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| Tomas Saraceno, Galaxies Forming along Filaments, Like Droplets along the Strands of a Spider's Web, 2009. |
What would one expect to emerge from such populations of more or less centralized organizations and more or less decentralized markets ? The answer is, a world-economy, or a large zone of economic coherence. The term, which should not be confused with that of a global economy, was coined by Immanuel Wallerstein, and later adapted by Braudel so as not to depend on a conception of history in terms of a unilineal progression of modes of production. From Wallerstein Braudel takes the spatial definition of a world-economy : an economically autonomous portion of the planet, perhaps coexisting with other such regions, with a definite geographical structure : a core of cities which dominate it, surrounded by yet other economically active cities subordinated to the core and forming a middle zone, and finally a periphery of completely exploited supply zones. The role of core of the European world-economy has been historically played by several cities : first Venice in the fourteenth century, followed by Antwerp and Genoa in the fifteenth and sixteenth. Amsterdam then dominated it for the next two centuries, followed by London and then New York. Today, we may be witnessing the end of American supremacy and the role of core seems to be moving to Tokyo. (16)
Interestingly, those cities which play the role of core, seem to
generate in their populations of firms, very few large ones. For
instance, when Venice played this role, no large organizations emerged
in it, even though they already existed in nearby Florence. Does this
contradict the thesis that capitalism has always been monopolistic ? I
think not. What happens is that, in this case, Venice as a whole played
the role of a monopoly : it completely controlled access to the spice and
luxury markets in the Levant. Within Venice, everything seemed like
"free competition", and yet its rich merchants enjoyed tremendous
advantages over any foreign rival, whatever its size. Perhaps this can
help explain the impression classical economists had of a competitive
stage of capitalism : when the Dutch or the British advocated "free
competition" internally is precisely when their cities as a whole held a
virtual monopoly on world trade.
World-economies, then, present a pattern of concentric circles around a
center, defined by relations of subordination. Besides this spatial
structure, Wallerstein and Braudel add a temporal one : a world-economy
expands and contracts in a variety of rhythms of different lengths : from
short term business cycles to longer term Kondratiev cycles which last
approximately fifty years. While the domination by core cities gives a
world-economy its spatial unity, these cycles give it a temporal
coherence : prices and wages move in unison over the entire area. Prices
are, of course, much higher at the center than at the periphery, and
this makes everything flow towards the core : Venice, Amsterdam, London
and New York, as they took their turn as dominant centers, became
"universal warehouses" where one could find any product from anywhere in
the world. And yet, while respecting these differences, all prices
moved up and down following these nonlinear rhythms, affecting even
those firms belonging to the antimarket, which needed to consider those
fluctuations when setting their own prices.
These self-organized patterns in time and space which define
world-economies were first discovered in analytical studies of
historical data. The next step is to use synthetic techniques and create
the conditions under which they can emerge in our models. In fact,
bottom-up computer simulations of urban economics where spatial and
temporal patterns spontaneously emerge already exist. For example, Peter Allen has created simulations of nonlinear urban dynamics as meshworks
of interdependent economic functions. Unlike earlier mathematical models
of the distribution of urban centers, which assumed perfect rationality
on the part of economic agents, and where spatial patterns resulted
from the optimal use of some resource such as transportation, here
patterns emerge from a dynamic of conflict and cooperation. As the flows
of goods, services and people in and out of these cities change, some
urban centers grow while others decay. Stable patterns of coexisting
centers arise as bifurcations occur in the growing city networks taking
them from attractor to attractor. (17)
Something like Allen's approach would be useful to model one of the two
things that stitch world-economies together, according to Braudel : trade
circuits. However, to generate the actual spatial patterns that we
observe in the history of Europe, we need to include the creation of
chains of subordination among these cities, of hierarchies of
dependencies besides the meshworks of interdependencies. This would need
the inclusion of monopolies and oligopolies, growing out of each cities
meshworks of small producers and traders. We would also need to model
the extensive networks of merchants and bankers with which dominant
cities invaded their surrounding urban centers, converting them into a
middle zone at the service of the core. A dynamical system of trade
circuits, animated by import-substitution dynamics within each city, and
networks of merchants extending the reach of large firms of each city,
may be able to give us some insight into the real historical dynamics of
the European economy. (18)
Bottom-up economic models which generate temporal patterns have also
been created. One of the most complex simulations in this area is the
Systems Dynamics National Model at MIT. Unlike econometric simulations,
where one begins at the macroeconomic level, this one is built up from
the operating structure within corporations. Production processes within
each industrial sector are modeled in detail. The decision-making
behind price setting, for instance, is modeled using the know-how from
real managers. The model includes many nonlinearities normally dismissed
in classical economic models, like delays, bottlenecks and the
inevitable friction due to bounded rationality. The simulation was not
created with the purpose of confirming the existence of the Kondratiev
wave, the fifty-two year cycle that can be observed in the history of
wholesale prices for at least two centuries. In fact, the designers of
the model were unaware of the literature on the subject. Yet, when the
simulation began to unfold, it reached a bifurcation and a periodic
attractor emerged in the system, which began pulsing to a fifty year
beat. The crucial element in this dynamics seems to be the capital goods
sector, the part of the industry that creates the machines that the
rest of the economy uses. Whenever an intense rise in global demand
occurs, firms need to expand and so need to order new machines. But when
the capital goods sector in turn expands to meet this demand it needs
to order from itself. This creates a positive feedback loop that pushes
the system towards a bifurcation. (19)
Insights coming from running simulations like these can, in turn, be
used to build other simulations and to suggest directions for historical
research to follow. We can imagine parallel computers in the near
future running simulations combining all the insights from the ones we
just discussed : spatial networks of cities, breathing at different
rhythms, and housing evolving populations of organizations and meshworks
of interdependent skills. If power relations are included, monopolies
and oligopolies will emerge and we will be able to explore the genesis
and evolution of the antimarket. If we include the interactions between
different forms of organizations, then the relationships between
economic and military institutions may be studied. As Galbraith has
pointed out, in today's economy nothing goes against the market, nothing
is a better representative of the planning system, as he calls it, than
the military-industrial complex. But we would be wrong in thinking that
this is a modern phenomenon, something caused by "late capitalism". (20)
In the first core of the European world-economy, thirteenth century
Venice, the alliance between monopoly power and military might was
already in evidence. The Venetian arsenal, where all the merchant ships
were built, was the largest industrial complex of its time. We can think
of these ships as the fixed capital, the productive machinery of
Venice, since they were used to do all the trade that kept her powerful;
but at the same time, they were military machines used to enforce her
monopolistic practices. (21)
When the turn of Amsterdam and London came to be the core, the famous
Companies of Indias with which they conquered the Asian world-economy,
transforming it into a periphery of Europe, were also hybrid
military-economic institutions. We have already mentioned the role that
French armories and arsenals in the eighteenth century, and American
ones in the nineteenth, played in the birth of mass production
techniques. Frederick Taylor, the creator of the modern system for the
control the labor process, learned his craft in military arsenals. That
nineteenth century radical economists did not understand this hybrid
nature of the antimarket can be seen from the fact that Lenin himself
welcomed Taylorism into revolutionary Russia as a progressive force,
instead of seeing for what it was : the imposition of a rigid
command-hierarchy on the workplace. (22)
Unlike these thinkers, we should include in our simulations all the
institutional interactions that historians have uncovered, to correctly
model the hybrid economic-military structure of the antimarket. Perhaps
by using these synthetic models as tools of exploration, as intuition
synthesizers, so to speak, we will also be able to study the feasibility
of counteracting the growth of the antimarket by a proliferation of
meshworks of small producers. Multinational corporations, according to
the influential theory of "transaction-costs", grow by swallowing up
meshworks, by internalizing markets either through vertical or
horizontal integration. (23)
They can do this thanks to their enormous economic power (most of them
are oligopolies), and to their having access to intense economies of
scale. However, meshworks of small producers interconnected via computer
networks could have access to different, yet as intense economies of
scale. A well studied example is the symbiotic collection of small
textile firms that has emerged in an Italian region between Bologna and
Venice. The operation of a few centralized textile corporations was
broken down into a decentralized network of firms, in which
entrepreneurs replace managers and short runs of specialized products
replace large run of mass produced ones. Computer networks allow these
small firms to react flexibly to sudden shifts in demand, so that no
firm becomes overloaded while others sit idly with spare capacity. (24)
But more importantly, a growing pool of skills is thereby created, and
because this pool has not been internalized by a large corporation, it
can not be taken away. Hence this region will not suffer the fate of so
many American company towns, which die after the corporation that feeds
them moves elsewhere. This self-organized reservoirs of skills also
explain why economic development cannot be exported to the third world
via large transfers of capital invested in dams or other large
structures. Economic development must emerge from within as meshworks of
skills grow and proliferate. (25)
Computer networks are an important element here, since the savings in
coordination costs that multinational corporations achieve by
internalizing markets, can be enjoyed by small firms through the use of
decentralizing technology. Computers may also help us to create a new
approach to control within these small firms. The management approach
used by large corporations was in fact developed during World War II
under the name of Operations Research. Much as mass production
techniques effected a transfer of a command hierarchy from military
arsenals to civilian factories, management practices based on linear
analysis carry with them the centralizing tendencies of the military
institutions where they were born. Fresh approaches to these questions
are now under development by nonlinear scientists, in which the role of
managers is not to impose preconceived plans on workers, but to catalyze
the emergence of meshworks of decision-making processes among them. (26)
Computers, in the form of embedded intelligence in the buildings that
house small firms, can aid this catalytic process, allowing the firm's
members to reach some measure of self-organization. Although these
efforts are in their infancy, they may one day play a crucial role in
adding some heterogeneity to a world-economy that's becoming
increasingly homogenized.
16. Fernand Braudel, op. cit., Vol 3., p.25-38.
17. Peter M. Allen, Self-Organization in the Urban System in William
C. Schieve and P.M.Allen (eds.), Self-Organization and Dissipative
Structures : Applications in the Physical and the Social Sciences, University of Texas, Austin, 1982, p.136.
18. Fernand Braudel, op. cit., Vol 3., p.140-167
19. J.D. Sterman, Nonlinear Dynamics in the World Economy : the Economic
Long Wave in Peter Christiansen and R.D. Parmentier (eds.), Structure,
Coherence and Chaos in Dynamical Systems, Manchester Univ. Press,
Manchester, 1989.
20. John Galbraith, op. cit., p. 321.
21. Fernand Braudel, op. cit., Vol 2., p. 444.
22. Vladimir Lenin, The Immediate Tests of the Soviet Goverment.
Collected Works, Vol 27, Moskow 1965.
23. Jean-Francois Hennart, The Transaction Cost Theory of the
Multinational Enterprise in Christos Pitelis and Roger Sudgen (eds.), The
Nature of the Transnational Firm, Rutledge, London, 1991.
24. Thomas W. Malone and John F. Rockart, Computers, Networks and the
Corporation in Scientific American, Vol 265, Number 3, p.131.
Also :
Jane Jacobs, op. cit., p.40,
Fernand Braudel, op cit, Vol 3, p. 630.
25. Jane Jacobs. op. cit., p.148.
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