Institutions *are* important. An evidence of the vitality of European culture before even the English, never mind French, revolution, is in the stance of imperial Russia, whose ambiguous east-west orientation was a litmus test of contemporary valuations of the merits of Europe and the orient.
Why, if Chinese science, productivity, technology and culture was superior, did Peter the Great (1672-1725) open his window on the world facing the Baltic? He was aware of China and Russia was the first western state to undergo sinification of trade, adoption of eastern dress, manners, colloquialisms, trade practices etc. Even Peter's father, the moderniser tsar Alexei Mikhailovich (1645-76)sought European assistance, importing Dutch engineers and shipbuilders like Kashtren Brandt.
The Romanov urge to modernise transcended traditional fear and envy of the east, so the choice of Europe is instructive.
Despite this evidence of European institutional dynamism, the real issue was not the specificity of institutions but their *negation*. This is what Frank and Landes and the schools they front, totally fail even to understand let alone acknowledge.
This absolute failure of historical vision is connected in Frank's case with his dismissal of Marx. Marx was not eurocentric either by inclination or as theorist. Marx saw capitalism as a global phenomenon. British capitalism was all there was in 1857, by when he'd completed his theorising of the phenomenon. It was not as clear than as later [after Marx!] that industrial capitalism which emerged *first* in Britain, was the future-wave. Marx was therefore neither eurocentric nor an orientalist. His achievement was in his characterisation of the dynamics of the capitalist accumulation-regime.
Frank never addresses this in his [erroneous] dismissal of Marx. To substantiate it Frank needs to do deconstruct Marx's holistic analysis not merely attack Marx's claims at universality. Marx never saw capitalism as a euro-phenomenon, speaking of 'capital-in-general' and seeing it as ONLY a world-system. This is why all the world-sytem theorists without exception as well as their world-history camp-followers owe such a huge intellectual debt to Marx even while denying it.
Pomeranz's wonderful analyses remind us there was nothing in Chinese development of irrigation, aquaculture, solutions to energy-deficits [efficient stoves] -- which is not -- ESPECIALLY today -- at the forefront of our imaginings of a post-capitalist, sustainable future. Marx wrote similarly for example in his correspondence with Zasulich in which he lauded the example of the Russia peasant commune, the zemstvo seen as a short cut to a humane, sustainable socialism, without a detour thru capitalism. A progressive civilization did not require either the savagery or the institutions of European capitalism. Marx was prepared for the kind of thought-experiments Pomeranz encourages. There are always alternatives.
This is so even though capitalism is unique in being the first social formation in which accumulation is not a by-product of secular productivity trends, but the main aim of the social actors, and an institutionalised matter of life and death. For the institutions of capitalism: the banks, discount-houses, commerce, technology, state, even the academy, are not supports of a settled way of life and its received truths, but market mechanisms, bankrupting failure, thru stock markets in particular making it impossible for investors who have failed to prevent more successful methods being adopted in the future, as all bureaucracies or centralised decision-making institutions do. The emergence of civil society was not in opposition to capitalism but as its supports and conditions of existence. There was no entrenched opposition between commerce for profit and the rest of society. This meant that the instutitions themselves lacked any organic integrity or mode of self-authentication: 'all that is solid melts into air', and it wasn't just guilds or the other medieval instances which Marx had in mind. It was the things which replaced them, the institutions of mdoern capitalism too, were and are at the mercy of the market. It is not institutions but their absence, as alternatives or anchorages of the social being, which drives capitalism. Nothing is sacred, everything open to question in the ceaseless turmoil of social relations and the institutionalised revolutionizing of social reproduction.
This relentless subversiveness of all capitalist institutions, their protean formlessness and inescapable power, became the basis of social life in sharp contrast to everything that went before, in a baleful and decisive judgement on societies which refused it, especially China. Thus the machinery and arms were only, and were seen as only the outward forms of an inexorable social logic which overawed and subordinated every other social formation, and which no rivals, even the most powerful, could compete with or even adopt.
This logic of self-expanding value was appropriate to fossil-fuel based industrial technologies. It is not possible to analyse C19 development without referring to this logic and analysing the accumulation-regime and its immanent limits.
Frank's alternative -- Kondratiev punctuated equilibria with technological revolutions recurring ever fifty years -- explains literally nothing any more than does the paralysis of the neoclassicals. The same criticism must even be levelled at the Marxist Jim Blaut whose otherwise remarkable work does not embrace a logic stronger than accident and contingency.
K-waves describe pulses of growth and decline and the fluxes of capital between cores and peripheries producing new cycles of infrastructural investment, destruction of existing obsolete capitals, and then resumed growth. But K-waves obscure the real causes.
Self-expanding value creates a closed dynamic characterised by Marx as M-C...P...C'-M', where the objective is not production of use-values but production of value. Money (M) is converted to capital (C) which is invested in production. The production phase (P) is an interruption to the circuit of capital; when new use-values are produced, they must be sold so that an augmented sum, money-prime (M') is realised and the initial capital valorised. For this to happen, labour expended in production must produce more value than than the initial cost of labour to the capitalist. Since all inputs are the product of labour, taking the system as a whole only labour- power itself is a cost.
The logic of competition forces individual capitals to increase labour- productivity. Even in the case of natural monopolies, for example the oil industry, monopsonised after its chaotic free-market inception, the logic of large-scale process industries asserts itself. But competition still governs the level of super-profits or rent which the monopolist extracts. Additionally, the state acts in the interests of the capitalist class as a whole to impose limits on monopolies.
The Second International assumed state-monopoly capital had displace laisser-faire competition, but they were wrong. Despite the predominance of monopolies, competition logic held.
Competition, however, would not work to increase productivity if it did not express something more fundamental. Marx: 'Competition executes the inner laws of capital; makes them into compulsory laws towards the individual capital; but it does not invent them. It realizes them. To try to explain them simply as the results of competition therefore means to concede that one does not understand them.'
Competition is a function of the accumulation dynamic, whose objective is to valorise the total social capital, not just a part of it, and considering that capitalism is a process whose dynamic is expressed through time, the only way that surplus-value can be valorised is by the further expansion of capitalist production.
Without continuously expanded reproduction capital cannot continue. It has to have new outlets to invest the surplus-value resulting from previous cycles. Production can simply be extended, without any increase in productivity and therefore with no change in the ratio C:V, i.e. in the proportion of labour to fixed capital (plant and machinery). Extended (simple) reproduction occurs, and is always present (as is *contracting* production within obsolete industries, depressed regions etc.) but it is not fundamental to capitalism. If it was fundamental and assuming there were never any environmental constraints on infinitely extended production, then capitalism would never run into crisis as the result of its inner contradictions. But simple extended reproduction always becomes expanded reproduction on the basis of intensified exploitation, that's in the system-logic and that is also what makes capitalism not just crisis-prone but TEMPORARY.
First and most important, each individual capitalist must extract surplus-value from his workforce, while competing with other capitalists to sell the produced commodities in the market. Capitalists can cartelise markets to mitigate competitive pressure. They can impose trade protection thru control of the state, and may do this in collusion with own workforce, since workers have an interest in a high wage, a low rate of exploitation, and therefore in protected markets for 'their' products. However, cartelisation, mercantilism, trade protectionism, are short-term palliatives with downsides.
Cartels outrage other capitalists forced to pay over the odds; rigged markets mean high prices for workers, as one group of capitalists hijacks a proportion of the total surplus-value. States which construct trade barriers may find other markets closed to their own products, and that their protected industries are uncompetitive on world markets. These effects may be discontinuous and protectionism has always been deployed by states wishing to build strong domestic industries against entrenched foreign rivals: the US, Germany and Japan all deployed such measures during their developmental stage at the end of the 19th century and Asian countries have built strong industrial bases the same way in recent times.
Nevertheless, barriers to free trade sooner or later break down. Neither individual capitalists nor capitalist states can hide from the logic of value, expressed thru competitive pressure. To survive capitalists strive to increase the rate of exploitation of their workers, to increase productivity, lower the prices of products and out-compete rivals, by speed-up in the labour-process (reduction of production time), by investing in new production techniques, plant and machinery, which increase the capitalist's command over labour, increase the productivity of workers in the labour-process and reduce the ratio of V to C by downsizing the workforce.
Capitalist exploitation of workers (and the problem of command and control of labour within production) is the essence of class struggle within production. Capitalists must find ways to force workers to become adjuncts of a machinery of production, and to see themselves as such; to perform tasks whose meaning belongs to the capitalist and whose results (the product) belong also to the capitalist, and are seized by the production process as soon as the worker has expended her/his labour on them.
Simple expanded reproduction, with no increased productivity and no change in C:V, was always inherently implausible, as Marx demonstrated when he created the first true macroeconomic models of multi-sector economies. In the simplest of these, his reproduction scheme involving a two-sector economy in which Department I produced capital goods ('means of production') and Department II produced consumer goods.
It was clear to Marx that while capitalist economy required the existence of these two departments (at least), their presence was bound to volatilise the economy and produce constant disequilibria. Thus for example, a transition from simple to expanded reproduction, or transition to further expansion, that is, to a higher growth path' means, Marx states, that: "in order to make the transition from simple reproduction to expanded reproduction, production in Department I must be in a position to produce fewer elements of constant capital for Department II, but all the more for Department I."
To achieve this, the manufacturers of fixed capital will have to spend more than before of their previous-accumulated surplus-value from consumption goods to capital goods they themselves supply. The effect is theoretically to deflate demand for consumption goods produced in Department II. Marx said: 'There would thus be an overproduction in department II.
The inevitable production cut-backs by consumption-goods manufacturers might depress demand for capital goods, thus aborting the transition to higher growth and producing recession instead.
Where the rate of increase in labour productivity is too low, capitalism will experience a profits-crisis resulting from which, new surplus-value wil not be valorised, excess capital will appear, and generalised crisis may follow. But the higher the rate of productivity increase, the more the ration of V to C declines, the more workers are expelled from production, and the greater the mass of social capital which a proportionately smaller productive workforce must valorise. This tendency was apparent from the start, and ir coincides with the ever-increasing centralisation and concentration of capital. The core countries [and industries] which were first to achieve take-off, simply exported these downsides to what soon became the new peripheries (China, India). It was Bengal cotton workers and Chinese textile, pottery and metallurgical manufacturers who went to the wall. The phenomenal immiseration of the Chinese and Indian masses, resulting in the decline of Chinese per capita GNP in constant 1960 US dollars from around $220 in mid-C18 to $170 per capita by 1950; this was the immiseration which Marx called 'the absolute general law of capitalism'. The process was fantastically powerful and dynamic and the apparently low initial growth rates in the first industrilaising countries, caused by the small relative size of the new industrial sectors, should not blind us to this. Today, around 200 million productively-employed proletarians, mostly employed in transnational corporations, are all that is required to valorise the enormous quantity of social capital; more than a billion and a half proletarians (perhaps twice that number) are semi- employed or not productively employed at all.
Gunder Frank rightly considers that the 'politics' of this debate about C18 China and the IR concerns the fate of *contemporary* China and the world-system: that, as I understand it, is the burden of his message in ReOrient. But the question is, how can this swing of the pendulum from west to east even be conceptualised, let alone accomplished? If most of Eurasia enjoyed broadly similar opportunities and living standards in mid-C18, by 1900 only 40% of people lived in broadly industrialising or developmental states; but now that proportion has shrunk to less than 20% as capitalism has continued to work its 'egalitarian' magic. How can the phenomenal conconcentration and centralisation of capital in its prodcutive and scientific centres which that means, be reversed, or in what ecological circumstances can we even imagine China/India replicating and THEN SURPASSING western production, with its already insupportable environmental burden? I submit that it is inconceivable that this can happen; a capitalist, marketised China can NEVER overtake the west, this side of an unparalleled catastrophe in the west, on a scale even exceeding the disaster which capitalism has visited on China/India since 1750.
Marx called the Tendency of the Rate of Proft to Fall 'in every respect the most important law of modern political economy... a law which, despite its simplicity, has never before been grasped and, even less, articulated':
"Since this decline in the rate of profit [Marx wrote] is identical in meaning (1) with the productive power already produced, and the foudation formed by it for new production; this simultaneously presupposing an enormous development of scientific powers; (2) with the decline of the part of capital... which must be exchanged for ... labour, ie. with the decline in the immediate labour required for the reproduction of an immense value, expressing itself in a great mass of products, great mass of products with low prices... (3) with the dimension of capital generally, including the portion of it which is not fixed capital; hence intercourse on a magnificent scale, immense sum of exchange operations, large size of the market and all-sidedness of simultaneous labour; means of communication etc., presence of the necessary consumption fund to undertake this gigantic process (workers' food, housing etc.); hence it is evident that the material productive power already present, already worked out, existing in the form of fixed capital, together with the population etc., in short, all conditions of wealth, that the greatest conditions for the reproduction of wealth, i.e., the abundant development of the social individual -- that the deveklopment of the productive forces ... [b]eyond a certain point becomes a barrier for capital... When it has reached this point, capital, i.e. wage labour, enters into the same relation towards the development of social wealth and of the forces of production as the guild system, serfdom, slavery, and is necessarily stripped off as a fetter.
The last form of human servitude assumed by human activity, that of wage-labour on one side, capital on the other, is thereby cast off like a skin... The growing incompatibility between the productive development of society and its hitherto existing relations of production expresses itself in bitter contradictions, crises, spasms. The violent destruction of capital not by relations external to it, but rather as a condition of its self- prservation, is the most striking form in which advice is given it to be gone and to give room to a higher state of social production. It is not only the growth of scientific power, but the measure in which it is already posited as fixed capital, the scope and width in which it is realised and has conquered the totality of production. It is likewise the development of the population...'
Marx held that a continuous growth of population in the form of a reserve army of labour, was an 'absolutely general law' of capitalist accumulation. As we have seen, this 'general law' has a correlative: the tendency for the proft-rate to fall (TRPF). Other things being equal, the constant accumulation of capital in the form of fixed plant and machinery is bound to reduice the rate of profit, since profits arise only from the exploitation of labour ('variable' capital); fixed capital ('constant' capital) does not add value, it only transmits to the final product a proportion of its own value.
The increased ratio of C to V must produce, according to Marx, a constantly rising 'organic composition' of capital. Thru each cycle of accumulation, the working class must valorise an ever-increasing mass of dead labour embodied in plant and machinery and the social capital generally. Thus labour productivity must grow proportionately faster than the rate of accumulation. 'Waste' of capital thru unproductive use (luxury goods, military expedniture, waste thru misapplication of investment or thru the unexpected effects of externalities revisiting their true costs on capital) is one counter- tendency to the TRPF. But these counter-tendencies are certain to be insufficient in the long term. Thus capitalism will experience period crises, in which valorisation cannot be completed; goods remain unsold because capitalists have no productive investment outlet for the capital previously accumulated, and so the system hangs.
Inefficient capitals go to the wall, space is created for new technologies to be introduced, surplus labour is expelled from production, the rate of exploitation is increased and accumulation can recommence. The expulsion of labour from production decreases demand in the market place, thus temporarily deepening the crisis. But the crisis is not one of the over-production of use-values but of value. If this were not so, capitalism would never emerge from the contractionary processes its own tempo of development causes in its failed rivals, which are not merely competing firms, but whole industries, states and even whole regions. Asia was the first instance of this and is still among the most spectacular episodes of bankruptcy.
Indeed, slumps may be protracted over several decades because of such vicious descending spirals. But sooner or later the accumulation-process will recommence, because the increase in labour-productivity forced by the crisis makes renewed valorisation possible. The C19 is properly seen as a constant struggle by the new core states to redress the collapse of peripheries and loss of markets, primarily by means of colonial imperialism and market-closure to rivals. The new focus on the orient which Frank and others has achieved casts this history in a new light, in which Marx's famous predictions not only are not falsified or relegated to a remote future, they are visible as *contemporary events*, and among the most powerful, tectonic events of the whole era, as whole regions and even continents were indeed consigned to the scrap heap and the peoples of Asia were impoverished and ruined.
Behind K-wave theory is actually the same old neo-classical convition that labour productivity will endlessly increase. But what if it will not? What if there is an absolute limit to productivity increases based on increased energy-efficiency? On the question of malthusian- equilibrium states posed by Brad deLong in his thoughtful remarks, one might point to the work of the anthropologist Marvin Harris, whose notion of 'cultural materialism' theorises that human cultures achieve stability and permanence by systematically controlling population growth in order to conserve their ecological niche. But Harris's examples seem mostly drawn from indigenous societies and I am not clear how they apply in agrarian societies let alone industrial ones.
Clearly where populations increase crises can emerge as a result of which there is either civilisational collapse (the Mayans Sumerians, ancient Rome, Greece etc) and die-off -- or the system relaunches successfully on a new developmental trajectory.
Industrial capitalism was surely a response to a crisis of relative over-population which emerged in Europe and elsewhere by the end of the 17th century. But did industrial capitalism achieve a new (growth based) equilibrium, or was this solution no solution at all since it has done no more than bring about a huge new increase of population on a still more unsustainable basis?
The population of Europe doubled from 100 million in 1650 to 200 million by 1800. And the rate of increase constantly accelerated. By 1789 Paris had more than 600,000 inhabitants, of whom at least 100,000 were vagrants: the footsoldiers of the French Revolution. London's population grew from 575,000 in 1750 to almost a million by 1801, 'including a mass of the bustling street-hawkers, pickpockets, urchins, and felons so well captured in contemporary prints.' [Paul Kennedy]
The burgeoning population huddled into the cities from the countryside and inhabited 'sprawling slums of jery- built houses, lacking water, light, heat, and sanitation... in the new manufacturing towns hordes of children lacked adequate health care, nutrtion and education; gangas on unemployed agrarian workers attackjed the new farming machines that had thrown them out of work; social prtest was common, especially in years when poor harvests drove up the price of bread.
By 1750 European economies were increasingly gridlocked, and hunger was common especially in France. The agrarian revolution impacted the environment in destructive ways. Enclosing of commons destroyed the last great British forests, which had been under intensive pressure as competitive uses for timber proliferated.
The most dangerous bottleneck faced by the British economy was the complete collapse of the iron industry as supplies of wood for charcoal dried up. By 1700 Britain was importinr iron wrought and pig-iron from Sweden, Spain and even the Urals.
That this trade was profitable evidences the desperate straits the English iron industry was in. The iron famine affected the entire English economy and imperilled its defence. This was the background to British activity in India and the Far East.
There were many atempts to solve the problem of smelting iron with substitutes, the most obvious being coke made from coal. These attempts did not succeed in solving the iron shortage until almost the end of the 18th century.
When the solutions came they synergistically combined to provide the platform for industrial take-off. But there surely can no longer be any doubt that take-off happened largely because of fortuitous accident (available coal, but in waterlogged deep mines requiring the development of pumps and then steam engines -- China's coal was remote, the mines were dry; the Trade Winds that made the America accessible to Europeans etc).
As for the dynamism of institutions, we need to think more about the desperate straits Britain was in, by 1750 -- than about any native superiority; and we need to register the way in which capitalism has never depended, since the Enlightenment, on any pre-existing institutions, regarding them all as potential barriers and sources of stagnation, and filling with content only those which served the accumulation-regime.
If Gunder Frank has put the IR back in the foreground the refocusing of attention on the dynamics of what has been a capitalist world-system for two centuries again also foregrounds Marxist themes and preoccupations.
Mark Jones