (Arrighi 1994: 161-167, 244-245, 282-284).

The internal contradiction of the British SCA is exactly this vertical fission of economic activity. “Not only did it make horizontal combinations in restraint of competition[27] difficult, … but, in addition, it prevented British business from seizing opportunities to cut unit costs through a closer planning and integration of the sequential activities into which processes of production and exchange were divided” (Arrighi 1994: 283).

The signal crisis of the British SCA came in the early 1870s, with the Great Depression of 1873-96 leading to cut-throat inter-capitalist competition, followed by inter-state competition in the 1880s with European-wide rearmament. This generated competition for surplus mobile capital, allowing capitalists to dictate terms for access to capital, leading to increased profits and the belle époque of 1816-1914. In the run up to 1914, the USA received most of British foreign investment. However, British demand for arms during the war was paid with the assets that investment had bought, and hence the US could not only pay for their infrastructure built in the nineteenth century at bargain prices, but also accumulated war credits. (Arrighi 1994: 171-173, 269-271). The terminal crisis of the British SCA was the 1914-1945 ‘thirty years war’.

II.3.6 The fourth (North American) SCA

Free trade, and the Great Depression of 1873-86 led to a surge of protectionism across Europe, and particularly in Imperial Germany. The Second Reich based its development on large concerns and cartels working in close association with the great banks. They were horizontally integrated (with small and medium enterprises surviving as subordinate members of a private command economy), and pursued technical efficiency (in order to control an increasingly larger market share) that led to higher rates of industrial growth but did not translate into an overall more efficient method of appropriation of value-added. However, it did precipitate the terminal crisis of the British SCA (Arrighi 1994: 265-269). Germany’s variant of corporate capitalism suspended the normal MCM’ cycle: through superior technology, it managed to remain in the MC phase of the British SCA for a longer period (Arrighi 1994: 287).

The US variant of corporate capitalism, however, superseded the British SCA, through vertical integration. Single enterprises internalised the whole business sequence from procuring raw inputs to selling finished outputs. This subjects costs, risks and uncertainties to long term corporate planning, and generates economies of speed (rather than of size) in the whole process, thus leading to decisive competitive advantages and fast growth, while imposing barriers to the entry of competitors, that need to start business at the same scale of the (transnational) existing enterprises. The main innovation of the US SCA is then internalisation of market (trade) costs within single corporations (Arrighi 1994: 239-241).

Further, the US had not only the advantage of internal economies due to vertical integration, but also of ‘external’ economies due to its continental size (Arrighi 1994: 294). The US had no need to hold directly other territories, and the extensive post-war de-colonisation process allowed it to situate itself as a champion of freedom (as the Dutch had done, relatively to imperial Spain). In this respect, we can say that the USA traded with the world ‘conquered’ by the British, deepening the world system structure.

After WW II, US corporations and the US Congress were reluctant to invest in the rebuilding of poor and fragmented Europe, creating an impasse whereby US (monopoly of) liquidity could not start an MC phase in Europe (Arrighi 1994: 277). The Cold War broke the impasse, first with the Marshall Plan and then with massive rearmament following the Korean war. In less than two years, the USSR was converted from ally to an ‘evil’ enemy, setting the ideological and cultural basis for US hegemony (Taylor 1996: 77). This had (neo-functionalist) spill-over effects, for instance influencing the creation of the European Coal and Steel Community (Middlemas 1995: 1-36, Archer 1994: 24-27). The strategic commodity of the US SCA was arms, and the main political stabilising framework the Cold War structures.

The main ‘universal’ idea through which cultural leadership was established was, as in the British SCA, that of modernity and progress as a vision of the future, this time embodied in the Space Age[28]. This was closely related to the arms industry, as advances in space travel technology was intimately connected with advances in the missile technology

The agency that led the US MC phase was not finance capital, but the US government itself, that started the boom of the trente glorieuses through global military Keynesianism. US corporate capital followed rather than led, however, it was both a critical means to US state-making and pursuit of global power activities, and a significant outcome of it. The US used the Marshall Plan and rearmament to integrate the European market in its sphere, and insisted US subsidiaries be treated as ‘European’, making Europe a fertile ground for expansion of US transnational corporations (TNCs), which in turn further integrated Europe into the US systemic cycle of accumulation of capital. (Arrighi 1994: 294, 305-6).

This was to some extent similar to the Dutch joint-stock chartered companies. The main difference was that, while those companies were malleable instruments in the hands of the Dutch governments, TNCs were not malleable instruments of US state power. Once the US government had opened the way for the TNCs, it could not control the process, not even in concert with the European major states. This undermined governance in regulation and production of world money by the US government, which reacted by tightening control over the dollar and abandoning the system of fixed exchange rates. The result was trade in forward currency values, financial expansion and hedging by geopolitical diversification, that is, increased transnationalisation of enterprises, which was the internal contradiction of the US SCA (Arrighi 1994: 305-313).

The coming crisis of the US regime was signalled between 1968 and 1973 in three distinct and closely related spheres. Militarily, the US army got into ever more serious troubles in Vietnam; financially, the US Federal Reserve found it difficult and then impossible to preserve the mode of production and regulation of world money established at Bretton Woods; and ideologically, the US government’s anti-communist crusade began losing legitimacy both at home and abroad. (Giovanni Arrighi 1994: 300-301)

This signal crisis marked the switch to the CM’ phase, and led to the deregulation drive of the 1980s and to the Reagan belle époque, that was accompanied by escalation of Cold War (e.g. the Strategic Defence Initiative commonly known as ‘Star Wars’) and with displays of US military might against selected third world countries, that is, increased inter-state competition (Arrighi 1994: 314-317). The whole Cold War framework, on which the political organisation of the US SCA was based, disintegrated abruptly in 1989. The fall of the Berlin wall can be taken as the symbolic end of the Cold War, and thus also as the terminal crisis of the US SCA. We shall deal extensively with this subject in section III.3.

II.3.7 The core-periphery structure and antisystemic movements

We mentioned in section II.3.1 that the increase of scale that each new hegemony entails both opens up new markets and increases the pool of available labour. This required the export of exploitation, from Europe to the rest of the world, creating a core‑periphery world-system (Wallerstein 1995a: 30-40, Frank 1966). This is a world‑wide social division of labour, with a geographic hierarchisation of the structure of production processes. Demotion of some production operations in the commodity chain, from being high- to low‑added value leads to their geographic relocation into the periphery. Unequal exchange of commodities is established, with a transfer of total surplus generated in one geographic zone – the periphery – to another – the core.

The geographic expansion of capitalism is then characterised by incorporation of cheap labour and cheap raw materials (see e.g. Brockway 1992). This has been done by the seemingly triumphant export of the European concept of ‘state’ to what thus became the Third World (see Burns 1992 for a case study): to ensure an efficient extraction of resources, local ruling classes, mostly (but not always – see e.g. Anderson 1991: 140) of European ancestry, are created in peripheral regions. These local ruling classes in turn extract surplus from their own satellites, in a fractal self-similar reproduction of core‑periphery relations (Gibbs 1986: 212-217).

The benefits of the core-periphery structure of the world system remain solidly in core zones (Europe, USA, and Japan, i.e. the Triad, during US hegemony), as well as with the local rulers of the periphery. The fraction of people benefiting (to some extent) from the capitalist system has remained approximately constant at around 15%, from fourteenth century Florence (Arrighi 1994: 101-102) until today, while the remainder has suffered relative, if not absolute, immiseration (Wallerstein 1995a: 98-101).

The expansion of the world economy during the UK and US SCAs, thus hierarchically organised into a core and a periphery, to encompass almost the whole world, meant that full allegiance and support of the population were required in the core zones, initially to fight the terminal crisis war of the UK SCA, and later to take part in the production of high value-added goods in the expansion phase of the US cycle. Thus twentieth century capitalism had to assign the nation-state a (limited) redistributive role in the core, which was achieved by the establishment of universal franchise and of the Keynesian welfare state[29], mainly by the reformist Social Democrat antisystemic movements (Arrighi 1989: 30-33, Butler 1997: 42-50).

Silver and Slater (Silver 1999: 151-216) discuss at length the social origins of hegemony. During periods of material expansion, new social groups and classes, excluded from the benefits of hegemony, grow in size and disruptive power. Their struggle to expand their rights accompanies the inter-state and inter-enterprise competition associated with the following CM’ phases. The emerging hegemon is then able to form social compacts between dominant and subordinate groups, leading to social peace in the next SCA:

The cooptation of rising groups was pivotal – the settler bourgeoisies of the Americas and the propertied middle classes of Europe in the transition from Dutch to British hegemony, and the Westernized elites of the non-Western world and the working classes of the Western world in the transition from British to US hegemony. But in both transitions, the widening of the social foundations of the hegemonic block was accompanied by, indeed, premised on a de jure or de facto exclusion of the majority of the world’s population from access to the same rights and privileges. (Beverly J. Silver and Eric Slater in Silver 1999: 152)

That is, incorporation of the emerging ‘middle classes’ (taken to include the upper echelon of the proletariat, e.g. artisans as opposed to the ‘rabble’) strengthens the social and political stability of the core countries, while further isolating the bottom tier of labour. In the UK SCA, this was done mostly through the invention of “the white race” and of racism (Allen 1994), as well as sexism (stronger e.g. in Japan, which is ethnically rather homogeneous). Later, in the US SCA, all (or almost) the population of the core countries was incorporated and enjoyed some benefits, as mentioned above[30].

II.3.8 The rise of the West and the fall of the East

Mudam-se os tempos, mudam-se as vontades, The times change, fancies change,
Muda-se o ser, muda-se a confiança; The being changes, trust changes;
Todo o mundo é composto de mudança, The whole world is made of change,
Tomando sempre novas qualidades. (…) Always taking new guises. (…)
E, afora este mudar-se cada dia, And, besides this everyday changing,
Outra mudança faz de mor espanto, Another change is most bewildering:
Que não se muda já como soía. Change itself isn’t what it used to be.

Luís de Camões 1524(?)-1580 (NPB translation)

The gist of this section has been the description successive western hegemonies of the capitalist world since 1350, and of the transitions between them, mostly ignoring the assertion of section II.2 that hegemony was located in Asia until at least 1450 (see also Table I). Indeed, since Roman times Europe had bought high value-added goods from Asia (e.g. porcelain and silk fabric, both manufactured industrial products, and spices), paying them with bullion (Wolf 1982: 125), in what constitutes a typical exchange between a peripheral region and the more advanced centre[31].

This was a powerful incentive for Europe to bid for control of the eastern sources of world wealth and power (Arrighi 1994: 35). The Portuguese established a seaborne empire in the Indian Ocean[32] through superior naval power, but had no land-based possessions there, becoming one of several competing powers in the region. While the Dutch enjoyed a greater (monopoly) control of the region, particularly the Malay archipelago, they could never challenge the power of the Mughal empire in mainland India (Parry 1963: 242-257). Even the British control of the Indian subcontinent only began after the disintegration of the Mughal empire in the second half of the seventeenth century, which was unrelated to the European presence. The British merely defeated “all local competition in the struggle for the Mughal succession” (Arrighi 1994: 248), and in doing so attained hegemony in the world system.

This is confirmed by studies of revenue in the eighteenth century. Paul Bairoch reviewed several estimates of the GDP per capita in 1750 of regions corresponding to what are now the first and third worlds (Bairoch 1995: 124-154), concluding that their ratio was between 1:1 to 1:2. The spread started to increase rapidly only in the beginning of the nineteenth century (i.e. in the MC phase of the British SCA). The importance of foreign trade in China was scant until the nineteenth century, and European (British) domination of the Indian landmass was only established in the second half of the eighteenth century (Braudel 1966: 238-240, 272-277). Even Paul Kennedy’s The Rise and Fall of the Great Powers (otherwise concentrated almost exclusively on Europe) recognises the Asian lead in industrial production up to 1800 (Kennedy 1988: 182-183).

Another indication is that East Asian cities were preponderant in the world system until about 1600, rivalled European ones until about 1800, and only in the 19th century did Western cities rise to prominence (Bosworth 1995: 223).

The ‘discovering’ double cycle (Genoese+Dutch SCAs) can then be seen as a single period, of gradual transition of hegemony from one major part of the world (Asia) to another one (Western Europe) (Frank 1993b: 47). It marks a fundamental transition in the way the world system works: It is a period of meta-systemic chaos during which the declining pre-modern non-capitalist hegemony coexisted with the rising modern capitalist hegemony[33]. In this respect, Genoa and Holland, which led the western rising hegemony, were not world system hegemons as such; they were instead the agency of world systemic hegemonic transition from the East to the West[34]. This meta‑systemic transition also marked a shift in the characteristics of hegemony, as seen in section II.4.1, and in the organisation of international relations, as seen in section II.4.4.

This transition was completed at the beginning of the British SCA. The ‘conquering’ double cycle (British+US SCAs) can then be seen as a single period, of undisputed western world systemic hegemony. Andre Gunder Frank (Frank 1998) and Giovanni Arrighi (Arrighi 1996), amongst others, claim that a hegemonic shift back to (East) Asia is now taking place. We shall come back to this subject (disagreeing with Frank and Arrighi) in chapter III.



[7] We will postpone a detailed discussion of the meaning of hegemony until section II.4.

[8] “[T]he essential feature of historical capitalism … has been the ‘flexibility’ and ‘eclecticism’ of capital rather than the concrete forms assumed by the latter at different places and at different times” (Arrighi 1994: 4). Money capital has the special status of embodying freedom of choice, and is hence the preferred form of capital. It will only be invested – i.e. tied up – in production or trade if there is a (systematically fulfilled) expectation by capitalist agencies of higher returns by doing so.

[9] Or at least for its core in a core-periphery structure, to which we will come back in section II.3.7.

[10] Charles Tilly’s discussion of the interplay between capital, coercive power and state formation (Tilly 1992) is not directly relevant to the study of SCAs and will be mostly disregarded here. It would however be interesting to study, within Tilly’s framework, the path to state formation (capital-intensive, coercion-intensive, or capitalised coercion) each of the successive hegemonic powers, as well as their main competitors, took, and its relation to hegemony in each given historical context.

[11] Or even more than two, as there are normally several hegemony contenders in competition with each other.

[12] An intensive mode of expansion “enables growth to proceed in situ without conquest” (Taylor 1996: 189).

[13] This is strongly reminiscent of the hegemony/rivalry cycles of the world system mentioned in section II.2.2, although the time scales involved are shorter in the modern capitalist world system.

[14] Arrighi considers that this material expansion/financial expansion cycle does not constitute an SCA, which must be led in its entirety by a single agency. While Italian city states were amongst the main beneficiaries of the financial expansion, the material expansion was not organised and promoted by them, being subordinate to other agencies such as the Mongol empire (Arrighi 1994: 88).

[15] When the material expansion Genoese SCA was in full swing, the Genoese could draw not only on their own capital but also on the capital accumulated by the other northern Italian city states (Arrighi 1994: 125), thus ensuring a transfer of the capital during the Venetian proto-SCA to the Genoese one, fulfilling the condition of ‘ceaseless accumulation of capital’.

[16] We shall use the overtly Eurocentric term ‘discover’ relating to the overseas Iberian expansion as it describes accurately the ideology of the agents of that (and future) expansion of the (European) capitalist world-system, notwithstanding that even the maritime way to India (in the opposite direction) was previously known by the Arabs (Nadvi 1966: 92-104).

[17] Note that we keep Frank and Gills’ notational distinction between (regional) ‘world-systems’ (with hyphen) and the (single, all-encompassing) ‘world system’ (without hyphen) (Frank 1993b: 3). The exception is when citing other authors, as they may or may not ascribe special significance to the hyphen.

[18] This is equivalent to asking whether the existence of surplus capital in a given region (for instance in Genoa) is not only a necessary, but also a sufficient condition for the start of an SCA, and indeed, of the sequence of systemic cycles of accumulation of capital. Our argument is that it not necessarily is, as the simultaneous existence of an overseas-bound land-based power could be a coincidence.

[19] Indeed, the last Arab kingdoms were reconquered 250 years earlier in Portugal (1249 as compared to 1492), and the Madeira and Porto Santo Atlantic islands off Africa were populated in the 1420’s while colonisation of the Canaries only took place after 1477 (McAlister 1984: 50-63, Diffie 1977: 17).

[20] We shall commit the anachronism of calling the then United Provinces as Holland.

[21] Note that by leading the fight against Imperial Spain, the United Provinces came to be perceived as champions of liberty and peace, as well as of the power to rule of the European absolute monarchs. Further, early seventeenth-century Amsterdam became the centre of the transition from the Renaissance to the Enlightenment (Arrighi 1994: 45-46, 135).

[22] Half-governmental and half-business organisations, chartered by European governments to act on their behalf overseas, and granted exclusive trading privileges in designated geographical areas, and mandated to undertake war- and state-making functions. They were formed when European powers were relatively weak by world system standards, and discontinued as soon as European states became strong, being replaced by more specialised governmental and business organisations (Arrighi 1999c: 98-99).

[23] Human activities have always had an impact on the environmental network (and vice-versa), but the Industrial Revolution potentiated a qualitative increase of the intensity and scope of that impact.

[24] The first African slaves were brought to Portugal in 1443, and by 1550 they constituted 10% of the population of Lisbon. However, they became essential only later, as labour in the American plantations: “Without blacks there was no sugar” (Azevedo 1928: 68-73, 227-229).

[25] Capital accumulation and territorial expansion have been historically closely associated. The capitalist and territorialist logics refer to the main strategic driving force, that is, whether capital accumulation is a means for imperial expansion, or territorial expansion is a means for further profit. These logics can be described in shorthand by TMT’ and MTM’, where T stands for territory. While there are normally elements of both TMT’ and MTM’ present, the UK integrated them to an unprecedented level (Arrighi 33-34, 49).

[26] That wanted (and needed) to become part of ‘progress’ and ‘the future’. Britain came to receive up to one third of the rest of the world’s exports (Arrighi 1999b: 60)

[27] That is, monopolies or oligopolies.

[28] The conquest of Space, ‘the final frontier’, was a promise of continued fulfilment of the Bible’s command by the ‘one nation under God’: “And God blessed them, and God said unto them, Be fruitful, and multiply, and replenish the earth, and subdue it: and have dominion over the fish of the sea, and over the fowl of the air, and over every living thing that moveth upon the earth” (Genesis 1: 28, King James version). Incidentally, this command was given before original sin (Genesis 3), hence to a pure and blameless Adam and Eve.

[29] And note that a universal welfare state, benefiting the whole population of that state, is only possible by relocating low-value added production processes into weaker states in periphery zones, that is, the welfare national state is only possible within a world state system (Wallerstein 1995a: 32, 35-36, Balibar 1996: 87-90). Note further that, within each state, the universal welfare state was not really universal. For instance, in Scandinavia and in Estonia, the pro-active measures normally associated with social welfare were accompanied by preventive measures, destined to prevent the undesirable from procreating and perpetuating the problems they created. These preventive measures took the form of Eugenics, with (mostly the Labour parties of) Sweden, Denmark, Norway and Finland approving laws to that effect in 1934, which involved the unwilling sterilisation of up to 168,000 people, of which 90% women, in the period 1934-1977 (Broberg 1996).

[30] This was a protracted process that required extensive labour struggle. For instance, “the old European social structure seems irreconcilable with an extremely modern mode of production as that offered by the most perfectioned American model, the industry of Henry Ford. Hence, the introduction of Fordism meets much ‘intellectual’ and ‘moral’ resistance, and is done in a particularly brutal and insidious way, through the most extreme coercion” (Gramsci 1968: 377, NPB translation).

[31] This was only inverted in the nineteenth century with the sale by the British of Indian opium to China (Wolf 1982: 257-258).

[32] And extending as far as Japan in its outer limits, converting 300.000 people to Christianity in the Nagasaki region (Russell-Wood 1992: 6).

[33] Of the two components of the Genoese SCA, one, Genoa itself, was modern and capitalist in nature, while the other one, Iberia, was basically pre-modern as we have seen in section II.3.3. This underlines its meta-systemic chaotic nature.

[34] This was accompanied by a fundamental transition in the world system, from being a structure based on a tributary economy, politically coercive, and on imperial states, to being based on a capitalist economy, economically coercive, and on an inter-state system (Hall 1996: 11). This was initiated by the capitalist Genoese, and completed by the Dutch hegemony.