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Introduction To ''Contradictions of Capitalism as a World System''

Fred Block
Crit Sociol 1999 25: 143
DOI: 10.1177/08969205990250020401
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INTRODUCTION TO CONTRADICTIONS OF CAPITALISM

AS A WORLD SYSTEM
Fred Block
University of California at Davis

Returning to an article published twenty- ve years ago is like exhuming a deceased relative; there is considerable dread as to how badly the
body will have decomposed. With an article, the passage of time can
be destructive in several distinct ways. First, the authors subsequent
intellectual and political development can make earlier writings appear
hopelessly naive. Second, historical change can reveal ones arguments
and analysis to have been simply wrong or utterly irrelevant. Finally,
changes in intellectual fashion or scholarly concern can enormously
accelerate the process of decay by invalidating the basic premises of
earlier scholarship.
It is only relative to this last process, that Contradictions of Capitalism
as a World System can be said to have aged well.1 At this moment
( January 2000), the question of globalization and debates over the
organization of the global economy have more currency in academia
and actual politics than ever before in the U.S. In the aftermath of the
Battle for Seattle, both the U.S. labor movement and a newly revived
student movement are increasingly focusing their attention on the organization of the world economy. Hence, the core question that the article askshow will global capitalism organize itself ?is a more urgent
question than ever. Yet the essay assumes that the answer to the question will be determined by global political and economic elites; it does
not even imagine the extraordinary possibility that has recently emerged
that the global economy could be reorganized by self-conscious actions
of transnational social movements.
The article has stood up less well against subsequent historical developments. The article provides a useful account of the critical period
of transition in the 1970s when the old Bretton Woods system was giving way to a new era of more disorganized global capitalism, but it
failed to anticipate three key patterns. The rst has been the extraordinary expansion of global nancial ows, currency trading, and speculation in derivatives and other complex instruments that has occurred
over the past twenty years. As of 1998, oYcial studies estimated daily
Critical Sociology 25,2/3
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fred block

turnover in global foreign exchange markets at $1.2 trillion per day.

When the article was originally written, turnover was probably 1 or 2%
of that amount.
In a word, I imagined back then that the very small steps towards
liberalization of nancial ows in the global economy that had occurred
in the early 1970s had already created an open world economy in
which capital was free to move across national boundaries in response
to market signals. The reality was that most nations still had a variety
of capital controls in place and the process of liberalization had only
just begun. What appeared to me then as a dangerous level of global
nancial anarchy looks in retrospect like a highly organized and stable system when compared to the results of two decades of nancial
liberalization.
The second and more humbling failure is my exaggeration of the
instability of this newly liberalized global nancial order. The article
assumes that without movement towards substantially greater international economic coordination, the global economy would be vulnerable
to escalating nancial crises that could lead to a replay of the crisis of
the 1930s. There has been a succession of international crises and severe
economic problems, including the Third World debt crisis, the long
term rise of European unemployment levels, the Japanese economic
downturn in the 1990s, and the East Asian nancial crisis at the end
of the 1990s. But the dominant story has been the amazing resilience
of the global economy and the ability of U.S. and other international
policymakers to manage successfully a series of global crises. These successes in turn, helped to facilitate the dramatic economic booms in the
U.S. in the 1980s and again in the 1990s. Writing in the 1970s, I
simply could not imagine that an increasingly liberalized and fragile
global nancial system would be able to limp through twenty- ve years
without a disastrous crisis or escalating economic warfare among the
major powers.
I also completely failed to anticipate the successful management of
in ation in the U.S. and other developed capitalist societies in the 1980s
and 1990s. In the 1970s, powerful in ationary pressures seemed to be
part of the very nature of capitalism, and it was diYcult to imagine
that a series of shocks between 1978 and 1983 would bring in ation
under control. The assumption that in ation would remain a central
economic problem was, in turn, linked to my exaggeration of the fragility
of global economic arrangements. With in ation under control, some
of the problems of global economic coordination became more manageable than they had been in the 1970s.
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introduction to contradictions of capitalism

145

Not only has in ation been brought under control, but what has
occurred in recent years is the almost alchemical shift of in ationary
pressures from the real economy to asset markets. We still have the old
problem of too much money chasing too few goods, but the dynamic
has eVectively been isolated to one particular category of goodsinvestment assets such as equities and real estate. So while prices for most commodities remain relatively stable, prices in asset markets have been rising
at an extraordinary pace. The result has been a sustained stock market boom that has created the illusion of almost universal prosperity.
Several aspects of my own subsequent intellectual development also
make it unsettling to reopen this particular coYn. For one thing, I nd
the prose of the piece overly wordy and marked by too many passive
constructions, so I am glad that the editors have cut the paper to its
intellectual essentials. For another, the article was written with certain
New Left Marxist assumptions that I have since discarded. Foremost
among these is the idea that capitalism is a form of social organization
characterized by a set of xed internal contradictions that can be managed but never fully overcome. Hence, the fundamental economic contradiction at the heart of capitalism means that either it will be marked
by periodic and deep economic downturns or it will face ongoing and
intensifying in ationary pressures. Moreover, as this contradiction is displaced into the global arena, it will make global capitalism extremely
vulnerable to either inter-imperialist con icts or economic collapse. In
short, those parts of the article that have aged the worst can be traced
to these particular Marxist underpinnings.
My own thinking has evolved in a more Polanyian direction that
seeks to build on Marxist and World-System insights without theorizing capitalism as an economic order with a xed essence. In a recent
essay, for example, I have suggested that rather than seeing global capitalism as a coherent and uni ed whole, it is useful to think of it as a
constructed order that is constantly under construction to resolve tensions and strains.2 In short, even without a highly developed system of
global governance, there is a continuous need for international agreements and coordination and active intervention by international organizations such as the World Bank, the IMF, and the WTO. If transnational
movements can succeed in showing that global capitalism is not operating according to some natural set of laws, but is actually a politically
managed and constructed entity, then they have a real opportunity to
gain some leverage over that process of construction and reconstruction.
Yet even this revised understanding of capitalism faces diYculties in
evaluating global capitalisms crisis tendencies. On the one side, it is
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fred block

important to overcome the Marxist fundamentalism that continuously

predicts a global crisis. On the other, one has to resist the ideologists
of the market who are continually explaining that with the New
Economy or some other equally imsy justi cation, that it is now reasonable to expect that stock markets and other markets can go up
inde nitely. Probably the best we can do is to have a healthy respect
for the capacities of global crisis managers to keep the inevitable rise
and fall of particular markets from escalating into a global collapse,
while also recognizing, that there might eventually be a crisis that is
beyond the capacity of these managers to control or contain.
Notes
1. Even the term capitalism which was still the province largely of left wing academics in the mid-70s had aged well. It is now the term that the business press uses to
describe the global market economy. The irony, of course, is that the terms critical
valence has completely disappeared.
2. Deconstructing Capitalism as a System, Reconstructing Marxism, forthcoming.

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