The modern world-economy is the economic component of the modern world-system (see “What is a world-system?” 7/31/2013). It consists of all the economic activities throughout the world that are related to one another through an extensive division of labor. The division of labor is geographical, in that particular economic activities are carried out in specific geographical regions. So the world-economy can be described as characterized by a geographical division of labor between two regions of the world, the core and the periphery. In addition, there is a third region, the semiperiphery, which has some core characteristics and some peripheral characteristics.
The core and the periphery have different forms of production and different tasks in their productive activities. Historically, the basic purpose of the periphery has been to produce raw materials (agricultural, animal and mineral products) on a foundation of forced and/or cheap labor, and to export them to the core. In order to fulfill this function, production in the peripheral regions has not required advanced technology or complex systems of production, and therefore the periphery has labor-intensive production and less sophisticated technology. In contrast, the core uses the raw materials imported from the periphery to manufacture various products. Because of the variety of economic activities involved in fulfilling this function, advanced and sophisticated technologies emerge, with inventions in some sectors being applied in others.
The structure of the world-economy thus generates a fundamental inequality between core and periphery. The economic function of each ensures that the core will have much greater diversity in manufacturing, higher levels of technology, higher wage levels, and higher levels of consumption. There is between core and periphery a structured relation of exploitation that creates two different realities: the core with its culture of consumerism, materialism, and individualism; and the periphery, where the basic democratic rights of access to adequate nutrition, housing, education and health care are denied on a mass scale, giving rise to a popular culture of social struggle and solidarity.
Although the basic function of the periphery is to produce cheap raw materials, the periphery also functions as a market for the surplus manufactured goods of the core. In the historic imposition of the peripheral role through conquest and domination, the traditional manufacturing capacities of the conquered regions were destroyed, or at least weakened, creating a dependency on the manufactured goods of the core. This dependency pertained to equipment and supplies necessary for raw materials production as well as to personal consumption. Consequently, the periphery provides a double benefit for the core: it functions as a purchaser of surplus manufactured goods as well as a supplier of cheap raw materials.
Since 1970, the relocation of core factories to peripheral and semi-peripheral zones has emerged, a phenomenon provoked by a profound systemic crisis. We shall see in future posts that the post-1970 peripheral manufacturing does not change the structured relation of exploitation between core and periphery.
Wallerstein, Immanuel. 1974. The Modern World System, Vol. I. New York: Academic Press.
__________. 1979. The Capitalist World Economy. New York: Cambridge University Press.
Key words: Third World, revolution, colonialism, neocolonialism, imperialism, democracy, national liberation, sovereignty, self-determination, socialism, Marxism, Leninism, Cuba, Latin America, Wallerstein, world-system, world-economy