What is World System Theory?

World System Theory, developed by Immanuel Wallerstein is a theoretical framework that seeks to understand the dynamics of the global political economy. It emerged in the 1970s as a critique of modernization theory, which argued that all countries would eventually develop along a similar path.

World System Theory, on the other hand, emphasizes the ways in which the global economy is structured by power relations between rich and poor countries. In this blog post, we will explore key concepts and main theorists of World System Theory and its relation to other theories.

Origin Of World System Theory

The origin of World System Theory can be traced back to the 1970s, when a group of scholars, led by Immanuel Wallerstein, began to critique the dominant modernization theory of the time. Modernization theory held that all countries would eventually develop along a similar path, with poorer countries eventually catching up to the more developed countries.

Wallerstein and other World System theorists argued that this view was overly optimistic and failed to take into account the power relations between rich and poor countries. They argued that the global economy is not a collection of separate national economies, but rather a single, integrated global economy. In this global economy, the wealthy, industrialized countries (core) dominate and shape the global economy, while the poorer, less developed countries (periphery) are dependent on the core and subject to external shocks and inequality.

The World System Theory was also influenced by the dependency theory, which was developed by Latin American scholars in the 1960s. Dependency theorists argued that peripheral countries are trapped in a cycle of poverty, in which they are unable to develop their own industries and are instead forced to rely on exports of raw materials to the core.

As World System Theory developed, it also incorporated elements from other fields such as Marxism, neo-Marxism, and historical sociology. Theorists such as Wallerstein, Andre Gunder Frank and Samir Amin, developed the theory further, and it became a widely accepted framework for understanding the global political economy.

Structure Of World Economy

According to Wallerstein, the world economy is divided into three main categories: the core, semi-periphery and the periphery.

1. Core Countries

Core countries are the wealthy, industrialized countries that dominate the global economy. They have strong economies, advanced technology, and high levels of education and productivity. They also have the ability to shape the global political economy and set the rules of the game. Examples of core countries include the United States, Western Europe, and Japan

2. Semi-Peripheral Countries

Semi-periphery countries are intermediate between core and peripheral countries in terms of economic development and power in the global economy. They have a mix of advanced and underdeveloped economic sectors and may be involved in both exploiting peripheral countries and being exploited by core countries. Examples of semi-periphery countries include Brazil, China, and South Africa.

3. Peripheral Countries

Periphery countries are the poorer, less developed countries that are dependent on the core for economic growth. These countries have weaker economies and less advanced technology, and they often rely on exporting raw materials to the core for their economic survival. They also have less agency and are more vulnerable to external shocks. Examples of peripheral countries include many countries in Africa, Latin America, and Asia.

A fundamental mechanism of the capitalist world economy is unequal exchange. Economic surplus is transferred from the periphery to the core. The surplus is appropriated from low-wage, low-profit producers in the periphery to high-wage, high-profit producers in the core. This transfer is further accentuated by the emergence of strong state machinery in the core and weak state types in the periphery.

Strong states can enforce unequal exchange on weak ones. Thus capitalism involves not only the appropriation of surplus value by an owner from a laborer, but also an appropriation of the surplus of the whole world economy by core areas. It was as accurate in the stage of agricultural capitalism as in the industrial capitalism stage.

In the process of unequal exchange, tensions are created in the system. The semi-periphery has an essential function in this regard. It provides an element of political stability. The core countries are not facing unified opposition; the semi-periphery acts as a buffer stock.

At the same time, the world economy is not entirely static; any single aim of the system may change the place from the periphery to semi-periphery, from semi-periphery to the core, and vice versa.

Furthermore, the types of commodities involved in core and peripheral economic activities, respectively, are subject to dynamic change.

Technological advance means that the factual content of ‘advanced economic activity‘ constantly changes. At one point, it was textiles; in a later phase, it was industrial machinery; today, it is information and biotechnology together with financial and other services.

But Wallerstein emphasizes that the capitalist system as such does not change. It remains a core, semi-periphery, and periphery hierarchy, characterized by unequal exchange.

Wallerstein sees the end of the Cold War and the destruction of the Soviet Bloc as a consequence of the development of the capitalist world economy. However, the long-term prospect is the demise of the capitalist system because contradictions in that system are now unleashing worldwide. 

Success, not failure, is the real threat to global capitalism; when the possibilities for expansion are all used up. The never-ending quest for more profit will lead to new crises in the world capitalist economy, which sooner or later will spell its transformation.

Examples Of World System Theory

Example 1: The relationship between developed countries and developing countries

World System Theory argues that developed countries, also known as core countries, dominate the global economy and shape the rules of the game, while developing countries, also known as peripheral countries, are dependent on the core and are more vulnerable to external shocks.

Example 2: The North-South Divide

World System Theory highlights the divide between developed countries in the Northern hemisphere and developing countries in the Southern hemisphere. It argues that the North dominates the global economy and sets the rules of the game, while the South is dependent on the North and subject to external shocks and inequality.

Example 3: The relationship between developed countries and colonies

World System Theory argues that the economic, political, and military domination of colonies by developed countries has led to the current system of inequality and dependence in those countries.

Example 4: The relationship between developed countries and the global south

World System Theory argues that developed countries have used their economic, political, and military power to maintain their dominance over the global south, extracting resources and perpetuating poverty and inequality in those countries.

Example 5: The relationship between developed countries and multinational corporations

World System Theory argues that multinational corporations, based in developed countries, have played a significant role in shaping the global economy and perpetuating inequality in peripheral countries by exploiting their resources and labor.

Example 6: Ancient and medieval examples of core and peripheral countries

The Roman Empire can be considered a core country, as it had a strong economy and military power, and controlled a vast network of trade and resources. The peripheral countries in this case would be the colonies and territories controlled by Rome. Similarly, during the medieval period, the Islamic Caliphate can be considered as a core country, as it controlled a vast network of trade and resources, while the peripheral countries would be the territories and colonies controlled by the Caliphate.