Modern History Sourcebook:
Summary of Wallerstein on World System Theory
THE DEVELOPMENT OF A WORLD ECONOMIC SYSTEM
A Summary of Immanuel Wallerstein, The Modern World System:
Capitalist Agriculture and the Origins of the European World Economy
in the Sixteenth Century (New York: Academic Press, 1974)
In his book, The Modern World System: Capitalist Agriculture
and the Origins of the European World Economy in the Sixteenth
Century, Immanual Wallerstein develops a theoretical framework
to understand the historical changes involved in the rise of the
modern world. The modern world system, essentially capitalist
in nature, followed the crisis of the feudal system and helps
explain the rise of Western Europe to world supremacy between
1450 and 1670. According to Wallerstein, his theory makes possible
a comprehensive understanding of the external and internal manifestations
of the modernization process during this period and makes possible
analytically sound comparisons between different parts of the
Before the sixteenth century, when Western Europe embarked on
a path of capitalist development, "feudalism" dominated
West European society. Between 1150-1300, both population as well
as commerce expanded within the confines of the feudal system.
However, from 1300-1450, this expansion ceased, creating a severe
economic crisis. According to Wallerstein, the feudal crisis was
probably precipitated by the interaction of the following factors:
- Agricultural production fell or remained stagnant. This meant
that the burden of peasant producers increased as the ruling class
- The economic cycle of the feudal economy had reached its optimum
level; afterwards the economy began to shrink.
- A shift of climatological conditions decreased agricultural
productivity and contributed to an increase in epidemics within
THE NEW EUROPEAN DIVISION OF LABOR
Wallerstein argues that Europe moved towards the establishment
of a capitalist world economy in order to ensure continued economic
growth. However, this entailed the expansion of the geographical
size of the world in question, the development of different modes
of labor control and the creation of relatively strong state machineries
in the states of Western Europe. In response to the feudal crisis,
by the late fifteenth and early sixteenth centuries, the world
economic system emerged. This was the first time that an economic
system encompassed much of the world with links that superseded
national or other political boundaries. The new world economy
differed from earlier empire systems because it was not a single
political unit. Empires depended upon a system of government which,
through commercial monopolies combined with the use of force,
directed the flow of economic goods from the periphery to the
center. Empires maintained specific political boundaries, within
which they maintained control through an extensive bureaucracy
and a standing army. Only the techniques of modern capitalism
enabled the modern world economy, unlike earlier attempts, to
extend beyond the political boundaries of any one empire.
The new capitalist world system was based on an international
division of labor that determined relationships between different
regions as well as the types of labor conditions within each region.
In this model, the type of political system was also directly
related to each region's placement within the world economy. As
a basis for comparison, Wallerstein proposes four different categories, core, semi-periphery, periphery, and external,
into which all regions of the world can be placed. The categories
describe each region's relative position within the world economy
as well as certain internal political and economic characteristics.
The core regions benefited the most from the capitalist world
economy. For the period under discussion, much of northwestern
Europe (England, France, Holland) developed as the first core
region. Politically, the states within this part of Europe developed
strong central governments, extensive bureaucracies, and large
mercenary armies. This permitted the local bourgeoisie to obtain
control over international commerce and extract capital surpluses
from this trade for their own benefit. As the rural population
expanded, the small but increasing number of landless wage earners
provided labor for farms and manufacturing activities. The switch
from feudal obligations to money rents in the aftermath of the
feudal crisis encouraged the rise of independent or yeoman farmers
but squeezed out many other peasants off the land. These impoverished
peasants often moved to the cities, providing cheap labor essential
for the growth in urban manufacturing. Agricultural productivity
increased with the growing predominance of the commercially-oriented
independent farmer, the rise of pastoralism, and improved farm
On the other end of the scale lay the peripheral zones. These
areas lacked strong central governments or were controlled by
other states, exported raw materials to the core, and relied on
coercive labor practices. The core expropriated much of the capital
surplus generated by the periphery through unequal trade relations.
Two areas, Eastern Europe (especially Poland) and Latin America,
exhibited characteristics of peripheral regions. In Poland, kings
lost power to the nobility as the region became a prime exporter
of wheat to the rest of Europe. To gain sufficient cheap and easily
controlled labor, landlords forced rural workers into a "second
serfdom" on their commercial estates. In Latin America, the
Spanish and Portuguese conquests destroyed indigenous authority
structures and replaced them with weak bureaucracies under the
control of these European states. Powerful local landlords of
Hispanic origin became aristocratic capitalist farmers. Enslavement
of the native populations, the importation of African slaves,
and the coercive labor practices such as the encomienda and forced mine labor made possible the export of cheap raw materials
to Europe. Labor systems in both peripheral areas differed from
earlier forms in medieval Europe in that they were established
to produce goods for a capitalist world economy and not merely
for internal consumption. Furthermore, the aristocracy both in
Eastern Europe and Latin America grew wealthy from their relationship
with the world economy and could draw on the strength of a central
core region to maintain control.
Between the two extremes lie the semi-peripheries. These areas
represented either core regions in decline or peripheries attempting
to improve their relative position in the world economic system.
They often also served as buffers between the core and the peripheries.
As such, semi-peripheries exhibited tensions between the central
government and a strong local landed class. Good examples of declining
cores that became semi-peripheries during the period under study
are Portugal and Spain. Other semi-peripheries at this time were
Italy, southern Germany, and southern France. Economically, these
regions retained limited but declining access to international
banking and the production of high-cost high-quality manufactured
goods. Unlike the core, however, they failed to predominate in
international trade and thus did not benefit to the same extent
as the core. With a weak capitalist rural economy, landlords in
semi-peripheries resorted to sharecropping. This lessened the
risk of crop failure for landowners, and made it possible at the
same time to enjoy profits from the land as well as the prestige
that went with landownership.
According to Wallerstein, the semi-peripheries were exploited
by the core but, as in the case of the American empires of Spain
and Portugal, often were exploiters of peripheries themselves.
Spain, for example, imported silver and gold from its American
colonies, obtained largely through coercive labor practices, but
most of this specie went to paying for manufactured goods from
core countries such as England and France rather than encouraging
the formation of a domestic manufacturing sector.
These areas maintained their own economic systems and, for the
most part, managed to remain outside the modern world economy.
Russia fits this case well. Unlike Poland, Russia's wheat served
primarily to supply its internal market. It traded with Asia as
well as Europe; internal commerce remained more important than
trade with outside regions. Also, the considerable power of the
Russian state helped regulate the economy and limited foreign
STAGES OF GROWTH
The development of the modern world economy lasted centuries,
during which time different regions changed their relative position
within this system. Wallerstein divides the history of the capitalist
world system into four stages, which for our purposes can be simplified
and divided into two basic phases:
Stages 1 and 2:
This period follows the rise of the modern world system between
1450-1670. When the Hapsburg Empire failed to convert the emerging
world economy to a world empire, all the existing western European
states attempted to strengthen their respective positions within
the new world system. In order to accomplish this move, most of
the states consolidated their internal political economic and
social resources by:
a) Bureaucratization. This process aided the limited but growing
power of the king. By increasing the state power to collect taxes,
the kings eventually increased state power to borrow money and
thereby further expand the state bureaucracy. At the end of this
stage, the monarch had become the supreme power and instituted
what has been called "absolute monarchy."
b) Homogenization of the local population. To underline state
involvement in the new capitalist system and encourage the rise
of indigenous capitalist groups, many core states expelled minorities.
These independent capitalist groups, without deep rooted local
ties, were perceived as threats to the development of strong core
states. The Jews in England, Spain, and France were all expelled
with the rise of absolute monarchy. Similarly, Protestants, who
were often the merchants in Catholic countries, found they were
targets of the Catholic Church. The Catholic Church, a trans-national
institution, found the development of capitalism and the strengthening
of the state threatening.
c) Expansion of the militia to support the centralized monarchy
and to protect the new state from invasions.
d) The concept of absolutism introduced at this time related to
the relative independence of the monarch from previously established
laws. This distinction freed the king from prior feudal laws.
e) Diversification of economic activities to maximize profits
and strengthen the position of the local bourgeoisie.
By 1640, northwestern European states secured their position as
core states in the emerging economy. Spain and northern Italy
declined to semi-peripheral status, while northeastern Europe
and Iberian America became peripheral zones. England gained ground
steadily toward core status.
During this period, workers in Europe experienced a dramatic fall
in wages. This wage fall characterized most European centers of
capitalism with the exception of cities in north and central Italy
and Flanders. The reason for this exception was that these cities
were relatively older centers of trade, and the workers formed
strong politico-economic groups. The resistance of workers broke
down the ability of employers to accumulate the large surplus
necessary for the advancement of capitalism. Meanwhile, employers
in other parts of Europe profited from the wage lag by accumulating
large surpluses for investment.
Long-distance trade with the Americas and the East provided enormous
profits, in excess of 200%-300%, for a small merchant elite. Smaller
merchants could not hope to enter this profiteering without substantial
capital and some state help. Eventually, the profits of the trans-Atlantic
trade filtered down and strengthened the merchants' hold over
European agriculture and industries. Merchants with sufficient
power accumulated profits through the purchase of goods prior
to their production. By controlling the costs of finished products,
merchants could extend their profit margin and control the internal
markets. This powerful merchant class provided the capital necessary
for the industrialization of European core states.
Stages 3 and 4 (18th century and beyond):
Industrial rather than agricultural capitalism represented this
era. With the shifting emphasis on industrial production, the
following reactions characterized this period.
a) European states participated in active exploration for the
exploitation of new markets.
b) Competitive world systems such as the Indian Ocean system were
absorbed into the expanding European world system. With the independence
of the Latin American countries, these areas as well as previously
isolated zones in the interior of the American continent entered
as peripheral zones in the world economy. Asia and Africa entered
the system in the nineteenth century as peripheral zones.
c) The inclusion of Africa and the Asian continents as peripheral
zones increased the available surplus, allowing other areas such
as the U.S. and Germany to enhance their core status.
d) During this phase, the core regions shifted from a combination
of agricultural and industrial interests to purely industrial
concerns. Between 1700, England was Europe's leading industrial
producer as well as the leader in agricultural production. By
1900, only 10% of England's population was engaged in agriculture.
e) By the 1900s, with the shift toward manufacturing, core areas
encouraged the rise of industries in peripheral and semi-peripheral
zones so that they could sell machines to these regions.
The capitalist world economy, as envisioned by Wallerstein, is
a dynamic system which changes over time. However, certain basic
features remain in place. Perhaps most important is that when
one examines the dynamics of this system, the core regions of
northwestern Europe clearly benefited the most from this arrangement.
Through extremely high profits gained from international trade
and from an exchange of manufactured goods for raw materials from
the periphery (and, to a lesser extent, from the semi-peripheries),
the core enriched itself at the expense of the peripheral economies.
This, of course, did not mean either that everybody in the periphery
became poorer or that all citizens of the core regions became
wealthier as a result. In the periphery, landlords for example
often gained great wealth at the expense of their underpaid coerced
laborers, since landowners were able to expropriate most of the
surplus of their workers for themselves. In turn in the core regions,
many of the rural inhabitants, increasingly landless and forced
to work as wage laborers, at least initially saw a relative decline
in their standard of living and in the security of their income.
Overall, certainly, Wallerstein sees the development of the capitalist
world economy as detrimental to a large proportion of the world's
Through this theory, Wallerstein attempts to explain why modernization
had such wide-ranging and different effects on the world. He shows
how political and economic conditions after the breakdown of feudalism
transformed northwestern Europe into the predominant commercial
and political power. The geographic expansion of the capitalist
world economy altered political systems and labor conditions wherever
it was able to penetrate. Although the functioning of the world
economy appears to create increasingly larger disparities between
the various types of economies, the relationship between the core
and its periphery and semi-periphery remains relative, not constant.
Technological advantages, for example, could result in an expansion
of the world economy overall, and precipitate changes in some
peripheral or semi-peripheral areas. However, Wallerstein asserts
that an analysis of the history of the capitalist world system
shows that it has brought about a skewed development in which
economic and social disparities between sections of the world
economy have increased rather than provided prosperity for all.
Source: Uncertain of the source of this summary
of Wallerstein. If you have any info, please send.
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(c)Paul Halsall Aug 1997