Growth and mobility in the capitalist world system.

Abstract

Between 1950 and 1986, the annual rate of economic growth was 2.54 percent, up from the 1.6 percent estimated for the previous 100 years. However, the oil shock of 1974 and the extended recession beginning in 1979 reversed growth rates in many of the middle-income and poor countries. Throughout the entire period, the gap between the wealthy countries and the rest of the world widened. Calculations based on levels and rates of growth indicate that only about ten countries will be able to catch up to the rich in the next century. Explanations of growth, or the lack of growth, during the post-war era emphasize external factors, with alternative hypotheses coming from convergence theory. According to world systems theory, transnational corporations (TNCs) have eclipsed trade as the primary growth-inhibiting linkage between core and peripheral states. The present study extends world systems theory by taking into account the long cycles of the world system. A trade concentration variable is added to the equation to reflect dependency theory's assertion that trade has been the primary inhibiting linkage between core and non-core states. The expansion and contraction of the world economy is shown to have a powerful impact on growth. During the period of expansion the degree of TNC penetration into a country's economy has a strong negative effect on economic growth; however, during the downturn TNCs are irrelevant to growth. This supports the claims of world system theorist in that the opportunity for middle-income countries to close the gap with the rich countries arises during a world economic contraction. Trade concentration has its negative effect during the downturn yet is not important during the upturn. Further examination of the data reveals, contrary to world systems expectations, that relative to other countries, the middle-income countries fare the best during the world economic expansion and the worst during the contraction.