Economic Cycles and Social Movements

Past, Present and Future

Eric Mielants, Katsiaryna Bardos, Katsiaryna Salavei Bardos

• Publisher: Routledge
• Year: 2020
• Print ISBN: 9780367528263
• eBook ISBN: 9781000171143
• Topic: Social Sciences
• Subtopic: Emigration & Immigration
• Index: Social Sciences

Economic Cycles and Social Movements: Past, Present and Future offers diverse perspectives on the complex interrelationship between social challenges and economic crises in the Modern World System. Written with a balance of quantitative, qualitative and theoretical contributions and insights, this volume provides a great opportunity to reflect upon the ongoing conceptual and empirical challenges when confronting the complex interrelations of various economic cycles and social movements. By engaging wide-ranging ideas and theoretical points of view from different disciplines, different countries and different perspectives, this study breaks new ground and offers novel insights into the way the capitalist world economy functions as well as the way social and political movements react to these constraints. Different chapters in this volume bring about novel interdisciplinary approaches to study business cycles, economic changes and social as well as political movements, offer new interpretations and, while examining the complexity of socioeconomic cycles in the long run, present epistemological challenges and a wide variety of empirical data that will increase our understanding of these complex interactions.

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INTRODUCTION

Eric Mielants and Katsiaryna Salavei Bardos

The 42nd Conference of the Political Economy of the World System provided a great opportunity to reflect upon the ongoing theoretical and empirical challenges confronting the complex interrelations of business cycles and social movements. Our international conference brought together scholars from different disciplines, different continents, and different perspectives, offering a wide variety of analytical contributions to the world system perspective broadly conceived. We welcomed and included theoretical as well as empirical studies that offered novel insights. The scholarship that follows in this volume utilizes, reformulates or engages the world system approach in stimulating ways.

In Chapter 2, Immanuel Wallerstein considers “Crisis” as a concept that has multiple meanings. The most common meaning is the downturn in major phenomena, which he labels “Cycles within structure”. Business cycles are one such widely studied phenomena. One can consider two types of structures: eternal or non-eternal. Eternal structures imply that cyclical ups and downs are part of the long-term upward or downward trend. The non-eternal structures of Fernand Braudel imply a conceptual framework of “events” and “cycles within structure”. It assumes a life-span of structures: they come into existence, function according to rules, and come to an end. Wallerstein reminds us here of the significance of the Braudelian conceptual framework.

He also argues that the modern world-system is in a structural crisis, and that this crisis is not a recurrence of a business cycle, and adds that the upturn after a downturn returns the measurement to a higher place, which results in an upward movement of the measurement (called “secular trend”). In the period of normal functioning of the system relative stability is the norm. Once the system enters into structural crisis small efforts have big effects and, as the result, the overall situation is chaotic. To properly analyze the structural crisis one must look at three arenas – the economy, the polity and the socio-cultural – for the world-system as the unit of analysis. In the capitalist system the main goal of those who produce is to realize a profit. This can be done by maximizing price or minimizing cost. There are three costs of production: remuneration of personnel, inputs of production and taxation. There are three kinds of personnel: unskilled labor, intermediate cadres, and senior management personnel. Remuneration of all three have been on an upward trend. Unskilled labor can increase pay through syndical action, however, producers can transfer production to zones of lower historical cost of production until that is no longer possible (in essence due to urbanization). Cadres experience increases in cost due to technological improvement and for political reasons (to help contain pressures of the syndical actions of the unskilled workers). Chief management officers experienced an increase in income owing to the increasing ability to take rent from the shareholders. The cost has also been constantly rising, with the most costly inputs being toxic removal, replacement of raw materials or semi-finished products; and infrastructure. Taxes have also experienced an overall increase. The combination of all these elements at the level of world-system is what accounts for the structural crisis.

To conclude, Wallerstein argues there are two camps competing for the determination of the outcome of a battle to construct a new stable system that will end the transitional period: Davos and Porto Alegre. Davos wants a structure that is not capitalist, but preserves its worst features: hierarchy, exploitation and polarization. The spirit of Porto Alegre wants a system that is relatively democratic and relatively egalitarian (which has not existed before). Both camps are divided. The key to success in a transitional situation is to tilt in the direction of one of the two basic camps so that a new stable world-system is established.

In Chapter 3, Matías Vernengo argues it has been over ten years since the Great Recession, which many have suggested is a terminal crisis of capitalism or a structural crisis of the modern world-system, which differs from normal business downturns. Many claim that it will lead to persistently lower growth. Vernengo argues that rather than being the end of capitalism itself, we are experiencing the crisis of neoliberal capitalism. For him, it is plausible that the current structural crisis of the modern world-system is a change within the economic system.

There are several economic theories of the business cycle. The dominant views on the economic cycles stress the effects of real and monetary external shocks, ignoring historical, institutional and geopolitical factors. The two most famous economists’ views on the economic cycle are Schumpeter’s synchronization of the three cycles view, and Friedman and Schwartz’s view of the failure of the Federal Reserve. Heterodox views suggested that a crisis can occur in the absence of shocks due to inherent fluctuations. Marxian views highlighted the role of profit maximization and the predator–prey mechanism. A heterodox Keynesian views profits as the result of the process of investing. Fluctuations exit because there is delay in the delivery of capital goods. Both Marxist and radical Keynesian theories of the cycle relate to a cyclical crisis within a given structure of production, but recognize the possibility of a structural crisis of capitalism. As such the Gold Standard and Breton Woods eras can be viewed as cyclical crises, while the Great Depression is an example of a structural crisis. One hegemonic cycle occurred with the decline of the United Kingdom and the rise of the United States after World War II. Many authors argue that another such turn of the hegemonic cycle is the decline of the United States and the rise of China. However, Vernengo suggests that the current crisis may not represent the end of the Neoliberal era, rather the final stages of the rise of the American hegemony.

The nature of the current crisis can be best understood by looking at the evidence. There is a clear decline in the economic growth after the Bretton Woods era. There has been a deceleration of growth in the United States and other advanced economies, as well as the collapse of the Soviet bloc, poor performance of Latin America and the Middle East. Some important trends are the deindustrialization of the core, associated with the rise of Global Value Chains (GVC) and the industrialization of the periphery (i.e. Asia). Development of GVC led to an increase in exports from China. Despite these trends, the driving force behind global GDP growth is still the growth of US’s GDP. The reason for this is that economic growth is driven by expansion of demand. Even though the US constitutes only 4 percent of the global population, it accounts for a quarter of all demand.

Alternative views of economic growth include the neoclassical view, which emphasizes the role of the rule of law, institutions and property rights. Vernengo argues that technical innovation in the West was in large part due to the expansion of demand, which resulted from military advantages that permitted the opening of foreign markets. This is an important reason to doubt the rise of the Sinocentric world, the decline of the US’s technological dominance and the rise of China. The main evidence of the crisis of the Neoliberal order is the growing inequality and the erosion of the middle class in the US. The characteristics of the crisis of the Neoliberal order are clear: low average output growth (with exceptions in China and India), high growth in Asia (the result of the transformation of the global value chains) and relocation of production, which is accompanied by increasing inequality, in turn stimulating political resistance to Neoliberal policies and the rise of populism, both from the far right and the far left. There is also a greater probability of financial crises. Interestingly, Vernengo argues that these features were, to some extent, what Neoliberals wanted to achieve. The real problem with Neoliberal order is that it has created a mass of excluded people, which may react against the system.

In conclusion, Vernengo argues that the current structural crisis does not suggest the end of capitalism or of the hegemonic dominance of the United States, while acknowledging contradictions in the capitalist system. Secular stagnation has been used by economists to explain the current situation. The argument is that the balance between investment and savings has been altered, resulting in low interest rates. In particular, low interest rates result from a slowed rate of population growth in the US, an increase in the propensity to save and the excess of global reserves in dollars. Bernanke argues that with free capital mobility global imbalances will disappear. Summers is skeptical of global rebalancing and the role of the dollar as reserve currency, and emphasizes the importance of the surplus countries expanding consumption. An alternative view is the lack of demand in the core economies stemming from inequality and private indebtedness. Stiglitz argues that secular stagnation is a political rather than economic problem. Vernengo suggests that it is unlikely that the dollar will be challenged by the yuan or euro as a key currency. Ultimately, Vernengo doesn’t believe in the end of American hegemony and the end of capitalism. This suggests that crises will continue to happen and the instability as well as the retreat of democracy are possibilities in the near future.

In Chapter 4, Ganesh Trichur focuses on Schumpeter’s Long Economic Waves (LEWs) and examines how far a purely economic history can explain the capitalist process and its crisis, excluding all external factors, such as wars, population growth, and governmental policies. He claims that capitalist business cycles are definable only after 1786 in England and the US, and after 1871 in Germany. Trichur argues that external factors interacted greatly with Schumpeter’s purely economic innovations in capitalist history. Drawing upon McNeill’s (1982b) military history, Trichur suggests that Schumpeter’s exclusion of war-making military dynamics and the dismissal of entrepreneurial opportunities created by “primitive accumulation” distorts capitalist history.

Trichur follows McNeill (1982b) to jointly examine the origins of capitalism and the rise of a military-commercial complex in fourteenth-century Northern Italian city-states, as well as the evolution and rise of the military-commercial complex in sixteenth- and eighteenth-century transalpine European States during the 300 years (1486–1786) preceding the First Long Wave. Military expansion of these states synchronized with the French Revolution and with England’s Industrial Revolution, which propelled the First LEWs (1786–1842). Military expansion continued through Bourgeois Kondratieff (1843–1897) and the Neo-Mercantilist Kondratieff wave (1897–1929), culminating in a full-blown military–industrial complex. Trichur describes in significant detail military history and the rise and evolution of capitalism during these periods. He argues that there was significant military innovation as a result of the pursuit of power of war-making states, just as there was significant commercial and industrial innovation as a result of the profit seeking behavior of the private-property economy. Moreover, there was significant collaboration between the military and the private-property economy. Trichur concludes that the connection of military expansion with each of Kondratieff’s cycles casts doubt on Schumpeter’s claim that capitalist history over the long run is entirely explained by economic processes. Thus, business cycles are at best only one part of the capitalist process and the militarist dynamic is almost entirely internal to the capitalist process.

In Chapter 5, Taylor Mann articulates the interconnectedness of political economy and cultural environments. The chapter examines the post-revolutionary period and presents both macro and micro case studies, and argues that the changes in cultural conditions indicate the tails of the systemic cycles. It also applies the principal of contradiction on both international and national basis and examines a variety of variables, ultimately attempting to explain the rise of nationalism.

In this text Mann argues that mankind encompasses both good and bad, which shape one another and are therefore dialectical. The two polarities are contradictory and complementary and contain elements of each other. The primary hypothesis studied in the chapter is that “the abundance of one polarity in relation to the other is self-reinforcing in the short-term, and self-undermining in the long-term” raising interesting questions about future developments.

Mann defines political economy world systems (PEWS) as the study of interrelationships within the macro sociological structure. The dialectics of PEWS are the contradictory relationships that shape and are shaped by the macro sociological structure. One of the primary contradictions of the world system is the dialectical relationship between business cycles and political trends. The power of every institutional structure is self-reinforcing in the short-term and self-undermining in the long-term. Mann breaks the homologies of the post-war era into three political structures: (1) the labor regime (1945–1970s) – centered on full-employment policy; (2) the capital regime (1980–2016) – centered on price-stability; (3) (2016–present). The key economic indicators in the first two periods are mirror images of each other. However, Mann argues that it was not only the economic, but also political and cultural trends that were different in those two periods.

The labor regime brought economic issues into politics, with pro-labor parties dominating during this period. This resulted in the lowest rates of inequality in modern history. However, class politics were replaced with identity politics and pro-capital elites gained control of both parties. Mann argues that the pro-capital regime that emerged during the 1980s was part of a broader structural shift that began during the mid-1960s. Mann argues that these trends provide support for Inglehart’s Material Insecurity Hypothesis, which posits that high stress environment leads to closed collectivism, xenophobia, and obedience. Low stress environment, on the other hand, leads to openness, individualism, xenophilia and freedom. Mann argues that a labor regime is an example of a closed system and that when the high stress is resolved there appears an appetite for more openness (capital regime). He also emphasizes that the political system in the US can be characterized by two phases: integrative and disintegrative. The former is a period of economic equality, social cohesion and political bipartisanship. The latter is the period of economic inequality, social stratification, and political polarity. Macroeconomic regimes shape and are shaped by income. To conclude, Mann argues that politics are not static. Rather, following Miller and Schofield, it is a dynamic process with the interaction of economic and social dimensions. He argues that a pro-labor regime requires the suppression of social issues because it requires a unified coalition of workers. A labor regime, on the other hand, requires the suppression of economic issues. Ultimately, the cultural environment plays an important role in business and political trends.

In Chapter 6, Rodrigo Luiz Medeiros da Silva and Lucimara Flavio dos Reis focus on Brazil and the recession of 2018 as well as the increasing crime rates and corruption scandals that elected a far-right politician, Jair Bolsonaro. Bolsonaro appeared to be pro US and Israel and hostile towards China, Brazil’s largest commercial partner. He visited Taiwan, which worsened relations with China. They explain Bolsonaro’s rise to power by examining economic trends in Brazil. After a decade of economic growth and poverty reduction, Brazil experienced a deep recession. However, the shift in political preference precedes recession. The authors argue that the economic crisis has in fact political roots. They assume that destabilizing factors are structural because the deterioration of political equilibrium arose during economic prosperity and institutional stability.

Brazil experienced a decline of the Gini Coefficient from the millennium to 2015. The decline in inequality implies that the salary of the lower tier of income increased faster than the salaries of the higher tier, which increases inflation. However, the increase of trade with China resulted in a downward pressure on global prices. China bought large amounts of raw materials from Brazil, provoking a persistent valuation of Brazilian domestic currency, leading to a reduction of prices of all tradable goods, offsetting the rising prices of low-skilled services. Given these trends, the authors argue that the rise of Bolsonaro in Brazil cannot be limited to the study of the internal structure of Brazilian society. Instead, they argue that it should be examined in conjunction with an examination of changes in the inter-regional and transnational division of labor. The rise of the conservatism in Brazil is understandable given the structural changes in Brazil in the twenty-first century. The authors follow Wallerstein’s World-System analysis considering the world system as one unit of division of labor and multiple cultural systems.

The authors conclude that the crisis in Brazil was not caused by the economic cycle because it began during the period of prosperity. The protests of 2013 were based on ideological and socio-distributive motives. The increase in wages of blue collar workers reduced the standard of living of white collar workers, which also affected women who used cheap labor to help with household duties. The middle class started to reject the top-down structure of power and offered opportunities for economic liberalism. They conclude that the main characteristic of Jair Bolsonaro’s election is the involvement of an intermediary segment with ideas of a decaying global order.

In Chapter 7, Luis Garrido Soto analyzes the significance of transportation to commodity chains and world markets. Surprisingly this approach has had a relatively marginal place in world-system analysis. Most scholars of the world economy include transportation in empirical analysis but largely ignore it in theoretical frameworks. It is often viewed as an “external shock.”

In his contribution, Soto attempts to provide a holistic approach to transportation within the framework of historical capitalism. First, based on Marx’s volume II of Capital he disentangles the transportation process and points out its productive moment and the commodification process in the capitalist world system. Second, he describes how this process goes from being a labor/production process to a valorization process. Third, he links the transportation process with a geographical substratum of the capitalist world economy. One can infer that the control of foreign trade flows is an interstitial dimension of capitalist accumulation on a world-systemic scale.

Throughout the lifecycle of historical capitalism, technological improvements enhanced the movement of goods, people and capital. In this chapter, Soto develops the “spatial implications” of foreign trade, where market exchange becomes the geographical transfer of value. While transportation has been increasingly considered in studies of historical capitalism, it has been subordinated to the cyclical relocations of productive capital and the extractive moment. Soto points out the importance of “lateral” appropriation of ever longer distances from the sixteenth century onwards. The fact that the cycles become shorter with time might be explained by the absolute dimensions of the world-system and the increasing mobility of capital. The challenge is to understand the absolute and relative magnitudes of transport value through the core–periphery magnitudes. When the geographical substratum of the capitalist world-system is taken into account then the world-market acquires other determinations. This is because it not only adds circulatory mediations of transportation to the core–periphery relations, but also because these same mediations are crossed by core–periphery divisions. The activity of transport incorporates more than special integration of the markets. It might be suggested that conjunctural TimeSpace covers the phases of geographical expansion and densification of the world market. Soto concludes that the production of space and geographical landsc...

Table of contents

• Cover
• Half Title
• Series Page
• Title Page
• Copyright Page
• Table of Contents
• Acknowledgments
• 1 Introduction
• 2 Cycles Within Structures vs. Structural Crises
• 3 The Crisis of the Neoliberal Order? On the Structural Crisis of the Modern World-System
• 4 Business Cycles and Militarism in Historical Capitalism
• 5 The Dialectics of Political Economy
• 6 Brazil: From the Vicissitudes of Systemic Rebalancing to the Crossroads of Conservatism
• 7 Space, Transport, and the World-Market: Maritime Transportation, Freight Rates, and the Global Control of Foreign Trade Flows in the Capitalist World-System
• 8 Polanyi’s Minskyian Monetary System
• 9 An Embedded-Systems Approach to the Socio-Economic Cycles of the World System
• 10 A Source for Greater Peripheral Sovereignty or a New Axis of Dependency Relations? China and Latin America in the Context of the Readjustment of Forces in the World System: The Case of China–Ecuador Relations
• 11 Rethinking Core and Periphery in Historical Capitalism: ‘World-Magnates’ and the Shifting Centers of Wealth Accumulation
• 12 Alternatives to Western Economic Models? Latin-American “Buen Vivir/Good Living” and the Opening of the Social Sciences
• Notes on Contributors
• Bibliography
• Index