world economic system essay

Wallerstein�s World-Systems Theory

By Frank W. Elwell

Marx�s legacy in social theory does not lie in his predictions of future utopias but rather in his analyses of the workings and contradictions of capitalism. Within contemporary sociology this tradition is very much alive in world-systems analysis, a perspective developed by Immanuel Wallerstein in the 1970s. According to Wallerstein, the modern nation state exists within a broad economic, political, and legal framework which he calls a �world-system.� Just as individual behavior cannot be understood without reference the sociocultural system in which they are members, individual societies or nation states cannot be understood without reference to the world-system in which they are embedded.

Modern nation states are all part of the world-system of capitalism, and it is this world-system that Wallerstein seeks to understand. Wallerstein believes that there are only three basic types of social systems.

The Modern World-System

Mini-systems

World empires

World-economies

The first he terms as �mini-systems,� these are the small, homogenous societies studied by anthropologists. Hunting and gathering, pastoral, and simple horticultural societies are relatively self-contained economic units, producing all goods and services within the sociocultural system itself. The second type of social system   is a �world-empire.� This system has an economy that is based on the extraction of surplus goods and services from outlying districts. Much of this tribute goes to pay for the administrators who extract it   and for the military to ensure continued domination, the rest goes to the political rulers at the head of the empire. The third type of social system, according to Wallerstein, is the world-economies. Unlike world-empires, the world-economies have no unified political system; nor is its dominance based on military power alone. However, like a world-empire, a world-economy is based on the extraction of surplus from outlying districts to those who rule at the center.

From the start, Wallerstein argues, capitalism has had a division of labor that encompassed several nation states. The capitalist world-system began in Europe in about 1500 and under the spur of the accumulation of capital, expanded over the next few centuries to cover the entire globe. In the process of this expansion the capitalist world system has absorbed small mini-systems, world-empires, as well as competing world-economies. The capitalist world-economy was created by establishing long-distance trade in goods and linking production processes worldwide, all of which allowed the significant accumulation of capital in Europe. But these economic relationships were not created in a vacuum. The modern nation state was created in Europe along with capitalism to serve and to protect the interests of the capitalists. What was in the interest of early European capitalists was the establishment of a world-economy based on an extremely unequal division of labor between European states and the rest of the system. Also in the interest of early European capitalists was the establishment of strong European states that had the political and military power to enforce this inequality.

For Wallerstein, the capitalist world-economy is a mechanism of surplus appropriation that is both subtle and efficient. It relies upon the creation of surplus through constantly expanding productivity.   It extracts this surplus for the benefit of the elite through the creation of profit. The capitalist world-system is based on a two-fold division of labor in which different classes and status groups are given differential access to resources within nation states; and the different nation states are given differential access to goods and services on the world market. Both types of markets, those within and those between nation states, are very much distorted by power.

Core & Periphery

Wallerstein divides the capitalist world-economy into three areas:

peripheral areas.  

Semi-peripheral

Core states

The peripheral areas are the least developed; they are exploited by the core for their cheap labor, raw materials, and agricultural production. The semi-peripheral areas are somewhat intermediate, being both exploited by the core and take some role in the exploitation of the peripheral areas. In the recent past they have been expanding their manufacturing activities particularly in products that core nations no longer find very profitable. The core states are in geographically advantaged areas of the world�Europe and North America.

These core states promote capital accumulation internally through tax policy, government purchasing, sponsorship of research and development, financing infrastructural development (such as sewers, roads, airports�all privately constructed but publically financed), and maintaining social order to minimize class struggle. Core states also promote capital accumulation in the world-economy itself. These states have the political, economic, and military power to enforce unequal rates of exchange between the core and the periphery. It is this power that allows core states to dump unsafe goods in peripheral nations, pay lower prices for raw materials than would be possible in a free market, exploit the periphery for cheap labor, dump in their environment, abuse their consumers and workforce, erect trade barriers and quotas, and establish and enforce patents. It is the economic, political, and military power of the core that allows significant capital to be accumulated into the hands of the few, the capitalist world-system that produces and maintains the gross economic and political inequalities within and between nations.

World-Systems Map

As with capitalism within nation states, this unequal power between nation states is not uncontested. It is the subject of struggle. There are internal contradictions that with the passage of time cause political and economic instability and social unrest. Eventually, according to Wallerstein, a world-wide economic crisis will be reached and the capitalist world-system will collapse, opening the way for revolutionary change. The coming crisis of capitalism, as predicted by Wallerstein�s world-systems theory, will be the topic of the next short-paper.

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.

world economic system essay

References:

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 World-Systems Theory you should use the following format:

Elwell, Frank W. 2013. "Wallerstein's World-Systems Theory," Retrieved August 31, 2013 [use actual date] http://www.faculty.rsu.edu/~felwell/Theorists/Essays/Wallerstein1.htm

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The economics, with their focus on a pure objective utility maximization, are far from human reality. Economic sciences are exclusively individually oriented. People decide in a social environment, which is why sociology is at least as important for behavior as psychology. The influence of the group (the company) or society must also be taken into account. All modern societies have institutions and organizations, giving them order, and instilling discipline in their citizens to behave in the manner socially desired. Norms, values and morality are important here, including attitudes towards the political and economic system. The attitudes of people in a society to the economically relevant activities have been paid as little attention by economic science as the existence of general economic knowledge.

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Parallel Perspectives on the Global Economic Order

world economic system essay

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Table of Contents

Report by Matthew P. Goodman, Ye Yu, and Daniel Remler

Published September 22, 2017

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A U.S.-China Essay Collection

The United States and China are the world’s two largest economies. Over the coming decades, no two countries will have a greater impact on the global economic order—the system of institutions, rules, and norms that govern international economic affairs. A global economy that delivers strong, sustainable, balanced, and inclusive growth will depend on such a well-managed order. More than ever before, Washington and Beijing must work together to identify potential areas of cooperation, as well as manage our differences.   It is this collaborative mission that has inspired the deep and productive relationship between our two institutions, the Center for Strategic and International Studies (CSIS) and the Shanghai Institutes for International Studies (SIIS), for many years. Since 2015, we have cohosted the U.S.-China Dialogue on the Global Economic Order, a track 1.5 dialogue that has sought to build mutual trust, enhance communication, identify issues, and propose solutions. The series of semiannual workshops, alternating between Beijing and Washington, has covered a wide range of topics across the global economic order, including trade, investment, finance, and climate change. The dialogue has drawn scholars, former policymakers, and current officials from the United States and China across a wide range of institutions and disciplines.   This essay collection harvests some of the rich bounty of our two-year dialogue. Scholars from the United States and China have contributed parallel essays presenting their respective positions on a wide variety of topics in the global economic order. We hope that this collection will generate new ideas that scholars, policymakers, and citizens in both countries can use to solve the most urgent problems in the global economy. Contents

Introduction: The United States, China, and the Global Economic Order in 2017 , by Kevin Nealer

Chapter 1 | Current State and Evolution of the Global Economic Order

A Grand Bargain to Strengthen the Global Economic Order , by Matthew P. Goodman

World Economic Order: Present and Future , by He Fan & Ye Qianlin

Chapter 2 | Macroeconomic Policy Coordination

U.S.-China Macroeconomic Policy Coordination: A MAP Without Daggers , by David Loevinger & Spencer Rodriguez

Economic Rebalancing Should Be the Core of China’s Supply Side Reform , by Wang Yuzhu

Chapter 3 | Financial Regulation

Living in Two Worlds: Chinese and U.S. Financial Regulation , by Douglas J. Elliott

Financial Regulation Reform and Financial Stability , by Zhao Xijun

Chapter 4 | International Financial Institutions

Toward Better Multilateral Development Banks: Can the United States and China Lead Together? , by Nancy Lee

China-U.S. Cooperation for a More Effective Multilateral Development Bank System , by Ye Yu

Chapter 5 | Global Trade Policy

Opportunities for U.S.-China Trade Cooperation , by William Reinsch

Managing Bilateral Trade Policy: A Quest for Rebalancing the Global Economy? , by Shen Minghui

Chapter 6 | U.S.-China Bilateral Economic Relations

A New Era in U.S.-China Economic Relations , by Amy P. Celico

The Trump Administration’s Trade Policy and Sino-American Economic Relations , by Song Guoyou

Chapter 7 | International Investment Policy

Prospects for U.S.-China Cooperation on Global Investment Policy , by Scott Miller

Changes in Global Trade and Investment and Implications for China-U.S. Economic Relations , by Xue Lei

Chapter 8 | Sustainable Development

A U.S.-China Partnership on the Sustainable Development Goals , by Scott Morris

The Development and Transformation of China’s Foreign Aid , by Zhang Haibing

Chapter 9 | Infrastructure

Addressing the Global Infrastructure Deficit: Channels for U.S.-China Cooperation , by Ziad Haider

The Belt and Road Initiative: Progress, Problems and Prospects , by Fang Jin

Chapter 10 | Climate Change and Energy

The U.S.-China Climate and Energy Relationship , by Joanna Lewis

Finance, Trade Policy, and the Implementation of the Paris Agreement , by Zhang Zhongxiang

Matthew P. Goodman

Matthew P. Goodman

Daniel remler, programs & projects.

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World Systems Theory – Definition, Examples, Critiques

world systems theory definition

The world systems theory states that the world exists as a single socio-economic system made up of a core, periphery, and semi-periphery. In this system, “surplus value” is transferred from the periphery to the core.

To better understand the world systems theory, it is helpful to begin with its components. These are three areas of the world:

  • Core Areas – A small set of technologically advanced and industrialized capitalist nations/regions characterized by higher incomes, large tax bases, and high standards of living. In the 21st century, the developed countries that form the G-7 group, along with China can be considered the core of the world-system.
  • Periphery Areas – Poor countries that primarily subsist by exporting primary products such as agricultural produce and natural resources to the core countries. The periphery is characterized by a small tax base, low incomes, and low levels of human development index. In the 21st century, much of sub-Saharan African, parts of Latin America and Central Asia can be considered the periphery.
  • Semi-Periphery Areas – These countries act as the periphery to core countries, and as a core to the countries on the periphery. Typically, such countries are regional powers with moderate levels of development indices and growing capitalist economies.   In the 21st century, countries such as India, Brazil, Turkey, Mexico, Israel, Nigeria etc. can be considered the semi-periphery of the world-system.

chris

Definition of World Systems Theory

Below is the classic definition of the world system by Wallerstein (1974):

  • A world system is a “multicultural territorial division of labor in which the production and exchange of basic goods and raw materials is necessary for the everyday life of its inhabitants.”

Coccia (2019) defines the world systems theory as:

  • “World-systems theory is a socioeconomic and political approach that explains the economic development and dynamics of capitalistic world economy analyzing the mechanisms of international market trade, economic division of labor between core and periphery regions, and interests of capitalist class in markets.”

world systems theory

Origins of the Theory

The world systems theory was proposed by the American sociologist Immanuel Wallerstein in the 1970s as an alternative to the then popular modernization hypothesis , which Wallerstein criticized on three grounds:

  • It was built using only the nation-state as the unit of analysis.
  • It proposed that there existed only one path to development for all states – the one followed by the developed countries. It was believed that the poor countries of today are simply primitive versions of the rich countries, and if they were to follow the same trajectory as that of the rich countries, would eventually become developed too.
  • It did not take into account transnational structures such as large business corporations that influence the development of states.

Wallerstein believed that the modernization theory, and other such models were the product of nineteenth century ways of thinking that believed in compartmentalizing knowledge. Which meant that such an approach could only look at the problems of development and underdevelopment through the lens of either developmental economics or political science.

What Wallersein proposed instead was a unified system approach that did not limit itself to any one subject or approach for analyzing global issues but combined the spheres of society, economy, and politics.

Examples of World Systems Theory

1. The Knowledge Economy

‘Knowledge economy’ is a term used to describe economies marked by a high level of technical and scientific innovation in which employment demands high levels of technical and scientific knowledge.

Such an economy stands in contrast to primary economies based on agriculture or resource extraction, and manufacturing economies that are based on skilled or unskilled manual labor.

Jobs in a knowledge economy tend to be weighted towards the finance, technology, and services sector.

In the present world-system, the developed countries have a predominant position in the knowledge economy, with almost all leading technology and financial sector corporations located in developed countries or the core of the world-system such as the US, Canada, the UK etc.

The markets for knowledge economy products often tend to be in the peripheral or semi-peripheral countries. For instance, companies such as Facebook and WhatsApp have most of their users in countries such as India, Brazil, Indonesia, Mexico, Bangladesh, etc.

This global knowledge economy is not solely based on classification by nation-states alone, for within the peripheral and semi-peripheral countries there exist regions that are integrated within the global capitalist system.

For instance, cities such as Bangalore and Mumbai in India are recognized as global hubs of Information Technology (IT) and finance, even though they are located within a semi-peripheral country.

Thus, rather than there existing a simple dichotomy of core and periphery countries, the application of the world-systems theory to the knowledge economy reveals a far more complex and interconnected world-system.

2. The Politics of Climate Change and Carbon Emissions

The politics of climate change are characterized by an unequal exchange. The core countries have historically extracted more of the earth’s natural resources including fossil fuels that contribute to global warming and have used more of the earth’s capacity to act as a heat sink.

For example, we now know that the USA’s CO2 emissions are greater than that of all of the African continent combined, or that India has one of the lowest per capita levels of CO2 emissions in the world at 1/19th those of Canada.

The world-systems theory tells us that countries or regions that form the core of the world-system have higher CO2 emissions and must consequently have a greater share in the responsibility to combat climate change as compared to countries or regions that fall in the periphery.

3. Hidden Hunger and the Packaged Food Industry

Hidden hunger is a form of malnutrition in which populations suffer from deficiency of micronutrients and vitamins, even though there may not appear to be any evident starvation.

Hidden hunger mostly results from consumption of empty calories found in packaged food and sweetened beverages.

While the global packaged food giants concentrated in the “core” countries, their products find big markets in the “periphery” countries.

It has been documented that 18 of the 20 most severely affected countries by hidden hunger are in sub-Saharan Africa, while the remaining two are in the South Asian nations of India and Afghanistan (Muthayya et al.,2013).

1. It Explains Internal Inequalities

Since the world systems theory does not take the nation-state as the primary unit of analysis, it helps explain internal inequalities within nation-states better than other development theories such as the modernization theory or the dependency theory .

For instance, India, a country in the semi-periphery of the world system is home to more than 200 million people living in poverty as defined by the World Economic Forum, while at the same time having the third highest number of billionaires in the world (177), after only the US and China.

Application of the world systems theory helps us understand that there are several regions within the peripheral and semi-peripheral countries that are deeply integrated with the global capitalist structure. The regional hubs within nations serve as the core to the peripheries located within the same countries.

This demonstrates a much more complex and nuanced model of global inequalities than simple classifications of first world and third world countries or developed, developing, and underdeveloped countries that other models provide.

Exploitation of a periphery by a core does not happen at the level of nation-states alone; a core within a country can also exploit a periphery within the same country leading to sharp regional inequalities.

2. Human-centric Rather than System-centric

The world systems theory conceptualizes the entire world as one unified system rather than made of different systems and structures. In the words of Frank & Gills (1993) it allows us to see ‘a common river and unity of history in a single world system [that is] multicultural in origin and expression’.

3. Cross-domain Applicability

The world systems theory can be applied to a number of fields including gender studies, ethnic and racial discrimnaiton studies, political geography, international relations to name a few.

For instance, a gender studies analysis of the world system reveals the manner in which women’s labor is exploited within a capitalist system controlled by men. Nash (1988), in an analysis of the Iranian carpet making industry has shown how carpet making households led by men were located in a periphery relative to the core regions of the developed world to which these carpets were exported. Within the household however, much of the carpet-weaving work was carried out by women while the men controlled the finances, replicating the core-periphery relationship, this time within the household, and with a highly gendered aspect to it.

Criticisms of World Systems Theory

1. Insufficient Grounding in Empirical Data

Because of its wide scope, empirically grounded studies justifying the hypotheses of the world systems theory are still emerging. The theory has been critiqued for presenting too many broad generalizations and not presenting a falsifiable hypothesis.

2. Overemphasizing the Role of Globalization and Capitalism

The world systems theory, in putting forward the notion of a unified world connected by networks of global capital, makes two assumptions that do not always hold true – one of globalization and the other of the inevitability of capitalism.

For instance, Balkilic (2018) has shown how local dynamics in the coffee plantations of the Caribbean developed independently of any global influences. Similarly, several countries such as Bhutan still remain outside the purview of the global capitalist system.

3. Ignores Socio-cultural Causes of Underdevelopment

Even though the world systems theory claims to be a unified approach combining the spheres of economy, politics, and society, it ends up relying too heavily on economic causes of underdevelopment while ignoring others such as culture, religion, tradition, etc.

For instance, the Indian caste system does not have any economic basis, being grounded in scriptural and traditional origins. Yet, it is widely acknowledged to be a system that kept millions oppressed and deprived. (Fuller 1973).

In fact one of the reasons Marxist theories failed to find much support in India was their insistence upon class as the primary system of oppression , when in fact, caste played an equally important, if not greater role, in India’s underdevelopment.

Not to be Confused With…

The dependency theory.

The dependency theory is a theory in economics that is a predecessor and an immediate influence on the world systems theory. The theory took birth in 1949 from the work of the Argentinian economist Raul Prebisch.

It directly critiqued the postulate of the modernization theory which stated that the underdeveloped countries of today are just a primitive version of the developed countries, and provided enough stimulus in the form of investment and technology transfer, can be put on the path to development.

Prebisch challenged this hypothesis by claiming that such investments and infusion of capital into underdeveloped countries only serve to further their dependence on foreign capital.

Prebisch was the first to use the terms core and periphery to describe this relationship – a terminology that Wallerstein later built upon for his own world systems theory. Prebisch was particularly interested in the curious case of Argentina, that, beginning the 20th century as one of the richest countries in the world on account of its strong agrarian exports, failed to keep pace with other rich countries of Europe and North America, eventually sliding into a seemingly interminable cycle of economic stagnation and political crisis.

However the world systems theory differs from the dependency theory in that it rejects Presbisch’s formulation of nation-states as the primary unit of analysis. As Wallterstein explained, core and periphery can exist within the same country too.

Wallerstein also devised a three-tiered model comprising a core, semi-periphery, and a periphery as opposed to Prebisch’s binary division. Finally, Wallterstein intended his formulation to be an interdisciplinary approach to understanding the world, whereas Presbisch’s work was a theory in macroeconomics.

Balkiliç, O. (2018). Historicizing world system theory: Labor, sugar, and coffee in Caribbean and in Chiapas . Gaziantep University Journal of Social Sciences . 17 (4), 1298–1310. https://dergipark.org.tr/tr/download/article-file/543464

Coccia M. (2019) Comparative World-Systems Theories. in Farazmand A. (eds) Global Encyclopedia of Public Administration, Public Policy, and Governance . New York: Springer.

Frank, A.G. & Gills, B.K. (1993) The World System: Five Hundred Years or Five Thousand? London: Routledge.

Fuller, C. (1973). Caste and class, or the anthropology of underdevelopment. Cambridge Anthropology, 1 (1), 1-9.  https://www.jstor.org/stable/23816332

Muthayya, S., Rah, J. H., Sugimoto, J. D., Roos, F. F., Kraemer, K., & Black, R. E. (2013). The global hidden hunger indices and maps: An advocacy tool for action. PloS one , 8 (6), e67860. https://doi.org/10.1371/journal.pone.0067860

Nash, J. (1988). Cultural parameters of sexism and racism in the international division of labor.  Racism, Sexism, and the World-System, Studies in the Political Economy of the World System , 11-38.

Labor. in Smith, J., Collins, J. Hopkins, T. & Muhammad,  A. (eds.) Racism, sexism, and the World-System . (pp. 11-38). Greenwood Press.

Wallerstein, I. (1974). The Rise and future demise of the world capitalist system: Concepts for comparative analysis. Comparative Studies in Society and History, 16 (4), 387-415. https://www.jstor.org/stable/178015

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world economic system essay

Importance of the Economic System to the World History Essay

The economic system is the essential structure in which the world functions. It is clearly defined as a scheme where goods and services are organized and distributed over a specified geographical region. It is the only system whereby production factors such as labor, capital, and physical resources are regulated. The economic system comprises institutions, entities, agencies, patterns, and decision-making processes that are economically structured for a specific community. It is an essential aspect of society as it improves the living standards of the people. The economic system is, therefore, significant to world history in various ways.

The earliest economic system is the one associated with primitive society. It involves the tradition serving as the central means of restoring order. The economic forms of primitive society are ancient compared to the Cro-Magnon people. Still, some states are up to date and preserved by several groups such as Kalahari hunters, Inuit, and Bedouin. In the arrangement, all traditionally-bounded people still solved their economic problems, despite having worked a long time ago. The occurrence was evident by climate changes and societal self-sustenance through hunting and gathering. A well-organized economic system will solve the following main financial problems: the kind and quantity of goods to be produced, how goods will be produced, and finally, how the goods will be distributed. If the three problems are well addressed, the standards of living are raised. The importance of these stages of the economic system was that people did not require to move from one place to another in order to get food (Ioffe & Maggs, 2019). The trade involved many cities that provided protection because of their large armies.

Primitivism mainly occurred during agrarian societies where people tended to self-produce all their wants and needs at a household level. Families grew their crops, built their own houses, hunted and cooked their food, and fashioned their clothes. A minor division of labor occurred in this era, which led to low production. There were fewer market transactions as the period encouraged vertical integration of production processes within a community where there was a reciprocal exchange between families and households (Ioffe & Maggs, 2019). In societies, decision-making and private property were more applied to the family.

The emergence of civilization brought up economies based on social class, such as feudalism and slavery. Slavery encompassed production by enslaved persons treated as the owner’s property as they lacked personal freedom and rights. In feudalism, a class of individuals known as the lords owned large land pieces. The lords leased small pieces of land to peasant farmers, who, in the end, handed over much of their production to the lords in exchange for security that included a place to live in and food to eat. Feudalism was vital in protecting violence and warfare after the fall of Rome. It also helped avoid the collapse of a strong central government in Western Europe (Ioffe & Maggs, 2019). In world history, feudalism helped secure Western Europe’s society and prevented powerful invaders, which helped in the restoration of trade.

Capitalism, another form of economic system evolution, emerged as a result of rapid industrialization. Capitalism is a system where entrepreneurs organize productive resources to produce goods and services for profitable means rather than personal consumption. In this era, workers are hired in return for wages; rent is paid to the owners of land for land use, and royalties are paid for resource use. There are minimal government regulations and state enterprises in capitalism to the social market systems. The efforts are to ensure equitable distribution of wealth and to maintain social justice. Through capitalism, Britain produced goods cheaply hence the need to open and explore overseas markets (Ioffe & Maggs, 2019). It is most important in world history as it contributed to international free trade and an end to tariffs which meant more profits.

Economic socialism is where limited ownership of the means of production and a system of prices, losses, and profits are not used as determinants to select the production owners. All decisions for production are made through a collective decision-making process. Some economic functions are shared by everyone, including economic, and strategic tasks that affect all citizens. Some capitalism elements are in modern socialism, such as centralized control of several systems and the market mechanism. Economic socialism can happen in various forms of government that include democratic socialism in Nordic countries and authoritarian strands. Through socialism, land and labor resources were well utilized, ensuring efficiency in production (Ioffe & Maggs, 2019). Key industries were nationalized, wealth was equally distributed, trade unions’ rights were recognized, and the activities marked an important stage in world history.

Communism is a form of an economic system whereby there is centralization of all economic activities. It is done by well-coordinated central planners dictated by the government. The government determines when, why, and type of goods to be produced. Communism is hardly practiced today, with countries such as North Korea and Cuba still practicing it (Ioffe & Maggs, 2019). The ideology of communism has led to improved public education and health, provision of state-directed social services, and social benefits, which has helped in societal development and labor productivity.

Among the four systems that the world functions on, the economic system is the most important. Through it, a country can measure its growth over a specified period. There is a decrease in growth; measures can be put in place to rectify the decline and improve the general increase. By setting up a proper decision-making process, economic agents can enter a binding contract that will later realize profits. The economic system uses a well-coordinated system and incentive system, which later encourages labor and specialization division. Production activities are equally distributed as income to individual groups in the society through a well-organized distribution system.

Ioffe, O. S., & Maggs, P. B. (2019). The Soviet legal system in connection with the Soviet economic system. The Soviet Economic System, 5 (8), 46-58. Web.

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Essay on Economic Systems

An economic system is composed of different but interrelated aspects that create an economic structure (Hayek, McWilliams & Churchill). Every society has an economic system; however, some communities have a similar system. The economic system is essential in a society because it addresses the needs and scarcity. A complex system of economy entails all means of production. Most societies have four basic economic systems, i.e., traditional economy, command economy, a pure market economy, and mixed economy. A command economy benefits society by addressing some important services such as health, however, it has a large bureaucracy that discourages new ideas.

A pure command economy is a well-organized economy system with a central institution that controls the means of production. The governing body is usually the central dominant that determines what, who, how and means of production. The demands and supply of goods and services are predetermined through statistical analysis (Hayek, McWilliams & Churchill). Private ownership is discouraged in this system. command economy is advantegous since there minimal chance of an overproduction crisis. Secondly, there is little wastage of resources and high savings. Scholars argue that the governing body can respond quickly to threats that might arise, such as military and economic threats. An example is a soviet response to communism in USSR. However, its disadvantages include limited motivation to work hard, and large bureaucracy results in little or no flexibility (Corporate Finance Institute, 2021). Individual and unique ideas are not rewarded, which also results in stagnant markets.

A Pure market economy comprises a free market where individuals and businesses bring together the buyers and sellers. Contrary to a command economy, a market economy comprises a decentralized in terms of decision making and structure. Most of the world’s economies are decentralized; they include the US economy. Market economy entails a large variety of products; there are also government interferences. As a result, consumers are highly satisfied, and there is the capability of gradual changes. However, fewer public facilities such as schools and healthcare are also at risk of unhealthy competition. Furthermore, it might face risks of market failure.

The traditional economy is a type of economic system that heavily relies mostly on agricultural production. Other activities include hunting and gathering. The traditional economy is the oldest system; the allocation of production and resources is based on rituals, customs, traditions, and customs by ancestors and elders(CK-Foundation, 2021). It is advantageous to society since different production and economic are determined based on gender and age. It is also stable and predictable. However, it is accompanied by low living standards, and economic progress is limited. In addition, it is criticized since it discourages new ideas and innovations.

A mixed economy entails both the characteristics of a market and command economy; hence it is sometimes referred to as a dual economic system (Corporate Finance Institute, 2021). Most modern economies are characterized by a mix of traditional, command, and free economies. In a mixed economy, some production like nuclear weapons is designated to the governing body while consumer goods and services are designated to the private sector since they can easily determine consumer needs (Hayek, McWilliams & Churchill). Although, mixed economy encounters balance challenge between state control and private sector, their equal distribution of goods and services while addressing consumer needs and wants. Also, most efficient producers are rewarded and also receive capital that can reinvest. Fourthly, it addresses the limitations in market economies like areas of nuclear weapons. However, efficient investors can disadvantage other businesses by lobbying states for tax subsidies. It can result in a monopoly of some products like nuclear.

There are four major economic systems, i.e., traditional, mixed, market, and command economy. Traditional economy mainly relies on agriculture, with ancestors and elders playing a subtle role in distributing roles. Command economy is composed of a central body governing production. It, however, does not address the consumers’ needs efficiently. The mixed economy comprises features of the three other economies . Since mixed addresses the limitations in market economies, e.g., addressing some important aspects of defense, it is the most preferred economic system. It also exhibits other characteristics of other economics; it further exhibits the advantages of other economic systems.

Corporate Finance Institute. (2021, January 30).  Economic System . https://corporatefinanceinstitute.com/resources/knowledge/economics/economic-system/

Foundation, C., 2021.  CK12-Foundation . [online] CK-12 Foundation. Available at: <https://flexbooks.ck12.org/user:zxbpc2rzcziwmthaz21hawwuy29t/cbook/episd-2019-2020-economics-with-emphasis-on-the-free-enterprise-system/section/1.5/primary/lesson/economic-systems/> [Accessed 21 August 2021].

Hayek, F., McWilliams, C., & Churchill, W. The economic system. Types of economic systems. Major economic systems All types of economic systems.

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World System Theory Essay Example

World System Theory Essay Example

  • Pages: 3 (688 words)
  • Published: June 21, 2017
  • Type: Essay

World system theory is a system of the international relations providing structralistic explanation of the global economy. IT divides the global economy into three parts of a pyramid. The top most part belonging to the Core countries. These are the most richest and developed nations. Then Semi Periphery nations who are seeking to elevate themselves to the core states like China, India etc.

Then at the bottom Is the Periphery nations who are characterize by downtrodden people, and corrupt governments, subservient to Core nations. The unequal system of exchange of maintains that they are not given the chance to develop.They get obsolete technology and hollow aid in return of the natural resources and labor. This can also be explained through the concept of takers and maker, the core nations being the takers of the goods and the international decisions, whereas the pe

riphery nations being the makers of those goods.

General growth and prosperity is being enjoyed by the core naions, where as the periphery nations bear the burden of poverty. This theory of Core/ Periphery complement the World System TheoryAnother important concept to be discussed here is World System analysis. It says that the core nations get the power through the system of Colonialism and neo colonialism. It is when the foreign power maintains political, social, economic, and cultural domination for an extended period. The dominant country leaves the dependent nation after expiring the natural resources or the cheap labor force. There is continued dependence on the more industrialized nations for technology and the political decisions There are unequal political and economic relations which are dominated by core countries of the world economic system.

called world System analysis. Even if nations make economic advance, they remain weak and subservient to the core nations as they depend on their assistance. Another important point here is that there is a stable relation between the different categories of the nations. It is quite challenging to move from one categories to another one. Specially moving from the periphery nations to semi periphery nations is quite difficult.

Next is the Dependency Theory which says that the international system is exploitative and there is dominance of some countries over other.They argue that there are different kind of states which performs differently. First is the Center of the center (CC) which are the most powerful of the nations like USA, UK. Then Periphery of the center (PC) like Canada which are modern and industrialized but have a little less global power. Next is Center of the Periphery (CP) which are still developing but have a fair amount of wealth. The last one is Periphery of the Periphery (PP) includes Cambodia which are not even on the path of development.

This distinction of the countries is due to the following main points:1. International division of labor between all of these countries - The core countries dominate in terms of technology. The PP are like resource extraction economies providing cheap labor. The structure is PC serve CC, CP serves CP ad CC, PP serves everybody else.2. Class distinction - There is a clear division in rich and working class and is same for each of the countries.

They cooperate with one another to ensure they remain in power to keep the system the way it is.3. Global Capitalism –

According to this all structures exist within the wider global system. In this system, liberal economic theory trades in interest of core countries. Banks, international institutions, media serve interest of richest countries. This entire system serves the interest of the wealthy.

They do not promote equal distribution, rather promote dominance and dependency.Now the major drawback of following these system is that it is not sustainable. When the global economy becomes urbanized, then the cost of production will go up as there will be no cheap labor and the natural resources will be exhausted once the saturation point is reached.To be sustainable, the Core countries should also develop the other nations by being equal in the terms of trade and therefore give them a chance to grow rather than trap them in the circle of poverty.

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EU AI Act: first regulation on artificial intelligence

The use of artificial intelligence in the EU will be regulated by the AI Act, the world’s first comprehensive AI law. Find out how it will protect you.

A man faces a computer generated figure with programming language in the background

As part of its digital strategy , the EU wants to regulate artificial intelligence (AI) to ensure better conditions for the development and use of this innovative technology. AI can create many benefits , such as better healthcare; safer and cleaner transport; more efficient manufacturing; and cheaper and more sustainable energy.

In April 2021, the European Commission proposed the first EU regulatory framework for AI. It says that AI systems that can be used in different applications are analysed and classified according to the risk they pose to users. The different risk levels will mean more or less regulation. Once approved, these will be the world’s first rules on AI.

Learn more about what artificial intelligence is and how it is used

What Parliament wants in AI legislation

Parliament’s priority is to make sure that AI systems used in the EU are safe, transparent, traceable, non-discriminatory and environmentally friendly. AI systems should be overseen by people, rather than by automation, to prevent harmful outcomes.

Parliament also wants to establish a technology-neutral, uniform definition for AI that could be applied to future AI systems.

Learn more about Parliament’s work on AI and its vision for AI’s future

AI Act: different rules for different risk levels

The new rules establish obligations for providers and users depending on the level of risk from artificial intelligence. While many AI systems pose minimal risk, they need to be assessed.

Unacceptable risk

Unacceptable risk AI systems are systems considered a threat to people and will be banned. They include:

  • Cognitive behavioural manipulation of people or specific vulnerable groups: for example voice-activated toys that encourage dangerous behaviour in children
  • Social scoring: classifying people based on behaviour, socio-economic status or personal characteristics
  • Biometric identification and categorisation of people
  • Real-time and remote biometric identification systems, such as facial recognition

Some exceptions may be allowed for law enforcement purposes. “Real-time” remote biometric identification systems will be allowed in a limited number of serious cases, while “post” remote biometric identification systems, where identification occurs after a significant delay, will be allowed to prosecute serious crimes and only after court approval.

AI systems that negatively affect safety or fundamental rights will be considered high risk and will be divided into two categories:

1) AI systems that are used in products falling under the EU’s product safety legislation . This includes toys, aviation, cars, medical devices and lifts.

2) AI systems falling into specific areas that will have to be registered in an EU database:

  • Management and operation of critical infrastructure
  • Education and vocational training
  • Employment, worker management and access to self-employment
  • Access to and enjoyment of essential private services and public services and benefits
  • Law enforcement
  • Migration, asylum and border control management
  • Assistance in legal interpretation and application of the law.

All high-risk AI systems will be assessed before being put on the market and also throughout their lifecycle.

General purpose and generative AI

Generative AI, like ChatGPT, would have to comply with transparency requirements:

  • Disclosing that the content was generated by AI
  • Designing the model to prevent it from generating illegal content
  • Publishing summaries of copyrighted data used for training

High-impact general-purpose AI models that might pose systemic risk, such as the more advanced AI model GPT-4, would have to undergo thorough evaluations and any serious incidents would have to be reported to the European Commission.

Limited risk

Limited risk AI systems should comply with minimal transparency requirements that would allow users to make informed decisions. After interacting with the applications, the user can then decide whether they want to continue using it. Users should be made aware when they are interacting with AI. This includes AI systems that generate or manipulate image, audio or video content, for example deepfakes.

On December 9 2023, Parliament reached a provisional agreement with the Council on the AI act . The agreed text will now have to be formally adopted by both Parliament and Council to become EU law. Before all MEPs have their say on the agreement, Parliament’s internal market and civil liberties committees will vote on it.

More on the EU’s digital measures

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