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Wallerstein’s Crisis of Capitalism

By Frank W. Elwell


There are three features of the capitalist system that are essential in its continuation:

  1. The system must constantly expand production, bringing in new markets and workers into the system;
  2. It must externalize many of its costs, that is shift much of the cost of production (pollution cleanup, securing needed resources) to the nation-state; and
  3. The nation-state and the interstate system must remain strong (74-78). The End of the World as We Know It

Wallerstein posits that it is these three features of the system that have been at the root of capital accumulation; yet the very success of the system has led to forces that are undermining this foundation. As it expands throughout the world capitalism is rapidly losing the easily exploitable portion of its labor market. Workers in formerly peripheral areas are increasingly demanding living wages, decent working hours, and a higher standard of living. The threat to the capitalist world system, according to Wallerstein, is the spread of democracy.

“The demands for income, health care and education, in particular, seem to be insatiable. To the extent that there is democratization, people insist not merely on having these three, but on regularly raising the minimal threshold for each. But having these three, at the level that people are demanding each day, is incredibly expensive, even for the wealthy countries not to speak of for Russia, China, and India. The only way everyone can really have more of these is to have a radically different system of distribution of the world’s resources than we have today” (2000, 386). Mass media and the newer social media, of course, serve as a stimulus for democratization as well as demands for consumer goods throughout the world system.

Another threat facing capital, according to Wallerstein, is the “ecological crisis” caused by development. “What we mean by historical capitalism is a system in which the institutions that were constructed made it possible for capitalist values to take priority, such that the world-economy was set upon the path of the commodification of everything in order that there be ceaseless accumulation of capital for its own sake” (1999, 78). When environmental issues get in the way of profits, it is the accumulation of capital that rules. Companies that depEcological Crisisleted the environment or that polluted air, water, and land through their production processes were able to minimize their costs by ignoring the environmental havoc they created, leaving governments to bear the clean-up costs, thus spreading the costs to the population as a whole. The profits, of course, go to the corporations. The fact that corporations could externalize these costs means that there is no incentive to factor ecology into corporate decisions (85).

The ecological crisis must necessarily intensify, Wallerstein explains, as corporations expand their markets and more people around the world are being integrated into consumer culture (76-82). As the crisis intensifies the budgets of national governments are increasingly stretched to provide for the cleanup. This, predicts Wallerstein, will cause governments to try to force companies to internalize these costs, which will cut deeply into their capital accumulation (31). Increasing costs for labor and for environmental clean-up cannot simply be passed on to the consumer in the form of higher prices. “That is to say, the ‘market” constrains the sales price, in that, at a certain point, the price becomes so high that the total sales profit is less than if the sales price were lower” (79). Thus the need to pay more for labor and environmental cleanup seriously erodes capital accumulation (81).

A third threat to the capitalist world-system is the decline in the power of the state. From the beginning, Wallerstein (and others) have argued, state power is essential for the capitalist world-system in keeping order at home, sponsoring monopolies, military threats, and favorable trade agreements with periphery and semi-periphery areas. The state also supports profits through purchasing and tax policies, building roads, sewers, airports, and other supports for capital, and acts to “soften discontent of the dangerous classes” through the establishment of welfare (1999, 63-74). But the state, according to Wallerstein, is rapidly losing legitimacy as liberal reform has failed to fundamentally address poverty, depletion, pollution, structural unemployment, and a host of other social problems. The system is in terminal crisis, Wallerstein argues, because all of the avenues of significant capital accumulation are being narrowed; capital accumulation no longer has free reign, nor can the state easily lift the restrictions (80-85).

The coming decades, Wallerstein (2000) predicts, will see the disorder continue to mount. “Capitalists will seek support from state structures as they have in the past. States will compete with other states to be the major loci of the accumulation of capital” (431). More and more of social life will be commodified, polarization of wealth and power wCorporate Earthill become even more extreme, and states will find it increasingly difficult to maintain order internally and internationally. Terrorism will intensify as the wealthy core countries will increasingly be called to account for past exploitation (414-415). The U.S. will lose its hegemonic status as its economy slows dramatically and weapons of mass destruction proliferate. The capitalist world-system will slip into chaos and a new order will eventually emerge after much struggle within and between nations (431). Unlike Marx, Wallerstein does not predict precisely what this new world order will be. There is no inevitability of something better or worse. What emerges, he asserts, very much depends upon the ongoing struggle between repressive and progressive forces (413).

Because our economic-political system is one of capitalism a great part of the sociocultural system (as well as the world-system) is organized around and infused by its need for expansion. It is this drive that is behind the ever more detailed division of labor, the adoption of computers and other technologies to replace workers, the economic squeezing of the working and middle classes, globalization and outsourcing, immigration, the commodification of social life, the degradation of work and workers, the economic, political, and cultural polarization within and between societies, and the rising tide of alienation and anomie. However, capitalism is not the only force at work causing these changes. Capitalism is an economic-political system that has prominent place in the sociocultural web in which population, technology, environment, bureaucracy, the state, primary groups, and such cultural elements as science, rationalization, nationalism, and human values, traditions, and beliefs evolve. These forces—never alone but always in interaction with one another (sometimes reinforcing, sometimes contradicting)—are the principle concerns of macrosociology.

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For a more extensive discussion of Wallerstein's theories refer to Macro Social Theory by Frank W. Elwell.  Also see Sociocultural Systems: Principles of Structure and Change to learn how his insights contribute to a more complete understanding of modern societies.


Elwell, F. W. 2006. Macrosociology: Four Modern Theorists. Boulder: Paradigm Publishers.

Elwell, F. W. 2009. Macrosociology: The Study of Sociocultural Systems. Lewiston: Edwin Mellen Press.

Elwell, F. W. 2013. Sociocultural Systems: Principles of Structure and Change. Alberta: Athabasca University Press.

Wallerstein, Immanuel. 1974. The Modern World-System: Capitalist Agriculture and the Origins of the European World-Economy in the Sixteenth Century. New York: Academic Press.

Wallerstein, Immanuel. 1980. The Modern World-System II: Mercantilism and the Consolidation of the European World-Economy, 1600-1750. New York: Academic Press.

Wallerstein, Immanuel. 1989. The Modern World-System III: The Second Era of Great Expansion of the Capitalist World-Economy, 1730-1840. New York: Academic Press.

Wallerstein, Immanuel. 1998. Utopistics:  Or, Historical Choices of the Twenty-first Century. New York: W.W. Norton & Company, Inc.

Wallerstein, Immanuel. 1999. The End of the World as We Know It. Minnesota: The University of Minnesota Press.

Wallerstein, Immanuel. 2000. The Essential Wallerstein. New York: The New Press.

Wallerstein, Immanuel. 2003. The Decline of American Power. New York: The New Press.


To reference Wallerstein's Crisis of Capitalism you should use the following format:

Elwell, Frank W. 2013. "Wallerstein's Crisis of Capitalism," Retrieved August 31, 2013 [use actual date]

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