Neoliberalism

According to David Harvey, “Neoliberalism is in the first instance a theory of political economic practices that proposes that human well-being can best be advanced by liberating individual entrepreneurial freedoms and skills within an institutional framework characterized by strong private property rights, free markets, and free trade… [and] …holds that the social good will be maximized by maximizing the reach and frequency of market transactions, and it seeks to bring all human action into the domain of the market” (Harvey 2006:2-3). But what does this mean?  What could be wrong with “liberating individual entrepreneurial freedoms,” owning property, engaging freely in markets and trade? Why would people want to be regulated and ‘controlled,’ as opposed to having the universality of “the market” effortlessly decide (or guide) things for us?  Much of modern – and especially Western society sees these buzzwords as positive things that allow people to work hard and create their own lives.  However, this narrative is only a very small part of what neoliberalism entails.

According to Anthropologist Tejaswini Ganti, neoliberalism is highly complex and has many meanings, but she claims that “the concept has four main referents: (a) a set of economic reform policies that some political scientists characterize as the “D-L-P formula,” which are concerned with the deregulation of the economy, the liberalization of trade and industry, and the privatization of state-owned enterprises; (b) a prescriptive development model that defines very different political roles for labor, capital, and the state compared with prior models, with tremendous economic, social, and political implications; (c) an ideology that values market exchange as “an ethic in itself, capable of acting as a guide to all human action and substituting for all previously held ethical beliefs;” and (d) a mode of governance that embraces the idea of the self-regulating free market, with its associated values of competition and self-interest, as the model for effective and efficient government (Ganti 2014:91).

But what does this mean in real-life terms today? For this I take a historical approach using David Harvey’s Conditions of Postmodernity (1990) where he keenly examines how neoliberalism develops throughout the twentieth century. Harvey starts his narrative in 1914 with Henry Ford’s car assembly line where he pays a very high wage of $5 for an 8-hour workday. According to Harvey, it was not this process that was so revolutionary, rather it was Ford’s “vision.” Ford seemingly understood that mass production meant mass consumption, which ushered in a new “politics of labour control and management… a new kind of rationalized, modernist, and populist democratic society” (Harvey 1990:125-6).  Ford believed that this wage would offer him the best and most committed workers, and also provide them with the money and leisure time to consume both his and other goods (Harvey 1990:126). This ideology ushered in a period of general progress in advanced industrial societies. Using Keynesian economic policies and theories, the power of the state had increased in conjunction with the development of the social welfare state; and within which labor rights were protected and advanced by strong unions and the structural aspects of Fordist production practices helped foster community involvement and cohesive and organized labor groups (Harvey 1990).

According to Harvey, this process changed greatly in the early to mid-1970s.  Following the oil and economic crises during that decade, there was a massive push for deregulation and more flexible modes of production. Fordist-era production had been based on building single factories where companies could produce an entire line of goods from start to finish in one place. As per the nascent neoliberal ideology, this rigidity did not allow businesses to react nimbly to shocks in the market, recessions, supply chain problems, and labor issues. Any problems the economy faced were also said to be exacerbated by increasingly inadequate Fordist methods of macroeconomic management (Harvey 1990).  During this time, Harvey points to a political economic shift that he labels “flexible accumulation,” and is “marked by a direct confrontation with the rigidities of Fordism. [Flexible accumulation] rests on flexibility with respect to labour processes, labour markets, products, and patterns of consumption. It is characterized by the emergence of entirely new sectors of production, new ways of providing financial services, new markets, and, above all, greatly intensified rates of commercial, technological, and organizational innovation” (Harvey 1990:147).

The key component that Harvey points to within this process is an acceleration of the “time-space compression” modern society experienced over the last several centuries. With technological advances in communications, satellites, transportation, etcetera, the world had “shrunk” and it became easier to communicate, ship to, or even be in, faraway places quickly (Harvey 1990). This meant that the era of a fixed factory with local workers producing an entire product, morphed into a process where companies simply rented production facilities in cheap locations (such as China) for a month, produced a product or part of a product, continued or finished the production in a separate facility, and then sold it in whatever market they could make the most money. This principle started what has been called the “race to the bottom,” in which developing countries offer the most “business friendly” incentives (such as tax breaks, deregulation, decreased labor power and oversight, etc.) to companies that locate production within their borders. This heightened global competition between states as companies evaluated entire supply and production chains from raw materials to market to find the cheapest places to procure and produce each individual component and product. Companies started locating their production where they had the lowest costs to market, specifically the lowest overhead costs per worker (basically less pay, less benefits, less safety at work, etc). Countries started deregulating their labor industries to attract more businesses. This weakened labor power and unions, and ushered in higher levels of structural un/underemployment and an expansion of part-time contract work. According to Harvey, all of this led to an incredible fragmenting of society and social connections, severing community ties, creating more individualized populations, and decreasing the capacity for workers and individuals to organize politically and economically (Harvey 1990:153). 

Building upon Harvey’s discussion of the shift to flexible modes of accumulation, this ideology is also traced to the Mont Pelerin Society (Ganti 2014) founded in 1947, and the “Chicago school” (of economic thought) led by Fredrich Hayek and Milton Friedman in the 1960s and 1970s and built upon neoclassical economic theory. The new form of this ideology was then instituted politically by Ronald Reagan and Margaret Thatcher in the 1980s, and globalized by technocratic regimes such as the figurative “Washington Consensus” in the 1990s. It is during these decades that John Gledhill (2006:332) believes neoliberalism as an ideology and global capitalism become intertwined, and spread throughout the world economy.

If we go back to Ganti’s four common themes we can see the outcomes of these policies on the ground, and that the state is still very much involved. Neoliberal policy initiatives deregulate, liberalize, and privatize economies; redefine political roles for labor, capital, and the state in marked ways; believe that an ethic of market exchange is capable of guiding all human action; and that a self-regulating free market (based on competition and self-interest) becomes the model for effective and efficient government. However, this was not in the traditional welfarist and Keynesian tradition, for the State loosens (or alters) its control by actively deregulating business climates, extricating itself from the market as much as possible, yet wholly redirecting state power toward allowing a “friendly business and regulatory climate” and within markets (Gledhill 2006:333). Neoliberal ideology is not about simply providing free markets as neoclassical ideology prescribed, but rather pushed for a “concerted political effort and organization” of society that was the most advantageous for businesses (Ganti 2014:92).

State services became the domain of non-profit actors, previously state-owned companies were privatized to allow for individual ownership and control, and labor practices and subsidies actually aided businesses beyond simply freeing up markets. The core tenets of economic society still involved individuals acting as rational actors working toward maximizing individual and corporate gains, but now businesses interests were placed above the interests of states, communities, and individuals (think of Harvey’s flexible accumulation and a more fragmented, individualist society as per Hayek and Rand’s positions, but that actively incentivized business interests above individual people’s interests). This was a decided divergence from Adam Smith’s belief that business leaders should not be listened to in matters of politics for this would be taking advice “from an order of men whose interest is never exactly the same with that of the public, who have generally an interest to deceive and even to oppress the public, and who accordingly have, upon many occasions, both deceived and oppressed it” (Smith 1991:220).

This shift towards business interests led to increased competition among some individuals, groups, and companies, but not those companies with close ties to neoliberal and Western governments (think World-Systems and Accumulation by Dispossession). This process of neoliberalization lead to increased inequality locally among individuals, but also globally among people and countries, and – while said to be aimed at empowering individuals – predominantly empowered the wealthy and “well situated” by increasing their economic and political power (as well as their profits). To Gledhill, neoliberalism is “the ideology of the period in which capitalism deepened to embrace the production of social life itself, seeking to commoditize the most intimate of human relations and the production of identity and personhood” (Gledhill 2006:340). It is within neoliberalism that human interactions cease to be human interactions and (as every component of human interaction is brought within the scope of the market) are institutionalized as market interactions. 

However, there are some complexities within this process. The work of Andrea Meuhlebach (2012) shows that despite David Harvey and John Gledhill’s observations positing the fragmentation of neoliberalizing societies as wholly negative, this fragmentation also creates (or forefronts) individual subjects’ longing for (and enactments of) a human morality that is intent on caring for others (Meuhlebach 2012). Her work shows that people in northern Italy volunteered and cared for less fortunate people both in spite of, and buttressed by, neoliberal policies. Meuhlebach’s analysis however, based on ethnographic work with caregivers, focuses primarily on everyday individuals and the elderly. As a result she seemingly ignores the obvious critique of the very divisive neoliberal ideology used by elites and capitalists that causes the need for this voluntary human caring in the first place. Still, her research complicates our analysis of neoliberal societies by showing a connectivity and caring that others claim is minimized in neoliberal society. 

Neoliberalism is further complicated by Jamie Peck and Adam Tickell’s work showing the localization of experiences with neoliberalism, which illuminate “local neoliberalisms [that] are embedded within larger within larger networks and structures of neoliberalism” (Peck and Tickell 2002).  Kingfisher and Maskovsky critique neoliberalism for its use as a thing that is often wielded to singularly explain or explore anywhere in the world or any type of experience. They see neoliberalism as an experiential and contextualized moment that happens in a multitude of ways in a multitude of places, and that each experience should be seen as singular, even if patterns can be recognized (Kingfisher and Maskovsky 2008). Within this synthesis, Kingfisher and Maskovsky attempt to:

“move beyond the view of neoliberalism as a unitary external structural force — conceived either as a set of economic policies or discourses — that bears down on states, civil society institutions, populations or individuals, whose agency is conceived narrowly in terms of either accommodation or resistance. This structure/agency binary, while oft-times noble in its emphasis on resistance, nonetheless risks describing neoliberalism ‘as something that is perhaps more powerful and all-encompassing than it really is, ignoring in the process its contradictions, fractures, partialities, contingencies, and both dialectics with and determinations by other social forces.’” They seek specifically to “interrogate, situate and problematize (rather than overstate) neoliberalism’s power to reshape the world” (Kingfisher and Maskovsky 2008:119).

As if that does not disjoint our understandings enough, Simon Springer (2014) believes that we are actually moving into a postneoliberal world.  He claims that since the economic crisis of 2008 there has been great pushback and protest surrounding neoliberal institutions and politics, and that many of the major industrialized countries in the world reinstituted Keynsian economic practices, and therefore increased state intervention (Springer 2014:2). His analysis points toward a global society moving towards something new, though he is not willing to say this explicitly, as amid the multitudes of non neoliberal practices, neoliberal patterns still dominate global political economic ideologies.  This is especially true at the level of governance and business decisions – places where capitalism carries profound power. Hence, while in the streets, neoliberalism may be seen as a disaster; but to those in positions of power – those who are making decisions about shaping our political, economic, and social futures (and are being rewarded by the status quo) – neoliberalism is very beneficial and therefore worth continuing.  Yet still, the fact that there is discussion of other ways of organizing society shows that communities and individuals who are not wealthy (or “successful”) are fighting against this version of capitalism and a greater rule of their own lives.

Classical, Neoclassical, and Keynesian

In direct contravention to Marxian theories of capitalism are those of (Neo)Classical Economics. This is a broad topical group and difficult to summarize in such limited space due, especially due to the depth of its infiltration into our lives and the seaming conflation of economics and capitalism that pervades Western notions of economic life. Much of this tradition starts with what Robert Heilbronner (1996) calls the “Commercial Revolution” and centers on mercantile systems of trade and economic interaction. During this time period (c. 17^th C), an intellectual shift began as Thomas Mun theorized money as more than a means of exchange (Heilbronner 1996:25). Richard Cantillon also conceptualized “market driven society as constituting a ‘system’ with a spontaneous mechanism of self-adjustment and a coherent relationship between the supply of money and the prosperity of the society as a whole” (Heilbronner 1996:30), and a study of the economy became more systematized and focused on the increasingly expansive commercial aspects of society (Heilbronner 1996). 

This intellectual foundation lay ground work for the rise of classical economic theorists that began with the publication of Adam Smith’s Wealth of Nations in 1776, and who’s theories were systematically tightened and expanded upon by David Ricardo in On the Principles of Political Economy and Taxation in 1817. These two works became known as classical political economy and “with many additions and changes, it dominated European thought about economics from 1780 to 1880” (Wolff and Resnik 2012: 15).

Smith ultimately believed that for society as a whole to achieve its greatest levels of economic and social success, there should no interference in a “free market” for goods and services (Smith 1991:322). He believed in the private ownership of property, and that each individual should become an “expert in his own peculiar branch” of the economy or market, and that through diversifying labor – and becoming experts – “more work is done upon the whole, and the quantity of science is considerably increased” (Smith 1991:16). This was founded upon a belief that “the difference between the most dissimilar characters, between a philosopher and a common street porter… seems to arise not so much from nature as from habit, custom, and education,” and that as each person acted in their own self-interest, developed their own niche and differentiated themselves and their expertise from others, unique skillsets and expertise would develop and help lift society as a whole (Smith 1991:20-1). In other words, Smith believed that we were not born unequal per say, but through education and diversifying our labor we created differentiation that he thought was good for society and created a stimulating and competitive environment “where every man may purchase whatever part of the produce of other men’s talents he has occasion for” (Smith 1991: 23, 151).

Smith believed that “whatever part of his stock a man employs as a capital, he always expects it to be replaced to him with a profit” (Smith 1991:272), and that they should always work for more than they put in. This wage based diversity of labor, with everyone industriously and competitively seeking to create their own comparative advantage, would lead to ever more “revenue and stock” and ever more demand for wage laborers. This pattern would ultimately and continually lead to an increase in “the revenue and stock of every country,” something that “cannot possibly increase without [this process]” (Smith 1991:73). In other words, people innately seek growth and to profit from their work, and this is the only way society and countries will develop. Yet, in a departure from neoclassical and neoliberal principles Smith did not believe in overworking people, he believed they’d be more productive without being overworked (Smith 1991:86). He believed that the improvement of those “of the lower ranks” (the majority of society) should not be seen as an inconvenience to society, but rather an advantage, and that society can only flourish if “the whole body of the people, should have such a share of the produce of their own labour as to be themselves tolerably well fed, clothed, and lodged” (Smith 1991:83).

What Smith and his adherents brought to “classical economics” was a focus on production and larger macro levels of analysis. However, around the time that Karl Marx published Capital (1867), classical economics shifted towards more detailed “micro” level studies of the economy that theoretically centered on the decision-making processes of individuals and individual enterprises. This focus lasted through the 1930’s and became labeled as neoclassical or micro-economics (Wolff and Resnik 2012:14-15). These principles have seen a resurgence since the 1970’s and is based on the:

“claim that the result of individuals' self-interested buying, selling, working, saving, and so on, is, in effect, an economic utopia: a perfect economic harmony among all individuals and between them and nature. For this utopia to be achieved, according to neoclassical theory, society must (1) endow and protect each individual with the full freedom to act in his or her own self-interest and (2) establish the institutional framework (competitive markets and private property) that guarantees that freedom” (Wolff and Resnik:15).

By the 1930’s, this focus on deregulating markets and minimized state intervention, led to a global economic crisis, and many people to question both neoclassical economic theory and the very merits of capitalism itself. In response to these crisis, John Maynard Keynes published The General Theory of Employment, Interest, and Money in 1937. Keynes believed the chief reason for the collapse of the economy was a huge drop in private spending which plunged the economy into depression. He thought that the only way to be able to guard against the ups and downs of the capitalist economy’s “business cycle” was to have the state act to intervene in the economy in order to regulate lending, money supplies, and the “macro” part of the economy on the whole. His overarching theory “analyzes and presents (1) the rules and laws that give the economy its overall structure and (2) the ways in which that structure essentially governs the activities of producers, consumers, and other individual economic actors” (Wolff and Resnik 2012:19). This prescription was very different from (neo)classical economics which focused on individual human beings acting and making decisions, and aimed to remove all structural hindrances to free markets.  Keynes believe that there were economic structures surrounding us, governing us, and that we needed to understand and control them with greater efficacy if we were to keep better control of the ups and downs of capitalist cycles (Wolff and Resnik 2012:19). 

While Keynesian ideas are often still turned to in times of crisis (the recent Great Recession and its “bank bailouts”), starting in the 1970’s there was a very propitious decline in the favor of Keynesian principles as neoclassical and (soon to be labeled) neoliberal economics began to increase in popularity and eventually seemingly monopolize political debates (Harvey 1994). As we can see in Adam Smith’s work, the individual is the main actor in a larger social structure.  However, this notion of the individual – central to any understanding of capitalism – was expounded upon by both Friedrich Hayek and Ayn Rand in the 20^th century, and encapsulates the role of the rational individual in capitalist life. In both of their works the individual is primary not just as an actor, but as an ideological notion for the primary object and origins of any social analysis. As Hayek states:

“there is no other way toward an understanding of social phenomena but through our understanding of individual actions directed toward other people and guided by their expected behavior. This argument is directed primarily against the properly collectivist theories of society which pretend to be able directly to comprehend social wholes like society, etc., as entities sui generis which exist independently of the individuals which compose them… It is the contention that, by tracing the combined effects of individual actions, we discover that many of the institutions on which human achievements rest have arisen and are functioning without a designing and directing mind” (Hayek 1948:6)

The logic that Hayek is espousing – and largely attributes to individualist thinkers such as Adam Smith – is that we has human beings can only know so much. We could never portend to understand or know everything about our immediate surroundings, nevermind a larger society; nationally, globally, etc. He believed that within this framework, and knowing what we know of ourselves and those around us, we should act within our local knowledge sphere and do what we can and know. Hayek saw the market as a perfect mechanism for individuals to engage with a larger – incomprehensible – social society, and where we would be treated equally; or more so, “be rewarded, not according to the goodness or badness of his intentions, but solely on the basis of the value of the results to others (Hayek 1948:21-22). In short, while the market may be harsh, it is equally harsh to everyone that engages with it.

In terms of navigating the difficulties of the market, Ayn Rand contradicts Hayek to some extent.  While she sees “the free market [as] a continuous process that cannot be held still, an upward process that demands the best (the most rational) of every man and rewards him accordingly” (Rand 1967:25), she also believed that “man’s most valuable attribute [is] the creative mind” (Rand 1967:19). She sees the genius of humans as the key aspect to our existence, and where as Hayek thinks our intellect is limiting to its surroundings and that we should focus on the here and the now, Rand see’s this genius as the foundation for rational thought – what she considers the key to navigating the market successfully – and seemingly not limited by locale or knowledge. The also differed slightly on the emancipatory possibilities of the rational individual acting within the market. While they both believed this individual freedom could afford opportunity for all, Hayek also felt that “the preservation of individual freedom [was] incompatible with a full satisfaction of our views of distributive justice” (Hayek: 21-22). Yet regardless of their differences, they both see the individual as primary and the market as the only pathway toward individual freedom, regardless of possible outcomes. 

Marxism

This processes created a capitalist mode of production, in which “the capitalist” claimed the “surplus labor” of a worker (the output of the worker’s labor output beyond what they need to sustain themselves), and after paying the costs of production, retains the “surplus value” (or profit) of the production process as their own to distribute as they please. In short, capitalists retain ownership and the right to the distribution and income of the produce of the workers labor. This creates a division that polarizes individuals, communities, and societies, and leads to class based societies of the rich bourgeoisie and the working class proletariat (Marx (1992[1867]; Marx and Engels; Wolf 1982).

To Karl Marx, capitalism began when precapitalist modes of exchange that used money as a medium to exchange two commodities (Commodity à Money à Commodity, C-M-C), transitioned to capitalist modes of exchange where money was exchanged for more money using commodities as a medium of exchange (Money à Commodity à Money, M-C-M) (1992[1867]).  According to Marx, within the capitalist process, money is not spent but rather “advanced,” as commodities are no longer exchanged based on their “use-value,” but on their “exchange value” within monetary terms (Marx 1992[1867]:249). Within capitalist modes of production, money is advanced into the market through a commodity that is then sold for an additional amount that adds on “surplus value” through a valorization process, better understood today as profit. The valorization of this surplus value happens when the capitalist transforms a use-value into an exchange value by producing a good “greater in value than the sum of the values of the commodities used to produce it and usually equates to labor value” (Marx 1992[1867]:293). To Marx, capitalist modes of production begin with this desire to exchange money for more money (M-C-M’), and charging more for the end product than the cost of the material and labor inputs needed to create it – the investment of capital to create even more capital.

This ability to charge more for the end product comes through surplus labor, the output of the worker’s labor beyond what they need to sustain themselves. Upon the sale of goods, the capitalist pays the laborer, but retains the value of the surplus labor to pay the cost of production, and then is left with a surplus value (i.e. profit) to distribute as they please. In short, the capitalist retains ownership of the produce of the workers labor, and the right to distribute all its proceeds as they see fit (e.g. capital). This creates a division that polarizes individuals, communities, and societies, and leads to class based societies of rich bourgeoisie and a working class proletariat (Marx (1992[1867]; Marx and Engels 1848; Wolf 1982).

“By turning his money into commodities which serve as the building materials for a new product, and as factors in the labour process, by incorporating living labour into their lifeless objectivity, the capitalist simultaneously transforms value, i.e. past labour in its objectified and lifeless form, into capital, value which can perform its own valorization process, an animated monster which begins to ‘work’ as if its body were by love possessed’” (Marx 1992[1867]: 302).

Marx, writing earlier with Freidrich Engels, saw the outcome of this capitalist transformation as creating “[t]he need of a constantly expanding market for its products chases the bourgeoisie over the whole surface of the globe. It must nestle everywhere, settle everywhere, establish connections everywhere” (Marx and Engels 1948: 83). This is a process we now call globalization, but which has transformed over time.

Marxist scholar, activist, and communist leader, Vladimir Lenin (writing in 1916-17), believed that commodity production was key to capitalism, but it was being undermined by big profits going to “the ‘genius’ of financial manipulation” (Lenin 1918:187). Lenin claimed that in the early 1900’s that “the old capitalism, the capitalism of free competition with its indispensable regulator, the Stock Exchange, is passing away. A new capitalism has come to take its place, bearing obvious features of something transient, a mixture of free competition and monopoly,” (Lenin 1918:197-8) which is reminiscent of today’s capitalism. Lenin calls this “financial capitalism,” or “monopoly capitalism” in which large companies and banks inbreed with each other (and the government), and all work towards one goal – one monopoly of capital (Lenin 1918:199-200)! Within this form of capitalism, capital is consolidated amidst a small number of “financially powerful” people and states, in which “profits of production” are replaced by “profits of commissions” as capitalism (especially today) shifts from a “system of production into a system of financial speculation” (Harvey 2005:142). This consolidation of capital and power in the hands of only a few, allows those individuals to control a majority of global trade (and economies more generally) with little impetus to share – unless it makes them more money. This is perhaps one of the most poignant critiques of capitalist production; that “surplus capital will never be utilized for the purpose of raising the standard of living of the masses in a given country, for this would mean a decline in profits for the capitalists, but for the purpose of increasing profits by exporting capital abroad to the backward countries” (Lenin).

While we may not use descriptors such as “backward countries” today, Lenin’s point is still relevant; and been used by David Harvey within his discussions of accumulation by dispossession, and within World-Systems analysis’ notion of core and peripheral states. In both of these theories there is a capitalist elite (be they countries, people, corporations, or organizations) that have or are accumulating wealth from other states that must (perhaps forcibly) stay in a subservient – or periphery – position to those within the core areas (Arrighi 2000, Harvey 2005). It is those core states and areas that bringing in more money than they are investing elsewhere (Arrighi 2000:138).  For it would not be capitalism if MàCàM brought back less money! Within this calculation, capitalism must use financial capital (and money) to invest in commodities to make the invested money back plus a surplus, or profit. As we will see later in the section of (neo)classical interpretations, mainstream capitalist economics is based on growth that Marx (1992[1867]:762-772) calls capital accumulation and which he envisions inevitably leading to a “chronic crisis of over accumulation” (Harvey 2005:144). To Harvey, this accumulation is done by dispossessing the working classes and periphery countries of their capital and wealth. This begins by “forcing” non-capitalist territories open their economies, “not only to trade (which could be helpful) but also to permit capital to invest in profitable ventures using cheaper labor power, raw materials, low-cost land, and the like” (Harvey 2005: 139). This can be seen from colonial expansion, to imperial expansion, to the “new” imperialism of today; and to Harvey is simply a new name for accumulation “based upon predation, fraud, and violence” and which was labeled as ‘primitive’ or ‘original’ accumulation by Marx, but claimed to no longer be relevant in today’s capitalist systems (Harvey 2005). It is Harvey’s contention that this accumulation by dispossession is in fact the essence of capitalist production, that capital creates and maintains disproportionate systems of power in which countries and people in high capital positions subordinate and disposes countries and people in lesser capital positions, and that capitalism is about accumulating capital by dispossessing it from others – using markets, coercion, or force – that inherently “creates its’ own ‘other’” and then positions them beneath those with the capital (Harvey 2005: 141; chapter 4).

World-Systems Theory is another Marxist inspired theory of global accumulation and differentiation.  Largely penned by Immanuel Wallerstein and Ferdinand Braudel, World-Systems Theory sees a world economy not bound by one political force, but based upon a division of labor leading to “significant internal exchange of basic or essential goods as well as flows of capital and labor” (Wallerstein 2004:23).  Within World-Systems Theory the world-economy and capitalism are symbiotic, with the modern world-system is seen as “the only world-economy to have survived for a long time… and that is because the capitalist system took root and became consolidated as its defining feature.” This is a framework that Wallerstein claims the capitalist system cannot exist outside of.  To Wallerstein “capitalism is not the mere existence of persons or firms producing for sale on the market with the intention of obtaining a profit. Rather, such persons or firms have existed for thousands of years all across the world. Nor is the existence of persons working for wages sufficient as a definition. Wage-labor has also been known for thousands of years. We are in a capitalist system only when the system gives priority to the endless accumulation of capital… [and] that people and firms are accumulating capital in order to accumulate still more capital, a process that is continual and endless” (Wallerstein 2004:24, my emphasis). 

This process of accumulation leads to an unequal relationship between a capital intensive core and a weaker periphery that lacks the same capacity to generate profit. This relationship creates similar types of monopolization and consolidation as Lenin and Harvey speak of; and amalgamates the higher capital core into less and less political units; therefore pushing semi-peripheral political units into a growing periphery and semi-periphery that compete against each other.

“Core-periphery is a relational concept. What we mean by core-periphery is the degree of profitability of the production processes. Since profitability is directly related to the degree of monopolization, what we essentially mean by core-like production processes is those that are controlled by quasi-monopolies. Peripheral processes are then those that are truly competitive. When exchange occurs, competitive products are in a weak position and quasi-monopolized products are in a strong position. As a result, there is a constant flow of surplus-value from the producers of peripheral products to the producers of core-like products. This has been called unequal exchange” (Wallerstein 2004: 28).

And this inequality is the cornerstone of Marxist inspired interpretations of capitalism. There is always a creation – or expansion – of “new classes, new conditions of oppression, new forms of struggle in the place of old ones” that are splitting society more and more “into two great hostile camps, into two great classes directly facing each other: Bourgeoisie and Proletariat” (Marx and Engels 1848:80). Within Marxist interpretations of capitalism, society is about capital exploiting both labor and society in general – political, economic, and social – in ways to maximize surplus values through maximizing labor hours worked in exchange for the minimum pay at the expense of individual and groups of labors. This therefore creates two classes of individuals, the bourgeoisie (those with control of capital), and the Proletariat (the workers that control only their own labor). And with this division of people, also the division of capital and wealth.