Capitalism as a world system (1986)

From the Summer 1986 issue of the World Socialist

Capitalism is basically an economic system, one in which production is oriented towards the accumulation of capital out of monetary profits realised on the market, the source of these profits being the unpaid labour of those who produce the goods that are sold. Production for a market, the accumulation of wealth having a monetary value, and even the exploitation of wage-labour had existed since ancient times but as more or less isolated practices rather than as a complete economic system. It was only in the 16th century that what Marx called "the capitalist era" began with the emergence of the world market, i. e., a pattern of trade and a division of labour involving a number of different countries and geographical areas.

The effect on the countries involved of producing for this market, or for export, was to subordinate the production of wealth within their frontiers to a new logic, that of re-investing profits so as to continually improve the methods of production as a way to remain competitive in the struggle to realise further profits. As a result profound changes were brought about in the economic, and therefore also in the social and political, structures of these countries amounting to the introduction of a new economic system.

Right from the start capitalism has been an international system, not only as a matter of historical fact but also because if it had not been so it would never have developed. The countries concerned would not have been subject to an external pressure—which they were ultimately unable to resist—to apply the new economic logic of capital accumulation and production for monetary profit and the new economic system would not have come into being.

Capitalism is the economic mechanism which comes into operation as a coercive external force acting on economic decision-makers when wealth is produced for sale, not simply on any market, but on the world market. Its history is the history of the development of the world market economy from its origins in Europe in the 16th century to its present situation, achieved by the end of the 19th century, of a truly world system embracing not only a number of different countries and geographical areas but all countries and all geographical areas.

This means there is not, and never has been, such a thing as a "national economy". That this latter exists is an illusion arising out of the fact that, politically, the countries and areas involved in producing for the world market have been divided into states which have always sought to interfere with the operation of that market. Capitalism is not a collection of national capitalist economies existing side by side but a single world economy functioning as such of which the "economies" of the separate states are merely integral parts, even to the extent of playing different functional roles (industrial producers, raw material producers, agricultural producers, etc.) within the system.

Collection of armed States

It should not be thought that capitalism is a purely economic system, just an economic mechanism of the accumulation of capital out of monetary profits. It is also a collection of armed states with clashing economic interests. These states use their coercive powers to interfere in the operation of the world market with a view to distorting it in favour of profit-seeking enterprises operating from within their frontiers. Although no state has ever been strong enough to completely control the world market, there have always been some sufficiently strong to distort it, at least temporarily, in their favour. Even though purely economic considerations—cost of production in relation to price, etc.—are in the end the determining factor, the intervention of states, both by economic means such as tariffs, customs duties, bounties and monopolies, and by the threat and the use of physical force, has thus always been a subsidiary factor in the distribution of world profits.

Since coercive intervention can to a certain extent affect the world division of profits, all states have an interest in being as strong as possible both internally and vis-à-vis the exterior. This is why there has been a historical trend under capitalism for strong centralised states to emerge and assert themselves internationally and for all states to arm themselves with the most up-to-date and destructive weapons they can afford:

"Within a world-economy, the state structures function as ways for particular groups to affect and distort the functioning of the market. The stronger the state machinery, the more its ability to distort the world market in favour of the interests it represents" (I. Wallerstein, The Capitalist World-Economy, p.  61).

"State machineries have interfered with the workings of the world market from the inception of capitalism. Moreover, the states have formed, developed, and militarized themselves each in relation to the others, seeking thus to channel the division of surplus value. In consequence, all state structures have grown progressively stronger over time absolutely, although the relative differences between core and peripheral areas have probably remained the same or even increased" (p. 274).

States do not accumulate these arms just to strengthen their bargaining position in the continual struggle with other states for a share of world profits. The arms are there to be used in the last resort, so that war too is built-in to the economic mechanism of capitalism. In fact all the wars that have taken place since the 16th century have been "trade wars" in the sense that they have been about the control of markets, raw material sources, trade routes, investment outlets, and strategic points to protect or acquire these.

Imperialism, inherent feature of capitalism

The final phase of capitalism's coming to embrace the whole world geographically in the second half of the 19th century took the form of a scramble for colonies in Africa and the Pacific Ocean. By the time this was over virtually the whole land surface of the planet was occupied by one or other of the stronger capitalist states. This led to a recognition that capitalism was a world system and was not just a collection of nationally-existing capitalisms, a recognition expressed, for all their errors, in such works as Rosa Luxemburg's The Accumulation of Capital, Bukharin's World Economy and Imperialism, and Lenin's Imperialism, the Highest Stage of Capitalism. The term that came into use to describe this new development was "imperialism".

Lenin argued that imperialism was "the highest stage of capitalism". But if imperialism is defined as being the tendency for capitalist states to use force for economic ends (to acquire or protect markets, raw material sources, trade routes, or investment outlets) then, as just seen, this has been a feature of the capitalist system since its beginning in the 16th century. In fact  all states are imperialist in this sense, even weak ones that are themselves the victims of other, stronger states.

Any state, given the chance, will use force to try to help profit-seeking enterprises operating from within its frontiers acquire as large a share of world profits as possible. Indeed, to help home enterprises (whether private or state) in this way is precisely the specific role that states have to play in the capitalist world economy. Under capitalism strong states have always tended to dominate weaker states and weak states will always try to dominate states that are weaker still. In this sense, then, imperialism of the type seen in the second half of the 19th century when the United States and the strongest states of Europe used force to acquire protected markets, sources of raw materials and investment outlets was nothing new. It did not merit the description of "highest stage of capitalism" since this sort of behaviour by states had been a feature of capitalism in all its stages.

Having said this, there is a sense in which the scramble that took place in the last part of the 19th century did lead to a new "stage" of capitalism. It led, as noted, to the final subordination of the whole planet to one or other capitalist power; in other words, to capitalism's coming to completely dominate the globe.

This meant that, from then on, there were no new raw material sources or investment outlets to be conquered. From this time on, all that could happen was that these areas could be re-allocated amongst the various competing states. Despite his error about imperialism being the highest stage of capitalism, Lenin expressed this point rather well in his pamphlet. Writing in 1916 about the period 1876-1900, he noted:

" . . . the characteristic feature of the period under review is the final partition of the globe—final, not in the sense that a repartition is impossible; on the contrary, repartitions are possible and inevitable—but in the sense that the colonial policy of the capitalist countries has completed the seizure of the unoccupied territories of our planet. For the first time the world is completely divided up, so that in the future only redivision is possible, i. e., territories can only pass from one 'owner' to another, instead of passing as ownerless territory to an 'owner'" (chapter VI).

Hence Lenin's more or less acceptable conclusion, in the preface he wrote to his pamphlet in 1920 that "the war of 1914-18 was imperialistic (that is, an annexationist, predatory, plunderous war) on the part of both sides; it was a war for the division of the world, for the partition and repartition of colonies, 'spheres of influence' of finance capital, etc".

The era of world wars

Wars in this new era of complete capitalist domination of the world—at least those between the major capitalist states—could only be wars over the redivision of colonial territories and spheres of influences, or rather of the markets, raw material sources, trade routes, investment  outlets and strategic points to protect these that colonies and spheres of influence represent.

In fact, the two world wars that took place in the 20th century while being, like all other wars that have occurred since capitalism came into existence, trade or business wars over markets were also wars to change or preserve an existing carve-up of the world between the leading capitalist states. Thus, an important aspect of the first world war was the attempt by Imperial Germany to upset, by force of arms, the then existing imperialist division of the world which benefited in particular Britain and France. Similarly, the second world war was an attempt by Germany and Japan to re-divide the world in their interest at the expense of the United States, Britain and France.

Naturally, in such wars, it is the challenging powers that have to take the initiative and so appear as the "aggressors", but only those completely taken in by the propaganda of the victorious powers (and of course the winners also win the right to impose their version of history) will believe that it was just Germany that was responsible for the first and second world wars. An objective examination of the situation will show that, apart from their "trade" aspects, these two wars were wars (on the one side) to try to change the existing imperialist carve-up of the world and (on the other side) to preserve it. What was responsible for these wars was the whole world system of capitalism with its competitive struggle for profits and its collection of competing armed states. No one state, or politician, or people can be blamed for these wars; they were the result of the "normal" functioning of the capitalist world system.

Ironically these wars did change the existing world carve-up even though, on both occasions, the challengers were beaten off. The first world war resulted in the US emerging as the leading world capitalist power at the expense of Britain and France. The second world war confirmed this and saw the emergence of state capitalist Russia as the No 2 capitalist world power (in military, though not in economic, terms) with its own huge sphere of influence, with Britain and France being definitively relegated to second rank status.

Between 1945 (as agreed that year at Yalta by Roosevelt, Stalin and Churchill) and 1990 the world was divided into two imperialist spheres of influence, the US sphere and the Russian sphere. In the end the US beat off the Russian challenge without a world war; there were only a continuous series of localised wars on the margins of the two spheres of influence. Given the dominant and dominating position of the US in the world, it was Russia that as the challenger played the role of "aggressor", but world tension and the threat of nuclear war could not be laid at the door of one state, its leaders or its people; they resulted, and still result, from the very nature of capitalism as an economic system involving a competitive struggle for profits in which armed states as well as profit-seeking enterprises (whether private or state) participate.

Anti-imperialism as ideology

When Lenin wrote his pamphlet on imperialism in 1916 he was then merely a leader of one of the factions of the Russian Social Democratic movement and the views he expressed in it, including the errors, were those that were held by many other critics of imperialism at the time. When, however, he wrote the preface to the French and German editions in 1920 his personal position had changed: he was now writing as the Prime Minister of a state (state capitalist Russia) whose economic interest it was to upset the imperialist re-division of the world that had resulted from the first world war. This change is reflected in the content of the preface as when he wrote

"Capitalism has grown into a world system of colonial oppression and of the financial strangulation of the overwhelming majority of the population of the world by a handful of 'advanced' countries. And this 'booty' is shared between two or three powerful marauders armed to the teeth (America, Great Britain and Japan), who involve the whole world in their war over the sharing of their booty".

"Capitalism has now singled out a handful (less than one-tenth of the inhabitants of the globe; less than one-fifth at a most 'generous' and liberal calculation) of exceptionally rich and powerful states which plunder the whole world simply by 'clipping coupons'".

While it is true that "the overwhelming majority of the population of the world" are exploited, it is not true to say that their exploiters are "a handful of exceptionally rich and powerful states". If this were the case, then the conclusion to be drawn would be that the people of the world should unite against this handful of states and their ruling classes (rather than against all states and all ruling classes), and this of course was the conclusion Lenin wanted drawn.

As a leading member of the government of a state not included in the "handful" he was appealing to all other excluded states, and their subjects—"proletarian states" as Mussolini, whose state was in a similar position, once called them—to rise up and in effect re-divide the world into new spheres of influence. But this would not have ended the exploitation of the world's population; it would merely have changed the way in which the proceeds of that exploitation—the booty, as Lenin aptly called it—were shared out amongst the states into which the world was divided, i. e., amongst their respective capitalist classes. In other words, "anti-imperialism" was being used by the ruling group in an up-and-coming but still excluded state to try to assert its right to a place in the sun. State capitalist Russia was eventually to achieve this, under Lenin's successor, Stalin, after the second world war.

The same theory that the whole population of the world is exploited by a handful of imperialist states was propagated by state capitalist China in the Mao era, and for the same reason. The rulers of China have since dropped this theory, having adopted the alternative strategy of "if you can't beat them, join them" to try to enter the club of world dominating powers, but the cynical use of this theory by the Maoist regime did have an interesting side-effect.

Since it bears a certain resemblance to reality—the vast majority of the world's population is exploited, the world is dominated by a handful of rich and powerful states, the solution does lie in a world revolution leading to the establishment of a new world society—this theory did provide a basis for a re-statement of the theory of capitalism as a single world system rather than as a collection of national capitalisms existing side by side. This "world-system" approach was adopted by a whole school of writers such as Immanuel Wallerstein, André Gunder Frank and Samir Amin even if they didn't completely free themselves from the Third Word v Handful of Imperialist Powers illusion. Wallerstein in particular had some very pertinent things to say. 

The world system approach leads to a recognition of the theoretical and practical impossibility of establishing "socialism in one country", indeed of any one country in any way escaping from capitalism on its own. As Wallerstein has written of past and existing so-called socialist (in reality state capitalist) countries:

"The fact that all enterprises are nationalized in these countries does not make the participation of these enterprises in the world-economy one that does not conform to the mode of operation of a capitalist market system: seeking increased efficiency of production in order to realize a maximum price on sales, thus achieving a more favorable allocation of the surplus of the world-economy" (The Capitalist World-Economy, p. 34).

"The capitalist system is composed of owners who sell for profit. The fact that an owner is a group of individuals rather than a single person makes no essential difference. This has long been recognized for joint-stock companies. It must now be recognized for sovereign states. A state which collectively owns all the means of production is merely a collective capitalist firm as long as it remains—as all such states are, in fact, presently compelled to remain—a participant in the market of the capitalist world-economy. No doubt such a 'firm'  may have different modalities of internal division of profit, but this does not change its essential role  vis-à-vis others operating in the world market" (pp. 68-69).

"The nationalization or socialization of all productive enterprises within the bounds of a nation-state is not and theoretically cannot be a sufficient defining condition of a socialist system, even if the whole nation thinks of socialism as its objective. As long as these nations remain part of a capitalist world-economy, they continue to produce for this world market on the basis of the same principles as any other producer. Even if  every nation in the world were to permit only state ownership of the means of production, the world-system would still be a capitalist system, although doubtless the political parameters would be very different from what they presently are" (pp. 73-74).

If Wallerstein had been consistent he would have dropped his support for Third World movements seeking to establish what he admitted could only have been state capitalism (Vietnam, Cuba, Nicaragua, PLO, etc) and have urged the exploited and oppressed people of all countries to strive for world socialism as, quite literally and without exaggeration, the only way out.

World socialism, the only alternative

The existence of capitalism as a world economic system means that there are no national solutions to the problems it causes. States, or rather the more powerful ones among them, can indeed distort the world market in their favour and so acquire, at the expense of other states, a greater share of world profits for their enterprises (whether private or state) than would otherwise occur. But, as no one state is strong enough to control the whole world market economy, such distortions can never be permanent, and the governments of all states are in the end compelled to submit to world market forces and give priority to capital accumulation, competitiveness and profitability over fully meeting people's needs in such fields as housing, health, education and the environment.

The solution to the problem of war and the threat of a nuclear holocaust that would kill millions and millions of human beings can, even more obviously, only be found on a world scale. Because of capitalism's nature as a world system involving a competitive struggle for profits in which the armed might of a state, whether or not it is actually used, can be a subsidiary factor for success, disarmament is impossible within the framework of capitalism and "disarmament conferences" are just a cruel joke. But not only is disarmament, even partial or step by step, impossible under capitalism, the tendency is in the opposite direction: towards increasing armament not just by super-powers but by all states. This will go on as long as capitalism lasts, involving a greater and greater waste of resources while over half the world's population are not even properly fed, let alone having their other needs met. This is the only future the capitalist world system has to offer humanity.

The lesson is clear. If the problems currently facing humanity are to be solved, the capitalist world economy must go. The only alternative to it is another world system, one geared to serving human interests in which the resources of the Earth would become the common heritage of all the people of the planet, so that they could be used to fully satisfy the material and cultural requirements of the whole population of the world. Such a socialist society would be, like capitalism, a world system functioning as such and not a collection of separate socialist societies existing on a national scale. Similarly, the action to establish such a world socialist society can only be a world-wide social revolution and not a series of "national" socialist revolutions.

Adam Buick (Britain)