Re: Thirwall's Law and Z system (fwd)

Thu, 06 Feb 1997 15:47:29 +1100
Bruce R. McFarling (

And now a skeptical rejoinder.


Bruce R. McFarling, Newcastle, NSW

Date: Tue, 04 Feb 1997 10:36:58 -0500 (EST)
From: "Gregoire de Nowell (ci-devant)" <>
Subject: Kohlerian world synthesis

I think it is very *interesting* to try to synthesize the
two views (Keynes and World systems)but it is not really
possible to do so.

The preconditions for Wallerstein's world system is

1) a multinational state system

2) a non-incorporated non-capitalist periphery

The multinational state system allows capital to threaten
to remove itself elsewhere. This is used to coerce the state
(where it is not a willing accomplice) into anti-labor
policies which increase the possibilities for surplus

The reason the threat of abandonmnet "works" is that
conditions are objectively worse in other countries--in
particular, in those countries where pre- or non-capitalist
peasant production provides a labor force that works for
wages BELOW the minimum necessary to survive. This labor
force can do this because it draws in part upon the
resrouces of the non-incorporated sector (i.e. working
a plot of land, Mom and the kids produce enough food
for survival; Dad's (or, vice versa, Mom's) scant
wages provide money income to puchase goods made in
the market--bare necessities.

In the absence of the periphery, and the threat of
capital disinvestment, Wallerstein posits that an alliance
of state and labor would increase its rate of extraction
of surplus from capital. At which point the "system"
would not longer be possible (i.e. private ownership).

Wallerstein thus "solves" the problem of "why no revolution/
socialism" in the 19th century by positing a dynamic state/
economic system which can, at least for a time, function
by differentiating labor on a global scale and partially
(not fully) contain upward pushes on wages in the "core".
In this way the "system" maintains itself in a state
of dynamic disequilibrium and enters an accumulation crisis
whenever the push to expansion slows down.

By contrast, the Keynesian system is based on the
interconntions gbetween the marginal propensity to consume
and the income effects that follow from investment/non-investment.
So long as state action can be used to balance deficiencies
in demand, there is no crisis. We can posit an "expansive"
or "imperialist" tendency as a result of the need to maintain
employment in the capital goods sector (especially) but also
in the consumer sector. Nonetheless this is not *necessary*
to the Keynesian model. In fact, Keynes originally
articulated a "closed system." This would be *impossible*
under the Wallerstein assumptions (& he is, along with
Arrighi, in my belief the best of the crowd; though the
school as a whole is interesting). In Keynesian terms
"the rate of extraction of surplus" is not a problem as
such; everyone is assumed to be trying to sell something
for a profit. The accumulation problem arises when
aggregate income falls, and it is certainly implicit--
and even explicit--in the Keynesian model that a rise
in income of people at the *bottom* of society, those with
the highest marginal propensity to consume--would have
*beneficial* effects--their MPC being the highest, their
rise in income would have the greatest boost effects on
aggregate demand, which would spur investment, which is
the salvation of "capital." By contrast, Wallerstein's
system is in *crisis* so soon as wages begin to rise
at the bottom of the world economy. It threatens the
surplus which is the sine qua non of privately directed

So ytou can't reconcile the two systems by throwing in
a world aggregate demand function. They have diametrically
opposed underlying assumptions. Abouyt the best I can dop
for you is to point out that *both* analytic approaches
can be used to support an improvement in the condition of
the poor. But under Wallersteinian assumptions improvement
s on a purely local scale (various nations or parts thereof)
does not change the system. It merely shifts the accumulation
of surplus from one country to another.

About the only other way to reconcile the two approaches is
to say that Keynsian aggregate demand approaches are
"the politics of capitalism" (I should say the
*progressive* politics of capitalism) which has explanatory
power in the short and maybe medium term while the world
system functions best in the long-term (as an explanation
of systemn dynamics). To use a medical analogy: Keynesianism
is about broken legs and cuts and wounds. Systems theory is
about ageing. The level of approach is relevant. If you
go to the ER with a broken leg you don'twwant a lecture
about your cholesterol levels and heart attack risk thirty
years hence. And it is not at all clear that the
micro-cellular processes behind ageing have anything to do
with your broken leg.

And you would probably never go to a research cell biologist
on ageing and ask for a prognostication on your recovery
time from an accident. Nor would you ask such a person
about your chances of performing well in the Olympics. And
that is also why MWS people are the wrong ones to ask about
your stock portfolio. To the extent that they offer opinions,
they are outside their domain of expertise, and any truth
content is purely coincidental.

So to conclude the "Z" variable doesn't work. It is much
better to approach both Keynesianism and MWS as alternative
interpretive constructs and let it go at that. Current
conditions are so brutally regressive (in the United States
and elsewhere) that it is sufficient for today's purposes
to be what engineers call "directionally correct" (favor
wage protection, social security, human rights, etc.) without
having to choose the "right" or "wrong" mega-construct which
is, in any case, and only in the best of circumstances, a
partially accurate way of trying to understand an infinitely
complex system.

greg nowell

modern world system