Capitalism's demise? An interview with sociologist Immanuel Wallerstein

Suh: These days, everybody is talking about a crisis. But everyone has a different definition of crisis. Some talk about a financial crisis, others about a more general economic crisis, including production. Still others talk about a crisis of neoliberalism, a crisis of American hegemony, and, of course, some talk about a crisis of capitalism. I would like to start by asking how you define the current crisis.

Wallerstein: First, I think the word crisis is used very loosely. As most people use it, it simply means a situation in which some curve is going down that had been going up. And they call that a crisis. I don't use the term that way. But, in fact, I think we are in a crisis and a crisis is a very rare thing.

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The second thing that happens when you have a Kondratieff B phase is that people who want to make a lot of money shift to the financial sphere; basically, speculation through debt mechanisms of various kinds. I see this from the point of view of the powerful economic players circa the 1970s, the United States, Western Europe and Japan. I call it exporting unemployment. Since there is a relative amount of unemployment in the world system as a result of the decline of industrial production, the question is: Who is going to suffer? So each tries to export the unemployment to the other. And my analysis is that in the 1970s Europe did well, and in the 1980s Japan did well, and in the beginning of the 1990s the United States did well. Basically, by various mechanisms -- I don't want to go into the details of the analysis of how they did it -- but financial speculation always leads to a bust. It's been doing that for 500 years, why should it stop now? It comes at the end of a Kondratieff B phase. Here we are. So what the people are calling a financial crisis is simply the bust. This recent business of Bernard Madoff and his incredible Ponzi scheme is just the most perfect example of the impossibility of continuing to make profits off financial speculation. At some point, it goes. If you want to call it a financial crisis, be my guest. That's not important.

Suh: What is particularly interesting about the current phase of the Kondratieff cycle, to use your preferred term, is that the world economy is reaching the bottom of the cycle just as U.S. hegemony is being questioned more seriously than before. It has been declining for some time, perhaps for about 30 years since its defeat in Vietnam. Various U.S. administrations have tried to reverse the process by various means. Some tried human rights diplomacy or some version of liberal measures. Others attempted more realist policies by expanding military capability or turning to high-tech military power such as “Star Wars.” None were able to reverse the process, but everyone sought to find the most efficient way to manage the world with less power. What happened in recent years is that George W. Bush came along with the neocons who thought they were going to reverse this by policy of militarism and unilateralism. But instead of reversing the process and restoring U.S. hegemony, they accelerated the process of decline.

Financial Crisis/Geopolitical Crisis

Wallerstein: Here we are, about to be 2009, and we are in a multi-polar situation, which is irreversible from the point of view of the United States and a very complicated messy one. And we are in a so-called financial collapse. We are in a depression. I think that all this pussy-footing about language is nonsense. We are in a depression. There will be serious deflation. The deflation, conceivably might take the form of runaway inflation but that's just another form of deflation, as far as I'm concerned. We might not come out of that for four or five years.

It takes awhile. Now all of that is what I think of as normal occurrences within the framework of the capitalist-run system. That's how it operates. That's how it always has operated. There's nothing new in the decline of hegemony. There's nothing new in the Kondratieff B phase and so forth. That's normal.

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Suh: What's different about this time, you suggest, is that we are entering not only a particularly turbulent Kondratieff B phase but we have also entered the terminal crisis of the world economy. If we have been in this terminal stage for some time, what does the current economic crisis do? What does it mean?

A Terminal Crisis of Capitalism?

Wallerstein: It means that the normal mechanisms of getting out of it won't work any longer. We've had this kind of depression before; one in '29. We've had many such depressions: 1873-96 was our Kondratieff B phase, 1873-96 was like this period. There have been many over the last four, five hundred years. The way you get out of it, there are standard modes of getting out of it. The modes of getting out of it aren't working this time because it's too hard. The standard modes of getting out of it; one of them is you create a new, productive leading industry, which you monopolize and get high profits and protect it very well, and so forth. You do a little bit of redistribution so that there are markets for these things. So, we've gotten out of it before, but it's not going to be so easy this time. That is to say, there may be an upturn. It's not impossible that there will be a relative upturn five years from now. It accentuates the problem because the upturn itself is raising the three basic curves, making them higher and higher and higher. There was an analysis done in the physical sciences a long time ago, which showed if a curve moves up towards an asymptote and gets to about 70, 80 percent of the way, at that point what happens is it begins to shake enormously. That's the analogy. We're at the 70, 80 percent point on these three essential curves and it is shaking enormously. There are great fluctuations and is very unstable; that is why we talk about being chaotic. But it can't move up another 10 percent because it's just too near. We haven't had that problem before because when the curve was way down here at 20 percent, it worked very well. And you go from 30 to 40 percent, it worked very well. When you get all the way up there, there's nowhere to go. That's what the concept of asymptote is. I want to analyze this in terms of percentages of possible sales prices. The whole point is you can't just expand the amount of money which you demand indefinitely for selling because people don't want to buy at a certain point, because it's just too much. And they don't.

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