Self-Regulation of the World Economic System. An Enactive Perspective. (2011)

SELF-REGULATION OF

THE WORLD ECONOMIC SYSTEM

An Enactive Perspective

Antonio Luis Hidalgo-Capitán, PhD

University of Huelva

Spain

To my wife Ana Patricia

and my children Irazú and Braulio.

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Table of Contents

1.- Introduction 7

2.- The distinction of the world economic system 13

3.- Autopoiesis, organization, and the structure of the world economic system 17

4.- The structural coupling of the world economic system with its ambience 21

5.- The genesis of the world economic system 27

6.- Self-regulation and the ontogeny of the world economic system 31

7.- The regulating agents of the world economic system 35

8.- The regulating institutions of the world economic system 41

9.- The subsystems of the world economic system 45

10.- The evolution of the world economic system 49

11.- Conclusions 55

12.- References 57

SELF-REGULATION OF THE WORLD ECONOMIC SYSTEM

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1.- Introduction1

For more than two decades, International Political Economy has been

trying to explain the phenomenon of economic globalization by means of a

combination of political and economic variables. This topic has become the

centre of analysis in the field of study. Given that the term 'economic

globalization' may be expressed as the 'process of emergence of a world

economy', our attention focuses on the question: What is the world economy?

Answering this question necessarily moves us to participate in debates

occurring between different currents of thought in the fields of International

Relations and International Political Economy.

The first of these debates is one occurring within representationism,

between neo-realists, and neo-liberals, and even neo-Marxists, about the

degree of autonomy of nation-states in the regulation of the world economy.

We believe that since the development of the Theory of Complex

Interdependence (Keohane and Nye, 1972; 1977) and the Theory of Diffuse

Power (Strange, 1988; 1996), the predominant role of nation-states in

explaining trans-border economic relationships has disappeared. Meanwhile

new approaches have arisen which consider the relevance of different agents

(trans-national and sub-national, public and private, individual and collective).

Therefore, we understand, in eclectic way, nation-states are not the only

agents which participate in the regulation of the world economy, although the

capacity for influence of some of them clearly has enormous importance.

The second of these debates is between representationists and

constructivists, with sharply opposed epistemological positions over whether

the world economy is a reality given for the observer (representationism) or

constructed by the observer (constructivism). We have assumed a position

1 The author thanks the comments of professors Marcelo Arnold (University of Chile), Ángel Martínez-González-Tablas (Complutensian University of Madrid), Gabriel Pérez-Alcalá (University Fernando III), Moisés Hidalgo-Moratal (University of Alicante), and Clara García-Fernández-Muro (University of Huelva), assisting in the rough draft of this essay, with additional thanks to Olga Mínguez-Moreno (University of Huelva) and Joseph D. Candora for the revision of the translation.


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halfway between representationism and constructivism, also known as the

enactive approach. This approach is based on the idea that phenomena

occur in front of an observer, who constructs interpretations of reality from

them (Varela, Thompson and Rosch, 1991: 202).2

As a result of our positioning in the first debate, we must accept trans-

nationality, or that trans-border economic relationships are not merely

international economic relationships (i.e. among nations), but also world (or

global) economic relationships (i.e. among agents from all over the world).

The difference is not irrelevant, because it allows us to speak about trans-

border and intra-border relationships as a whole – the world economy – and

not as the sum of parts (the national economies in analyses within traditional

International Political Economy). And if we consider the world economy as a

whole, it is very useful to apply systemic analysis, allowing us to reformulate

the question in a different way: 'What is the world economic system?'

The application of systemic analysis to the study of the world economy

is not new; it is enough to recall the works of Wallerstein (1974; 1979; 1980;

1989) on the world-system and the world-economy. In fact, the Neo-Marxist

school of International Political Economy has used and continues to use

systemic analysis (e.g. Martínez-González-Tablas, 2000).

Nevertheless, new systemic approaches to the study of the world

economy are possible; such is the case of the biological variant of

Autopoiesis Theory, which has its origin in the works of Maturana and Varela

(1973 and 1985), who studied the self-organization of living systems. This

theory has become one of the most suggestive and innovative theories of

2 Some authors from the fields of International Relations and International Political Economy (Smith, 2001; Woods, 2001) denominate 'representationist' theories as 'rationalist' or 'positivists' theories, and 'constructivists' theories as 'reflectivists', 'post-rationalist', 'post-positivists', 'post-modern', 'radicals', 'alternatives' or, simply, 'new' theories; they also usually refer to the 'enactive approach' as 'socio-constructivist approach' or 'social constructivism'; we have preferred to use the expressions 'representationism', 'constructivism' and 'enactive approach' used by some epistemologists (Maturana and Varela, 1985; Varela, Thompson and Rosch, 1991). We can find the antecedents of the enactive approach in the phenomenological structuralism of Merleau-Ponty (1942; 1945).


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recent decades in the fields of Biology, Psychology and Epistemology, where

it has generated important developments. In the Social Sciences, the

biological variant of the theory has been less developed (Maturana, 1985;

Maturana and Varela, 1985 [1990]: 154--74), unlike the sociological variant

led by Luhmann (1984), who articulates his approach around the notion of

communication as the key element of self-organization in social systems.

We believe that the biological variant of Autopoiesis Theory is the most

useful systemic approach in studying the behaviour of the world economy as

a living system that self-organizes in an independent way. This will be our

main theoretical frame of reference.

But Autopoiesis Theory cannot alone explain the behaviour of the world

economy, because the theory was developed with first- and second-order

living systems (cells and organisms, respectively) in mind, presenting only a

few considerations about third-order living systems (i.e. social systems).

In our opinion, these considerations, including those of Maturana (1985)

and of Maturana and Varela (1985 [1991]: 154--74), are insufficient to

completely explain the behaviour of the world economy. We therefore need to

incorporate some elements from other analyses: e.g. the contributions of

Morin (1973) on bio-anthropology; of Perroux (1981) on the agent; of

Foucault (1978; 1980; 1982) on power; of North (1990) and Hodgson (1993)

on institutions; and of Waddington (1957; 1969) on evolutionary trajectories;

among others.

On the other hand, the adoption of an enactive perspective forces to us

to reformulate our question so that it contemplates the world economic

system neither as an objective reality nor as a constructed reality, but as an

enacted3 reality. Our question would then become: 'What is the world

economic system for us as observers?'

3 The term 'enaction' is a neologism derived from the verb 'to enact'; we can consider this verb as synonymous with the expressions 'to bring forth' or 'to cause to emerge'; therefore 'to enact' means 'to cause to emerge' and 'enaction' means 'action which causes to emerge'.


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In this essay we are seeking a 'scientific answer' to this question, and

we understand by scientific answer a 'proposal of mechanisms (concrete or

conceptual systems) whose functioning (working) generates every

phenomenon that is involved in the question' (Maturana, 1985 [1995]: 4).4 We

propose to respond to our question 'What is the world economic system for

us as observers?’ by means of the formulation of an explanatory theory of

world economy behaviour using key elements of the biological variant of

Autopoiesis Theory and from different approaches of Political Economy, in

general, and of Global Political Economy, in particular; that is to say, we shall

set out 'the formulation of a theory of the self-regulation5 of the world

economy'.

The utility of this theory, as it corresponds to an enactive perspective,

will depend on the meaning evoked in the mind of each reader. For those

readers close to radical representationism, this essay may be a sterile

exercise of reflection on the part of its author, whose proposals cannot easily

be falsified. For those readers close to radical constructivism, the reflection

on the identity of the world economic system may not be deep enough in this

essay, which assumes as given certain values and behaviours of the agents.

We, as readers of our own essays, find in this document the eclectic

integration of some of the most suggestive expositions of different thought

currents referring to the world economy – representationism and

constructivism. We do not consider that this document contributes toward

building a bridge between the moderate representationists and the moderate

constructivists, such as some authors (Wendt, 1999) have tried to make;

rather we have tried to sit on the fence that separates them, and observe the

best of both worlds. On the other hand, we also believe that our theory has

the virtue of explaining, in a simpler way than others, the various aspects

4 Most quotations come from the Spanish version of these texts, which the author of the article has attempted to translate into English; it is likely that these quotations differ from the English version when the original version is not in English. 5 The term 'self-regulation' is used here as a synonymous with 'self-organization'.


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involved in the concept of 'world economy', it has a great potential for

dissemination and teaching, and it suggests a new research program yet to

be developed.


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2.- The distinction of the world economic system

From the perspective of an observer, reality happens as perceived

phenomena; phenomena that are neither completely objective nor completely

subjective, because they receive sense via the subjective perception of the

observer, who cannot have a perception if there is not real phenomenon to

perceive. In other words, the observer enacts, or brings forth, a world of

perceptions, which is the only possible approach to reality; a reality neither

objective nor constructed, but enacted (Varela, Thompson and Rosch, 1991

[1992]: 168, 174--8, 202--4, 238--40).

We shall enact a world economic system from a series of phenomena

of an economic nature, but we must first lay the foundations of our analysis,

and we will do so by evoking the human being.

A human being is a living organism (equipped with a nervous system)

comprised of other indivisible living organisms (i.e. cells). Therefore, a cell

would be a first-order living entity; a human being, comprised of cells, would

be a second-order living entity; and a society, comprised of human beings,

would be a third-order living entity, as would also be the case for a colony of

honeybees, themselves comprised of cells.

Focusing on human beings, it can be observed that multiple

interrelationships, called social relationships, occur. Those social

relationships of an economic character would be economic relationships; that

is to say, the relationships of production, distribution, interchange, and

consumption occurring among human beings. The set of these relationships

constitutes the dominion of economic relationships, which would be a specific

type of phenomenological dominion, understood as the 'dominion of

interactions specified by the properties of the interacting units' (Maturana,

1975 [1996]: 231).

In this dominion of the economic relationships among human beings, as

observers we can make a distinction; that is to say, we can 'indicate a unit

doing an operation that defines its limits and that separates it from its


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background' (Maturana, 1975 [1996]: 243). This operation will allow us to

identify a unit comprised of human beings who maintain economic

relationships.

But in order to distinguish such a unit, we need to have an idea of the

type of organization, or 'relations among the components that define [it]'

(Maturana, 1975 [1996]: 229); this idea comes from our experience as

observers. Therefore, our perception is guided by our perceptive experience,

as corresponding to an enactive perspective.

In our opinion, and according to our experience, the type of organization

of the economic relationships that should guide our perception is the capitalist

organization. Therefore we will only perceive capitalist economic

relationships; that is, relationships based on the market, where people freely

exchange productive goods and services as well as factors (labour, capital,

and land, the former inseparable from the workers and the latter two

protected by private property rights).

If we observe capitalist economic relationships, we can perceive that

human beings (whether close together or far apart) engage in a series of

interrelationships of production, distribution, interchange and consumption, all

based on the market. These relationships occur almost all around the planet,

and only certain isolated and primitive indigenous communities and countries

of relatively autarkic real socialism, where the economic relationships are of a

different nature, remain at the margin of general activity.

Therefore, in the dominion of the economic relationships, we can

distinguish an 'almost worldwide' organization comprised of human beings

who maintain capitalist relationships, with the exception of a few non-

capitalist minority groups. This organization we will denominate as an almost

worldwide capitalist economic system or, in brief, the world economic system.

But for an entity to be considered a system, several conditions must be

met. According to the classic definition, a system is a 'set of elements


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standing in interrelations' (Bertalanffy, 1968: 55) that can be considered as a

single organization.

The world economic system is precisely such a system if it is a set of

human beings with capitalist economic interrelationships that can be

considered collectively as a unit. As observers, we have thus enacted through

distinction the world economic system.


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3.- Autopoiesis, organization, and the structure of the world economic

system

The world economic system, as a social system, is a third-order system

comprised of human beings (second-order living systems), themselves

comprised of cells (first-order living systems). This economic system is

furthermore a living system, because it is able to produce in an independent

way its own components (human beings) and the economic interrelations

among them. That is to say, it is a living system because it is 'an autopoietic

system that exists in physical space' (Maturana, 1975 [1996]: 232),6

understanding by autopoietic system:

'a dynamic system defined as a unit by the relations that constitute it as a

network of production processes of the components that: a) participate

continuously by their interactions in the generation and accomplishment

of the network of production processes of components that produce

them; and b) constitute this network of processes of production of

components as a unit in the space where they (components) exist

making their boundaries' (Maturana, 1975 [1996]: 232).

However, in the case of world economic system, as a social system,

autopoiesis derives from the aggregation of human beings and is not the

distinctive characteristic of the system. Therefore:

'although there is no doubt that social systems are third-order autopoietic

systems due to the single fact that they are systems comprised of

organisms, what defines them as social systems is not the autopoiesis of

their components, but... the manner of relation among the organisms that

comprise them' (Maturana, 1994: 19).

The autopoiesis of a system (its capacity as a social system to produce

in an independent way its own components and the economic

interrelationships among them) is not the characteristic that allows us to 6 The term 'autopoietic', deriving from the neologism 'autopoiesis', was coined by Maturana and Varela (1973) and is comprised of two Greek expressions, 'auto' (by itself) and 'poiesis' (to make); therefore, we conclude that 'autopoiesis' means 'the capacity to produce oneself'.


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distinguish the world economic system, but rather its organization, here its

capitalist organization. Nevertheless, the fact remains that the world

economic system, as social system, is autopoietic, and although this

characteristic is not distinctive of this kind of system, it allows us to attribute to

the system every implicit connotation in autopoiesis, such as operational

closure, autonomy, self-regulation (self-organization), spontaneity, ontogeny,

evolution, etc.

Interactions among human beings inside the world economic system

are as much individual as collective in nature. Therefore the interactive

elements of the world economic system will be individuals as well as families,

companies, productive sectors, cities, regions, countries, regional blocks, and

so on. On the other hand, the economic interrelationships among these

elements adopt the form of flows of merchandise, services, capital,

currencies, labour, people, energy, information, etc.

Before continuing, we should formulate explanations regarding the

concepts of system, organization, and structure. We have already seen that

we can define the term 'system' as a 'set of elements standing in

interrelations' (Bertalanffy, 1968: 55), with the term 'organization' referring to

the 'relations among the components that define a system as a unit'

(Maturana, 1975 [1996]: 229). On the other hand, the term 'structure' refers to

'the real components and real relations which those components must satisfy

in their participation in the constitution of a given unit' (Maturana, 1975 [1996]:

230). Therefore:

'The organization of a composite system constitutes itself as a unit and

determines its properties as such, specifying a dominion in which it can

interact (and be treated) as a non-analysable whole. The structure of a

composite system determines the space in which it exists and it can be

altered, but not its properties as a unit.... Therefore, two composite units


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separated in space can have the same organization, but different

structures' (Maturana, 1975 [1996]: 230).7

Therefore, the fact of its capitalist organization defines the world

economic system as a system, giving sense to the system and allowing us to

distinguish it. Whereas the fact of their real elements (individual and

collective) are distributed almost worldwide, and the real interrelationships

among them exist in near-total geographic scope, we may perceive the

present capitalist economic system, in particular, as a world economic

system, because the space occupied by this system is, for all practical

purposes, global.

7 'Element', in Bertalanffy’s expression, must be understood as equal to 'component' in Maturana’s expression.


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4.- The structural coupling of the world economic system with its

ambience

In line with previous remarks on the operation of distinction of the world

economic system, we implicitly drew a boundary limiting this system. When

we included within the world economic system every human being who

maintains capitalist economic relationships, as well as these relationships

themselves, we excluded a set of human beings who have no capitalist

economic relationships and their relationships; the latter human beings and

their relationships occupy a physical space that we denominated as their

environment.

The physical space that we observed in this distinction, denominated as

medium or ambience, we can divide into niche, or the physical space that the

system occupies, and environment, or the physical space that the system

does not occupy (Whitaker, 1998 [2003]: 'environment'). From this

perspective, the niche of the world economic system would be nearly the

entire planet, including the environment (that physical space where capitalist

relationships among human beings do not occur).

The environment of the world economic system constitutes the physical

space which human beings do not inhabit (deserts, polar zones, oceans...) or

where human beings live but maintain no capitalist economic relationships, as

is the case with certain primitive indigenous communities (of the Amazon,

Central Africa...) as well as residual countries engaged in autarkic real

socialism (North Korea and Cuba).

As with every living system, the world economic system is a physically

open system and 'the observer can see it interchanging elements with its

environment' (Maturana, 1975 [1996]: 235), but it has operational closure.

This concept refers to the changes that take place in a system as a

consequence of their own behaviour and which are determined by their

structure. Therefore, they are not determined from outside the system.

However, changes in the ambience (environment and/or niche) can cause


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('trigger') changes in the system so that ambience and system are coupled.

Conversely, changes in the system can cause changes in the ambience so

that both are coupled, although changes in the system will always come

structurally determined (Maturana, 1985 [1995]: 5).

Changes in the world economic system which couple it to its ambience

are structural changes, while the coupling between this system and its

ambience is known as a structural coupling. Most of the structural changes

derived from structural coupling allow the world economic system to maintain

its capitalist identity. Nevertheless, when a structural change, triggered by the

ambience and structurally determined, does not permit a system to maintain

its identity, the system disappears. That is, it ceases to exist as a system,

although its elements may yet endure.

'The history of the structural changes without loss of identity in... [an

autopoietic system] is the ontogeny. The coupling of the changing

structure of... [an autopoietic system] to the changing structure of the

medium in which it exists, is the ontogenic adaptation.... if structural

coupling of... [the system] and the medium is not carried out, the

autopoietic system disintegrates' (Maturana, 1985 [1996]: 237, emphasis

is ours).

In one part of the ambience, namely the environment, operations of

distinction can also be made to identify economic systems without capitalist

organization. Thus, if we observe this environment, and we do so perceptibly

guided by forms of organization such as primitive communism or real

socialism, we can distinguish diverse economic systems: local communitarian

economic systems and national socialist economic systems. 8

8 Nowadays it is not easy to distinguish national socialist economic systems, since most of the few that remain have already undertaken a transition towards capitalism. The cases of China, with the evolution of its mercantile-socialism, and of Vietnam and Laos, with their liberating reforms, are evident examples of this transition, as is (to a lesser extent) Cuba, with its policy of attracting foreign investments and promoting international tourism. Only North Korea seems to resist to the transition towards capitalism. In our opinion, at this moment, we can only distinguish two socialist economic systems: North Korea and Cuba.


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Relations between the world economic system and local communitarian

economic systems are scarce, due to the inherent physical isolation of these

systems. That is to say, the ontogenic adaptation between both is not very

significant. Nevertheless, if these relations become intense, the contact will

trigger changes in local communitarian economic systems that often lead to a

loss of identity of these systems, their disintegration as systems, and the

absorption of their elements into the world economic system ('phagocytosis').

This is what happened historically when human beings of different

national capitalist economic systems began to maintain economic

relationships with members of isolated primitive communities (local

communitarian economic systems). The contact between individuals of such

different systems, usually promoted by individuals within certain national

capitalist economic systems for economic reasons (such as hunting, mining,

farming, commerce...), ended up generating serious problems inside these

previously isolated communities (anomy, alcoholism...). Such problems have

often led to their disappearance as communities and their integration into the

national capitalism economic system with which they had maintained contact.

Something similar has happened in the ontogenic adaptation of the

national socialist economic systems; increased relations with the world

economic system have tended to cause a loss of identity (e.g. the effects of

tourism in Cuba). In the future such cases will likely be phagocyted by the

world economic system, disintegrating themselves as systems (as happened

with the national socialist economic systems of Central and Eastern Europe).

Since the world economic system will 'phagocyte' all the economic

systems of its environment, the environment will itself be reduced while the

niche grows to fit the medium, except for unoccupied zones, and every

economic relationship among human beings will be capitalist and thus

internal to the world economic system.


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But external relations of the world economic system are not confined

exclusively to its environment.9 Capitalist economic relationships among

human beings take place in a certain niche that is not empty, but which is full

of matter and energy independent of that which composes the system.

In the niche and in the environment (i.e. in the medium or ambience), a

set of natural phenomena takes place: physical, chemical and biological

interactions, or processes, among material and energy elements. These

interactions constitute the dominion of natural phenomena. If we observe

these processes, we can distinguish in the physical space of the planet a

planetary ecological system or world ecosystem; a system maintaining a set

of relations with the world economic system as well as with other economic

systems of its environment. These relations of ontogenic coupling between

the different economic systems and the world ecosystem are denominated

anthropical-natural interactions.

Focusing on the anthropical-natural interactions between the world

economic system and the world ecosystem, it can be observed that many

economic activities are the result of the structural coupling between both

systems (agriculture, cattle farming, fishing, forestry, mining, energy

production and water supply, but also industry and construction and large

portion of services).

The exploitation of natural and environmental resources, and their

transformation into goods (with economic value), and residual waste (without

value); and activities geared toward environmental protection (recycling,

waste management, decontamination, production of technologies that pollute

less and use resources more efficiently...); or certain environmental

catastrophes of anthropical origin (fires, chemical agent spills, nuclear

radiation...) can all trigger changes, structurally determined, in the world

ecosystem. Conversely, climatic alterations (droughts, floods, cold or heat 9 We could also study the interrelations occurring between the world economic system and other systems distinguishable in other sub-dominions of the social phenomena dominion that are distinct from the economic phenomena dominion. However, this is not the object of the present essay.


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spells...), telluric activity (earthquakes, volcanic eruptions...), and the

extinction, mutation, and appearance and proliferation of new species (virus,

bacteria, insects, seaweeds...) in the world ecosystem will also trigger

changes, determined structurally, in the world economic system.

Therefore, the world economic system and the world ecosystem show

an ontogenic adaptation, so that the structural changes that take place in

each of these systems, although structurally determined, are caused by the

anthropical-natural interactions between them (although not exclusively). We

must consider that anthropical-natural interactions between the planetary

ecosystem and other economic systems exist, and that anthropical-natural

interactions between these other economic systems and the world economic

system also exist, and that they both generate ontogenic adaptations. Thus

the ontogeny, as the history of the structural changes of a system, is not

exclusively a consequence of structural coupling but also a consequence of

the internal dynamics of the system itself.


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5.- The genesis of the world economic system

If we observe the recent history of capitalist economic relationships

among human beings, we can appreciate how, step by step, these

relationships have been extending beyond the borders of national capitalist

economic systems (systems with different structures but with identical

organization), ultimately reaching a point where it is difficult to distinguish

some systems from others. The borders of these systems have been diluted

while a new border has appeared, allowing us to distinguish an almost-

worldwide capitalist economic system (world economic system) from its

environment.

Economic relationships that reach beyond borders of national economic

systems are nothing new; they have existed ever since the origin of these

systems. But something has changed in recent years, especially since the

mid-1970s: the intensity of these relationships. The process of generation of

the world economic system via the massive extension of capitalist economic

relationships among human beings and beyond the borders of national

capitalist economic systems since the mid-1970s we denominate as

economic globalization or globalization of the economy.10

For observers able to distinguish at present a world economic system,

as is our case, the globalization of the economy (as genesis of this system)

has already finished; but for observers yet unable to distinguish this system

(although they may perceive alterations in the borders of national capitalist

economic systems) globalization is still taking place. Therefore, from our

perspective, the present intensification in capitalist economic relationships

among human beings within the world economic system is simply the

development of this system.

However, the borders of the world economic system do not seem to be

fixed; quite the opposite. The loss of identity of the national socialist economic

10 In fact, the phenomenon is the globalization of the capitalist economic relationships among human beings, and not the globalization of economy.


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systems of Eastern Europe, and their later disintegration, allowed territorial

expansion of the world economic system while this system was emerging. If

the same thing happens to the surviving national socialist economic systems,

the world economic system will continue its territorial expansion. We could

say the same with respect to local communitarian economic systems.

The most important characteristic of globalization is its spontaneity;

once 'the sufficient conditions occurred ... it happened in an inevitable way'

(Maturana and Varela, 1991: 43). This spontaneity assumes that the world

economic system has no necessary purpose (i.e. the system may not have

an underlying plan that becomes evident with its behaviour over time). We

believe that the world economic system has not arisen for a purpose, but

spontaneously, and there is no teleological determinism in its rise. Therefore,

the attribution of purpose to this process belongs entirely to 'the reflective

dominion of the observer, as the commentaries he or she makes when he or

she is comparing and explaining his or her distinctions and experiences at

different moments from his or her observing' (Maturana, 1994: 29).

Nevertheless, the apparent determinism of the spontaneity is only a

posteriori determinism; if we know the complete sequence of events that

ended with the emergence of the phenomenon, here globalization, we can

conclude that the phenomenon was spontaneous. A priori, we can only affirm

the determination of a phenomenon if the same conditions allowing the

previous emergence of this phenomenon re-occurred exactly: an impossibility

due to the irreversibility of time. We derive here that the only valid concept of

time is historic time (or irreversible time), which is that interval where 'the

content of a moment depends on the content of every previous moment'

(Granger, 1955: 157).

Like purpose, chance does not exist in phenomenological dominions.

Chance belongs entirely to the reflective dominion of the observer, because

every phenomenon has its causes without which said phenomenon could not

take place. The observer calls random every phenomenon whose sequence


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of previous events is not known, and chance has therefore become

determinism, since the observer has more knowledge of the sequence.

Considering this, we can affirm that globalization of the economy took

place when suitable conditions occurred. Those conditions, known a

posteriori, would be linked with the triumph of Neo-Liberalism as the dominant

ideology, allowing trade and financial opening of the national capitalist

economic systems, as well as a technological revolution based on information

and communications technologies, which have permitted the maintenance of

economic relationships without space-time simultaneity by transferring activity

to a virtual dimension.

The disintegration of national socialist economic systems occurred

simultaneously with the globalization process, permitting the territorial

expansion of an emergent world economic system. Nevertheless, the

disintegration itself cannot be considered a cause of this emergence.

Neither was the triumph of Neo-Liberalism, nor the technological

revolution, enough to bring about globalization; it was essential that human

beings, both individually and collectively, decided to increase their trans-

border economic relationships. Ultimately, it was the collective will of the

human beings who composed the national capitalist economic systems that

caused the triumph of Neo-Liberalism, the technological revolution, and the

increase in trans-border economic relationships.

Therefore, we have an 'uncaused cause' (Hodgson, 1993: 219) in the

will,11 the root cause of every social phenomenon linked with the fact that

human beings have a nervous system, a conduct, a capacity to know, a

capacity to modify their conduct, and a capacity to learn.

11 From a phenomenological perspective, the individual will is the result of a series of complex neuronal processes, unknown by the observer but biologically determined. However, in the economic phenomena dominion the individual will appears to the observer as an indeterminate behaviour of the human being. The collective will would be the result of a communication process among human beings, each with a will that is biologically determined and independent.


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'The human, purposeful agent... can change goals, and furthermore this

may happen without any stimulus from outside.... The capacity to change

both behaviour and goals without external stimulus means that humans

have a will, and that some of our choices are real ones' (Hodgson, 1993:

219).

Summarizing, from our perspective as observers, we can say that

globalization, as a process of the spontaneous appearance of a world

economic system, has been the result of a combination of innumerable

individual and collective decisions, made by countless human beings

belonging to different national capitalist economic systems, from which the

massive extension of trans-border capitalist economic relations has been

derived.


31

6.- Self-regulation and the ontogeny of the world economic system

Self-regulation of the world economic system consists of permanent

neutralization of the disturbances that shake this system, coming either from

without (the world ecosystem or other non-capitalist economic systems), or

from within (human beings).

The latter internal disturbances and the regulation of the system lead us

to the concept of agent. We can define an agent as:

'an organization or an individuality, which lives in society and makes

decisions, that is to say, that combines its instrumental-variables with its

objective-variables according to its information and its potentiality and

resorting to the memory to elaborate its project' (Perroux, 1981 [1984]:

81).

Therefore, an agent would be a human being, or a group of human

beings, with social relationships and the capacity to make decisions. It is

useful here to differentiate between an individual agent (a human being) and

a collective agent12 (a group of human beings: family, company, association,

government, political party, union, supranational organism...).

The world economic system, as a social system, is composed of agents

who are responsible for internal disturbances and the regulation of the

system. Therefore, the world economic system is regulated from within by the

agents who compose it through their capacity to make decisions. Self-

regulation of the world economic system is thus based on the uncaused

cause, the will of agents; the self-regulation of the world economic system is,

a priori, indeterminate.

However, this indeterminacy is only partial, because we can observe

certain regularities in the decisions of different agents. Following the principle

of partial indeterminacy, 'it is not the case that at a certain moment literally

12 North (1990: 5) denominates collective agents as 'organizations or organisms', understood as 'groups of individuals bound together by some common purpose to achieve objectives'.


32

anything may happen next – rather that several different things could happen

and one of them will' (Thorp, 1980: 68).

The regularity of the decisions of different agents rests in the fact that

they live in society and present cultural behaviours,13 which are understood

as 'the behavioural configurations that are acquired ontogenically [by human

beings] in the communicative dynamics of a social medium, and that remain

stable through generations' (Maturana and Varela, 1985 [1990]: 170). In other

words, decisions of agents are conditioned by the culture in which they are

immersed; from the perspective of the observer, actions of agents will be

determined partially by their culture and undetermined partially by their will.

Thus can the behaviour of agents be said to have deliberate aspects (choices

or decisions) and non-deliberate aspects (habits).

Based on decisions of agents, it might be assumed that agents can act

in various possible ways, and they can even change their objectives without

need of external stimuli, because decisions are real and the will of the agents

is inherent within them. Nevertheless, agents have powers of imagination and

creativity limited by their own experience and the habits of thought of the

culture to which they belong. Therefore, real indeterminacy, as a

consequence of the will, is restricted by culture, and the set of decision

possibilities for agents is limited (Hodgson, 1993: 222--4).

We denominate institutions those 'settled habits of thought common to

the generality of men' (Veblen, 1919: 239). We will now define 'world

economic institutions' as those norms and behaviour guidelines commonly

accepted by agents in the world economic system. These institutions are the

result of previous decisions made by the agents, and they constitute a priori

decisions – as opposed to the ipso facto decisions made in the face of a

dilemma. From this perspective, institutions represent limitations for the

agents. 13 Cultural behaviours, transmitted across generations, had their origin in prior decisions; transmission and acceptance of cultural behaviours are consequences, again, of decisions. In the last instance, the cultural behaviours are the fruit of the will.


33

'Institutions are the rules of the game in a society or, more formally, the

humanly devised constraints that shape human interaction…. Institutions

reduce uncertainty by providing a structure to everyday life.... institutions

define and limit the set of choices of individuals.... both formal constraints

– such as rules that human beings devise – and informal constraints –

such as conventions and codes of behaviour' (North, 1990: 3--4).

But not every decision made by agents comprising the world economic

system, nor every institution of the system, has regulation of the system as its

purpose. Reasons generating the different decisions from the agents, and

those generated by present institutions in the world economic system, are of

very different nature and only some of the innumerable decisions and

institutions are focused on system regulation. Those that do can be called

regulating decisions and regulating institutions; and the agents who make

regulating decisions would be regulating agents.

Regulating institutions and regulating agents constitute self-regulation

mechanisms of the world economic system; the former would be the

automatic self-regulation mechanisms14 of the system and the latter would be

the deliberate self-regulation mechanisms of the system. The behaviour of

these mechanisms is responsible for the structural stability and the history of

structural changes of this system, allowing it to adapt to changes in its

ambience, or to other internal changes, without losing its capitalist identity.

That is to say, the self-regulation of the world economic system is responsible

for its ontogeny.

However, as we have already affirmed, decisions of the regulating

agents are conditioned by the culture in which they are immersed; in

particular, a specific expression of the culture is what conditions those

decisions, constituting the ideology. By ideology we understand 'a set of

ideas and values concerning the political order whose function is to guide

14 It is 'automatic' because the decision comes prior to the event over which the decision must be made (a priori), and it works as a rule, eliminating the possibility of an ipso facto decision.


34

collective behaviour' (Bobbio and Matteucci, 1976 [1982]: 'ideología').

Therefore, the ideology of the regulating agents of the world economic

system would be a coherent set of ideas and values concerning the

regulation of this system, and whose function is to guide the behaviours

(decisions and habits) of the agents.

The ideology, as a specific expression of a certain culture, composes

the 'cultural code', which works like a 'genetic code' of the system (Morin,

1973 [2000]: 237--238), and which constitutes the ideological code of the

world economic system.

At present, the dominant ideology among the regulating agents is Neo-

Liberalism,15 which came to replace Keynesianism, which had prevailed in

national capitalist economic systems between World War II and the systemic

crisis of 1970s. Neo-Liberalism, as ideological code of the world economic

system, inspires not only most of the decisions of the regulating agents, but

also most of the present-day regulating institutions. As long as no ideological

change occurs to mutate this ideological code, it will continue to inspire

institutions and regulating decisions. Therefore, present self-regulation of the

world economic system is based on the Neo-Liberal ideological code (i.e.

Neo-Liberalism).

As long as the regulating decisions inspired by Neo-Liberalism or Neo-

Liberal regulating institutions are able to generate structural changes in the

world economic system, allowing it to adapt to inner changes, and those

produced by its ambience, and thereby maintaining its identity, Neo-

Liberalism will continue as the ideological code of this system. Nevertheless,

if and when those self-regulation mechanisms fail, there will be either an

ideological change in the regulating agents of the world economic system, or

this system will lose its capitalist identity, disintegrating the system as such.

15 We can define Neo-Liberalism as that ideology which has as basis minimal intervention by the State and maximum freedom for the agents that participate in economic activity.


35

7.- The regulating agents of the world economic system

The regulation of the world economic system by different agents

constitutes a power exercise, 'a set of actions upon other actions' (Foucault,

1982: 15), because power is not 'an institution, a structure, or a certain force

with which certain people are endowed; it is the name given to a complex

strategic relation in a given society' (Foucault, 1978: 93); and it is 'a more-or-

less organized, hierarchical, co-coordinated cluster of relations' (Foucault,

1980: 198). Thus no one has exclusive power to regulate the world economic

system; it is a diffuse power (Strange, 1988; 1996) exerted by innumerable

agents, who will be more powerful if their actions (deliberate or non-

deliberate) are able to condition the actions of other agents, obtaining a

regulation of the world economic system that remains close to their interests.

In an initial approach, we can identify two types of regulating agents:

direct ones, whose deliberate actions condition the regulating actions of a

majority of agents; and indirect ones, whose deliberate actions condition the

actions of the direct regulating agents. Thus, the deliberate actions of an

indirect regulating agent will condition the deliberate actions of a direct

regulating agent, whose actions will further condition the regulating actions of

most other agents, including that indirect regulating agent whose deliberate

actions initially conditioned the deliberate actions of the direct regulating

agent before him. The exercise of power can be said to have not only a

reticular and diffuse character, but also a recursive16 one.

In a second approach, we can classify all the regulating agents into five

broad groups: individual regulating agents, sub-national regulating agents,

national regulating agents, trans-national regulating agents, and supra-

national regulating agents. In most cases, the capacity for regulation by these

agents is indirect, and it is based on the capacity to condition the actions of a

few direct regulating agents (e.g. the governments of the great economic

powers, the G-8, the United Nations System, etc.). 16 Something is 'recursive' if it is defined in terms of itself.


36

We can subdivide individual regulating agents into two groups: citizens

and opinion leaders. On the one hand, particular citizens who are worried

about the behaviour of the world economic system, and who bear it in mind

while voting or while participating in public demonstrations of a political

nature, are regulating agents. The power exercise of each individual citizen is

scarcely relevant to the regulation of the world economic system, but a

coordination of individual decisions by citizens can become very relevant, for

example by altering the composition of a government via elections, or by

popular revolution, or by seeding terror through violent action.

On the other hand, opinion leaders can condition the regulating actions

of other agents simply by expressing opinions in the mass-media, protected

by their authority or by their capacity for persuasion. Among these we could

emphasize: governors and ex-governors of great economic powers; leaders

and ex-leaders of supra-national organizations; leaders and ex-leaders of

trans-national organizations of varying type; religious, guerrilla and terrorist

leaders; successful businesspeople; artists, sports figures and intellectuals of

international prestige; etc.

Sub-national regulating agents are those collective agents whose

members belong to a particular sphere which is inferior to the national (i.e.

local or regional). These would include governments, political parties,

enterprise associations, unions, non-governmental organizations, terrorist

organizations, think tanks, etc., of a sub-national territorial scope. Their

capacity to influence the regulation of the world economic system depends,

fundamentally, on their capacity to act deliberately upon the deliberate

actions of the governments of the nations they compose, and on the capacity

of those governments to act upon most of the regulating actions of the

system.

National regulating agents are those collective agents whose members

belong to a single, unified national territorial sphere. In this sense, national

governments are agents which have a greater ability to act deliberately upon


37

the regulating actions of most agents, so long as they are direct regulating

agents (governments of great world economic powers) or able to condition

the actions of such. Other national regulating agents (political parties,

enterprise associations, unions, non-governmental organizations, terrorist

organizations, think tanks, etc.) try to condition, through deliberate actions,

the deliberate actions of the national governments or other direct regulating

agents.

Trans-national regulating agents are those collective agents whose

members belong to different national scopes without representing the

collective will of the agents of those scopes. International federations of

political parties, unions and enterprise associations; trans-national

companies; trans-national non-governmental organizations; international

federations of alternative social movements; terrorist networks; trans-national

think tanks; and other trans-national organizations such as the Trilateral

Commission, the World Economic Forum, and the World Social Forum, can

all be emphasized in this field. These agents try to condition, through their

deliberate actions, the deliberate actions of direct regulating agents.

Supra-national regulating agents are those collective agents whose

members belong to territorial scopes of different nations while representing

the collective will of the agents of those territorial scopes; that is to say,

international organisms in which the governments of different nations

participate. Here we can distinguish four sub-groups: universal international

organisms (every organism pertaining to the United Nations System);

international organisms of regional integration (EU, MERCOSUR, CAN,

CAIS, CARICOM, ASEAN...); sectorial international organisms (OPEC,

OECD, the Arab League, NATO...); and a special international organism, the

G-8 (or Group of the Eight, composed of rich countries including the United

States, Canada, the United Kingdom, France, Germany, Italy, Russia, and

Japan, as well as a representative of the European Union, and whose chief

executives meet informally).


38

The most characteristic aspect of the regulation of the world economic

system, as opposed to national economic systems, is the absence of a main

regulating agent such as a world government might be. The world economic

system has no 'brain' as such; the diffuse, reticular and recursive character of

power exercise is more clearly perceived, and regulation of the system is the

result of more or less coordinated interaction among innumerable agents.

Nevertheless, though we cannot speak of a world government, we can point

to two supra-national regulating organisms which very much resemble world

government. These are the G-8 and the United Nations System.

On the one hand, the G-8 is what we might denominate a world

pseudo-government (or false world government), an agent whose deliberate

actions are effective and similar to those of a world government, though

lacking in the form and legitimacy of a world government. It is an exclusive

club of great economic powers, deciding upon the regulation of the world

economic system, considering their own interests but not necessarily those of

all the agents who belong to the system. Because the G-8 gathers together

the governments of the great world economic powers, its decisions are

tantamount to deliberate regulatory actions within the national purviews of

those governments, as well as being actions upon the deliberate actions of

other national governments, and on the organisms of the United Nations

System, effectively forcing regulatory compliance. In this way, G-8 decisions

condition the actions of many other regulating agents of the world economic

system.

On the other hand, the United Nations System constitutes what we

might call a world proto-government (or embryo of world government),

integrated by specialized organisms, connected organs, and diverse

programs (World Bank, IMF, WTO, ILO, WHO, FAO, UNIDO, WTO,17

UNCTAD, DUNP, UNEP, UNICEF...) which function much like sectorial

ministries. United Nations has a certain legitimacy to represent (albeit in a 17 The first WTO is World Trade Organization and the second WTO is World Tourism Organization.


39

defective way) the collective will of a majority of the governments of the world,

themselves representing the collective will of the agents within each nation.

This legitimacy allows deliberate actions by United Nations to condition the

actions of many other regulating agents of the world economic system.

However, the effectiveness of these deliberate regulating actions will depend

on an absence of conflict with decisions made by the G-8.

As previously stated, the Neo-Liberal ideological code inspires most

deliberate actions or decisions made by regulating agents of world economic

system, because agent actions are determined by the culture in which they

are immersed (i.e. by the cultural code to which the ideological code

belongs). However, since the deliberate actions of these agents are also

made partially indeterminate by their will, many do not correspond to the Neo-

Liberal ideological code. If an agent acts systematically at the margin of this

code, that agent can be considered an 'individual deviation [that] introduces

new behaviour patterns, which can extend toward becoming a custom'

(Morin, 1973 [2000]: 199--200). In fact, alternative social movements of

varying scope and the World Social Forum presently constitute the most

important deviations attempting to introduce into the regulation of the world

economic system behaviours derived from a different ideological code. We

can denominate such as an alternative ideological code.


41

8.- The regulating institutions of the world economic system

The regulating institutions of the world economic system (norms and

behaviour guidelines that are accepted by most individuals or groups that

operate in the world economy) also derive from the ideological code of the

system, and most have a Neo-Liberal character.

Some of them, called established norms (formal limitations), are the

result of prior deliberate actions made by the regulating agents of the system.

By indicating appropriate behaviour for agents facing a dilemma, and based

on the values of the ideological code, these norms limit the decision capacity

of the agents and simplify their process of decision making.

In other cases, institutions, which act as behaviour guidelines (informal

limitations), are not the result of prior decisions; rather, they represent non-

deliberate behaviour by the agents (at least with respect to the regulation of

the world economic system), usually an automatic behaviour or habit, also

derived from the values of the ideological code, which has been considered

appropriate and internalized unquestioningly by the agents.

We can identify innumerable examples of world regulating institutions;

most relevant are the free determination of currency exchange rates in

currency markets, the free circulation of capital among national economic

systems, the free circulation of merchandise and services among national

economic systems, the free circulation of workers among national economic

systems, and business freedom (freedom to install in any national economic

system and freedom to contract productive factors, inputs, and products). In

most cases, these institutions are no more than the transfer to a worldwide

scope of institutions already existing in the scope of the national capitalist

economic systems, once these institutions have assumed Neo-Liberalism as

their ideological code.

The free determination of currency exchange rates in currency markets

is a behaviour guideline assumed to be most effective by most of the

monetary authorities of the various national economic systems. From this


42

perspective, most main agents believe that the world economic system works

better with floating exchange rates, and that the exchange rate is an indicator

of the behaviour of the national economic system to which it applies.

Therefore, most agents are against intervention into these markets by

monetary authorities, who therefore scarcely intervene in currency markets,

except on rare occasions, such as with the maintenance of the fixed

exchange rate of the Argentine peso with the dollar in the 1990s, or

interventions in favour of the euro and yen at the beginning of the present

decade. From this perspective, this institution is basic to the existence of free

circulation of capital, because it guarantees an international exchange

mechanism that is agile and sensitive to the behaviour of the national

economic systems, for example, in orienting short-term investment decisions.

The free circulation of capital among national economic systems is,

unlike the previous institution, a norm found in the legislations of the various

national economic systems. Since the beginning of the 1990s, these systems

have been modifying their legislative frames to allow the entry and exit of

capital, both long- and short-term. From this perspective, we can surmise that

the world economic system works better if capital can operate in those

markets offering better investment opportunities. Therefore, such norms allow

the expansion past national borders of financial intermediation between

savers and investors.

The free circulation of merchandise and services among national

economic systems is another institution adopting the status of norm. It can be

found in multilateral commercial agreements (like GATT, GATS, or TRIPS); in

Free Trade Agreements (like NAFTA or ALCA, currently under negotiation); in

regional integration agreements (like EU, MERCOSUR, or CAN); and in the

trade legislations of different countries. Based on the theory of comparative

advantage, free trade might be said to act in favour of the efficiency of the

world economic system, because it allows the productive specialization of


43

different territories, whether or not they are national economic systems,

bringing about an increase in world production and in global welfare.

The free circulation of workers among national economic systems is a

very particular institution. While the legislations of most national economic

systems fight against it through dissuasive measures, this institution is

without doubt a behavioural guideline accepted by most agents belonging to

underdeveloped national economic systems, as well as by some agents

belonging to developed national economic systems (as for example in the

case of companies requiring immigrants as a cheap labour force). Every one

of these agents considers that the displacement of workers (from national

economic systems where excess labour supply exists, to national economic

systems where labour demand is excessive) contributes toward increasing

world production as much as the standard of living of immigrant workers and

their families.

Business freedom is a complex institution, itself composed of other

institutions such as the freedom to establish productive activities in any

national economic system, or the freedom to contract capital (as in non-

intervened national financial markets), or workers (as in flexible national

labour markets), or goods and services, like inputs or consumption products

(as in non-intervened national product markets). From this perspective, it can

be considered that for the world economic system to work properly, it is

essential that companies be able to locate their production, totally or partially,

in those territories where unit costs are lowest and where they can rely upon

free markets for their products, their inputs, and their productive factors.

Hence they may obtain greater production at a lower cost, with positive

effects on business profits and world consumption prices.


45

9.- The subsystems of the world economic system

Distinguishing a world economic system in the domain of economic

phenomena does not preclude the distinction of other inner economic

systems by means of specific criteria. In fact, taking as our criterion a specific

form of regulation (national laws), we can clearly distinguish national

economic systems (or national economic subsystems) within the world

economic system. But the former are not autonomous, and while they have a

capacity to self-regulate, it is confined to smaller aspects and does not

significantly affect the maintenance of structural stability for the world

economic system. The vital aspects of economic behaviour are currently

regulated beyond national borders, the world economic system being the only

self-regulated and autonomous system. As a consequence, every territorial

economic system of less-than-global dimension is regulated, at least partly,

by the self-regulation mechanisms of the world economic system, which exist,

in great part, outside of said territory. Therefore, these systems will be

regulated from outside; that is to say, they are allonomous systems18

(Whitaker, 1998 [2003]: 'allonomy' and 'autonomy'). However, because an

allonomous territorial economic system is a part of the autonomous world

economic system, the former participates in the self-regulation mechanisms

of the latter; and the greater the degree of participation in the self-regulation

mechanisms of the world economic system, the smaller its allonomy. For

example, the degree of allonomy of the national economic system of the

United States is sensibly inferior to that of the national economic system of

Trinidad and Tobago.

Alongside the national systems, regional economic subsystems

(regional blocks) are the most important subsystems that we can distinguish

inside the world economic system. In fact, among observers who do not yet

distinguish an autonomous world economic system, many consider that the

18 This term derives form the expression 'allonomy' meaning 'controllable from outside', as opposed to 'autonomy' (Whitaker, 1998 [2003]: 'allonomy').


46

transference of self-regulation capacity has taken place between national and

regional economic systems, which they can distinguish, either as an early

step toward conformation with a world economic system, or as a measure

taken against the tendency to conform.

Regional economic subsystems are subdivisions of the world economic

system by virtue of the regional intensity of trade, financial, and migratory

flows. If we identify the regional territories with greater economic dynamism

(centres), we can observe that they behave like centres of gravity in a

constellation toward nearby territories (peripheries) with which they keep

intense relations (Prebisch, 1949). Flows from the centres toward the

peripheries usually include flows of capital (varied foreign investments and

remittances by emigrants) and flows of products of high added value (goods

and services with high technological content); flows from the peripheries

toward the centres generally include flows of capital (repatriation of profits

and withdrawal of foreign investments), flows of products of low added value

(raw materials and products with low technological content), and flows of

workers (immigrants).

With these criteria it is possible distinguish regional subsystems

regardless of the existence of ongoing integration processes; however, and

due to globalization, the distinction between these subsystems is not

particularly easy to perceive, because borders are no longer clear.

With greater clarity we can distinguish what might be called the

American subsystem, with its centre in the United States and Canada and its

periphery in Latin America and the Caribbean. With relative clarity, we also

distinguish a Euro-Mediterranean-African subsystem, with its centre in the

European Union and the EFTA and its periphery in the countries of Central

and Eastern Europe (not within the European Union), as well as in countries

of the Magreb and Middle East and in Sub-Saharan Africa. With still less

clarity, we can also distinguish a Pacific-Asian subsystem, with its centre in

Japan, Australia, and New Zealand and a very heterogeneous periphery


47

comprised by Mongolia, China, Taiwan, South Korea, the countries of

ASEAN, the Indian subcontinent, and some islands of the Pacific.19

However, by employing sectorial criteria in the process of distinguishing

allonomous subsystems (as the economic relationships taking place in the

productive process, or in markets of products or factors, both capital and

labour), instead of territorial criteria, we may distinguish four allonomous

sectorial economic subsystems as parts of the world economic system: the

world productive subsystem, the world trade subsystem, the world monetary-

financial subsystem, and the world labour subsystem.

These subsystems would each have their own mechanisms of

regulation, being sectorial divisions of the self-regulation mechanisms of the

world economic system; and we denominate as regimes these mechanisms

of regulation for each sectorial subsystem. This concept also can be defined

as 'principles, norms, rules and decision making procedures, around which

actor expectations emerge in a given area of the international relations'

(Krasner, 1982: 186).20 Thus, considering the sectorial divisions of the world

economic system into subsystems, the regimes would be: the world

productive regime, the world commercial regime, the world monetary-financial

regime, and the world labour regime.

Some of these self-regulation mechanisms would be automatic

(sectorial regulating institutions), whereas others would be deliberate

(sectorial regulating agents). Among the mechanisms of deliberate self-

regulation in the different sectorial subsystems we could include, for example:

UNIDO, FAO, and WTO (productive subsystem); WTO21 and UNCTAD (trade

19 If and when North Korea and Cuba pass toward Capitalism, they will become parts of the Pacific-Asian subsystem and the American subsystem, respectively. 20 This definition of 'regimes' includes the sectorial regulating institutions and the ideological principles, but does not include the sectorial regulating agents. We include sectorial regulating institutions and agents, but exclude the ideological principles. 21. The first WTO is World Tourism Organization and the second WTO is World Trade Organization.


48

subsystem); IMF and World Bank Group (monetary-financial subsystem); and

the ILO (labour subsystem).


49

10.- The evolution of the world economic system

The world economic system, in spite of maintaining a certain structural

stability, cannot remain invariable, but will instead evolve in time through a

chreod,22 understanding by chreod a relatively stable trajectory of the

development of a system (Waddington, 1957). Thus, although 'environmental

influences may operate in such a way as to tend to push the system off the

trajectory... the canalization of chreod... will tend to bring the system back on

to the normal path again' (Waddington, 1969: 366).

In other words, the multiple disturbances that permanently shake the

world economic system are continually neutralized by the behaviour of its

self-regulation mechanisms, guaranteeing the structural stability of the

system. The majority of disturbances are neutralized by the regulating

institutions, whereas others specifically require the decisions of regulating

agents.

These self-regulation mechanisms limit the drift of the system in its

evolution and contribute to the conformation of chreod. And because the

mechanisms are the result of the development of the Neo-Liberal ideological

code of the world economic system, the chreod by which this system evolves

will be an ideological chreod (the Neo-Liberal chreod). As long as the

aforementioned mechanisms act correctly, the evolution of the world

economic system will be guided by Neo-Liberalism.

Nevertheless, when a disturbance cannot be neutralized by the self-

regulation mechanisms of the world economic system, and in order to avoid a

situation of deep structural instability, particular agents could make decisions

to generate small structural changes, allowing the system better adaptation to

the new situation. These changes would guarantee a new structural stability,

coherent both with the capitalist organization of the system and with its Neo-

Liberal ideological code. We can denominate such changes as minor

22 The term 'chreod' was coined by Waddington (1957) from the Greek expressions 'chre' (destiny or necessity) and 'hodos' (path or way).


50

structural changes, as opposed to major structural changes, which are the

result of changes in the ideological code.

'The cultural code… [and the ideological code as its component] can be

modified... under the effect of certain events... arising directly from the

phenomenal experience of society. Such events can have their origin in

modifications of the natural ecosystem that have repercussions on social

practice, provoking new customs, new rules, and, more likely, new

techniques and new myths. They can also have origin in contacts with

neighbouring societies, through which a culture can integrate techniques,

consumption products, ideas, etc., coming from a foreign culture. Finally,

they can arise from the life of the society itself, where the individual

deviation introduces new patterns of behaviour which can extend until

they become custom, or where a new invention is finally integrated in its

cultural capital' (Morin, 1973 [2000]: 199--200).

A change in the ideological code, or ideological mutation, necessarily

implies a chreodic jump, an abrupt change of evolutionary trajectory, the

displacement of the system from one chreod to another. This is so because

the development of the new ideological code will generate new regulating

institutions and new regulating decisions, as well as new regulating agents.

But this ideological mutation will not occur easily, and it likely only when

the world economic system is facing a catastrophe, a situation of extreme

instability, where points of evolutionary bifurcation exist, as can only happen

when a system is in the midst of structural crisis; understanding by crisis:23

'an increase of the disorder and the uncertainty in a system... caused

by... the blockage of organizing devices, especially those of regulating

character... determining, on the one hand, rigid coercions, and on the

other hand, the unfreezing of potentialities that were inhibited until then'

(Morin, 1973 [2000]: 165).

23 Boyer (1987 [1992]: 67--85) made a typology of the crises of an economic system that included the structural crises.


51

Until now, the world economic system has suffered no such structural

crisis, although such a crisis might occur at any time; we cannot say a priori

whether a crisis will or will not be structural until it has almost completely

developed. Nevertheless, if a combination of disturbances arise that could not

be neutralized by the self-regulation mechanisms of the system (due to a

mutual incompatibility between the recovery of the structural stability of the

system and the institutional frame and ideological reference of the agent

decisions), we can consider this situation a structural crisis.

Here, various agents, unblocking their inhibited potential, would rush to

break with the institutions, to commence with survival strategies and to build

new self-regulation mechanisms of the world economic system, according to

ideological values considered more suitable to the new situation. The new

ideological code, the new institutions, and the new decisions of most agents

of the world economic system will be different depending on what agents

obtained that their actions conditioned a majority of the actions of other

agents. We dominate this fact as ideological mutation, which is consequence

of chreodic jump.

Therefore, at any time, certain combinations of disturbances, whether

from within the world economic system itself, or the economic systems of its

environment, or the world ecosystem, could trigger an ideological mutation,

always safeguarding the capitalist organization that identifies it, though

meanwhile altering its structure. That is to say, the world economic system

could cease being Neo-Liberal while remaining capitalist.

'In policy terms, although the existence of chreodic-type developments

implies that small, marginal adjustments towards a more optimal path of

development are generally ineffective, it does leave open the possibility

of the planned transition from one chreodic path to another. Indeed, such

a transition may be necessary if the chreodic path is approaching a

"catastrophe"' (Hodgson, 1993: 259).


52

A good example of ideological mutation can be found it in the

immediate antecedents of the appearance of the world economic system.

When the crises of the 1970s--1980s took place (the crisis of the gold-

exchange standard, the energy crisis, the crisis of Fordism, the debt crisis,

the crisis of the Welfare State, etc.) the deliberate and automatic self-

regulation mechanisms of the different national capitalist economic systems

failed, and they were not able to guarantee structural stability for a period of

time. Until an ideological mutation took place, and the existing ideological

code was replaced by a new one, the self-regulation mechanisms could not

recover their operative capacity. The aforementioned ideological mutation of

national capitalist economic systems amounted to the substitution of

Keynesianism for Neo-Liberalism as the dominant ideological code,

effectively making a chreodic jump from a Keynesian evolutionary trajectory

to a Neo-Liberal one. Thus, since the mid-1980s, Neo-Liberal self-regulation

of the national capitalist economic systems has once again guaranteed the

structural stability of such, allowing integration into the world economic

system.

A number of changes resulted from the above shift. Changes in the

institutional frameworks of the national capitalist economic systems were

related to the disappearance of certain institutions (for example, the gold-

exchange standard, or the necessity of administrative authorization for the

circulation of capital among national economic systems), as well as to the

appearance of new institutions (like the free fluctuation of exchange rates in

currency markets, or the free circulation of capital among national economic

systems). In addition, new regulating agents appeared (the WTO, the G-8,

and the World Economic Forum) while others altered direction (e.g. the

change of functions of the IMF).24

24 The new institutions and the new regulating agents are already linked to the regulation of the world economic system, because the development of the institutional frame was simultaneous to the globalization process. Other regulating agents which do not share the Neo-Liberal ideological


53

Thus, the national capitalist economic systems were able to survive the

structural crisis of the 1970s-1980s by a jumping of chreod; that is, they were

able to keep their identity thanks to an ideological mutation resulting in the

world economic system. Nevertheless, most national socialist economic

systems were not able to survive this structural crisis and were extinguished,

losing their socialist identity and being 'phagocyted' by the rising world

economic system.

So, in summary, the world economic system can undergo an a priori

unpredictable structural crisis at any time; consequently either an ideological

mutation would arise allowing it to keep its capitalist identity25 and to evolve

by a new chreod, or the system would be disintegrated by the loss of its

capitalist identity, occasioning a different world economic system or a group

of equally different territorial economic systems.

Furthermore, 'a feasible transition can be instigated either at early stage

of development of a chreodic path, close to the point of bifurcation, or even

later with a sufficiently large investment in resources' (Hodgson, 1993: 259).

That is to say, it is possible that certain agents acting under a different

ideology from the dominant (Neo-Liberal) one could try to force a chreodic

jump when the world economic system is not yet facing a catastrophe. But

unless the world economic system had already undergone a chreodic jump a

short time before (which is not the case), the agents would need to mount an

enormous effort, making such an action highly improbable. Therefore, the

best strategy for such diverted agents who insist on causing a chreodic jump

would be to prepare for that moment at which system is close to catastrophe,

when they might be able to offer an ideological alternative permitting a new

chreodic development in which the world economic system could recover

structural stability while maintaining its capitalist identity.

code also arose as 'deviations', such as the World Social Forum or alternative social movements, also inadequately denominated anti-globalization movements. 25 Why could this not occur by means of a substitution of the Neo-Liberal ideological code for an alternative ideological code constituted by the values defended by the World Social Forum?


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11.- Conclusions

At this point, it may be said that we have offered a scientific answer to

the question 'What is the world economic system for us as observers?',

developing a proposal of mechanisms whose functioning generates every

phenomenon involved in that question.

Summarizing, the world economic system is a social system:

a) which arose spontaneously, when the conditions for it occurred, as a final

consequence of the will of the human beings who compose the system;

b) which has the capacity to self-regulate, thanks to the existence of

institutions and continuous decisions by innumerable agents who have a

specific ideology, Neo-Liberalism, as reference; and

c) the evolution of which depends on the capacity of these self-regulation

mechanisms to neutralize disturbances, whether from outside or from

within, while never losing the capitalist identity of the system (although

ideological changes are sometimes necessary).


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