World-systems Theory - Interpretation of The World History

Interpretation of The World History

Before the 16th century, Europe was dominated by feudal economies. European economies grew from mid-12th to 14th century, but from 14th to mid 15th century, they suffered from a major crisis. Wallerstein explains this crisis as caused by:

1. stagnation or even decline of agricultural production, increasing the burden of peasants,
2. decreased agricultural productivity caused by changing climatological conditions (Little Ice Age),
3. an increase in epidemics (Black Death),
4. optimum level of the feudal economy has been reached in its economic cycle; the economy moved beyond it and entered a depression period.

As a response to the failure of the feudal system, Europe embraced the capitalist system. Europeans were motivated to develop technology to explore and trade around the world, using their superior military to take control of the trade routes. Europeans exploited their initial small advantages, which led to an accelerating process of accumulation of wealth and power in Europe.

Wallerstein notes that never before had an economic system encompassed that much of the world, with trade links crossing so many political boundaries. In the past, geographically large economic systems existed, but were mostly limited to spheres of domination of large empires (such as the Roman Empire); development of the capitalism enabled the world economy to extend beyond individual states. International division of labor was crucial in deciding what relationships exists between different regions, their labor conditions and political systems. For classification and comparison purposes, Wallerstein introduced the categories of core, semi-periphery, periphery, and external countries. Cores monopolized the capital-intensive production, and the rest of the world could only provide labor and raw resources. The resulting inequality reinforced existing unequal development.

According to Wallerstein, there have only been three periods in which a core nation has dominated in the modern world-system, with each lasting less than one hundred years. In the initial centuries of the rise of Europe, Northwest Europe constituted the core, Mediterranean Europe the semiperiphery, and Eastern Europe and the Western hemisphere (and parts of Asia) the periphery. Around 1450, Spain and Portugal took the early lead when conditions became right for a capitalist world-economy. They lead the way in establishing overseas colonies. However, Portugal and Spain lost their lead primarily due to becoming overextended with empire building. It became too expensive to dominate and protect many colonial territories around the world.

The first nation to gain clear dominance was the Netherlands in the 17th century, after their revolution led to a new financial system many historians consider revolutionary. An impressive shipbuilding industry also contributed to their economic dominance through more exports to other countries. Eventually, other countries began to copy the financial methods and efficient production created by the Dutch. After the Dutch gained its dominant status, the standard of living rose, pushing up production costs.

Dutch bankers began to go outside of the country seeking profitable investments, and the flow of capital moved, especially to England. By the end of the 17th century, conflict among core nations increased as a result of the economic decline of the Dutch. Dutch financial investment helped England gain productivity and trade dominance, and Dutch military support helped England to defeat the French, the other country competing for dominance at the time.

In the 19th century, Britain replaced the Netherlands as the hegemon. As a result of the new British dominance, the world-system became relatively stable again during the 19th century. The British began to expand all over, with many colonies in the New World, Africa, and Asia. The colonial system began to place a strain on the British military, and along with other factors, led to an economic decline. Again, there was a great deal of core conflict after the British lost their clear dominance. This time it was Germany, and later Italy and Japan providing the new threat.

Industrialization was another ongoing process at that time, resulting in the diminishing importance of the agricultural sector. In the 18th century, England was Europe's leading industrial and agricultural producer; by 1900, only 10% of England's population was working in the agricultural sector.

By 1900, the modern world-system was much different than it was 100 years earlier. Most of the periphery societies had already been colonized by one of the older core nations. In 1800, the old European core claimed 35% of the world's territory, but by 1914 it claimed 85% of the world's territory. Now, if a core nation wanted periphery areas to exploit as had done the Dutch and British, these periphery areas would have to be taken from another core nation. This is what Germany, and then Japan and Italy, began to do early in the 20th century. The modern world-system became geographically global at that time, and even the most remote regions of the world have all been integrated into the global economy.

While these countries were moving into core status, so was the United States. The American civil war led to more power for Northern industrial elites, who were now better able to pressure the government for policies favorable to industrial expansion. Like the Dutch bankers, British bankers were putting more investment toward the United States. Like the Dutch and British, the U.S. had a small military budget compared with other industrial nations at the time.

The U.S. began to take the place of the British as the new dominant nation after World War I. With Japan and Europe in ruins after World War II, the U.S. was able to dominate the modern world-system more than any other country in the history of the world-system. After World War II, the U.S. accounted for over half of the world's industrial production, owned two-thirds of the gold reserves in the world, and supplied one-third of the world's exports. However, since the end of the Cold War, the future of the US hegemony has been questioned and according to some scholars its hegemonic position has been in decline for a few decades. By the end of the 20th century, the core of the wealthy industrialized countries was composed of Europe, but also some other countries, such as United States or Japan. The semiperiphery comprised many states that have been long independent, but did not achieve Western levels of influence, and poor, former colonies of the West formed the periphery.