The Phoenix cycle: Global Leadership Transition in a Long-Wave Perspective
Joachim Karl Rennstich
Department of Political Science
Indiana University
Bloomington, IN 47405
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Paper prepared for delivery to the 26th Political Economy of World-Systems 2002 Conference at the University of California at Riverside, Riverside, CA, May 3-4, 2002
Draft as of:
April 25, 2002
Abstract
It has been argued that one of the reoccurring phenomenon of hegemonic transitions is the inability of the existing leader to establish a similar leadership position in a newly emerging and structurally different commercial and organizational arrangement. This shift in the geographical and political location of power has been explained as the outcome of the leader’s experience of success in the current setting, creating an entrenched institutional setting (in a broader sense) that proves adaptive in defending its turf but less so in fostering the rise of new leading sectors. However, the case of Britain’s continued leadership over an extended period of time (and separate long waves) has shown that this is not always the case. This paper introduces the concept of internal and external global network environments in the world system and argues that the extension of leadership from an old to a new commercial and organizational arrangement is dependent on the systemic nature of the world system. A shift from an external to an internal network environment (or vice versa) allows the parallel development and rise of new leading sectors because they pose no threat to the existing institutional setting of the established leading sectors. The emerging new leading sectors do profit from the relative advantages of the current leadership position (in terms of capital, costs, etc.) without the resistance usually encountered from the established leading sectors. The paper develops a systematic account of the shifts from maritime commercial (external network environment) phases, over industrial (internal network environment) phases, to the rise of a digital commercial (external network environment) phase. It concludes that the shift from an industrial phase to the new digital commercial phase puts the current systemic leader, the United States, in a position of continued leadership over two long-waves.
Introduction
Beginning with the work of Braudel (1992b; 1992c; 1992a), Wallerstein (1974; 1980; 1984; 1989) and others (e.g., Abu-Lughod 1989; Arrighi 1994; Arrighi, Silver, and Ahmad 1999; Buzan and Little 2000; Chase-Dunn 1989, 1995; Chase-Dunn and Hall 1997; Dark 1998; Denemark et al. 2000; Frank 1978, 1998; Frank and Gills 1993; Freeman 1983; Freeman and Louçã 2001; Gilpin 1987; Goldstein 1988; Kennedy 1988; Modelski and Thompson 1996; Hugill 1993; Modelski 1987, 2000; Pomeranz and Topik 1999; Pomeranz 2000; Rasler and Thompson 1989, 1994; Thompson 1999, 2001; Tilly 1992; Tilly and Stinchcombe 1997) we have taken significant steps toward our understanding of the governance of the world political economy in its historical development. Despite the large variety of approaches and models (or rather as a result therefore), the dynamics of systemic change, however, still require further attention. The purpose of this paper is to examine the process of transition from one hegemonic leader to the next. In doing so, we built on previous models by employing an evolutionary framework to the study of the transition mechanism, creating a synthesis of Arrighi’s and Modelski and Thompson’s conceptualization of the hegemonic leadership transition process.
One of the main characteristics of hegemonic[1] transitions in most treatments of the subject seems to be the inability of the existing leader to establish a similar leadership position in a newly emerging and structurally different commercial and organizational arrangement. This shift in the geographical and political location of power has been explained as the outcome of the leader’s experience of success in the current setting, creating an entrenched institutional setting (in a broader sense) that proves adaptive in defending its turf but less so in fostering the rise of new leading sectors. However, the case of Britain’s continued leadership over an extended period of time (and separate long waves) has shown that this is not always the case.
This paper introduces the concept of internal and external global network environments in the world system and argues that the extension of leadership from an old to a new commercial and organizational arrangement is dependent on the capitalist mode and its effect on the systemic nature of the world system. A shift from an external to an internal network environment (or vice versa) allows the parallel development and rise of new leading sectors because they pose no threat to the existing institutional setting of the established leading sectors. The emerging new leading sectors do profit from the relative advantages of the current leadership position (in terms of capital, costs, etc.) without the resistance usually encountered from the established leading sectors.
A large literature has acknowledged the various significant changes currently occurring in the world system, often summarized as the effects of “globalization.” Here we argue (with many of the authors noted above) that “globalization” is not a recent development, but rather the recent stage of a systematic evolution of the world economic and social system. To understand the current shifts then, makes it necessary to gain a better understanding of the historical process of the evolution of this system. This paper develops a systematic account of the shifts from maritime commercial (external network environment) phases, over industrial (internal network environment) phases, to the rise of a digital commercial (external network environment) phase. In contrast to some authors, such as Wallerstein, who argue for the occurrence of a discontinuation of the developmental process of the world system, we propose a model that allows us to view the current changes as fully consistent with the past development of the world economic and social system. The paper closes with a discussion of the geographic locus of the next leader and concludes that the transition from an industrial phase to the new digital commercial phase puts the current systemic leader, the United States, in a position of continued leadership over two long-waves.
Leadership Transitions and Systemic Structure
As noted earlier, a multitude of models of hegemonic leadership and its transitions exist in the literature. We have chosen here to focus on the three conceptualizations of Wallerstein, Arrighi, and Modelski and Thompson for several reasons. First, these models represent broadly the main arguments and processes put forward based on the assumption that the current world system is an outgrowth of an evolutionary process for at least five centuries. Second, these models are not necessarily exclusionary but in fact complementary. We are thus able to create a synthesis of these models that incorporates their individual strengths while allowing us to overcome their respective weaknesses.
Existing Models of Hegemonic Change and Transition
Before we can go on to discuss the current process of change, it is necessary to briefly review some of the existing models and to develop a synthesis of these seemingly divergent but in our view compatible theorizations of systemic change and leadership transition. By applying an evolutionary framework we are able to use components of the existing models to create a new model of hegemonic change that takes into account not only the hegemonic crises but also systemic crises that result from changes in the capitalist mode of the system and lead to shift in the meta-structure of the world system.
Wallerstein’s Model of the Hegemonic Cycle
Wallerstein (1983) conceives of hegemony in the interstate system as the moment in which the enduring rivalry between great-powers is so unbalanced that one of these powers emerges as a primus inter pares. This elevated position of power is the outgrowth of its economic supremacy and only occurring during the phase in which the hegemonic state masters an edge in efficiency in all three major economic arenas, namely agro-industrial production, commerce, and finance. As a result, this primus has the ability to impose its rules and its wishes in the economic, political, military, diplomatic, and cultural spheres. Wallerstein identifies three such instances – Dutch, British, and US hegemony – as the outcome of long periods of “competitive expansion” resulting in a particular concentration of economic and political power. Figure 1 summarizes graphically the process of the rise and fall of hegemonic dominance in the world system.
/Figure 1 about here/
Over the course of this competitive expansion, the rising hegemon acquires first a “decisive edge” in agro-industrial production, then also in commerce, and finally reaches a dominant position in finance as well. This process of concentration of productive, commercial, and financial fitness clustering in one state must be secured, however, through victory in a thirty-year-long climatic world war[2] (in Wallerstein’s count the Thirty Year’s War from 1618 to 1648 [World War Alpha], the Napoleonic Wars from 1792 to 1815 [World War Beta], and the long Eurasian World Wars from 1914 to 1945 [World War Gamma]), acting as a catalyst “encrusting” the greater edge of the hegemonic state and protecting it against erosion through the creation of a postwar interstate settlement (Wallerstein 1983, 104).
One feature of this “interstate settlement” is the element of “global liberalism.” While enforcing the principle of the relatively free flow of goods, capital, and labor throughout the world economy, it not only serves the purpose of intensifying the hegemonic power’s position of strength, but also delegitimizes the efforts of other state machineries to act against the economic superiority of the hegemonic power. At the same time, it allows for the diffusion of technological expertise (know-how) and causes the steady rise of labor factor costs, allowing the competing states to catch up. Eventually, these two factors combined lead to a loss of the dominating competitive fitness of the hegemon, allowing for a renewed competitive expansion of the system and the rise of a new hegemonic state (Wallerstein 1983).
Arrighi (Arrighi, Silver, and Ahmad 1999, 24) points out to the obvious problem of this model, namely that is exogenizes the source of change that ultimately drives the system. Particular complexes of governmental and business agencies develop into an institutional setting (in a broader sense) proving to be more fit than others in the unfolding of the competitive expansion. This fitness, however, is derived from mere reaction to the challenges (in the case of the declining hegemon) or opportunities (in the case of the rising competitors) provided by the structural properties of the world capitalist system on which these actors seem to have no impact. In the words of Arrighi “they are all product and not at all productive” (Arrighi, Silver, and Ahmad 1999, 24). Whereas he accepts the notion that the systemic properties act as powerful constraining and disposing forces on the selection of the hegemonic state, he argues for the need to include the factor of fundamental reorganization of the system by the hegemon resulting in a change of its properties.
Arrighi’s Model of Hegemonic Transition
Building on Wallerstein’s model of hegemonic cycles, but aiming to endogenize systemic change, Arrighi extends this model by employing a Gramscian (Gramsci 1971) notion of hegemony “as something different than domination pure and simple: it is the additional power that accrues to a dominant group by virtue of its capacity to lead society in a direction that not only serves the dominant group’s interest, but is also perceived by subordinate groups as serving a more general interest” (Arrighi, Silver, and Ahmad 1999, 26; emphasis in the original). Arrighi defines world hegemony as referring specifically to the power of a state to exercise functions of leadership and governance over a system of sovereign states. Hegemony in this context includes not only “push” factors of (military and economic-based) coercion and a systemic reorganization by the hegemon but also “pull” factors that lead to a widespread imitation of the hegemonic state. Arguably the reorganization of the system, then, is as much depended on both, push and pull factors, or what Gramsci (1971, 57) calls “domination” and “moral leadership” (see Figure 2).
/Figure 2 about here/
Buried in the leader’s own success as both a “model” and “modeler” – leading to “leadership against the leader’s will” (Schumpeter 1934) – lies the demise of the leader’s dominance of the system, leading to a systemic expansion and consequently a hegemonic crisis. Arrighi identifies three distinct, but closely related processes characterizing all historical hegemonic crises, namely interstate rivalries and interenterprise competition of followers and imitators, social conflicts arising out of the expansion of the “volume” and “dynamic density” (Durkheim 1938; 1984) of the system causing the regulatory overstretch of existing institutions, and the interstitial emergence of new configurations of power. In addition, relying to a wide degree on Braudel’s (1992a) identification of financial expansions, Arrighi puts a strong emphasis on what he argues to be the “most evident manifestation of the capitalist nature of the modern world system” (Arrighi, Silver, and Ahmad 1999, 231), namely the pattern of systemwide financial expansion. Employing Marx’s general formula of capital
where M represents money capital (meaning liquidity, flexibility, freedom of choice), C stands for commodity capital (or capital invested in a particular input-output combination in view of a profit), and M’ means expanded monetary capital (and thus greater liquidity, flexibility, and freedom of choice), Arrighi (1994, 6) goes on to argue that this formula can be interpreted as depicting not just the logic of historical capitalist investments, but also a reoccurring pattern of historical capitalism as world system. For Arrighi, then, the central driver of the capitalist world system becomes the alternating cycle of “epochs of material expansion” in the form of (1) phases of capital accumulations
setting in motion an increasing mass of commodities and consisting of phases of continuous change, during which the capitalist world-economy grows along a single-developmental path; and (2) phases of financial rebirth and expansion, formulaically noted as