Immanuel Wallerstein’s Work Can Help Us Understand the Deepening Crises of Capitalism

Immanuel Wallerstein developed a compelling analysis of capitalism as a world-system that undercut the triumphalism of the neoliberal age. Wallerstein’s work is full of valuable insights into the forces that are destabilizing global capitalism.

Immanuel Wallerstein in France, February 1997. (Louis Monier / Gamma-Rapho via Getty Images)

Immanuel Wallerstein was a creative thinker who believed that conventional social science represented the interests of the powerful. Born in New York City in 1930, the place he would later identify as the capital of the world economy, Wallerstein spent his life challenging dominant social-scientific and cultural views of global capitalism.

By the time he died in 2019, Wallerstein thought that the capitalist system was in structural crisis, guaranteed to collapse. Yet for him the end of capitalism did not necessarily mean the rise of socialism.

Wallerstein saw the contemporary struggle as one between regressive forces pushing for another highly unequal system and progressive forces fighting for some form of egalitarianism. He dubbed these contesting forces the spirit of Davos and the spirit of Porto Alegre, respectively. In his opinion, each force had a roughly equal chance of success.

How did Wallerstein come to this seemingly ominous conclusion? In truth, he did not see his prediction as gloomy. “The odds,” as he liked to say, “are fifty-fifty. But fifty-fifty is a not a little; it is a lot.”

Crisis and Collapse

Unlike many twentieth-century left intellectuals, Wallerstein did not trade his youthful optimism for an elderly pessimism or acquiescence. As neoliberalism took hold in the era of Ronald Reagan and Margaret Thatcher, Wallerstein’s outlook transformed into something altogether beyond the feelings of optimism and pessimism. He adopted a cool rationality, an assuredness of his diagnosis of the modern world-system’s deepening crises and forthcoming collapse.

In the 1990s, as neoliberalism won over parties in the United States and Western Europe that in Wallerstein’s childhood had represented workers’ interests, he remained unshaken. Amid the governments of Bill Clinton and Tony Blair, who championed the seemingly unlimited potential of free-market capitalism, Wallerstein continued to argue that US dominance was waning, and that capitalism was deeply unstable.

Neoliberalism associated human freedom and development with unregulated markets. Wallerstein, on the other hand, associated those concepts with equality in politics, economics, the law, and culture.

We can see today that history has unfolded more in line with Wallerstein’s predictions than those of the neoliberals who had promised economic prosperity and lasting peace. America’s wars in Afghanistan and Iraq did not lead to a more peaceful or stable world scene. American leaders who promoted unfettered markets, instead of achieving their goal of pacifying through prosperity, merely provoked global social protests and renewed unionization efforts.

Wallerstein’s world-systems analysis can help us make sense of our chaotic world. Seemingly disconnected phenomena, such as financial crises, popular protests, and wars reveal a system in structural crisis.

African Independence and Modernization Theory

Wallerstein was always curious about politics and the ideas that inform our actions, as well as the interconnections between international and domestic politics. He was a youthful supporter of the movement for world federalism. In 1954, he wrote a master’s thesis on McCarthyism that was later cited by the historian Richard Hofstadter.

Wallerstein was drafted into the US military at the time of the Korean War and sent to defend the Panama Canal. Afterward, he set his sights on Africa’s independence movements in the context of the changing world scene. With expertise came the realization that existing social science could not explain the problems faced by the continent’s newly independent states.

Postcolonial governments almost immediately fell into problems of debt and political instability. The prevailing view among academics in the study of political development — a term for the growing sophistication and resilience of governing bodies — was that poor and unstable nations were poor and unstable because of the choices made by their leaders. The assumption was that most politics was national, with only incidental interaction with the outside world.

This perspective, which still persists today, was known as “modernization theory.” Its champions recommended that struggling nation-states drop barriers to trade and open up to foreign investment.

Wallerstein never accepted that Africa’s new postcolonial governments were to blame for their problems. He believed that the politics of debt and unfair terms of trade were, as Tanzania’s president Julius Nyerere put it, the “second scramble” for Africa. He saw that the impact of Western imperialism had survived formal decolonization.

Antisystemic Movements

Nonetheless, Wallerstein initially sought to amend rather than replace modernization theory. In the late 1960s, he planned a major study. He wanted to devise lessons for the world’s “new” nations based on the experiences of the world’s “old” nations, the European states that had formed in the 1600s.

However, he soon rejected the premise of his project. It was “a bad idea,” he wrote decades later. Newly independent nation-states were creating governments and engaging in diplomacy in radically different circumstances than the old nations of Europe. It was the relationship between the old and new that was significant, he reasoned.

Wallerstein’s new perspective arrived shortly after the global protests of 1968, which he experienced directly in New York. In fact, he liked to remind his French friends that the Columbia University uprising predated the Paris protests by a number of weeks.

Wallerstein saw the global protests as being interconnected. In his view, they all fought against the established order and sought to create better life circumstances. Later, he would say that 1968 “crystallized” many of his opinions — beliefs he had previously held “in a more confused way.”

He would go on to describe 1968 as an “antisystemic movement,” part of a long line of modern social and nationalist movements symbolized by their years, such as 1789, 1848, 1917, 1968, and 1989. The term describes the way in which people occasionally challenge the highly unequal established order, characterized by hierarchy and exploitation. Sometimes they achieve their goals (or some of them), as the French revolutionaries did in 1789. Sometimes the results are more mixed, as in Europe’s 1848 revolts.

After initially trying to revise modernization theory, pointing it in a more international and historical direction, Wallerstein went back to the drawing board. He formulated a new way of thinking about world politics, inspired by the revolutions of 1968, one that accounted for the relationship between colonizer and colonized, banker and debtor.

The World-System

By drawing on thinkers such as Fernand Braudel, Amílcar Cabral, Frantz Fanon, and Karl Polanyi, Wallerstein devised a way to specify the relationship between great and minor powers. He referred to his approach as “world-systems analysis,” using the term “analysis” in preference to “theory,” which he thought would imply a premature sense of closure — of having everything figured out.

Wallerstein hyphenated “world-system” to indicate that the two ideas were inseparable. The hyphen showed that he was writing about a system that was a world, rather than merely the world’s system. Therefore, he contended, a world-system could take up a space smaller than that of the Earth.

Wallerstein envisioned a few main types of world-system, the most prominent of which were the world-empire and the world-economy. A world-empire was a large-scale civilization with a single governing institution and a single economic system, such as that of ancient Rome. It conquered and occupied vast stretches of territory, and received tribute from various constituent parts.

A world-economy, by contrast, was for Wallerstein an unusual creature, consisting of several distinct governing institutions within an overarching economic system. In the case of the capitalist world-economy, the states (that is, countries or nations) were bound together by a capitalist economic system.

According to Wallerstein, capitalism formed in Western Europe and the Americas over the course of the “long sixteenth century,” roughly spanning the years from 1450 to 1640. Given the prevalence (even today) of slavery, indentured servitude, and other forms of forced labor, he avoided defining capitalism as a system based on wage labor and private ownership. Wallerstein defined it instead as a system based on the endless accumulation of capital, by which he meant stored value.

There quickly emerged a division of labor that mirrored class divisions within the states. The wealthy and powerful “core” (initially limited to Western Europe) exploited and profited from the immiserated “periphery” (much of the rest of the world-system). Between, Wallerstein saw a conveyer belt category called the semi-periphery, comprised of exploited states with a small claim to the rewards generated by the periphery.

The central element of world-systems analysis, however, is the contention that all systems are impermanent. A system is born and goes through a period of fragility and then strength, before finally entering a period of terminal crisis. Wallerstein argued that capitalism has a finite lifespan and that its normal operations will eventually cause its conclusion. After meeting the Nobel Prize–winning chemist Ilya Prigogine, Wallerstein realized that this logic also held true for natural systems, including the universe as a whole.

By stressing the relationship among societies, Wallerstein found a way to describe the capitalist mode of production as it actually existed. Previously, social scientists used the state as their unit for analysis. For Wallerstein, states were one component of a larger system.

Cyclical Rhythms

In the 1970s and ’80s, Wallerstein wrote widely about the history of capitalism in a book series titled The Modern World-System, with a final volume appearing in 2011. He explained the system’s fragile formation, periods of expansion and growth, and its deepening contradictions.

Politically and culturally, this period was characterized by the triumph of neoliberalism. Yet Wallerstein swam against the neoliberal current by describing the origins and expansion of capitalism, its episodic behavior, and its enduring trends.

Wallerstein referred to capitalism’s ups and downs as “cyclical rhythms.” One such rhythm was the economic “long wave” — longer-term periods of faster and slower growth. Some waves were several decades long, whereas others extended over the course of centuries. He was particularly interested in how states and other actors responded to long-term periods of expansion and consolidation.

Another cyclical rhythm Wallerstein identified was the rise and fall of international dominance. Occasionally, a nation converts its economic advantages into an unrivaled position of power that he dubbed “hegemony.” By considering lessons from the Dutch, British, and American examples, Wallerstein found a common pattern.

The rising hegemon fends off a rival. As it does, its advantages in the fields of agro-industrial production, commerce, and finance convert into military superiority. After a major conflict such as World War II, the newly dominant nation sets the rules for a lasting international order.

From that point, it slowly declines by losing its economic advantages in the same order that they were gained, beginning with agro-industrial production and concluding with finance. Wallerstein believed that the United States had begun to decline in the 1970s.

Secular Trends

We could imagine cyclical rhythms in metaphorical terms as the modern world-system taking in a breath and then letting it out again. Typically, they return to a kind of normal place, an equilibrium, but they also cause new developments in the system. Such “secular trends” increase over the lifespan of the system. By definition, they cannot be undone.

Wallerstein conceived of several secular trends, including political revolts, the development of a proletarianized labor force (broadly understood), and the geographic expansion of the world-system. The latter is useful for thinking about global capitalism today.

According to Wallerstein, a sign of capitalism’s structural crisis is its inability to expand geographically. For four centuries, until roughly the end of the nineteenth century, capitalism could relieve its internal pressures through expansionism. In any given area, as workers demanded better wages and safer working conditions, while resources grew scarce, owner-producers would “run away” to new areas.

In many cases, this running away led to the incorporation of external areas into the world-economy. The system began in Europe and the Americas, but has at times quickly spread. For example, in the age of empire from approximately 1750 to 1850, European powers pushed much of South Asia, West Africa, and the Ottoman Empire into the world-system’s periphery.

Just as the ideology of unfettered market capitalism took hold in the West, Wallerstein’s historical analysis showed a system in trouble. Without room to grow, he argued, the system relied more on the creation of new technologies, new commodities, and new contracts, such as those protecting future profits in international trade agreements.

By emphasizing the system’s increasing contradictions, Wallerstein rendered himself immune to the cultural attitude of late capitalism that had so frustrated fellow radicals: namely, the idea that unlimited corporate freedom was somehow the world’s natural condition and the best of all possible options. If we could summarize the philosophy of neoliberalism by that old line, “there is no alternative,” Wallerstein summed up his own attitude with an often-used retort: “there are thousands of alternatives!”

Dangerous Classes

The wild fortunes of capitalism so far during the 2020s have many short-term causes, such as the pandemic and disruptions in the just-in-time supply chain, oil shortages, the unpredictable nature of traditional stocks, and the predictable volatility of cryptocurrencies. Yet Wallerstein’s ideas tell us that we should see the sequence of recent crises in a longer time span. They represent a world-system unable to return to equilibrium. Instead, the system continues to swing chaotically in one direction after another.

The crisis of capitalism has also emboldened regular people to demand more from their states. For a long time, liberalism’s promise of slow-but-steady reforms successfully pacified people — or at least enough people to maintain the existing power structures. Elite pronouncements about political freedoms, indeed liberty, were for Wallerstein actually justifications for inequality. Core states sought to “tame dangerous classes,” he wrote, “by incorporating them in to the citizenry and offering a part, albeit a small part, of the imperial economic pie.”

Yet over time, core powers such as the United States found it harder to justify their imperial adventures and the perpetuation of economic inequality. As American hegemony diminished, it also proved incapable of maintaining the order it created decades ago. Other nations no longer feel constrained by its directives.

Hegemonic powers can decline gracefully or precipitously, according to Wallerstein, but they cannot stave off decline. He saw the 2003 invasion of Iraq as a case of the United States trying to convince other nations of its greatness. As he wrote two months before the invasion began:

With the collapse of the Soviet Union, the United States lost the major political argument it had to persuade Western Europe and Japan to follow its political initiatives. All it has left is an extremely strong military.

The early twenty-first century is characterized by the cyclical unsettling of the US hegemonic order. But it is also characterized by the secular unsettling of the world-system itself. For Wallerstein, the system cannot return to normal.

Strangely enough, many of the places that inspired Wallerstein’s concept of world-systems analysis can also benefit from its ideas. Postcolonial nations remain in crisis, struggling with debt and political instability. Yet their former colonizers are also in trouble, with restless citizens demanding better treatment from their bosses and governments.

Wallerstein was convinced that egalitarians stood a better chance of success if they were armed with the right ideas. His ideas have made for dangerous classes indeed!