At the 1996 Summer Session, a panel presented a way to understand the globalization process based upon the structuralist approach expounded by Giovanni Arrighi in The Long Twentieth Century, published in 1994. Arrighi postulates that a crisis in the current cycle of world capitalism began in 1970 and it may signal the beginning of the end of the period of American “hegemony,” or dominance in military, political and economic terms. He looks at the history of capital accumulation since the 13th century to discover patterns of accumulation cycles that may be precedents to what is to come. He seeks to identify the systematic conditions under which a restructuring and reorganization of the capitalist system may occur, and then to speculate about where the next cycle of accumulation may be centered.

          This structuralist interpretation of globalization did not attract me, so I determined to read Arrighi’s book and critique it in order to better understand my negative reaction to his ideas. I did not think mine was simply a knee-jerk reaction to anything Marxian, although that might have been part of it. The theory seemed to me to leave out too many trends and events that are vital elements of globalization, and it failed to explain phenomena that I think are historically important, but my critique of Arrighi’s approach will be presented more fully later, after summarizing the principle elements of his theory.

II.            ARRIGHI’S ARGUMENT: CYCLES OF ACCUMULATION

          Professor Arrighi, who teaches at SUNY-Binghamton, owes much to the dean of French economic historians, Fernand Braudel, and to Karl Marx, for the origins of his theory. Braudel, in Civilization and Capitalism, a three-volume work completed in 1984, constructed a vast panorama of economic life from the late Middle Ages through the industrial revolution into modern times. Curiously, he mentions capitalism only in passing in the first volume, discusses capital and capitalist but not capitalism in the second, and avoids defining the term in the third [Heilbronner, 1985], but Arrighi finds him useful for his description of systematic cycles of accumulation, a formulation closely related to the Marxian general formula of capital: MCM’. Marx used this formula to suggest the logic of individual capitalist investments, where M = money, C = the investment of money in material form (trading or production), and M’ = the expansion of M through profits resulting from these investments. This is a cycle of accumulation at the level of the individual or firm.

          Arrighi’s cycle of accumulation relates to century-long or longer periods in which the center of capitalism resides in a given location and goes through the cycle of liquidity, investment, and greater liquidity. At the final stage of each cycle, capitalists from the center are able to find more lucrative returns on their investments in other locations, so they withdraw their funds from trade or production, preferring to use assets to finance other areas where profits are greater. These cycles of accumulation are based on Braudel’s observations of recurrent financial expansions through history. Arrighi departs from Braudel in taking the periods of rapid financial expansion to represent periods of fundamental transformation of the worldwide capital accumulation process, leading to a geographical shift of the center. In other words, Arrighi adds meaning to the expansionary periods that the economic historian did not detect, and he extends Marx’s formula for capital accumulation in ways Marx did not intend.

          The first observed cycle of capital accumulation started in the northern Italian city-states in the l3th century. Venice, the largest, specialized in trade with the East, especially in spices. Genoa specialized in the silk trade through Central Asia. Florence and Milan engaged in manufacturing and trading with northern Europe, the former mainly in textiles and the latter in metals. While trade was expanding, the city-states co-existed amicably, but in the mid-14th century trade dropped off and there began a century of episodic inter­state warfare, which sapped the energies and wealth of the participants. In Arrighi’s mind, capital gradually left off financing trade and manufacturing and began financing warfare, thus gaining power as well as wealth for the capitalists. When local warfare, too, became unprofitable, the financiers turned to financing power struggles in Europe and in the church. This turned out to be a losing strategy when, in 1339, Edward III defaulted upon massive loans from two Florentine firms and a great crash ensued.

          From the turmoil following the crash, the Medici family emerged as the dominant financial empire for the next century. They continued to finance European wars, and began managing the Vatican’s finances just before the Black Death multiplied the legacies and donations to the Church. As long as the Hundred Years’ War continued, both sides relied upon external loans, and the Medicis prospered. Shortly after the war’s end, however, the Medicis faded from the world of European high finance. Arrighi suggests that they had become so engaged in the politics of the time, and so entangled in the aristocracy, that they let their commercial and financial interests wither away. That is a rather curious way for the cycle of capital accumulation to end in the city-states. The leading accumulators apparently became effete courtiers and lost interest in the grubby world of high finance.

          The Dutch hegemonic cycle emerged, rather confusingly, from the Treaty of Westphalia in 1648. Between the Medicis and the Dutch, Spain enjoyed a brief reign as a center of power, and Genoese bankers rose to new heights, but these episodes apparently did not qualify as a cycle -- only part of the transition period. The Dutch, and their northern allies, succeeded in breaking Spanish power during the Thirty Years’ War. They had been sapping Spanish power for years by systematic piracy ever since the Spanish occupied Holland to enforce taxation a century earlier.

          The Treaty of Westphalia signaled an end to the Thirty Years’ War, and to medieval rule as well. It signaled the beginning of a modern state system, built upon international law and the balance of power. Dutch power, based initially on control of trade in the Baltic region, expanded to include colonization in the Far East and control of the spice trade. Their seamanship allowed their commercial and financial talents to come into full flower. They succeeded in making Amsterdam the central entrepot of Europe, and also the financial center of the region. They opened the world’s first permanent stock exchange. Abroad, the Dutch government chartered commercial ventures with the power to exercise exclusive trading rights and sovereignty over large areas, especially the Dutch East Indies (Indonesia).

          For more than a century, from around 1610 to 1730, Arrighi finds the Dutch in a hegemonic position, but then the very success of their trading and financial system attracted imitators who sought to establish profitable overseas territories and to route commodity and money flows through their own jurisdiction. This heralded the beginning of the mercantile system that undermined and eventually destroyed the Dutch world trading system. Mercantilism was coupled with industrialization. The Dutch, unable to compete, withdrew from trade and concentrated on high finance, the CM’ phase of Arrighi’s MCM’ formulation.

          The Dutch did well for a time financing both sides of conflicts between the French and the British, but their own power elite made the mistake of siding with the French against the British in support of the American Revolution. In retaliation, the British destroyed what was left of Dutch sea power, and gained access to Dutch overseas territories. London had been gaining on Amsterdam as a center for finance throughout the 18th century, and it gained clear superiority in the financial crisis that followed the Dutch defeat. The British took the lead in industrialization, making full use of the capital available in the City. Arrighi suggests that the finance capital available exceeded the uses to which it could be put domestically, leading the British to build and finance railways in many parts of the world and also leading to the production of modern armaments.

          The British “century” came to an end only when the World War exhausted its energies and drained its reserves, but its demise was signaled earlier, according to Arrighi’s formula. The world experienced its first great depression in 1873-96, following which British exports of capital soared to new heights. The British withdrew from trade and used their funds for the more profitable business of lending, mostly to finance the arms build-up in Europe in the latter part of the 19th century. An important byproduct of this diversion of capital from production to overseas loans was the adverse impact it had on working class incomes. Arrighi claims that working class incomes contracted in Renaissance Florence, the final expansionist stage of the Dutch era, and Edwardian Britain, even though those periods were the best of times for the bourgeoisie.

          Arrighi contends that Britain’s “hegemony” rested upon the twin pillars of India’s balance of payments deficits to Britain and trading balances between Britain and Europe and North America. The fact that Britain entered the war well before the US, and that the US had restricted lending to all combatants during its neutrality, forced Britain to liquidate considerable assets in the United States at bargain basement prices in order to finance the purchase of armaments, machines and raw materials. Britain had also lent heavily to its poorer allies early in the war, leaving the US free to displace Britain’s role of chief investor and financial intermediary in Latin America and much of Asia. After the war, the US joined but did not replace Britain as the world’s financial clearinghouse. Both the dollar and the pound sterling became reserve currencies. British financial institutions continued to have the capacity and experience to manage the world monetary system, but the US institutions did not.

          Only the great depression of the 1930s succeeded in toppling British pre-eminence in world finance, and by then the US cycle was already firmly underway. By 1938, US national income was already about the same size as that of Britain, France, Germany, Italy and the Benelux countries combined, and three times that of the USSR. In 1948, it was more than twice that of the group of European countries and more than six times that of the USSR.

III.            ARRIGHI ON U.S. HEGEMONY

          Now, three-fourths of the way through the book, one has the feeling we are at the point of learning what this is all about. The past pages are prologue; finally we are at the main event: the cycle of US hegemony in the post-WW II period. (Most of the views in this section were not featured at the Summer Session seminar, and I would not wish to ascribe them to the presenters.) Arrighi sets the stage by asserting that Truman supplanted Roosevelt’s fanciful one-world ideal with the doctrine of two worlds, an aggressively expansionist communist one and the free world which only the US could organize for self-defense. [Arrighi, p. 177] Arrighi discusses the Bretton Woods monetary arrangements and the difference between the externally-oriented economy of hegemonic Britain and an “autocentric” economy with seeming objectivity, but throughout there is the spoken and unspoken assumption that this cycle of capital accumulation differs little from those that passed before; we are simply living through another turn of the Ferris wheel of greed.

          The motivation of US policies alleged by Arrighi is most difficult for an old cold warrior like myself to swallow. Arrighi reluctantly credits the US with being anti­colonialist, mainly in order to create larger world markets. The Marshall Plan, he holds, was the remaking of Western Europe in the US image. Point Four, the US foreign aid program, was designed to thwart the Soviets. The Korean War was a great relief to the US because it allowed us to build up our armaments and thus solve our liquidity problems. The Cold War was Truman’s invention. The US blocked Korean attempts to unify their country by intervening in their civil war. These opinions are found throughout Arrighi’s analysis of capital accumulation since the Second World War.

          Fortunately, from Arrighi’s viewpoint, the American century (in this case less than 100 years) of hegemony seems shortly to come to an end. He finds the oil crises of the 1970s to be a signal that the terms of trade are turning against the US. The Reagan era in which the gap between rich and poor widened is an example of the M’ stage of the cycle, where capital is withdrawn from trade and production and turned to financing more profitable ventures abroad, mainly in the Far East. Real incomes of the working class have fallen, as they did at the end of previous hegemonic cycles. He sees signs that the Far East will be the next historic center for capital accumulation. Goodbye US hegemony, welcome Japan and China.

IV.       THE FIELDING PERSPECTIVE

          All of this has a surface plausibility and coherence, which can be attractive to those seeking to understand the current movement towards economic globalization. It is one way of looking at the world, but not the only one. As Arrighi says in his introduction, “the construction presented here is only one of several equally valid, though not necessarily equally relevant, interpretations of the long 20th century.” In fact, he says, he consciously put aside another paradigm, that of class struggle and core-periphery relations, which he finds still valuable from “its own angle of vision.” This emphasis on relevance and angle of vision is the basis for my critique. In the context of the Fielding Institute, is this angle of vision most relevant for Fielding students?

          I raised the issue of relevance in the Summer Session seminar, and one of the faculty responded that this approach was selected because of its “truth;” it could not be ignored. I doubt that this position would be defended, upon reflection, by anyone on the faculty, steeped as they are in the notion of paradigms and research cultures. Fielding seems to be a sanctuary for relative truth, and Arrighi’s perspective may deserve a niche in the Pantheon of interpretations of the human condition in Century 21, but not a large one.

          My summary of Arrighi’s story does not do his scholarship justice. His paragraphs are larded with references to other authors and quotations from world leaders. Some of the latter I find to be taken out of context, such as the quote from Dean Acheson to the effect that the outbreak of the Korean War “saved us” by allowing the build-up of armaments and thus the creation of needed liquidity in the capitalist world. I think the quote should be interpreted in the context of the difficulty of getting the American people to authorize expenditures for a military build-up when the nation was not at war, despite the increasingly obvious aggressive designs of the Soviet Union.

          Despite the fact that I strongly disagree with Arrighi’s orientation, I am not prepared, literally, to take on Arrighi’s historical account of the cycles of capital accumulation. I do challenge, however, its relevance to Fielding students.