What is the correct label for the global economy?
It's a form of intellectual laziness to re-purpose simple labels to the meta context of international relations
What is the correct label for the global economy?
Capitalism? Socialism? Neo-liberalism? Malthusianism? Anarchism? Amoralism?
Is it meaningful to say the world economy is a capitalist system, if some of the constituent nations pursue socialist policies, and all of the nations have adopted mixed economies?
“Capitalism.” Is it descriptive? Does it illuminate? Or do such labels actually keep us from seeing the real experience of the humans living in this system?
Here is the problem: if we describe the world economy incorrectly, then we will likely misdiagnose the problems with it, and we will misunderstand how it can change in the future.
To understand the truth, it is crucial that we sometimes disregard all of the labels and models and jargon and instead, with fresh eyes, look at the true lived experience of the people who make up the societies that we study.
Every economy is unique. Every economy is historical, it exists briefly. There is some sense in which each economy only exists for a single day, for by the time tomorrow comes, relationships have changed, and power has shifted. The evolution of those relations of power might move with the speed of the continental plates, but in the sense that it is true that North America is today a few millimeters further from Europe than it was yesterday, so it is true that the relations of power are moving, in every society. The world is different today, compared to yesterday.
But isn’t it true that some structures remain in place for centuries at a time? That is absolutely true, both in politics and culture. The Great Barrier Reef, near Australia, reinvents itself everyday, and yet as a large structure it has been present for 25 million years.
We can say that blacks in North America suffered the unique horror of slavery from the arrival of the first slaves in Florida in 1565 till their emancipation in 1865. But any study of slavery makes us aware of how much the situation was ever changing. For a long while, the Indian tribes were present in every state and willing to grant a certain amount of safety to escaped slaves, so that escape was much easier in the 1500s and 1600s than later on, and for that reason the system of slavery was itself less oppressive than it became later on. It wasn’t till the mid-1600s that the English speaking colonies adopted the rule that a child born to a slave was also a slave. Later, in the 1700s, slavery almost became unprofitable because of falling commodity prices, and so the possibility arose of the slave owners themselves ending slavery. But later still, especially after the invention of the cotton gin, slavery became the most profitable form of work in North America, and the brutality of the oppression was expanded and intensified. By the 1820s many Southern states in the USA made it illegal to teach a slave how to read and write.
In short, slavery both lasted for centuries and also it changed constantly.
Perhaps a useful concept, Fernand Braudel spoke of the Longue Durée, an idea that undergirds all of his work and which he attempted to describe directly in an essay in 1958:
In 1958, in response to what he considered a general crisis in the human sciences and as a plea for their rapprochement, Fernand Braudel clarified his idea of time as a social construct, rather than a simple chronological parameter. This article begins by looking at the lessons of the idea of a plurality of social times, grounded in the concept of Braudel’s the longue durée, for social analysis. The first lesson was that we live in one singular “world.” His insight led to the basic premise of world-systems analysis that historical social systems come into being as a unique and indivisible sets of singular, longue durée structures with a beginning and an end, that is, recognizable over the long term, but not forever into the past or into the future. As Braudel observed, the reproduction of these structures —according to world-systems analysis, the axial division of labor, the interstate system, and the structures of knowledge— exhibit secular trends and cyclical rhythms that may be observed over the life of the system. Eventually, however, the processes reproducing these structures run up against asymptotes, or limitations, in overcoming the contradictions of the system and the system ceases to exist. The second great lesson of Braudel’s longue durée has been to allow us to see clearly not only the singularity of our world, but its uniqueness as well, that is, a world that has now expanded to become global, a world that consists of the three analytically distinct but functionally, and existentially, inseparable structural arenas, as never before existed. The third great lesson of the longue durée was to allow us to interpret crisis as the possibility for fundamental structural change.
While labels such as “capitalism” or “socialism” or “slavery” offer a certain simple convenience, it is important to be awake to those moments when that convenience becomes a lie. Take, for instance, slavery. While most human societies, for several thousand years, have allowed slavery, it’s also clear that all systems of slavery break into at least 2 categories: those where the children of slaves are automatically born free versus those where the children of slaves are automatically born slaves. In some conversations the difference is not relevant, but at other times the difference is significant.
Sometimes it is convenient to use a simple label for some phenomena. It’s certainly reasonable to point out that the USA was a slave state in 1820. But if one wanted to compare slavery in USA to slavery in Brazil, then of course one would have to switch away from simple labels, and focus on the differences between those two systems. Brazil, for instance, had mulattos as a racial category, whereas the USA had an unusually strict system where only pure whites were considered white; the slightest “contamination” meant that someone was considered black.
Likewise, the global economy. Is there any label that can be fixed to it that is accurate? It’s a system in which every exchange between nations is managed by complex treaties, literally millions of pages of laws. Some of the nations that make up the world system rely primarily on productive capacity that is owned by the government. That is especially true with the oil exporting nations, where the oil industry is often owned or closely controlled by the government, and is the main source of foreign exchange, and therefore the starting point of participation in the global economy.
An irony of much Leftist discourse is the complaint that economics uses technical jargon to ignore people’s actual lived experience, but then many on the Left use the same technical jargon when they are attempting to criticize the economy. But if such technical jargon blinds us to the reality of people’s lives, then we are willfully and stupidly blinding ourselves every time we use such jargon.
A fisherman boat captain in choppy waters might fear for his or her life, or fear for the lives of the crew, or fear for going bankrupt if the catch is lost, or perhaps think of the love of their life, and crave to say something to them in that moment of despair. None of these emotions are adequately captured by an economic equilibrium model that tells us simply of supply functions and demand functions and shifts in the elasticity or inelasticity of supply.
Again: if we describe a system incorrectly, then we are likely to misdiagnose the problems in the system, and we are likely to misunderstand the system’s capacity for change.
As another example, we might ask, were Latin American countries capitalist during the 20th Century? There were certainly aspects of the Latin American economies that were capitalistic, and when we are talking about those specific parts of the system, then it is natural to use the word “capitalism” to reference what we mean. But it’s also true that Latin America had structural problems that caused it’s economies to behave in ways that were fundamentally different than those economies that were closer to the core of the world economy:
The controversy between “structuralists” and “monetarists” that took place in Latin America in the 1950s and 1960s was the most important debate in the history of Latin American economics. It happened before the 1960s/1970s macroeconomic argument involving monetarists and Keynesians in the northern hemisphere. Indeed, Campos (1961) and others introduced the terms “monetarist” and “monetarism” in Latin America before they became widespread in the US and the UK. Unlike the later Anglo-Saxon controversy—and the 1950s demand-pull vs. cost-push inflation discussion—the Latin American debate was not about the specification of the aggregate demand side, but about changes and composition of aggregate supply and the relation between economic development and inflation. Hence, the identification of Latin American structuralism of the 1950s with Anglo-Saxon Keynesianism is a simplification.
That controversy grew out of the International Monetary Fund’s unsuccessful stabilization plans in the region, which led to the formulation of the monetary approach to the balance of payments by that institution. Latin American structuralism asserted that any attempt to bring inflation down, for a given economic structure, was bound to cause a permanent reduction in the rate of economic growth.
…Pinto and Sunkel (1966, pp. 82-83) questioned the import of analytical methods from North American economics—and the export of Latin American economic students to the US. They praised the use of mathematical methods for attesting that the analysis is “logical and consistent”, but warned that not all economic problems can be treated mathematically. Moreover, they claimed, those who can are not necessarily the most relevant, and the use of mathematical methods is not the only way to “achieve scientific rigor”. Interestingly enough, Milton Friedman would shortly deliver his hugely successful 1967 presidential address to the American Economic Association, which launched the natural rate of unemployment hypothesis. Friedman’s (1968) argument was entirely verbal, with no use of mathematics, diagrams or a model of any sort. Instead, it was based upon the application of general principles of neoclassical economics (Hoover 1987, p. 24). Surely, many would soon model that hypothesis, even independently so, as witnessed by E. Phelps parallel articles.
…The goal of the historical-structural method, as put forward by Sunkel (p. 95), was not to capture static or synchronic facts, but reality as a totalization that “objectively reproduces itself in a permanent way”. Such approach should take into account only the “essential” elements of totality, given the intrinsic complexity of social phenomena. It is significant that Sunkel explained his notion of totality by referring to J.-P. Sartre’s existentialist concept of dialectical totalization. In the immediate post-war period existentialism was French dominant intellectual movement. C. Lévi-Strauss’ classic structuralism rose to prominence in the 1960s in the wake of existentialism. This focused on the construction of reality and meaning, and assumed that individuals are agents who consciously intend their actions. Structuralism, on the other hand, focused on structures of meanings as predetermined, and assumed that actions are dominated by the deeper structures of mind that lie beneath the individual’s conscious behaviour. It was only gradually that classic structuralism penetrated Latin American intellectual community, as illustrated by Furtado (1970), who tried to blend it with Fernand Braudel’s historicism in his methodological treatment of models in economics.
This is crucial to understand: the economic models imported from North America did not fit the reality of Latin America. To realize this truth, some economists had to put aside all the labels and all the jargon and instead look at the lived experience of the people of Latin America.
And that is what I advocate for all of us. We can import other people’s models when it is convenient, but we must also, at least sometimes, discard all of the models and labels and jargon and so, with fresh eyes, look at the true lived experience of the people. The more complex the system, the more likely it is that models and labels will cause us to make a mistake.
So what is the correct label for the global economy? The most straightforward descriptive label is “heterogeneous” — it’s a good word that reminds us of the complexity of the system that we are talking about. And I would urge everyone to use this word, save for when one is talking about a specific subset of the phenomenon that make up the global system.