Arrighi's cycles and world capitalist development since 1740 -

Fri, 4 Apr 1997 17:41:10 +0200 (MET DST)

One notion figures here: the notion that capitalist development is characterized by strong cyclical fluctuations, that are parallel to political and social instabilities and changes, both at the national and the international level. In a way, this notion goes back to the thought of Giovanni Arrighi, who proposed in his analysis of the 'Long 20th Century' (1995) the thought that the logic of accumulation on a world-scale is governed by the ups and downs in the succession of regulation and de-regulation, starting from the Venetian (regulatory) and Genoese (deregulated) era of capitalism, followed by the Dutch (regulatory) and British (deregulated) era, and the US hegemony, which - after 1945 - was a regulatory model. From the late 1970s, however, we witness, Arrighi's argument goes on, again the renewed rise of a deregulated model of world capitalism. The often bemoaned end of the Keynesian era has its real basis, Arrighi's argument goes, in the shifting accumulation pattern of !
world capitalism. We agree with Arrighi that the rise of financial capitalism and the decline of productive capitalism are always connected to major shifts in the location of the centres of world capitalism, first from Venice to Genoa, followed by the shift from Genoa to Amsterdam, from Amsterdam to London, from London to New York, and from there on to the capitalist archipelago of East Asia today (Arrighi, 1995). Arrighi also introduced the important notion, that there is a certain coexistence in the time-perspective between the 'different logics', so that elements of the waning and elements of the emerging order might coincide for years. Arrighi's sequential model of world capitalism is also a historic interpretation of the old Marxist notion of financial expansion - > material expansion- >financial expansion (MCM'), and as such radically challenges the notion of 'unchanging' general laws of rise and decline under world capitalism. Following Arrighi, we postulate that regula!
tory strategies might have been well compatible with growth under the rise of the Venetian, Dutch, and American era, while at the time of the rise of 'deregulation', such deregulatory strategies and not 'big government' will be conducive to economic growth.
There were dozens of articles being published on these 'laws' of development in world society, with the quantitative dependency argument perhaps most clearly having been stated by Bornschier and Chase Dunn in 1985. Their widely received book, and a never-ending series of quantitative articles in the leading social scientific scholarly journals in America, still can be considered as the quantitative canon of arguments about the workings of domination and dependence in the capitalist world economy put forward over the years by such different authors in such different countries at such different points of time as Herb Addo (before his untimely death in Trinidad); Samir Amin (now Senegal); Volker Bornschier (Switzerland); Fernando Henrique Cardoso (now the president of his home-country, Brazil); Christopher Chase-Dunn (USA); Armando Cordova (Venezuela); Steffen Flechsig (Neue Bundeslaender); Andre Gunder Frank (now Canada); Froebel, Heinrichs and Kreye (Germany); Goldfrank (USA);!
Hettne (Sweden); Hoell (Austria); George Kent (Hawaii, USA); Kimmo Kiljunen (Finland); Kari Levitt-Polanyi (Canada); Kunibert Raffer (Austria); Robert Ross (USA); Kurt Rothschild (Austria); Dieter Senghaas (Germany); Robert Stauffer (Hawaii, USA); Hanns-Albert Steger (Germany); Osvaldo Sunkel (Chile); Henryk Szlajfer (Poland); Immanuel Wallerstein (USA); Edward L. Wheelwright (Australia), being joined, as hinted at already above, by the quantitative debate in such journals as American Journal of Sociology, American Political Science Review, American Sociological Review, Social Forces, and many others.
The basic two questions are then:
a) do these 'laws' still hold and are they still in force after the world went through the recession of the late 1970s and early 1980s?
b) do these 'laws' still hold for new phenomena, like social, ecological, and human development, as well as gender disparities, that more and more become an intrinsic part of the capitalist world system, and that, better than economic growth, express ascent and decline in world society today?
International social science since the mid-1960s studied patterns of international development in a cross-national perspective. This movement towards retrievability of research results, based on statistical analysis with internationally available and recognised data, which was initiated, amongst others, by the late Karl Wolfgang Deutsch from Harvard University, had important implications for international social policy. It allowed for the rigorous testing of hypothesis, contested in the political arena in an often passionate fashion.
Our attempt to estimate the determinants of world economic and social development from 1980 onwards tries to be based in this tradition. The UNDP Human Development Reports, our main new data source, emerged over the years as one of the leading socially scientific relevant data collections for cross-national research; the wealth of data contained in them shows concern for the global environment and for social decay and by far exceeds in quality other comparable products on the market today. The choice of the time period corresponds to the Kondratieff-type long cycle theories, that are presented below. Our data collection goes on to use some materials which are relevant for the description of the long-run position of a society in terms of ownership of the means of production (public investment, transnational investment), the social security programme experience, and ethno-linguistic fractionalization from the Bornschier/Heintz data collection. In combining the new UNDP data with!
these older materials from Bornschier/Heintz and the World Handbooks of Political and Social Indicators, I-III, pertaining to the earlier Kondratieff cycle, we fully integrate the new knowledge about cycles into our hypotheses.
Our data sources for the study of this latest phase in the evolution of transnational capitalism relied at least in part also on Fischer Weltalmanach; Nohlen; Seager and Olson and Stiftung Entwicklung und Frieden, which are excellent data handbooks for the study of international relations. Some data were also cross-checked with Tausch, 1993, 1994; UNECE; UNICEF (Cornia, 1993 and 1994); and the World Bank WDR and other sources. Our main samples of 123 nations and 135 nations comprised all the countries for which UNDP reports economic growth rates and life expectancies at two different periods. The countries of the ex-USSR are not being included for the reason of data limitations, while other 'real socialist' or ex-'real socialist' nations, like China and Hungary, at any rate integral parts of the conceptualisations of the capitalist world economy today, do form part of our main 123 and 135 countries' investigation.
Our leading, but not exclusive indicator of the process of dependence and globalization is the historic legacy of MNC (multinational corporation) penetration of a country in the earlier Kondratieff-cycle (Tausch/de Boer, 1997) or the effects of the share of inward FDI stock in the gross domestic product of the host countries of MNC penetration. The MNC-penetration-concept was first contained in the very widely used publication by Bornschier and Heintz, reworked and enlarged by Ballmer-Cao and Scheidegger, later on widely popularised by the book publication Bornschier/Chase Dunn, 1985. The emphasis was on MNC investments, 1967 and 1973, weighted by population and total capital stock. The more recent UNCTAD concept of the share of FDI stock is defined in terms of total host-country GDP. That is to say, available measurements correspond to the value of the indicator during the B-phase of the earlier long economic cycle.
The more dependent a country is in the system of the world-wide market economy, the greater will be the penetration of its economy by transnational capital. Dependency theories (Cardoso/Faletto, 1971) hold, that the countries of the periphery were integrated into the world-economy in the following sequence of events

(i) desarrollo hacia exterior (development to the outside)
(ii) desarrollo hacia adentro (inward-looking development)
(iii) transnacionalizacion de los mercados internos (internationalisation of the internal markets)

Starting from the late 1950s, the transnational system increasingly dominates the industrialisation process of the periphery and the semi-periphery (phase iii). The penetration of the host countries by transnational investment becomes the most important scientific yardstick of dependency (Bornschier/Chase-Dunn, 1985).

To these phases in the evolution of the international division of labour, one would have to add

(iv) financial capitalism and globalization

as the latest stage of centre-periphery relationships during the 1980s and 1990s.
Cycle time plays an important role in our approach. Above, we already hinted at Arrighi's thought, that the logic of accumulation on a world scale shifts along time, and that we again witness during the 1980s and beyond a deregulated phase of world capitalism with a logic, characterized - in contrast to earlier regulatory cycles - by the dominance of financial capital. Arrighi further teaches us that even a century can be a 'short run' in the evolution of world capitalism. There are signal crises of world capitalism, and there are terminal crises of the world system, like the great crash of the early 1340s, which marked the beginning of the Genoese age, the 1560s, which marked the beginning of the Dutch era, the 1750s and 1760s, which marked the beginning of the British era, and the 1930s, which were the terminal crisis of British world capitalist dominance. Regulation can be successful, like after 1560, and 1930, and deregulation can be successful, like after 1340, 1760, and !
- most probably - the 1980s (compiled from Arrighi, 1995). Macroquantitative research about the determinants of world development has to be conscious about the time horizon, in which the research design is situated. Bornschier (1988) found out that state sector expenditures in 21 western democracies correlate with economic growth in the following fashion:

1950-60 r = + .41
1960-75 r = - .07
1974-77 r = - .72

(Bornschier, 1988: 309)

Thus, the growth efficiency of public expenditures has drastically declined over recent decades. If the post-war period was regulatory, the post-1968 period decidedly is anti-regulatory (Arrighi, 1995; Bornschier, 1988). Studies about world development throughout the entire period 1960 - 1997 might be misleading, because the time period would reflect the 'logic' of the waning 'regulatory' cycle, the economic global crisis of the 1970s and the early 1980s, and the ascent of financial capitalism and the East Asian archipelago of the 1990s. Thus, the beginning of the 1980s serve as our 'cutting point'.
The long cycle literature, largely overlooked by macroquantitative development studies, tells us, why there is a recurrent pattern of instability in the social orders both at the level of national society as well as at the level of the international system. It also explains the often puzzling aspect, how different studies, using different time perspectives, reach different results. Long cycles by themselves are quite a strong argument in the debate about the long-run viability of the world-wide market economy: the recurrence of cycles, depressions and wars was thematically portrayed, amongst others, by Goldstein (1988) and Arrighi (1995) in very far-reaching empirical studies of world development from 1450 onwards. Our starting point was the well-known data series by J.Goldstein (1988):
Xtn+1 is the index value of world production for tn+1; Xtn index value of world production for tn

(3.1.1) DYN = _______ - 1

Post-1975 data: UN ECE; Fischer Weltalmanach, see Tausch, 1994. X is the time axis.
(3.1.2)(dating scheme Tausch, 1993a) growth 1740-1778 = a - b1*X + b2*X2; r2 = 0.7%
(3.1.3) (dating scheme Goldstein, 1988) growth 1746-1789 = 5th-order polynomial; r2 = 9.6% (nadir during mid-century)
(3.1.4) (dating scheme Tausch, 1993a) growth 1779-1841 = a - b1*X + b2*X2 - b3*X3 + b4*X4; r2 = 0.3%
(3.1.5) (dating scheme Goldstein, 1988) growth 1790-1847 = 5th-order polynomial; r2 = 1.1%
(3.1.6) alternative model for the 18th and early 19th century: growth 1756-1841 = a - b1*X + b2*X2 - b3*X3 - b4*X4 + b5*X5; r2 = 3.0%; inclusion of 2-year-time-lagged variable: squared root battle fatalities yields a fifth-order polynomial expression with 3% explained variance, statistical influence of war on growth is positive
(3.1.7) growth 1842-1883 = a + b1*X - b2*X2 - b3*X3 - b4*X4 + b5*X5; r2 = 2.2%; inclusion of 2-year-time-lagged variable: squared root battle fatalities yields a fifth-order polynomial expression with 2.6% explained variance, statistical influence of war on growth is positive
(3.1.8) (dating scheme Goldstein, 1988) growth 1848-1892 = 5th-order polynomial; r2 = 2.8%
(3.1.9) (dating scheme Tausch, 1993a) growth 1884-1932 = a - b1*X + b2*X2 - b3*X3 - b4*X4 + b5*X5; r2 = 11.62%; inclusion of 2-year-time-lagged variable: squared root battle fatalities yields a fifth-order polynomial expression with 16.8% explained variance, statistical influence of war on growth is positive
(3.1.10) (dating scheme Goldstein, 1988) growth 1893-1939 = 5th-order polynomial; r2 = 4.3%
(3.1.12) (dating scheme Tausch, 1993a) growth 1933-75 = a - b1*X + b2*X2 - b3*X3; r2 = 10.5%; all predictors significant at 5%-level; inclusion of 2-year-time-lagged variable: squared root battle fatalities yields a fifth-order polynomial expression with 12.4% explained variance, statistical influence of war on growth is negative. Data series ends in 1971.
(3.1.13) (dating scheme Goldstein, 1988) growth 1933-75 = 5th-order polynomial; r2 = 10.5%; all predictors significant at 5%-level
(3.1.14) (dating scheme Tausch, 1993a) growth 1976-92 = a + b1*X - b2*X2; r2 = 10.6%
(3.1.15) (dating scheme Goldstein, 1988) growth 1976-92 = 3rd-order polynomial a + b1*X - b2*X2; r2 = 10.6%
First we update the evidence, that led Goldstein to the conclusion that the capitalist world systems tends continuously towards wars and violent conflicts:

Graph 3.1: the tendencies of the capitalist world economy towards Kondratieff cycles

economic growth (left hand scale) and war intensity (right-hand scale) in the world economy. Moving 9-year averages, calculated with EXCEL 5.0 from Goldstein's original data.

war intensity = nat. logarithm from (1 + battle fatalities from great-power wars ^0.10)

At a time of major shifts in world politics and economics, it is no wonder that systematic studies in the evolution of the international order have gained ground. Arrighi's main hypotheses (1995) differ from those of Goldstein. Goldstein's quantitative approach (1988 ff.) concentrates on the major power confrontations as the 'watershed' in international relations. Ample empirical evidence supports Arrighi's and Goldstein's theories. The recurrence of major power wars in the capitalist world economy from 1495 to the present is one of the most intriguing features of the international system. Each world political cycle up to now corresponded to a 'W'-pattern of war intensity. The x-axis in our graph is the number of years after the end of the major power wars, i.e. 1648, 1816, and 1945. The starting point is Goldstein's data series about economic growth since 1740:

economic growth in the world system since 1740; adapted from Goldstein, 1988 and UN ECE/Fischer Weltalmanach, current issues. 5 and 9-year moving averages

>From Goldstein's data series, it is possible to derive - without any smoothening of the data - the following cycles of war in world society since 1495, using 6th order polynomial expressions:

Graph 3.2: The war cycles since 1495




1946 -

annual battle fatalities from major great power wars in thousands

The stylized function could be seen as follows:

Source: our own compilations, using a sinus function (1495 = 0; 1496 = 0,33; 1497 = 0,33 + 0,33 etc.) about war in the world system. The sinus function is the stylized function, based on reasoning about three major global wars in capitalist world society (Thirty Years War, Napoleonic Wars, Germany's Wars in the 20th Century); the dotted lines are the fourth root of Goldstein's data series on major power battle fatalities; the trend line is a 20 years moving average of major power war fatality rates, calculated as before

Alternatively, we could also use a shorter swing, which would then be more in line with Arrighi's argument of the four hegemonies in world capitalism (Arrighi, 1995): Genoa, the Netherlands, Great Britain and the United States:

Source: our own compilations, using a sinus function (1495 = 0; 1496 = 0,45; 1497 = 0,45 + 0,45 etc.) about war in the world system. The sinus function is the stylized function, based on Arrighi's reasoning about the four hegemonies in capitalist world society, connected with the ups and downs of war in global society (Genoa, the Netherlands, Britain, the United States, while the major power confrontations were Charles V Wars, the Thirty Years War, the French-British Conflict of the 18th Century, Napoleonic Wars, Germany's Wars in the 20th Century); the dotted lines are the fourth root of Goldstein's data series on major power battle fatalities; the trend line is a 10 years moving average of major power war fatality rates, calculated as before

Each long Goldstein or Arrighi cycle of world politics could be characterised, according to Modelski, by a dominant world economic power and it's challenger. Goldstein and Arrighi have very aptly described these world political cycles in great detail, so there is no need to repeat their reasoning here. The simple statistical evidence to support their theories on the basis of Goldstein's own original data is surprising, though. Our tests use a very common software, available on millions of home micro-computers around the world (the EXCEL 5.0 programme). The R^2 for the test series is between 31% and 91%; no transformation of the data was performed. The W-structure of conflict emerges neatly from all the tests. And each time, the challengers for world hegemony of a dominant sea-power were former members of the ruling coalition (France, Germany, Russia + China?), while the challengers in the world wars (Thirty Years War, Napoleonic Wars, German Wars of our century) always were co!
ntinental powers (the Hapsburgs, France, Germany) (see also: Modelski, 1987; Goldstein, 1988, Arrighi, 1995). Thus, there is some support at least for the hypothesis about the sequence of world politics, leading from global wars to hegemonies, to the de-concentration of the international system, to the de-legitimisation of international leadership, and finally, to new global wars.
Ever since the days of Schumpeter, economists and sociologists were inclined to see also more short-term cycles at work, namely the Kitchin cycles, lasting three and a half years, the Jugar cycles lasting 8-10 years, and the Kuznets cycles between 18 and 25 years. The intense controversy about cycles should only be mentioned briefly here; for the policy-maker perhaps more important is the fact, that after the economic crisis of 1825, the stock exchange collapse of 1873, the Black Friday of 1929 and the world recession starting in 1973/75, world capitalism has experienced quite severe downswing-phases, that hit with elementary weight especially the countries of the periphery and the semi-periphery. The Kondratieff cycles of approximately 50 years duration and the Kuznets cycles, 20 years long, are especially relevant for our understanding of the ups and downs of world economics and politics: our data series, constructed from Goldstein's original data, is explained quite markedl!
y by the application of the Kondratieff and Kuznets-cycle hypotheses, even when there are now data filtering or smoothening operations being performed:

Graph 3.3: Kuznets-cycles in the world system, 1756 - 1975

Three Kuznets cycles make up one Kondratieff cycle; three Kondratieff cycles up to now led the world economy in a W-shaped pattern towards the major global wars.
The 'filtering' of the very short-term economic fluctuations plays an important part in the debate about the existence of Kondratieff-cycle fluctuations. It should not be denied here, that Kondratieff cyclical movements in the world economy are seen to be highly controversial, with a large tradition in economic literature, like Eklund and Kuznets, denying the existence of such cycles. Other social scientists from a variety of theoretical camps, only some of them, like Mandel, Marxists, others, like Forester, W. W. Rostow, also took up the challenge of long-wave research. Filtering out the very-short-term Kitchen-cycle fluctuations by applying 5 year moving averages and then to explain these moving averages by a Kondratieff cycle hypotheses from 1756 seems to be a reasonable new research strategy. The results for such a procedure are being reprinted below:

Graph 3.4a: New evidence regarding the Kondratieff cycles, 1740-1975, based on 5-year moving averages

Graph 3.4b: Kondratieff cycles, based on 10 year moving averages

The stylized Kondratieff-function could have the following form:

Source: our own compilations, using a cosine function (1740 = 0; 1741 = 0,85; 1742 = 0,85 + 0,85 etc.).

The fit with the empirical data for a Kondratieff swing is the following:

Legend: A Kondratieff-type cyclical fluctuation in the world economy, compared to the empirical data about world economic growth (dotted line) and the 10-year moving averages. As to the calculation of the cosine function, see above

Legend: Kuznets-cycles and growth in the capitalist world economy, 1740-1975. Kuznets fluctuations, 10-year moving averages of real growth rates and the empirical data (dotted line). (1740 = 0; 1741 = 0,255; 1742 = 0,255 + 0,255 etc.).

Thus, we achieved here a structural differentiation of the time periods, and it will be easier to correctly evaluate the cross-national evidence from different periods in the history of the evolution of the world economy.

Throughout this work, the following statements hold:

Regression coefficients at the level of error probability < or = 5% are printed in bold type. The following further conditions do hold:

Concepts: growth always refers to per capita income growth in real terms, if not specified otherwise

Time period: 1980s and beyond (if not specified otherwise)

Missing values: mean substitution, if possible, by known values for the economic or geographic region (like: countries with low human development, excluding India et cetera)

It should be explained here, what is meant under the term 'structural adjustment': the empirical measurement (and not normative concept) of adjustment compares the GNP per capita growth rates in two subsequent periods with a regression-based residual analysis. In other words: we try to answer the empirical, and not normative question, which countries accelerated their economic growth compared to the earlier cycle, and which countries adapted badly to the new conditions. Our measurement concept compares growth rates predicted for the period of the new Kondratieff cycle (post 1980/82)(^Yi) upon knowledge of the performance during the earlier Kondratieff B-phase (1965-80) with the actual growth rates Yi during the new Kondratieff cycle from 1980/82 onwards:

(3.2a) adjustment i = Yitn-^Yitn
Y = economic growth
Ytn = a + b1 * Ytn-1

Changes in the underlying logic of ascent and decline in the world economy will be especially observable at a time of comparison between the logic of a waning Kondratieff cycle and the emerging laws of a new cycle. Thus, adjustment will be a theoretically especially relevant phenomenon.
Next, we should deal with the trade-off between development level and performance. Policy planning must, in order to avoid spurious results, under any circumstances properly specify such trade-offs. Poor countries increase rapidly their average life-expectancy or economic growth and they quickly reduce their income inequality; prima vista there will be a spurious and very high, but absolute non-sense correlation between, say, the number of shanty-town dwellers per total population and life expectancy increases. The reduction of the infant mortality rate, the acceleration of growth or the redistribution of income over time will all dramatically and positively be influenced by the number of people still living in shanty towns. If we do not properly specify development level as an intervening variable, our results will be biased extremely.
The curve-linear function of growth, being regressed on the natural logarithm of development level and it's square, is sometimes called the 'Matthew's effect' following Matthew's (13, 12):

'For whosoever hath, to him shall be given, and he shall have more abundance: but whosoever hath not, for him shall be taken away even that he hath'

Social scientists interpreted this effect mainly in view of an acceleration of economic growth in middle-income countries vis-à-vis the poor countries and in view of the still widening gap between the poorest periphery nations ('have-nots') and the 'haves' among the former Second and Third World (Jackman, 1982):

(3.2b) economic growth/adjustment success = a1 + b1* ln (PCItn-1)-b2* (ln(PCItn-1))2

The same function is also applied to income inequality, following a famous essay published by S. Kuznets in 1955. Redistribution gets underway after 1000 $ per capita income is reached; the share of the richest 20% diminishes from approximately 55% to around 40%. Growth and adjustment accelerate with redistribution.
Now, we should turn to basic human needs satisfaction and hence, life expectancy: it is very difficult to arrive at valid propositions about social conditions and development as a dependent variable on the basis of income distribution data alone. There are comparable World Bank income distribution data for only 65 countries, while basic human needs satisfaction data are available from many more countries. Studies about the determinants of basic human needs satisfaction, and hence, poverty are of a more recent date (Stokes and Andreson, 1990; Tausch and Prager, 1993; furthermore: Moon and Dixon, 1992; Ragin and Bradshaw, 1992). The idea to link life expectancy to energy consumption levels or dollar income levels, that is to say, to patterns of civilisation, that exploit mother earth and lead to the self-destruction of life chances of the human species, is still somewhat revolutionary, although there has been quite an extensive debate among different researchers from the ILO, th!
e World Bank and other researcher institutions, most notably Goldstein, 1985b and Russett, 1983b, on the proper specification of the development-basic-human-needs trade-off. Among the decision makers of our time, US vice-president Gore formulated such 'green' philosophical apprehensions in the most stringent fashion (Gore, 1994). It is difficult to design a single indicator of the civilisational malaise constituted by the environmental crisis caused by the industrial mode of production. But the energy consumption-life expectancy trade-off offers a very clear, mathematical expression. The prime success measure of a society should be, how much energy can be saved in achieving a given quantity of life of the population and to avoid premature death. The limited resources of our planet, so clearly foreseen by Polanyi, dictate, that as little as possible energy is being used. The social demands and moral convictions of civilisations dictate, that premature death should be avoided. T!
hus, eco-social reasoning taking into account the performance scores of the energy consumption-life expectancy trade-off would hold, that the energy consumption of a society should be minimised and life expectancy maximised. One recent formulation of this position, reported in Tausch and Prager, 1993, that contains a reference to the extensive earlier debate at the World Bank and at the ILO about this trade-off, arrived at the conclusion that using very common deviates of the natural constants e (2.7) and pi (3.1) reproduce this important trade-off in an optimal fashion, although most other published mathematical formulations boil down to similar strong curve-linear functions. It is also imperative to consider the effect of already achieved levels of life expectancy on the subsequent life expectancy increase: a poor society with, say, 40 years life expectancy, will find it easier to expand the well-being of the population to 50 years average life expectancy than a society that!
already reached the level of a 75 year-average.

To avoid problems of collinearity, increases in life expectancy over time are being calculated by differences in logarithms 10, i.e.

(3.3) DYN LEX = ((log 10 (LEX tn)-log 10 (LEX tn-1)) * 100

Let LEX denote life expectancy or other basic human needs indicators, PCI per capita incomes, ENCONS p.c. energy consumption rates per capita and year in kg oil equivalent, and DYN rates of increases of basic human needs satisfaction. On a world scale and for different groups of countries, levels of human development and increases in terms of human development, reductions in infant mortality et cetera will always significantly correspond to the following function and the first derivative:

(3.4) LEX = a + b1 * (ENCONS p.c.)^(1/(e^2)) - b2 * (ENCONS p.c.)^ln(pi)

R2 = 72.4%; F = 157.63; df. = 120; alpha (one-tailed) 5% > 1.289

(3.5) DYN LEX(tn) = a - b1 * LEX (tn-1) +-

b2 * (PCI)(tn-1)^((1/(e^2))-1)-b3 * (PCI)(tn-1)^(((ln(pi))-1)))

R2 = 69.8%; F = 91.85; df. = 120; alpha (one-tailed) 5% > 1.289
predictors b2 and b3 only: R2 = 43.3%; F = 45.89; df. = 120; alpha (one-tailed) 5% > 1.289. Formulation also possible with ENCONS p.c., but the PCI data series is more complete

Based on UNDP (1993) data for all the countries that report economic growth rates for the periods 1965-80-90, equation (3.4) explains 72.4% of total variance of life expectancy; equation (3.5) - even without life expectancy in 1960 as an additional control variable - explains 45.9% of total variance.
Equation (3.2) can also be applied to human development, the world gender issues and democratisation:

(3.6a) human development or gender development or gender empowerment = a1 - b1* ln (PCItn-1) + b2* (ln(PCItn-1))2


(3.6b) political rights violations or civil rights violations = a1 + b1* ln (PCItn) - b2* (ln(PCItn))2

Human development, and the growing participation of women in society, are a clearly rising function of achieved development level, while political and civil rights violations decrease along the course of development. No result is weaker than roughly 2/5 of variance explained; and all results show - per se - an optimistic perspective for human development, gender justice and democratisation: the human development index, the gender development index, the gender empowerment index (ranging from 0.0 to 0.999 each), political rights violations and civil rights violations (ranging from 1.0 to 7.0) are all to be represented as a function of achieved development level in 1990 (expressed in purchasing power parity rate). For the calculation of the gender empowerment (GEI) function, the following procedure to estimate missing data was followed: means of country groups with available data were taken to substitute missing values. The following groups were used: industrial countries (UNDP d!
efinition, 1993; GEI = 0.56); developing countries with a higher human development index (UNDP 1993 list - Barbados through to Saint Lucia; GEI = 0.391); developing countries with medium human development (UNDP 1993 list - Turkey through to El Salvador; GEI = 0.347); developing countries with low human development (UNDP 1993 list - Maldives through to Sierra Leone; GEI = 0.27). The following statistical properties of the functions hold:

human development index R^2 = 82.4%; F = 281.0
gender development index R^2 = 80.1%; F = 240.8
gender empowerment index R^2 = 60.0%; F = 90.0
political rights violations R^2 = 38.0%; F = 36.8
civil rights violation R^2 = 40.0%; F = 39.9

(3.6a) might be formulated, however, by function (3.6b), applying model (3.4). The function is:

(3.6b) Human Development Index = a + b1 * (real purchasing power p.c.)^(1/(e^2)) - b2 * (real purchasing power p.c.)^ln(pi)

The trend-line then has the following fashion:

Graph 3.5a: the Human Development Index as a function of the level of development (real purchasing power)

Legend: human development as a function of development level

Gender empowerment itself is a very strong non-linear function of achieved development level. The above functions will be used in the following chapter to evaluate the validity of different development theories to explain the dependent variables under due consideration of these general development functions. To exclude them will lead to spurious results. The capability poverty measure, in turn, is being determined by the following function of real purchasing power of a society:

Graph 3.5b: capability poverty as a function of real purchasing power - the results at the level of the semi-periphery and periphery countries

Graph 3.5c: capability poverty as a function of real purchasing power - the results at the level of the semi-periphery and periphery countries with a real GDP per capita between 4000 $ and 8500 $

Finally, we summarise the critical values of the t-test, applied in this work, at the 5%-level in Graph 3.6:

Graph 3.6: critical values of the t-test

Legend: the x-axis symbolises degrees of freedom, the y-axis critical values of the t-test at the 5%-level according to Kriz, 1978

Some nations develop more rapidly and in a less contradictory manner as other nations. Over the last decade, Europe began to lag behind, while Asia is ascending. The globalization model of economic and social stagnation in the world economy, which was empirically first developed by Bornschier, is clearly vindicated again with the new data. The European Union policies, as maintained by EU-critics ever since the days of Johan Galtung, favour disproportionately the powerful, big, European transnational corporations and banks, while the real dynamics of modern capitalism demand a lean, relatively socially just state, a high, internal savings mobilization, and relatively little room for manoeuvre of social distribution coalitions. The protected home market for the transnationals in Europe created large market distortions which are inhibiting economic growth.
TNC-dominated development pressures societies towards higher income inequality, and less employment. Women, especially, become marginalized, a trend, which is still enhanced by the growing tendency towards a new international division of labour within Europe. In Europe, where the legacy of politically established feminism is still relatively strong, state expenditures are being used to redress the balance, but the struggle is an uphill one against the tendencies of contemporary globalization. Feminism will become over the years the big loser in the redistribution of world political and economic resources.
High MNC penetration becomes one of the main blocks against further European ascent in the world economy. We have already stated, that for a true liberal economist, dependency is a special situation of the typical constraints, caused by a policy of import substitution and export discrimination. Policies, that create double deficits (huge current account balance deficit + large state sector budget deficits) and discriminate against internal savings, will lead to a high propensity to import foreign capital, often still aided by de-iure or de-facto policies that prevent enterprise creation and savings mobilization. Instead of selling-out the 'family jewels' of national industry, both private and national (so common in Europe today), there would be an alternative for the European policy-maker: neo-classical economists would agree with 'dependentistas' in their critique of import substitution strategies, currency overvaluations, and - hence - the discrimination against exports in b!
enefit of the urban sector and to the detriment of rural society. European monetary union, just like the smaller monetary union between the D-Mark and the new Bundesländer, will only increase this problem (Süddeutsche Zeitung, 50, 1/2 March, 1997: 25). German unification cost anywhere between 750 thousand million or 1000 million D-Mark; monetary union, Maastricht style, will load another sum of similar proportions onto the more advanced participant nations of the monetary union project.
The basic argument of such a sophisticated version of the neo-liberal school further runs as follows: in world politically stable countries with long recognised international borders, narrow distribution coalitions emerge in the wake of too big a state sector influence, and they will thwart growth perspectives and bring about stagnation and unemployment. Political feminism in Europe cannot be exempted from this.
Neo-classical and of course dependencia theorists would admit, that gender discrimination is a typical violation of the assumptions of a functioning market economy. The neo-classical remedy would consist in better creating better market access for the underprivileged groups. Without question, the gender issue is one of the most typical instances of such a market imperfection under 'capitalism'. The solution, especially in Europe, has been to remedy this imperfection with huge programmes of state expenditures. But state expenditures in excess of revenues, together with a deficit in the balance on the current account, are a good receipt for increasing the share of foreign capital in the national economy. The circle continues.
Government consumption in the EU was 19% already in 1992, and will still increase with eastward expansion and the rising unemployment problem. Tax revenue was on average only 38 of GNP - in contrast to the 50.9% of GNP, spent by the national government. EU-imports were 23% of GNP, while EU-exports only 22% of EU-GNP. By 1992, the average deficit per EU-GNP was 10%. In such a situation, the inflow of foreign capital, including that of dubious legality, will become an economic necessity. Indirect taxes play an overwhelming role in European finances, and indirect taxes are a growth-inhibiting structure of their own (Tausch/Prager, 1993).

In our empirical analysis, as we already explained in our methodological section above, we included the proper specifications for development levels and other trade-offs affecting processes of development. For example, it would be senseless to predict life expectancy increases without properly taking into account earlier, achieved levels of life expectancy; and it would be senseless to talk about deforestation rates and coverage of a country with woodlands, not knowing how much of the total areas is taken up by agricultural land. Dependency from the transnational corporations both in 1973 and in 1985 significantly and fairly constantly blocks development. The data outprints of Table 4.1 reiterate again the well-known dependency and neo-classical results in the tradition of Bornschier, Chase-Dunn, Dadush and Brahmbatt, even for the new time period and the new indicators of world development, published by the UNDP:

Table 4.1c: The re-iteration of the dependency and neo-classical model of growth and development in the capitalist world economy, 1980 - 1992

There are 19 variables and processes of development measured here. 14 variables are explaining different aspects of development. MNC penetration in 1985 significantly and negatively affects 15 of the 19 dimensions reported, the rest - life expectancy increases, the greenhouse index, ethno-warfare, and the existence of war and political destabilisation in a country, are still affected in a fashion, as predicted by our theory, but not significantly.
Three variables again measure dependency: MNC penetration, trade dependency, and terms of trade; the processes, relevant for liberal transformation theories are again government expenditures, UN member years, civil rights violations, and social security expenditures. The reform theories are again being measured by social security, women in parliaments, women as a percentage of the labour force, and the fertility rate. In addition, arms conversion and peace sub-theories in the reformist camp will be measured by military personnel ratios.
One dimension, not significantly affected by MNC penetration, the greenhouse index, is shown to be a clear function of militarization; however, smaller nations in world society (high trade dependency index) still have a more favourable balance here. The new research design shows again, that women are particularly marginalized by the process of globalization, as is shown in our results for gender development, gender empowerment, and maternal mortality. Female power and equity is incompatible, at the other hand, with the process of growth and adjustment in the era of globalization.
Our findings suggest, that MNC penetration in the present Kondratieff cycle period again significantly blocks adjustment, growth, the political and human rights record, human development, gender development, gender empowerment, life expectancy, a reduction of maternal mortality, and the protection of the world forests.
In addition, income inequality (the share of top 20% of income earners in the 81 countries according to Moaddel's data base, enlarged by WDR World Bank data, 1994) is again well explained by the penetration of multinational corporations in the host countries, and is again - in contrast to Weede's earlier findings - significantly enhanced and not lessened by militarization. MNC penetration increases significantly poverty, as measured by the new UNDP 1996 CPM poverty measure. International system participation age is again an important control variable in the whole process of the explanation of post-1982 growth and development/stagnation. It significantly enhances the increase of life expectancy over time, gender empowerment, and the educational and employment record of a given country (the strong points of belonging long enough to the de-facto distribution coalition of long-standing UN members), while it significantly fails to block the deforestation process, especially due to !
the divergence between professed ideals and dire realities in the long-standing UN member-nations in Latin America and in Eastern Europe. Terms of trade have again a significant effect in the expected direction on the process of maternal mortality, and life expectancy.
However, our results again need a series of qualifications: (i) as above, militarization is still one of the main development blocs in the period after 1980, with 5% significant results regarding adjustment, growth, employment, income redistribution, the greenhouse effect, and further notable effects on the two deforestation indicators. The main theoretical thrust of our new results with MNC penetration during the 1980s points, however, in the following further directions: (ii) fertility is again negatively related to redistribution, employment and human capital formation, but there is perhaps somewhat surprising ceteris paribus positive effect on gender empowerment, mainly due to the relatively good gender empowerment performance of countries with a relatively higher historical fertility rate like Barbados, Bahamas, China., Ireland etc., whose gender empowerment is higher than that of nations with a historically low birth rate like France (iii) The small and open economies in!
the world society also tend towards gender political power sharing and towards a better employment situation. A world economically open society with a high proportion of foreign trade per total product is also more likely to have - ceteris paribus - a lower greenhouse-index. To further support the predictions about the positive effects of trade dependency on development, developed by Katzenstein, one should emphasise also the positive effects on human capital formation and employment. But trade dependency also works as a classic transmitter of mechanisms of dependency by the effects it wields on life expectancy, maternal mortality, and the coverage of a nation with forests. (iv) Government activity is again not significantly related to adjustment and growth; but a government-controlled economy increases also in this research design in a negative way the performance of a country regarding the political and human rights record. At the other hand, strong, and not weak government!
, again enhances the human development index, the gender development index, the human capital formation record of a nation, and government significantly reduces the amount of absolute poverty measured by the new UNDP CPM-measure to be found in developing countries. The effects of government or - more specifically - the social welfare state (social security index) on the indicators of the situation of the world woodland's are however not giving reason for optimism. The relative strength of the social welfare state has - like so many explanatory variables - positive and negative effects on the process of world development: it has a negative effect on employment, and it has a negative effect on human capital formation (mean years of education), while welfare states - ceteris paribus - still tend to behave in a protective fashion regarding their ecological systems (% forest coverage). (v) Established feminism (representation of women in parliaments and in the work force) again eme!
rges as the main loser of the world economic changes that have taken place since the 1980s. States with a high feminist power base at the one hand were - as in the above research design - again successful in still increasing the feminist power base (gender empowerment index); and were performing relatively well on the forest protection front; but even the gender development index could again not be affected in an upward direction by established feminism; and ceteris paribus, states with a well-developed feminist power base were performing very badly regarding adjustment, growth, life expectancy increases, political and civil rights performance, the human development index.
Our analysis also shows the effects, that transnational migration has on the sending and on the receiving countries. The hope of many semi-periphery and periphery nations to change their weak position in the world-wide structure of the division of labour by mass migration to the developed countries is not realistic. These findings could have an implication not only for the social scientific, but also for the political debate in Europe. At present, 'green', 'alternative' and socialist-left-wing groups claim that Western Europe should allow more immigration from the South and the East. For us, migration is - above all - an expression of a peripheral position in the world economy. The dominant countries, like Japan or the United States, send their managers abroad, but not their workforce. It is a sign of world economic weakness to be a net exporter of labour force. Poor and peripheral countries, like Jordan, Pakistan, Ireland, Portugal, or nowadays Poland, send their workers abro!
ad, and import their managers. In the old colonial days, priests and soldiers were imported, timber, ivory, copper, slaves and bananas were exported. Still, the structure exists, but at a much higher level. Interestingly enough, the effect of government size on growth becomes significantly and highly negative, once we consider for the effect of migration on development.

Just as during the world depression of the 1930s, democracy could not survive in the region (Polanyi, 1944), today the danger arises, that instability and not democratisation will triumph in the end, especially in countries like those of the former USSR. The turning points in the long waves between the ascents and decline phases (B-phases) were always the beginnings of political decay in the region as well, while the ascent phases were associated with authoritarian modernisation; time-lags between the Western cycle and the Eastern semi-periphery and periphery have to be admitted. The decisive-kairos-years are:


The logic of the Kondratieff waves from 1756 onwards are given as follows:

social process cycle 1756-1835/41

basic project defeudalization

prosperity reform compulsory education,
conscription; American and
French Revolution;
Joseph II (Austria)

mid-cycle conflict wars of the French Revolution,
Napoleonic wars
Poland: 1807 Duchy of Warsaw

technological change

basic industrial steam engine (end 18th century)
projects 'Spinning Jenny' (J. Stargreave, 1770)

new technologies steam locomotive 'Puffing Billy'
emerging during (W. Hadley, 1813)
prosperity re-

Unresolved problem freedom of association

crisis of the model revolution 1830
Poland: rebellion 1830/31

international regime

A-phase British naval
dominance (George III)

B-phase 'congress of Vienna'-regime

dominant economic
theory A. Smith, 1776

political economy of
world system D. Ricardo, 1817


social process cycle 1835/42-83 1884-1932 1933-81

basic project freedom of market enlargement welfare
and enterprise of participa- state,
tion corporatism

prosperity reform freedom of asso- social secu- educational
ciation rity, parlia- reform,
mentarism civil
of women

mid-cycle conflict wars and civil Eastern Europe: Vietnam war,
wars Revolution world student
Poland: revolution 1905 rebellion
1863/64 1968
Winter 1970

technological change

basic industrial railway, steel, oil,
inputs and steamship electricity, synthetics,
technological electric automobile
projects motor

new technologies steel petrochemicals chips
emerging during
prosperity re-

unresolved prob-
lem enlargement relationship basic income
of participation capital, la- environment
bour, state unequal
crisis of the
model revolution revolution contestation
1871 1917 of the model
Poland: Poland: from 1968
socialist strikes onwards
movement peasant
1880s uprisings Poland:
1936/37 Summer 1980

international regime

A-phase liberal mercantilism Bretton
world trade Woods

B-phase -"- hypermercan- neo-
tilism protectio-

dominant eco-
theory J. St. Mill, A. Marshall, J.M. Keynes,
1848 1890 1936

political economy
world system K. Marx, 1867 R. Hilferding, K. Polanyi,
1910 1944

from E. de Boer and Arno Tausch 'The Imperative of Social Transformation'

The danger is of course, that the Cold-War structure will be substituted by a new power rivalry between the former members of the winning coalition of World War II:

Hegemonic wars in the world system from 1495 onwards

Role in War Thirty Years War Napoleonic WW I+II

losing hegemonic
contender Hapsburgs France Germany

new hegemony Netherlands Britain USA

newly emerging
challenger: eco-
nomically deci-
mated member of
winning coalition France Germany China+

contender for
systemic hegemony,
joining the war
effort of the
winning coalition Sweden Hapsburgs France

The former hegemonic contenders slowly slide into an acceptance of their status in the international system. The real power struggle erupts already soon after the great hegemonic war, and through the ups and downs of the history of the system evolves slowly into the hegemonic challenge. Seen in such a way, not 1989, but Korea and Vietnam could become rather the benchmarks of the future W-structure of conflict in the international arena. For the foreign policies of the European Union, it is also important to notice the following tendency: German-Russian alliances tend to happen during depressions, and they break up during the economic upswings of the world system:

Khol + Gorbi/Boris 1985 ff.
Rapallo 1922
Bismarck's Three Emperor Alliance 1873
Holy Alliance 1815
Alliance Russia-Germany 1764
Nordic War 1700-1721

The relationship of the Kondratieff and Kuznets cycles with Russian history is the following:


KONDRATIEFF Perestroika, Lenin's NEP,
OR KUZNETS Great Reforms 1861,
DOWNSWING Katharinas Assembly 1775

Nobility's Victory 1730,
Split of the State Church 1653,
Boris Godunow 1598-1605

Repressive Modernisation

KONDRATIEFF Joseph Stalin,
OR KUZNETS Imperialistic Expansion
UPSWING and Repressive Industria-
lization at the end of 19. th century
Nikolas the
Gendarme of Europe,
Elisabeth's expansionist
Peter the Great,
Michael III,
Iwan the Terrible

Reform Repression

1985 'Gorbi' <--------------> 1928 Stalin
57 Years

64 Years 47 Years

1921 NEP <--------------> Alexander III
40 Years

60 Years 56 Years

1861 Great Reforms <--------------> Nikolas I 1825
36 Years

86 Years 84 Years

1775 Constituent <--------------> Elisabeth's expansionist rule

Assembly 34 Years 1741

45 Years 52 Years

1730 Victory of <--------------> Peter I 1689
Nobility 41 Years

77 Years 76 Years

Church Split 1653<--------------> Michael III 1613
40 Years

55 Years 48 Years

Boris Godunow 1598 <--------------> Iwan's 'Oprichina' 1565
33 Years

Average periods of Russian history:

Perestroika <--------------> authoritarian modernisation
40 Years

64.5 Years 60.5 Years

Seen in such a way, there is even little that the West seems to be able to do to stabilise democracy in Russia. However, the return of the East Europeans towards a more 'middle of the road' and sensible philosophy - whatever the colour of the government (Orenstein, 1996) - seems to be an urgent necessity, after the ups and downs of central planning and 'the central market principle'.
It is now time to look at the transformation success or failure using methods of cross-national development research. Such studies are relatively scarce and are only now just beginning to emerge, with the World Bank World Development Report (1996) leading the field. Our data selection from the world of transformation shows, that a rapid privatisation is not in itself a precondition of a more rapid socio-economic development, and that a policy oriented towards human development and democracy will be successful, while extreme egalitarianism has certain growth limits in the region.


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