Arrighi (2009) The Long Twentieth Century: Introduction

Arrighi, G. (2010) The Long Twentieth Century: Money, Power and the Origins of
our Time. Verso: London. 1-27.

Introduction

Over the last quarter of a century something fundamental seems to have
changed in the way in which capitalism works. In the 1970s, many spoke
of crisis. In the 1980s, most spoke of restructuring and reorganization. In
the 1990s, we are no longer sure that the crisis of the 1970s was ever really
resolved and the view has begun to spread that capitalist history might be
at a decisive turning point.
Our thesis is that capitalist history is indeed in the midst of a
decisive turning point, but that the situation is not as unprecedented
as it may appear at first sight. Long periods of crisis, restructuring and
reorganization, in short, of discontinuous change, have been far more
typical of the history of the capitalist world-economy than those brief
moments of generalized expansion along a definite developmental path
like the one that occurred in the 1950s and 1960s. In the past, these long
periods of discontinuous change ended in a reconstitution of the capitalist
world-economy on new and enlarged foundations. Our investigation is
aimed primarily at identifying the systemic conditions under which a new
reconstitution of this kind may occur and, if it does occur, what it may
look like.
Changes since about 1970 in the way capitalism functions locally
and globally have been widely noted; though the precise nature of
these changes is still a matter of some debate. But that they amount
to something fundamental is the common theme of a rapidly growing
literature.
There have been changes in the spatial configuration of processes of
capital accumulation. In the 1970s the predominant tendency appeared
to be towards a relocation of processes of capital accumulation from
high-income to low-income countries and regions (Fröbel, Heinrichs,
and Kreye 1980; Bluestone and Harrison 1982; Massey 1984;
Walton 1985). In the 1980s, in contrast, the predominant tendency
appeared to be towards the recentralization of capital in high-income
countries and regions (Gordon 1988). But whatever the direction
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the long twentieth century

of the movement, the tendency since 1970 has been towards greater
geographical mobility of capital (Sassen 1988; Scott 1988; Storper
and Walker 1989).
This has been closely associated with changes in the organization
of processes of production and exchange. Some authors have claimed
that the crisis of “Fordist” mass production – based on systems of
specialized machines, operating within the organizational domains of
vertically integrated, bureaucratically managed, giant corporations –
has created unique opportunities for a revival of systems of “flexible
specialization” – based on small-batch craft production, carried out
in small and medium-sized business units coordinated by market-like
processes of exchange (Piore and Sable 1984; Sable and Zeitlin 1985;
Hirst and Zeitlin 1991). Others have focused on the legal regulation of
income-generating activities and have noted how the ever-increasing
“formalization” of economic life – that is, the proliferation of legal
constraints on the organization of processes of production and exchange
– has called forth the opposite tendency towards “informalization” –
that is, a proliferation of income-generating activities that bypass legal
regulation through one kind or another of “personal” or “familial”
entrepreneurialism (Lomnitz 1988; Portes, Castells, and Benton 1989;
Feige 1990; Portes 1994).
Partly overlapping this literature, numerous studies have followed in
the footsteps of the French “regulation school” and have interpreted
current changes in the mode of operation of capitalism as a structural
crisis of what they call the Fordist–Keynesian “regime of accumulation”
(for a survey, see Boyer 1990; Jessop 1990; Tickell and Peck 1992). This
regime is conceptualized as constituting a particular phase of capitalist
development characterized by investments in fixed capital that create the
potential for regular increases in productivity and mass consumption.
For this potential to be realized, adequate governmental policies and
actions, social institutions, norms and habits of behavior (the “mode of
regulation”) were required. “Keynesianism” is described as the mode of
regulation that enabled the emergent Fordist regime fully to realize its
potential. And this in turn is conceived of as the underlying cause of
the crisis of the 1970s (Aglietta 1979b; De Vroey 1984; Lipietz 1987;
1988).
By and large, “regulationists” are agnostic as to what the successor
of Fordism–Keynesianism might be, or indeed as to whether there
will ever be another regime of accumulation with an appropriate
mode of regulation. In a similar vein, but using a different conceptual
apparatus, Claus Offe (1985) and, more explicitly, Scott Lash and
John Urry (1987) have spoken of the end of “organized capitalism” and
of the emergence of “disorganized capitalism.” The central feature of

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“organized capitalism” – the administration and conscious regulation
of national economies by managerial hierarchies and government
officials – is seen as being jeopardized by an increasing spatial and
functional deconcentration and decentralization of corporate powers,
which leaves processes of capital accumulation in a state of seemingly
irremediable “disorganization.”
Taking issue with this emphasis on the disintegration rather than
coherence of contemporary capitalism, David Harvey (1989) suggests
that, in fact, capitalism may be in the midst of a “historical transition”
from Fordism–Keynesianism to a new regime of accumulation,
which he tentatively calls “flexible accumulation.” Between 1965 and
1973, he argues, the difficulties met by Fordism and Keynesianism
in containing the inherent contradictions of capitalism became more
and more apparent: “On the surface, these difficulties could best
be captured by one word: rigidity.” There were problems with the
rigidity of long-term and large-scale investments in mass production
systems, with the rigidity of regulated labor markets and contracts,
and with the rigidity of state commitments to entitlement and
defense programs.
Behind all these specific rigidities lay a rather unwieldy and seemingly
fixed configuration of political power and reciprocal relations that bound
big labor, big capital, and big government into what increasingly appeared
as a dysfunctional embrace of such narrowly defined vested interests as to
undermine rather than secure capital accumulation. (Harvey 1989: 142)

The US and British governments’ attempt to maintain the
momentum of the post-war economic boom through an extraordinarily
loose monetary policy met with some success in the late 1960s but
backfired in the early 1970s. Rigidities increased further, real growth
ceased, inflationary tendencies got out of hand, and the system of
fixed exchange rates, which had sustained and regulated the post-war
expansion, collapsed. Since that time, all states have been at the mercy
of financial discipline, either through the effects of capital flight or
by direct institutional pressures. “There had, of course, always been a
delicate balance between financial and state powers under capitalism,
but the breakdown of Fordism–Keynesianism evidently meant a shift
towards the empowerment of finance capital vis-à-vis the nation state”
(Harvey 1989: 145, 168).
This shift, in turn, has led to an “explosion in new financial
instruments and markets, coupled with the rise of highly sophisticated
systems of financial coordination on a global scale.” It is this
“extraordinary efflorescence and transformation in financial markets”

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that Harvey, not without hesitation, takes as the real novelty of
capitalism in the 1970s and 1980s and the key feature of the emerging
regime of “flexible accumulation.” The spatial reshuffling of processes
of production and accumulation, the resurgence of craft production
and of personal/familial business networks, the spread of market-like
coordinations at the expense of corporate and governmental planning
– all, in Harvey’s view, are different facets of the passage to the new
regime of flexible accumulation. However, he is inclined to see them as
expressions of the search for financial solutions to the crisis tendencies
of capitalism (Harvey 1989: 191–4).
Harvey is fully aware of the difficulties involved in theorizing the
transition to flexible accumulation – assuming that that is what capitalism
is actually experiencing – and points to several “theoretical dilemmas.”
Can we grasp the logic, if not the necessity, of the transition? To what
degree do past and present theoretical formulations of the dynamics of
capitalism have to be modified in the light of the radical reorganizations
and restructurings taking place in both the productive forces and social
relations? And can we represent the current regime sufficiently well to
get some grip on the probable course and implications of what appears
to be an ongoing revolution? The transition from Fordism to flexible
accumulation has . . . posed serious difficulties for theories of any sort.
. . . The only general point of agreement is that something significant
has changed in the way capitalism has been working since about 1970.
(Harvey 1989: 173)

The questions that have informed this study are similar to Harvey’s.
But the answers are sought in an investigation of current tendencies in
the light of patterns of recurrence and evolution, which span the entire
lifetime of historical capitalism as a world system. Once we stretch the
space–time horizon of our observations and theoretical conjectures in
this way, tendencies that seemed novel and unpredictable begin to look
familiar.
More specifically, the starting point of our investigation has been
Fernand Braudel’s contention that the essential feature of historical
capitalism over its longue durée – that is, over its entire lifetime –
has been the “flexibility” and “eclecticism” of capital rather than the
concrete forms assumed by the latter at different places and at different
times:
Let me emphasize the quality that seems to me to be an essential feature
of the general history of capitalism: its unlimited flexibility, its capacity for
change and adaptation. If there is, as I believe, a certain unity in capitalism,
from thirteenth-century Italy to the present-day West, it is here above all that

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such unity must be located and observed. (Braudel 1982: 433; emphasis in
the original)

In certain periods, even long periods, capitalism did seem to “specialize,”
as in the nineteenth century, when it “moved so spectacularly into the
new world of industry.” This specialization has led “historians in general
. . . to regard industry as the final flowering which gave capitalism its
‘true’ identity.” But this is a short-term view:
[After] the initial boom of mechanization, the most advanced kind of
capitalism reverted to eclecticism, to an indivisibility of interests so to speak,
as if the characteristic advantage of standing at the commanding heights of the
economy, today just as much as in the days of Jacques Coeur (the fourteenthcentury tycoon) consisted precisely of not having to confine oneself to a single
choice, of being eminently adaptable, hence non-specialized. (Braudel 1982:
381; emphasis in the original; translation amended as indicated in Wallerstein
1991: 213)

It seems to me that these passages can be read as a restatement of Karl
Marx’s general formula of capital: MCM´. Money capital (M) means
liquidity, flexibility, freedom of choice. Commodity capital (C) means
capital invested in a particular input–output combination in view of a
profit. Hence, it means concreteness, rigidity, and a narrowing down or
closing of options. M´ means expanded liquidity, flexibility, and freedom
of choice.
Thus understood, Marx’s formula tells us that capitalist agencies do
not invest money in particular input–output combinations, with all the
attendant loss of flexibility and freedom of choice, as an end in itself.
Rather, they do so as a means towards the end of securing an even greater
flexibility and freedom of choice at some future point. Marx’s formula
also tells us that if there is no expectation on the part of capitalist
agencies that their freedom of choice will increase, or if this expectation
is systematically unfulfilled, capital tends to revert to more flexible forms
of investment – above all, to its money form. In other words, capitalist
agencies “prefer” liquidity, and an unusually large share of their cash flow
tends to remain in liquid form.
This second reading is implicit in Braudel’s characterization of
“financial expansion” as a symptom of maturity of a particular capitalist
development. In discussing the withdrawal of the Dutch from commerce
in the middle of the eighteenth century to become “the bankers of
Europe,” Braudel suggests that such a withdrawal is a recurrent worldsystemic tendency. The same tendency had earlier been in evidence in
fifteenth-century Italy, when the Genoese capitalist oligarchy switched

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from commodities to banking, and in the latter half of the sixteenth
century, when the Genoese nobili vecchi, the official lenders to the king
of Spain, gradually withdrew from commerce. Following the Dutch,
the tendency was replicated by the English in the late nineteenth and
early twentieth centuries, when the end of “the fantastic venture of the
industrial revolution” created an oversupply of money capital (Braudel
1984: 242–3, 246).
After the equally fantastic venture of so-called Fordism–Keynesianism,
US capital followed a similar path in the 1970s and 1980s. Braudel
does not discuss the financial expansion of our day, which gained
momentum after he had completed his trilogy on Civilization and
Capitalism. Nevertheless, we can readily recognize in this latest “rebirth”
of finance capital yet another instance of that reversal to “eclecticism”
which in the past has been associated with the maturing of a major
capitalist development: “[Every] capitalist development of this order
seems, by reaching the stage of financial expansion, to have in some
sense announced its maturity: it [is] a sign of autumn“ (Braudel 1984:
246; emphasis added).
Marx’s general formula of capital (MCM´) can therefore be interpreted
as depicting not just the logic of individual capitalist investments, but
also a recurrent pattern of historical capitalism as world system. The
central aspect of this pattern is the alternation of epochs of material
expansion (MC phases of capital accumulation) with phases of financial
rebirth and expansion (CM´ phases). In phases of material expansion
money capital “sets in motion” an increasing mass of commodities
(including commoditized labor-power and gifts of nature); and in
phases of financial expansion an increasing mass of money capital
“sets itself free” from its commodity form, and accumulation proceeds
through financial deals (as in Marx’s abridged formula MM´). Together,
the two epochs or phases constitute a full systemic cycle of accumulation
(MCM´).
Our investigation is essentially a comparative analysis of successive
systemic cycles of accumulation in an attempt to identify (1) patterns
of recurrence and evolution, which are reproduced in the current
phase of financial expansion and of systemic restructuring; and (2) the
anomalies of this current phase of financial expansion, which may lead
to a break with past patterns of recurrence and evolution. Four systemic
cycles of accumulation will be identified, each characterized by a
fundamental unity of the primary agency and structure of world-scale
processes of capital accumulation: a Genoese cycle, from the fifteenth
to the early seventeenth centuries; a Dutch cycle, from the late sixteenth
century through most of the eighteenth century; a British cycle, from
the latter half of the eighteenth century through the early twentieth

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century; and a US cycle, which began in the late nineteenth century
and has continued into the current phase of financial expansion. As
this approximate and preliminary periodization implies, consecutive
systemic cycles of accumulation overlap, and although they become
progressively shorter in duration, they all last longer than a century:
hence the notion of the “long century,” which will be taken as the
basic temporal unit in the analysis of world-scale processes of capital
accumulation.
These cycles are altogether different from the “secular cycles” (or
price logistics) and the shorter Kondratieff cycles to which Braudel
has attached so much importance. Secular and Kondratieff cycles are
both empirical constructs of uncertain theoretical standing derived
from observed long-term fluctuations in commodity prices (for surveys
of the relevant literature, see Barr 1979; Goldstein 1988). Secular
cycles bear some striking similarities to our systemic cycles; they are
four in number, they all last longer than a century, and they become
progressively shorter (Braudel 1984: 78). However, secular price cycles
and systemic cycles of accumulation are completely out of synchrony
with one another. A financial expansion is equally likely to come at the
beginning, middle, or end of a secular (price) cycle (see figure 3.4 on
p. 220, this volume).
Braudel does not attempt to reconcile this discrepancy between his
dating of financial expansions – on which our periodization of systemic
cycles of accumulation is based – and his dating of secular (price) cycles.
And nor shall we. Faced with a choice between these two kinds of cycles,
we have opted for systemic cycles because they are far more valid and
reliable indicators of what is specifically capitalist in the modern world
system than secular or Kondratieff cycles.
Indeed, there is no agreement in the literature on what long-term
fluctuations in prices – whether of the logistic or the Kondratieff
kind – indicate. They are certainly not reliable indicators of the
contractions and expansions of whatever is specifically capitalist in
the modern world system. Profitability and the command of capital
over human and natural resources can decrease or increase just as
much in a downswing as in an upswing. It all depends on whose
competition is driving prices up or down. If it is the “capitalists”
themselves, however defined, that are competing more (less) intensely
than their “non-capitalist” suppliers and customers, profitability will
fall (rise) and the command of capital over resources will decrease
(increase), regardless of whether the overall tendency of prices is to
rise or fall.
Nor do price logistics and Kondratieffs seem to be specifically capitalist
phenomena. It is interesting to note that in Joshua Goldstein’s synthesis

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of the empirical findings and theoretical underpinnings of long-wave
studies, the notion of “capitalism” plays no role at all. Statistically, he
finds that long waves in prices and production are “explained” primarily
by the severity of what he calls “great power wars.” As for capitalism, the
issue of its emergence and expansion is put squarely outside the scope of
his investigation (Goldstein 1988: 258–74, 286).
The issue of the relationship between the rise of capitalism and longterm price fluctuations has troubled world system studies right from
the start. Nicole Bousquet (1979: 503) considered it “embarrassing”
that price logistics long pre-dated 1500. For the same reason, Albert
Bergesen (1983: 78) wondered whether price logistics “represent the
dynamics of feudalism or capitalism, or both.” Even Imperial China
seems to have experienced wave-like phenomena of the same kind as
Europe (Hartwell 1982; Skinner 1985). Most unsettling of all, Barry
Gills and André Gunder Frank (1992: 621–2) have maintained that “the
fundamental cyclical rhythms and secular trends of the world system
should be recognized as having existed for some 5000 years, rather than
the 500 years that has been conventional in the world system and long
wave approaches.”
In short, the connection between Braudel’s secular cycles and the
capitalist accumulation of capital has no clear logical or historical
foundation. The notion of systemic cycles of accumulation, in contrast,
derives directly from Braudel’s notion of capitalism as the “nonspecialized” top layer in the hierarchy of the world of trade. This top layer
is where “large-scale profits” are made. Here the profits are large, not just
because the capitalist stratum “monopolizes” the most profitable lines of
business; even more important is the fact that the capitalist stratum has
the flexibility needed to switch its investments continually from the lines
of business that face diminishing returns to the lines that do not (Braudel
1982: 22, 231, 428–30).
As in Marx’s general formula of capital (MCM´), so in Braudel’s
definition of capitalism what makes an agency or social stratum
capitalist is not its predisposition to invest in a particular commodity
(e.g. labor-power) or sphere of activity (e.g. industry). An agency
is capitalist in virtue of the fact that its money is endowed with
the “power of breeding” (Marx’s expression) systematically and
persistently, regardless of the nature of the particular commodities
and activities that are incidentally the medium at any given time.
The notion of systemic cycles of accumulation which we have derived
from Braudel’s historical observation of recurrent financial expansions
follows logically from this strictly instrumental relationship of
capitalism to the world of trade and production, and emphasizes it.
That is to say, financial expansions are taken to be symptomatic of a

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situation in which the investment of money in the expansion of trade
and production no longer serves the purpose of increasing the cash
flow to the capitalist stratum as effectively as pure financial deals can.
In such a situation, capital invested in trade and production tends to
revert to its money form and accumulate more directly, as in Marx’s
abridged formula MM´.
Systemic cycles of accumulation, unlike price logistics and Kondratieffs,
are thus inherently capitalist phenomena. They point to a fundamental
continuity in world-scale processes of capital accumulation in modern
times. But they also constitute fundamental breaks in the strategies
and structures that have shaped these processes over the centuries. Like
some conceptualizations of Kondratieffs, such as Gerhard Mensch’s
(1979), David Gordon’s (1980), and Carlota Perez’s (1983), our cycles
highlight the alternation of phases of continuous change with phases of
discontinuous change.
Thus, our sequence of partly overlapping systemic cycles bears a
close formal resemblance to Mensch’s “metamorphosis model” of
socioeconomic development. Mensch (1979: 73) abandons “the notion
that the economy has developed in waves in favor of the theory that it has
evolved through a series of intermittent innovative impulses that take the
form of successive S-shaped cycles” (see figure 1.1). His model depicts
phases of stable growth along a well-defined path alternating with phases
of crisis, restructuring, and turbulence, which eventually recreate the
conditions of stable growth.
Mensch’s model refers primarily to growth and innovations in
particular industries or in particular national economies, and as such
has no immediate relevance to our investigation. Nevertheless, the
idea of cycles consisting of phases of continuous change along a single
path alternating with phases of discontinuous change from one path
to another underlies our sequence of systemic cycles of accumulation.
The difference is that what “develops” in our model is not a particular
industry or national economy but the capitalist world-economy as a
whole over its entire lifetime. Thus, (MC) phases of material expansion
will be shown to consist of phases of continuous change, during which the
capitalist world-economy grows along a single developmental path. And
(CM´) phases of financial expansion will be shown to consist of phases
of discontinuous change during which growth along the established
path has attained or is attaining its limits, and the capitalist worldeconomy “shifts” through radical restructurings and reorganizations
onto another path.
Historically, growth along a single developmental path and shifts from
one path to another have not been simply the unintended outcome of
the innumerable actions undertaken autonomously at any given time

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1.1

Mensch’s Metamorphosis Model

by individuals and the multiple communities into which the worldeconomy is divided. Rather, the recurrent expansions and restructurings
of the capitalist world-economy have occurred under the leadership of
particular communities and blocs of governmental and business agencies
which were uniquely well placed to turn to their own advantage the
unintended consequences of the actions of other agencies. The strategies
and structures through which these leading agencies have promoted,
organized, and regulated the expansion or the restructuring of the capitalist
world-economy is what we shall understand by regime of accumulation
on a world-scale. The main purpose of the concept of systemic cycles is to
describe and elucidate the formation, consolidation, and disintegration
of the successive regimes through which the capitalist world-economy has
expanded from its late medieval sub-systemic embryo to its present global
dimension.
The entire construction rests on Braudel’s unconventional view of
the relationship that links the formation and enlarged reproduction of
historical capitalism as world system to processes of state formation on
the one side, and of market formation on the other. The conventional
view in the social sciences, in political discourse, and in the mass media is
that capitalism and the market economy are more or less the same thing,
and that state power is antithetical to both. Braudel, in contrast, sees
capitalism as being absolutely dependent for its emergence and expansion
on state power and as constituting the antithesis of the market economy
(cf. Wallerstein 1991: chs 14–15).
More specifically, Braudel conceived of capitalism as the top layer
of a three-tiered structure – a structure in which, “as in all hierarchies,

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the upper [layers] could not exist without the lower stages on which
they depend.” The lowest and until very recently broadest layer is that
of an extremely elementary and mostly self-sufficient economy. For
want of a better expression, he called this the layer of material life, “the
stratum of the non-economy, the soil into which capitalism thrusts its
roots but which it can never really penetrate” (Braudel 1982: 21–2,
229):
Above [this lowest layer], comes the favoured terrain of the market economy,
with its many horizontal communications between the different markets: here
a degree of automatic coordination usually links supply, demand and prices.
Then alongside, or rather above this layer, comes the zone of the anti-market,
where the great predators roam and the law of the jungle operates. This –
today as in the past, before and after the industrial revolution – is the real
home of capitalism. (Braudel 1982: 229–30; emphasis added)

A world market economy, in the sense of many horizontal
communications between different markets, emerged from the depth
of the underlying layer of material life long before capitalism-as-worldsystem rose above the layer of the market economy. As Janet AbuLughod (1989) has shown, a loose but none the less clearly recognizable
system of horizontal communications between the principal markets
of Eurasia and Africa was already in place in the thirteenth century.
And for all we know, Gills and Frank may well be right in their claim
that this system of horizontal communications actually emerged several
millennia earlier.
Be that as it may, the question that bears directly on our research is
not when and how a world market economy rose above the primordial
structures of everyday life; it is when and how capitalism rose above the
structures of the pre-existing world market economy and, over time,
acquired its power to reshape the markets and lives of the entire world.
As Braudel (1984: 92) points out, the metamorphosis of Europe into the
“monstrous shaper of world history” that it became after 1500 was not
a simple transition. Rather, it was “a series of stages and transitions, the
earliest dating from well before what is usually known as ‘the’ Renaissance
of the late fifteenth century.”
The most decisive moment of this series of transitions was not the
proliferation of elements of capitalist enterprise across Europe. Elements
of this kind had occurred throughout the Eurasian trading system and
were by no means peculiar to the West:
Everywhere, from Egypt to Japan, we shall find genuine capitalists,
wholesalers, the rentiers of trade, and their thousands of auxiliaries – the

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commission agents, brokers, money-changers and bankers. As for the
techniques, possibilities or guarantees of exchange, any of these groups of
merchants would stand comparison with its western equivalents. Both inside
and outside India, Tamil, Bengali, and Gujerati merchants formed close-knit
partnerships with business and contracts passing in turn from one group to
another, just as they would in Europe from the Florentines to the Lucchese,
the Genoese, the South Germans or the English. There were even, in medieval
times, merchant kings in Cairo, Aden and the Persian Gulf ports. (Braudel
1984: 486)

Nowhere, except in Europe, did these elements of capitalism coalesce into
the powerful mix that propelled European states towards the territorial
conquest of the world and the formation of an all-powerful and truly
global capitalist world-economy. From this perspective, the really
important transition that needs to be elucidated is not that from feudalism
to capitalism but from scattered to concentrated capitalist power. And the
most important aspect of this much neglected transition is the unique
fusion of state and capital, which was realized nowhere more favorably for
capitalism than in Europe:
Capitalism only triumphs when it becomes identified with the state, when it is
the state. In its first great phase, that of the Italian city-states of Venice, Genoa,
and Florence, power lay in the hands of the moneyed elite. In seventeenthcentury Holland the aristocracy of the Regents governed for the benefit and
even according to the directives of the businessmen, merchants, and moneylenders. Likewise, in England the Glorious Revolution of 1688 marked
the accession of business similar to that in Holland. (Braudel 1977: 64–5;
emphasis added)

The obverse of this process has been interstate competition for mobile
capital. As Max Weber pointed out in his General Economic History, in
antiquity, as in the late Middle Ages, European cities had been the seedbeds
of “political capitalism.” In both periods the autonomy of these cities was
progressively eroded by larger political structures. Nevertheless, while in
antiquity this loss of autonomy meant the end of political capitalism, in
early modern times it meant the expansion of capitalism into a new kind
of world system:
In antiquity the freedom of the cities was swept away by a bureaucratically
organized world empire within which there was no longer a place for political
capitalism. . . . [In] contrast with antiquity [in the modern era the cities] came
under the power of competing national states in a condition of perpetual
struggle for power in peace or war. This competitive struggle created the
largest opportunities for modern western capitalism. The separate states had
to compete for mobile capital, which dictated to them the conditions under which

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it would assist them to power. . . . Hence it is the closed national state which
afforded to capitalism its chance for development – and as long as the national
state does not give place to a world empire capitalism also will endure. (Weber
1961: 247–9; emphasis added)

In making the same point in Economy and Society, Weber (1978: 353–4)
further suggested that this competition for mobile capital among “large,
approximately equal and purely political structures” resulted
in that memorable alliance between the rising states and the sought-after
and privileged capitalist powers that was a major factor in creating modern
capitalism. . . . Neither the trade nor the monetary policies of the modern
states . . . can be understood without this peculiar political competition
and “equilibrium” among the European states during the last five hundred
years.

Our analysis will substantiate these remarks by showing that interstate
competition has been a critical component of each and every phase of
financial expansion and a major factor in the formation of those blocs
of governmental and business organizations that have led the capitalist
world-economy through its successive phases of material expansion. But
in partial qualification of Weber’s thesis, our analysis will also show that
the concentration of power in the hands of particular blocs of governmental
and business agencies has been as essential to the recurrent material
expansions of the capitalist world-economy as the competition among
“approximately equal” political structures. As a rule, major material
expansions have occurred only when a new dominant bloc accrued
sufficient world power to be in a position not just to bypass or rise above
interstate competition, but to bring it under control and ensure minimal
interstate cooperation. What has propelled the prodigious expansion of the
capitalist world-economy over the last five hundred years, in other words,
has not been interstate competition as such, but interstate competition in
combination with an ever-increasing concentration of capitalist power in
the world system at large.
The idea of an ever-increasing concentration of capitalist power in
the modern world system is implicit in a pattern noted by Karl Marx
in Capital. Like Weber, Marx attributed great importance to the role
played by the system of national debts pioneered by Genoa and Venice
in the late Middle Ages in propelling the initial expansion of modern
capitalism:
National debts, i.e., the alienation of the state – whether despotic,
constitutional or republican – marked with its stamp the capitalistic era. . . .
As with the stroke of an enchanter’s wand, [the public debt] endows barren

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money with the power of breeding and thus turns it into capital, without
the necessity of its exposing itself to the troubles and risks inseparable from
its employment in industry or even in usury. The state-creditors actually
give nothing away, for the sum lent is transformed into public bonds, easily
negotiable, which can go on functioning in their hands just as so much hard
cash would. (Marx 1959: 754–5)

Marx’s focus on the domestic aspects of capital accumulation prevented
him from appreciating the continuing significance of national debts in a
system of states in constant competion with one another for assistance
from capitalists for their power pursuits. For Marx, the alienation
of the assets and future revenues of states was simply an aspect of
“primitive accumulation” – Adam Smith’s “previous accumulation,” “an
accumulation not the result of the capitalist mode of production, but its
starting point” (Marx 1959: 713). Nevertheless, Marx did acknowledge
the continuing significance of national debts, not as the expression of
interstate competition, but as means of an “invisible” inter-capitalist
cooperation, which “started” capital accumulation over and over again
across the space–time of the capitalist world-economy from its inception
through his own day:
With the national debt arose an international credit system, which often
conceals one of the sources of primitive accumulation in this or that people.
Thus the villainies of the Venetian thieving system formed one of the secret
bases of the capital-wealth of Holland to whom Venice in her decadence lent
large sums of money. So was it with Holland and England. By the beginning
of the 18th century . . . Holland had ceased to be the nation preponderant in
commerce and industry. One of its main lines of business, therefore, [became]
the lending out of enormous amounts of capital, especially to its great rival
England. [And the] same thing is going on to-day between England and the
United States. (Marx 1959: 755–6)

Marx, however, failed to notice that the sequence of leading capitalist
states outlined in this passage consists of units of increasing size, resources,
and world power. All four states – Venice, the United Provinces, the
United Kingdom, and the United States – have been great powers of
the successive epochs during which their ruling groups simultaneously
played the role of leader in processes of state formation and of capital
accumulation. Seen sequentially, however, the four states appear to have
been great powers of a very different and increasing order. As we shall
detail in the course of this study, the metropolitan domains of each state
in this sequence encompass a larger territory and a greater variety of
resources than those of its predecessor. More importantly, the networks of
power and accumulation that enabled the states in question to reorganize

introduction

15

and control the world system within which they operated grew in scale
and scope as the sequence progresses.
It can thus be seen that the expansion of capitalist power over the
last five hundred years has been associated not just with interstate
competition for mobile capital, as underscored by Weber, but also with
the formation of political structures endowed with ever-more extensive
and complex organizational capabilities to control the social and
political environment of capital accumulation on a world-scale. Over
the last five hundred years these two underlying conditions of capitalist
expansion have been continually recreated in parallel with one another.
Whenever world-scale processes of capital accumulation as instituted at
any given time attained their limits, long periods of interstate struggle
ensued, during which the state that controlled or came to control the
most abundant sources of surplus capital tended also to acquire the
organizational capabilities needed to promote, organize, and regulate
a new phase of capitalist expansion of greater scale and scope than the
preceding one.
As a rule, acquiring these organizational capabilities was far more the
result of positional advantages in the changing spatial configuration of
the capitalist world-economy than of innovation as such. Braudel (1977:
66–7) goes as far as saying that innovation played no role whatsoever
in the successive spatial shifts of the center of systemic processes
of accumulation: “Amsterdam copied Venice, as London would
subsequently copy Amsterdam, and as New York would one day copy
London.” As we shall see, this process of imitation was far more complex
than the simple sequence outlined here implies. Each shift will be shown
to have been associated with a true “organizational revolution” in the
strategies and structures of the leading agency of capitalist expansion.
Nevertheless, Braudel’s contention that the shifts reflected “the victory
of a new region over an old one” combined with “a vast change of scale”
will stand.
The flows of capital from declining to rising centers that Marx noted
were the instrument of attempts on the part of declining centers to lay
some claim to the large-scale surpluses that accrued to the new centers.
Flows of this kind have characterized all past financial expansions. The
current financial expansion, in contrast, is said to diverge from this
pattern.
As we shall document in the Epilogue, the current financial expansion
has witnessed the explosive growth of Japan and lesser East Asian states
to a new center of world-scale processes of capital accumulation. And yet
there was little evidence in the 1980s of a major flow of capital from the
declining center to this emergent center. On the contrary, as Joel Kotkin
and Yoriko Kishimoto (1988: 123) have pointed out, after quoting from

16


the passage in which Marx describes the “secret” support that declining
leaders of processes of capital accumulation have accorded to their
successors, “in a stunning reversal of Marx’s dictum, the United States
is not following the pattern of other capital-exporting empires (Venice,
Holland and Great Britain), but now is attracting a new wave of overseas
investment.” In their view, this reversal is due primarily to the pull
exercised on foreign capital by the United States’ relative lack of control
over foreign business activity, expanding population, physical expanse,
vast resources, and “status as the world’s richest and most developed
continental power.” In partial support of this contention, they report
the view of the chief economist of a Japanese bank and “well-known
economic nationalist” Hiroshi Takeuchi, according to whom the United
States has the scale and resources that Japan will never possess. As a result,
Japanese surpluses flowed to the United States just as British surpluses
did in the late nineteenth century. “The Japanese role will be to assist the
United States by exporting our money to rebuild your economy. This is
the evidence that our economy is fundamentally weak. The money goes
to America because you are fundamentally strong” (quoted in Kotkin and
Kishimoto 1988: 122–3).
Takeuchi’s view of Japanese power relative to US power is basically
the same as that expressed by Samuel Huntington at a Harvard seminar
on Japan held in 1979. As Bruce Cumings (1987: 64) reports, when
Ezra Vogel opened the seminar by saying: “I am really very troubled
when I think through the consequences of the rise of Japanese power,”
Huntington’s reply was that Japan was in fact “an extraordinarily weak
country.” Its most fundamental weaknesses were “energy, food, and
military security.”
This assessment is based on the conventional view of interstate power
as consisting primarily of relative size, self-sufficiency, and military forces.
Such a view entirely overlooks the fact that the “technology of power”
of capitalism – to borrow an expression from Michael Mann (1986) –
has been quite different from territorialism. As Weber underscores in
the passages quoted above, and as our investigation will substantiate,
competition for mobile capital among large but approximately equal
political structures has been the most essential and enduring factor in the
rise and expansion of capitalist power in the modern era. Unless we take
into account the effects of this competition on the power of the competing
states and on the power of the statal and non-statal organizations that
assist them economically in the struggle, our assessments of relationships
of forces in the world system are bound to be fundamentally flawed. The
capabilities of some Italian city-states over several centuries to keep at bay
militarily and to influence politically the great territorial powers of late
medieval and early modern Europe would be as incomprehensible as the

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17

sudden collapse and disintegration in the late 1980s and early 1990s of
the largest, most self-sufficient, and second greatest military power of our
times: the USSR.
It is no accident that the seeming reversal of Marx’s dictum noted by
Kotkin and Kishimoto occurred in the midst of a sudden escalation of
the armaments race and political-ideological struggle between the United
States and the USSR – Fred Halliday’s (1986) Second Cold War. Nor is
it by chance that the financial expansion of the 1970s and 1980s attained
its moment of greatest splendor precisely at the time of this sudden
escalation. To paraphrase Marx, it was at this time that the alienation of
the US state proceeded faster than ever before; and to paraphrase Weber,
it was at this time that the competition for mobile capital between the
two largest political structures in the world created for capitalism an
extraordinary new opportunity for self-expansion.
The flow of capital from Japan to the United States in the early 1980s
must be seen in this context. Political considerations inspired by Japan’s
dependence on, and subordination to, US world power no doubt played
a critical role in prompting Japanese capital to assist the United States
in the escalation of the power struggle, as Takeuchi seems to imply.
Nevertheless, as subsequent events have shown, political considerations
were inseparable from considerations of profit.
In this respect, the flow of capital from Japan to the United States was
not as anomalous as Kotkin and Kishimoto thought. It was somewhat
analogous to the financial assistance that the rising capitalist power (the
United States) gave the declining capitalist power (the United Kingdom)
in the two world wars. The Anglo-German confrontations, unlike the
US–Soviet confrontation of the 1980s, were, of course, “hot” rather than
“cold.” But the financial requirements of the two confrontations and the
profits that could be expected from “backing” the winner were none the
less comparable.
The main difference between US financial assistance to Britain in the
two world wars and Japanese financial assistance to the United States in
the Second Cold War lies in the outcomes. Whereas the United States
reaped enormous benefits, Japan did not. As we shall see in chapter 4,
the two world wars and their aftermath were decisive moments in the
redistribution of assets from Britain to the United States which hastened
the change of leadership in systemic processes of capital accumulation.
During and after the Second Cold War, in contrast, there was no
comparable redistribution. In fact, Japan probably never got its money
back.
The greatest losses were suffered as a consequence of the fall in the
value of the US dollar after 1985. This meant that money borrowed
in greatly overvalued dollars was serviced and repaid in undervalued

18


dollars. The losses inflicted on Japanese capital by the devaluation were
such that Japanese business and the Japanese government withdrew their
previously unconditional financial support for the US government. In
mid-1987 Japanese private investors reversed their export of capital to
the United States for the first time since the early 1980s. And after
the stock market crash of October 1987, the Japanese Ministry of
Finance did nothing to encourage financial intermediaries to support
the important auction of US government debt held in November 1987
(Helleiner 1992: 434).
The difficulties Japan met in wielding its increasing command over
surplus capital in order to redistribute assets from US to Japanese control
were not simply the result of the historically unprecedented power of US
public and private agencies, acting in concert, to manipulate demand and
supply, interest rates, and rates of exchange in world financial markets. The
acquisition of material assets in the United States presented difficulties of
its own. As far as Japanese capital was concerned, the world’s richest and
most developed continental power proved to be not as devoid of control
over foreign business as Kotkin and Kishimoto thought.
This “control” has been more informal than formal, but is no less real
for all that. There have been cultural barriers of the kind best epitomized
by the hysterical reaction triggered in and by the US media when Japanese
capital bought the Rockefeller Center in New York City. Since Japanese
purchases of US real estate paled in comparison with European, Canadian,
and Australian purchases, the reaction sent the message to buyers and
sellers alike that Japanese money did not have quite the same “right” to
acquire US assets as did the money of foreigners of European stock.
If the mass media have been the chief protagonists in erecting
cultural barriers to the transfer of US assets to Japanese capital, the
US government has played its part by erecting political barriers. It
welcomed Japanese money to finance its deficit and public debt and to
establish production facilities that created jobs in the United States and
reduced the US balance of payments deficit. But it strongly discouraged
that same money from taking over profitable but strategically sensitive
enterprises. Thus, in March 1987 protests from the Secretary of Defense,
Caspar Weinberger, and Secretary of Commerce, Malcom Baldridge,
convinced Fujitsu that it would be prudent to withdraw its attempt
to take over the Fairchild Semiconductor Corporation. Yet, as Stephen
Krasner (1988: 29) remarked: “Fairchild was owned by the French
company Schlumberger, so the issue was not simply one of foreign
ownership.”
What cultural and political barriers could not stop, the barriers to
entry built into the very structure of US corporate capitalism did. The
complexities of US corporate life proved to be more insurmountable

introduction

19

barriers to entry for Japanese money than cultural hostility and political
mistrust. The biggest ever Japanese takeovers in the United States –
Sony’s takeover of Columbia Pictures in 1989, and Matsushita’s takeover
of MCA the following year – failed completely in their objective. When
the Sony deal was struck, the media over-reacted and Newsweek‘s cover
talked of Japan’s “invasion” of Hollywood. And yet, as Bill Emmott
wrote in the op-ed page of the New York Times (26 November 1993:
A19),
less than two years passed before it became clear that the scares and hyperbole
had got it wrong. . . . [T]he Japanese “invasion” of U.S. business has been
no such thing. Even the best Japanese companies have made spectacular
and costly mistakes and have not taken control even of the businesses they
purchased, let alone of culture and technology. (see also Emmott 1993)

In short, the real anomaly of US–Japanese relations during the current
financial expansion is not that Japanese capital flowed to the United
States in the early 1980s; rather, it is that Japanese capital benefited so
little from assisting the United States economically in the final escalation
of the Cold War with the former USSR. Is this anomaly symptomatic
of a fundamental change in the mechanisms of interstate competition
for mobile capital which have propelled and sustained the expansion of
capitalist power over the last six hundred years?
These mechanisms have a clear built-in limit. Capitalist power in
the world system cannot expand indefinitely without undermining
interstate competition for mobile capital on which the expansion rests.
Sooner or later a point will be reached where the alliances between
the powers of state and capital that are formed in response to this
competition become so formidable that they eliminate the competition
itself and, therefore, the possibility for new capitalist powers of a higher
order to emerge. Are the difficulties met by the emerging structures
of Japanese capitalism in profiting from interstate competition for
mobile capital a symptom of the fact that this point has been reached,
or is about to be reached? Or, to rephrase it, do the structures of US
capitalism constitute the ultimate limit of the six centuries-long process
through which capitalist power has attained its present, seemingly allencompassing scale and scope?
In seeking plausible answers to these questions, the complementary
insights of Weber and Marx concerning the role of high finance in the
modern era must be supplemented by Adam Smith’s insights concerning
the process of world market formation. Like Marx after him, Smith saw in
the European “discoveries” of America and of a passage to the East Indies
via the Cape of Good Hope a decisive turning point in world history. He

20


was none the less far less sanguine than Marx about the ultimate benefits
of these events for humanity:
Their consequences have already been great; but, in the short period of
between two and three centuries which has elapsed since these discoveries
were made, it is impossible that the whole extent of their consequences
can have been seen. What benefits, or what misfortunes to mankind may
hereafter result from these events, no human wisdom can foresee. By
uniting, in some measure, the most distant parts of the world, by enabling
them to relieve one another’s wants, to increase one another’s enjoyments,
and to encourage one another’s industry, their general tendency would
seem to be beneficial. To the natives, however, both of the East and West
Indies, all the commercial benefits which can have resulted from these
events have been sunk and lost in the dreadful misfortunes which they have
occasioned. These misfortunes, however, seem to have arisen rather from
accident than from any thing in the nature of those events themselves.
At the particular time when these discoveries were made, the superiority
of force happened to be so great on the side of the Europeans, that they
were enabled to commit with impunity every sort of injustice in those
remote countries. Hereafter, perhaps, the natives of those countries may
grow stronger, or those of Europe may grow weaker, and the inhabitants
of all the different quarters of the world may arrive at that equality of
courage and force which, by inspiring mutual fear, can alone overawe the
injustice of independent nations into some sort of respect for the rights
of one another. But nothing seems more likely to establish this equality
of force than that mutual communication of knowledge and of all sorts
of improvements which an extensive commerce from all countries to all
countries naturally, or rather necessarily, carries along with it. (Smith
1961: II, 141; emphasis added)

The process sketched in this passage presents some striking similarities
with Braudel’s view of the formation of a capitalist world-economy: the
fortunes of the conquering West and the misfortunes of the conquered
non-West as joint outcomes of a single historical process; the long timehorizon needed to describe and assess the consequences of this single
historical process; and most important for our present purposes, the
centrality of “force” in determining the distribution of costs and benefits
among participants in the market economy.
Smith, of course, did not use the term “capitalism” – a term introduced
in the vocabulary of the social sciences only in the twentieth century. Yet,
his assessment that “superiority of force” was the most important factor
in enabling the conquering West to appropriate most of the benefits –
and to impose on the conquered non-West most of the costs – of the
wider market economy established as a result of the so-called Discoveries,
parallels Braudel’s assessment that the fusion of state and capital was the

introduction

21

vital ingredient in the emergence of a distinctly capitalist layer on top
of, and in antithesis to, the layer of market economy. As we shall see in
chapter 3, in Smith’s scheme of things large-scale profits can be maintained
for any length of time only through restrictive practices, buttressed by
state power, which constrain and disrupt the “natural” operation of the
market economy. In this scheme of things, as in Braudel’s, the upper layer
of merchants and manufacturers “who commonly employ the largest
capitals, and who by their wealth draw to themselves the greatest share of
the public consideration” (Smith 1961: I, 278) is truly the “anti-market,”
Braudel’s contre-marché.
However, Braudel’s and Smith’s conceptions of the relationship
between the market economy and its capitalist antithesis differ in one
important respect. For Braudel the relationship is fundamentally static.
He neither sees nor foresees any synthesis emerging from the struggle
between “thesis” and “antithesis.” Smith, in contrast, does see such a
synthesis emerging out of the withering away of inequality of force
under the impact of the very process of world market formation. As the
last sentence of the passage quoted above indicates, Smith thought that
the widening and deepening of exchanges in the world market economy
would act as an unstoppable equalizer of relationships of force between
the West and the non-West.
A more dialectical conception of historical processes is not necessarily
more accurate than a less dialectical one. As it turned out, for more than
150 years after Smith advanced the thesis of the corrosive impact of
processes of world market formation on the superiority of force of the
West, the inequality of force between West and non-West increased rather
than decreased. World market formation and the military conquest of
the non-West proceeded in tandem. By the 1930s, only Japan had fully
escaped the misfortunes of Western conquest, but only by itself becoming
an honorary member of the conquering West.
Then, during and after the Second World War, the wheel turned.
Throughout Asia and Africa old sovereignties were re-established and
scores of new ones were created. To be sure, massive decolonization was
accompanied by the establishment of the most extensive and potentially
destructive apparatus of Western force the world had ever seen. The farflung network of quasi-permanent overseas military bases put in place by
the United States during and after the Second World War, Krasner (1988:
21) notes, “was without historical precedent; no state had previously based
its own troops on the sovereign territory of other states in such extensive
numbers for so long a peacetime period.” And yet, on the battlefields
of Indochina, this world-encompassing military apparatus proved to be
wholly inadequate to the task of coercing one of the poorest nations on
earth to its will.

22


The successful resistance of the Vietnamese people marked the
apogee of a process initiated by the Russian Revolution of 1917,
whereby the West and non-West were reshuffled into a tripartite
grouping consisting of a First, Second, and Third World. While the
historical non-West came to be grouped almost entirely in the Third
World, the historical West split into three distinct components. Its
more prosperous components (North America, Western Europe, and
Australia) joined by Japan, came to constitute the First World. One of
its less prosperous components (the USSR and Eastern Europe) came
to constitute the Second World, and another (Latin America) joined
the non-West to constitute the Third World. Partly a cause and partly
an effect of this tripartite fission of the historical West, the fortunes of
the non-West from the end of the Second World War to the Vietnam
War seemed to be in the ascendant.
Writing for the bicentenary of the publication of the Wealth of Nations,
and shortly after the United States had decided to withdraw from Vietnam,
Paolo Sylos-Labini (1976: 230–2) speculated on whether Smith’s vision
was about to be realized – whether the time had finally come when “the
inhabitants of all the different quarters of the world . . . arrive at that
equality of courage and force which, by inspiring mutual fear, can alone
overawe the injustice of independent nations into some sort of respect
for the rights of one another.” The economic conjuncture also seemed to
signal that some equalization of relationship of forces in the world system
at large was imminent. The natural resources of Third World countries
were in great demand, as was their abundant and cheap labor. Agents of
First World bankers were queuing up in the ante-chambers of Third (and
Second) World governments offering at bargain prices the overabundant
capital that could not find profitable investment in their home countries.
Terms of trade had turned sharply against the capitalist West, and the
income gap between First and Third World countries seemed to be
narrowing.
Within six years, though, it had become clear that any hope (or
fear) of an imminent equalization of the opportunities of the peoples
of the world to benefit from the continuing process of world market
formation was, to say the least, premature. US competition for mobile
capital in world money markets to finance both the Second Cold War
and the “buying” of electoral votes at home through tax cuts, suddenly
dried up the supply of funds to Third and Second World countries and
triggered a major contraction in world purchasing power. Terms of
trade swung back in favor of the capitalist West as fast and as sharply
as they had swung against it in the 1970s, and the income gap between
the capitalist West and the rest of the world became wider than ever
(Arrighi 1991).

introduction

23

Nevertheless, the backlash did not restore the status quo ante. On the
one hand, the superiority of force of the capitalist West seemed to have
become greater than ever. Disoriented and disorganized by the increasing
turbulence of the world-economy, and hard-pressed by the Second Cold
War, the USSR was squeezed out of the “superpower business.” Instead
of having two superpowers to play off against one another, Third World
countries now had to compete with the fragments of the Soviet empire in
gaining access to the markets and resources of the capitalist West. And the
capitalist West, under US leadership, moved quickly to take advantage of
the situation to tighten its de facto global “monopoly” of the legitimate
use of violence.
On the other hand, superiority of force and the capitalist accumulation
of capital seemed to diverge geopolitically as never before. The decline
of Soviet power was matched by the emergence of what Bruce Cumings
(1993: 25–6) has aptly called the “capitalist archipelago” of East and
Southeast Asia. This archipelago consists of several “islands” of capitalism,
which rise above a “sea” of horizontal exchanges among local and world
markets through the centralization within their domains of large-scale
profits and high value-added activities. Below this sea lie the huge,
low-cost, and highly industrious laboring masses of the entire East and
Southeast Asian regions, into which the capitalist “islands” thrust their
roots but without providing them with the means needed to rise to or
above “sea level.”
Japan is by far the largest among these capitalist “islands.” Lesser
“islands” of the capitalist archipelago are the city-states of Singapore
and Hong Kong, the garrison state of Taiwan, and the half nationstate of South Korea. None of these states is powerful by conventional
standards. Hong Kong has not even attained – nor probably will ever
attain – full sovereignty. The three bigger states – Japan, South Korea,
and Taiwan – are wholly dependent on the United States not just for
military protection but also for much of their energy and food supplies as
well as for the profitable disposal of their manufactures. Yet, collectively,
the competitiveness of the East and Southeast Asian capitalist archipelago
as the new “workshop of the world” is the single most important factor
forcing the traditional centers of capitalist power – Western Europe and
North America – to restructure and reorganize their own industries, their
own economies, and their own ways of life.
What kind of power is this that even an expert eye can hardly discern?
Is it a new kind of “superiority of force” or, rather, the beginning of the
end of the superiority of force on which, over the last five hundred years,
the capitalist fortunes of the West have been built? Is capitalist history
about to end through the formation of a truly global world empire based
on the enduring superiority of force of the West as Max Weber seemed to

24


envisage, or is it going to end through the formation of a world market
economy in which the superiority of force of the West withers away as
Adam Smith seemed to envisage?
In seeking plausible answers to these questions we shall proceed by
successive approximations. Chapter 1 focuses on the process of formation
and expansion of the modern interstate system as the primary locus of
world power. The earliest beginnings of this process will be traced to the
formation in late medieval Europe of a northern Italian sub-system of
capitalist city-states. This sub-system was and remained an enclave of the
disintegrating mode of rule of medieval Europe – a form of warlordism
subjected to and held together by the dual systemic power of pope and
emperor. It none the less prefigured, and unintentionally created the
conditions for, the emergence two centuries later of the larger Westphalia
system of nation-states.
The global expansion of this system will then be described as
consisting of a series of transitions, in the course of which the system
as previously instituted broke down, only to be reconstituted on wider
social foundations. This preliminary analysis ends with the late twentiethcentury crisis of the enlarged and thoroughly transformed Westphalia
System. In diagnosing the symptoms of the present crisis, a new research
agenda will be formulated which focuses more directly on the “spaceof-flows” of business organizations than on the “space-of-places” of
governments. It is at this point that our construction and comparison of
systemic cycles of accumulation will begin.
The comparative analysis through which systemic cycles of accumulation
will be constructed follows the procedure that Philip McMichael (1990)
has called “incorporating comparison.” The cycles are not presumed but
constructed, both factually and theoretically, with the explicit purpose
of gaining some understanding of the logic and likely outcome of the
present financial expansion. The comparison is incorporated into the very
definition of the research problem: it constitutes the substance rather than
the framework of the inquiry. The cycles that emerge from the inquiry
are neither subordinated parts of a preconceived whole, nor independent
instances of a condition; they are interconnected instances of a single
historical process of capitalist expansion which they themselves constitute
and modify.
Chapter 2 constructs the first two instances of this single historical
process of capitalist expansion: the Genoese and the Dutch cycles.
Chapter 3 adds a new stage to the process by defining the third (British)
cycle and comparing it with the first two. The concluding section of
the chapter makes explicit and seeks some plausible explanation for the
pattern of recurrence and evolution revealed by the comparative analysis
of the first three cycles. The stage is thus set for the construction in

introduction

25

chapter 4 of the fourth (US) systemic cycle of accumulation, portrayed
as an outgrowth of the preceding cycles and the matrix of our times. In
the Epilogue we shall return to the questions that we have raised in this
Introduction.
This reconstruction of capitalist history has its own limitation. The
notion of systemic cycle of accumulation, we have noted, derives directly
from Braudel’s notion of capitalism as the top layer of the hierarchy
of the world of trade. Our analytical construct, therefore, focuses on
that top layer and offers a limited view of what goes on in the middle
layer of market economy and the bottom layer of material life. This
is simultaneously the main strength and the main weakness of the
construct. It is its main strength because the top layer is “the real home
of capitalism” and at the same time it is less transparent and less explored
than the intermediate layer of the market economy. The transparency
of the activities that constitute the layer of market economy and the
wealth of data (particularly quantitative data) that these activities
generate, have made this intermediate layer the “privileged arena” of
historical social science and economics. The layers below and above
the market economy are instead “shadowy zones” (zones d’opacité). The
bottom layer of material life is “hard to see for lack of adequate historical
documents.” The upper layer, in contrast, is hard to see because of the
actual invisibility or the complexity of the activities that constitute it
(Braudel 1981: 23–4; Wallerstein 1991: 208–9):
At this exalted level, a few wealthy merchants in eighteenth-century
Amsterdam or sixteenth-century Genoa could throw whole sectors of the
European or even world economy into confusion, from a distance. Certain
groups of privileged actors are engaged in circuits and calculations that
ordinary people knew nothing of. Foreign exchange, for example, which was
tied to distant trade movements and to the complicated arrangements for
credit, was a sophisticated art open only to a few initiates at most. To me, this
second shadowy zone, hovering above the sunlit world of the market economy
and constituting its upper limit so to speak, represents the favored domain of
capitalism. . . . Without this zone, capitalism is unthinkable: this is where it
takes up residence and prospers. (Braudel 1981: 24)

Systemic cycles of accumulation are meant to throw some light on this
shadowy zone without which “capitalism is unthinkable.” They are not
meant to tell us what goes on in the lower layers, except for what is directly
relevant to the dynamic of the systemic cycles themselves. This, of course,
leaves much out of sight or in the dark, including the privileged arenas of
world systems studies: core-periphery and labor-capital relations. But we
cannot do everything at once.

26


Marx (1959: 176) invited us to “take leave for a time of [the] noisy
sphere [of circulation], where everything takes place on the surface and in
view of all men, and follow [the possessor of money and the possessor of
labor-power] into the hidden abode of production, on whose threshold
there stares us in the face ‘No admittance except on business.’ ” Here, he
promised, “[w]e shall at last force the secret of profit making.” Braudel
also invited us to take leave for a time of the noisy and transparent
sphere of the market economy, and follow the possessor of money into
another hidden abode, where admittance is only on business but which
is one floor above, rather than one floor below the marketplace. Here,
the possessor of money meets the possessor, not of labor-power, but of
political power. And here, promised Braudel, we shall force the secret
of making those large and regular profits that has enabled capitalism to
prosper and expand “endlessly” over the last five to six hundred years,
before and after its ventures into the hidden abodes of production.
These are complementary projects, not alternative ones. However, we
cannot go to the top and the bottom floors at the same time. Generations
of historians and social scientists have taken up Marx’s invitation and
have extensively explored the bottom floor. In so doing, they may not
have discovered “the” secret of profit-making in the industrial phase of
capitalism, but they have certainly discovered many of its secrets. Then
dependency and world system theorists and practitioners have invited us
to have another look at the middle floor of market economy to see how
its “laws” tend to polarize the hidden abodes of production into core and
peripheral locales. In this way more of the secrets of profit-making have
been exposed. But few have ventured to the top floor of the “anti-market”
where, in the words of Braudel’s hyperbole, “the great predators roam and
the law of the jungle operates” and where the secrets of the longue durée of
historical capitalism are said to be hidden.
Today – when world capitalism seems to be prospering, not by
thrusting its roots more deeply into the lower layers of material life and
market economy, but by pulling them out – is as good a time as any to
take up Braudel’s invitation and explore the real home of capitalism on
the top floor of the house of trade. That and that only is what we are
about to undertake.
It follows that our construction is both partial and somewhat
indeterminate. Partial because it seeks some understanding of the logic
of the present financial expansion abstracting from the movements
that go on under their own steam and laws at the levels of the world’s
market economies and of the world’s material civilizations. It is somewhat
indeterminate for the same reason. The logic of the top layer is only
relatively autonomous from the logics of the lower layers and can be fully
understood only in relation to these other logics.

introduction

27

Certainly, as our construction proceeds, what initially may appear to
be mere historical contingency will begin to appear to reflect a structural
logic. Nevertheless, the tension between the two kinds of appearance
cannot be fully resolved within the limits of our research agenda. A full
resolution of the tension – if that is possible – requires that we descend
again to explore the lower layers of market economy and material life with
the knowledge and questions brought back from the journey into the top
layer which this book undertakes.

Arrighi (2009) The Long Twentieth Century: Introduction

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Arrighi (2009) The Long Twentieth Century: Introduction