GROUP 4: KRISTY, SHANTANU, AATRISHNU, VATSALA, TANICA, NGAMSIN, AARJU, KARUNESH

TOPIC: HISTORICAL CAPITALISM (IMMANUEL WALLERSTEIN)

Immanuel Maurice Wallerstein in his essay “Historical Capitalism” explains capitalism with
a different approach by treating capitalism as a historical social system. So, to understand its
origin, its working or its current prospects he divides the study into 4 questions, what capitalism
has actually been like in practice; how does it function as a system; why has it developed in the
ways it has and where is it presently heading. These are the four aspects that we are going to
focus on in this reading.
CAPITAL, being a key element in capitalism has two usage; one as its mere definition and
another in the context of historical capitalism. According to its definition it’s merely described as
accumulated wealth but in historical system capital was used in a special way with its primary
objective or intent being self-expansion, which is to use capital in order to accumulate even more
of it. And it was this goal of accumulating more capital, which made the holder of the capital,
who had to establish relations with others in order to achieve this goal, a CAPITALIST. And
since this goal was regularly a priority over other objectives for most capitalists, it was said to be
a capitalist system in operation.
Although this was the goal of the capitalists but in historical time this was never an easy task to
do so. The production process in historical time was known as the circuit of capital; as you can
see in the slide this process included all the sub processes needed to accumulate profit at the end.
The producer first had to find and hire appropriate kind and quantity of labour, secondly, once
the goods were produced they had to be marketed through a system of distribution. Thirdly, the
producer had to find a group of buyers with the wherewithal to purchase the goods. Fourthly, the
producer had to set the price greater than the total cost with a margin of profit and save the profit
until a reasonable opportunity occurred to invest it. And lastly, renew the whole process from
production, basically repeat.
Since each production process of a particular good included a lot of sub production processes
within it resulted in complex commodity chains. For example: to produce a candle one typically
requires at the very least, wax, wicks, tools and labour power. But each of these items in turn
have to be produced and the items that go into their production in turn are also to be produced
and this goes on, creating a complex commodity chain. On top of it not every commodity of
every sub process was even commodified. But what we can point out here is that there is very
large and dispersed set of workers who are receiving some sort of remuneration, meaning
salary/wage which then adds up to the final cost. In simple words, all these workers too hold a
share in the ultimate margin that exists in the commodity chain between the total cost of prod
and the total income received by the disposal of the final product.
Once this point was clear all the capitalist then focused on a single goal which was to increase
the rate of accumulation of the capital, which then created the competition in the capitalist
market. Most of the capitalist tried to decrease there cost of production as a solution for
increasing the rate of accumulation inorder to survive in the market. Higher rewards went to
those who had greater judgement, greater ability to control work force and better access to
politically decided constrains, basically the monopolies.
But this system led to two contradictions. The first contradiction in the system was that Market
interests often favored capitalists against each other. Since reducing the cost of prod rather
favored some major capitalists, some decided to increase their share of a smaller global margin
rather than accept or smaller share of larger global margin.
The second contradiction in the system was concerned with the consumers. With the reduced
cost of production the flow and distribution of money also reduced inhibiting the steady
expansion of purchasers. And redistribution of profits in a way that could help increase the
consumer network often tend to reduce the global margin of profit. So, capitalists often pushed in
one direction for not only their own enterprise but also the collective class. Historical Capitalism
is thus, a concrete, time bounded, space-bounded integrated locus of productive activities within
which the endless accumulation of capital has been the economic objective.
Moreover, Wallerstein describes how the capitalist system actually functioned by understanding
the relationship between the producer and the notion of profit. Since a producer’s main objective
is to increase the accumulation of capital, its procedure would be to maximize sales of a given
good as much as possible at the highest profit margin. But the producer can only do this while
going through a series of economic constraints that exist in the market. For instance, his total
production will be limited by the availability of all the required elements of the production, the
amount of profit margin he can claim is also limited by the availability of competition in the
market etc. These are all objective constraints, meaning they exist in the absence of any
particular set of decisions by a given producer or by others active in the market. These
constraints are the consequence of the total social process that exists in a concrete time and
place. There are always in addition other constraints, more open to manipulation. Firstly, for
instance, governments may adopt or may already have adopted, various rules which in some way
transform economic options and therefore the calculus of profit. Then, a given producer may be
the beneficiary or the victim of existing rules.
Labour-power being the most significant element in the production process, is concerned with
two different aspects: its availability and its cost. Now there are two different types of labour and
both come with their own disadvantages. Social relations of production that were fixed, in the
sense of a stable work-force for a given producer, might be low-cost if the market were stable
and the size of his work-force optimal for a given time. But if the market for the product
declined, the fact that the work-force was fixed would increase its real cost for the producer. And
should the market for the product increase, the fact that the work-force was fixed would make it
impossible for the producer to take advantage of the profit opportunities.
On the other hand, variable work-forces also had disadvantages. Variable work-forces were
work-forces that were not necessarily continuously working for the same producer. Such workers
cost more than fixed labour, since they had to make enough to cover periods when they did not
receive remuneration. Plus they were less in quantity since most of the labour was fixed.
Due to both the options, not being suitable enough for producers causes a contradiction and
results in a historically uneasy compromise. These considerations gave rise to the institution of
wage-labour, wherein a group of persons existed who were permanently available for
employment, more or less to the highest bidder. This process is referred as the operation of
labour market, and the persons who sell their labour as, proletarians.
For all real purposes, it’s the household that has been the economic unit that has engaged in
economic activities, with first seeking enough to survive then with more income enjoying a life
style more satisfactory and with still more capital entering into capitalist game to accumulate
more of it. Within the household structure comes a social distinction between productive and
unproductive work in working class. 1. Productive work came to be defined as money-earning
work (primarily wage-earning work) and non-productive work that, was merely subsistence
activity and therefore was said to produce no surplus. 2. Productive (wage) labour became the
task primarily of the adult male/father and secondarily of other (younger) adult males in the
household. Non-productive (subsistence) labour became the task primarily of the adult
female/mother and secondarily of other females, plus the children and the elderly. 3. Productive
labour was done outside the household in the work place while non-productive labour was done
inside the household.
Although division of real labour by gender and age was not an invention of historical capitalism,
what was new under historical capitalism was the “correlation of division of labour and valuation
of work”. Under historical capitalism there has been a steady devaluation of the work performed
by women and heavy emphasis have been laid upon adult male’s work. The male wage earner
came to be termed as the “breadwinner” and the female home worker as “housewife”, leading to
all breadwinners being considered as the only economically active labour force in national
statistics. And thus was sexism institutionalized. And the concepts of extended childhood and
retirement, are concomitants of the emerging household structures of historical capitalism. They
are viewed as “progressive” exemptions from work. Also, non-work is another term used to
define their work.
Proletarian households are the ones with more wage workers, where most of the real income
comes from wage work. Where a proletarian household depended primarily upon wage-income,
then that had to cover the minimal costs of survival and reproduction. However, when wages
formed a less important segment of total household income, it would often be rational for an
individual to accept employment at a rate of remuneration which contributed less than its
proportionate share (in terms of hours worked) of the real income. These were what Wallerstein
has termed as the Semi proletarian household, which led to a demise of proletarian households.
Recruitment from the non-wage workers permitted producers to remunerate their work-force at
lower rates, thereby reducing their cost of production and increasing their profit margins. Hence,
forcing any employer of wage-labour to prefer wageworkers located in semi-proletarian rather
than in proletarian households.
The ‘market’ is a place where initial producer and ultimate consumer meet. Most transactions in
historian capitalism have involved exchange between two intermediate producers located on a
long commodity chain. The purchaser was purchasing an input for his production process. The
seller was selling a ‘semi-finished product’, semi-finished in terms of its ultimate use in direct
individual consumption. This was known as intermediate markets.
Whenever the ‘seller’ and the ‘buyer’ were in the same firm, the price could be arbitrarily
juggled in terms of fiscal and other considerations, but such a price never represented the
interplay of supply and demand. Vertical integration was not rare, just like horizontal monopoly
or horizontal integration, which involves expansion of its own plantation.
16th - 18th centuries chartered companies were:
• The Great merchant house of the nineteenth
• The transnational corporation of the twentieth
These companies were seeking to comprise as many links in a particular commodity chain. But
the small structures of vertical integration were more widespread.
Vertical integration has been the statistical norm of historical capitalism rather than those
‘market’ nexuses in commodity chains in which seller and buyer were truly distinct and
antagonistic. Their points of origin have been manifold, but their points of destination have
tended to converge in few areas. Commodity chains have moved from the peripheries of the
capitalists’ world-economy to the centers or cores or extended social division of labor, which has
become more and more functionally and geographically extensive, and more hierarchical
because of which it led to an even greater polarization between the core and peripheral zones of
the world-economy.
The losing zone was called ‘periphery’ and the gaining zone a ‘core’. Whenever a ‘vertical
integration’ of any two links on a commodity chain occurred, it was possible to shift an even
larger segment of the total surplus towards the core than had previously been possible. Also, the
shift of the surplus towards the core concentrated capital there and made available
disproportionate funds for further mechanization, both allowing producers in core zones to gain
additional competitive advantages in existing products and permitting them to create ever new
rare products with which to renew the process. The concentration of capital in core zones created
both the fiscal base and the political motivation to create relatively strong state-machineries,
among whose many capacities was that of ensuring that the state machineries of peripheral zones
became or remained relatively weaker. They could thereby pressure these state-structures to
accept, even promote, greater specialization in their jurisdiction in tasks lower down the
hierarchy of commodity chains, utilizing lower-paid work-forces and creating (reinforcing) the
relevant household structures to permit such workforces to survive.

The so-called “core”/ “gaining zone” never used to release the force of apparatus (in terms of
hard, soft or economic power) at all the times but only when the process of unequal exchange
had some serious challenges.
This process of unequal exchange brought satisfaction to the interests of many capitalists by
definition but not every individual interest. So those still competing only for accumulation of
comparatively lesser capital, had a hard time resulting in which they constantly tried to change
things in their favour, either politically or find ways monopolistically. This pretty much begins
the answer for what actually proceeded proletarianization.
Monopolistic practice and competitive motivation have been a paired reality of historical
capitalism. No specific pattern linking the productive processes could be stable and it is always
found fine to overlook the global impact on alteration of time-space conditions to adapt and pull
over the competing interests of one’s own. Here, Adam Smith’s concept of Invisible Hand from
his work The Wealth of Nation comes to discussion. As per the Invisible Hand concept, there are
certain actions in the market that are enacted by the individual in the goal of accumulating self-
interest but the consequences end up amplifying to benefit those in the proximity of time and
space, particularly resulting in harmony.
In a pattern repeated recurrently in half a century, disproportions of investment by increasing
number of entrepreneurs linking themselves in different commodity chains led to in
Wallerstein’s words “misleadingly, of overproduction.” The clogging by accumulated capital
without much of its displacement plans has done a shakedown of the productive system. This
activity, which held massively, in a series of operations, has eliminated many entrepreneurs and
workers. Whatever the operations were, they enabled entrepreneurs to introduce themselves to
innovation in which new links can be established to any commodity chains. This is because
certain operations happening earlier within these chains were first “demoted” to make space for
new links.
Coming back to historical capitalism period, such “demotion” brought geographical relocation,
which involved a new arsenal of industries and labors with new-wage levels. In the twentieth
century, the world saw a massive relocation in automobile, steel and electronics industries. There
are some major consequences of these changes. First has been the geographical restructuring that
changes various things structurally such as hierarchical levels of processes. Under this
reshuffling, products have “product cycles” whose nature categorizes the products as “core” or
“peripheral” and when undergoing change, certain “core” products can become “peripheral.” But
paradoxically as resolving as the reshuffling sounds to put on paper, the empirical observations
say that the global polarization in terms of (core and peripheral zones). The second consequence
has been quite different from the first one. The word “overproduction” which Wallerstein
thought to be misleading, has brought to attention the absence of an effective demand for some
key products of system. The idea of using the term was not to undermine the fact that work-
forces create enough surpluses to create back-up during the economic breakdown. Furthermore,
their pursuit is also actually motivated by the fact that there’s more exploitation in semi- rather
than in fully-proletarianized households. Hence with that context on how it happens, that’s how
Wallerstein wanted to use the term “overproduction.”
Workforces have always sought to increase their share of surpluses. And one of the most
effective ways to increase their real income is through commodification of their own labour. The
work-forces realized that there is greater exploitation in semi-proliterianism than in more fully
proletarianized households owing to the fact that the real income is very less. The work-force
themselves have sought to substitute wage-labour for those parts of the household production
processes which have brought in low amounts of real income. Now during stagnations producers
had to give in to the political pressure of the work-forces by believing that structural changes and
commodification of labour i.e. basically push for further proletarianization would actually
benefit them. This is why there has been an increase in proletarianism despite the fact that it has
reduced profit levels in the capitalist economy. As a third consequence, there's a paradox to
explain as to how concentrated was historical capitalism upon the goal of capital accumulation
but proletarianization has reduced the profit levels simultaneously. A suitable, empirical
explanation is that technological innovation created new zones for social division of labour and
lessened the cost of expensive labour into the core zones. So geographical expansion during the
phases of stagnation served as a counter-balance to the profit-reducing process of increased
proletarianization by incorporating the new work-force destined to be semi-proletarianized.
Conclusion:
In Historical Capitalism with Capitalist Civilization, Immanuel Wallerstein takes a different
approach. A political sociologist credited with the promulgation of “world-systems theory”, he
resolves to treat capitalism as a historical system, examining how it has empirically behaved
without falling back on abstruse theoretical conceptions. Arguing that the distinctive trait of
capitalism is how it treats endless capital accumulation as an end, he builds a rigorous model that
analyses both its economic foundation and the political struggles that it precipitates.

REFERENCE:
Wallerstein, Immanuel Maurice. Historical Capitalism. London: Verso, 1983. 1.
Commodification of Everything: Production of Capital.