Walker reviews Adam Smith in Beijing

To: Retort
From: DW

Karl Marx Between Two Worlds: 
The Antinomies of Giovanni Arrighi’s Adam Smith in Beijing
Richard Walker
March 2008

[Dick Walker has agreed to circulate a draft of his response to Arrighi's Adam Smith in Beijing, written for the 2008 Historical Materialism forum. IB]

The sheer historical and geographical sweep of Adam Smith in Beijing is enough to give one pause about trying to frame a reply.  Arrighi’s knowledge of global economics and politics over the centuries is certainly impressive, and it speaks well to the staying power of the Braudel School of meta-history deeply informed by geography.  And one can only applaud the effort to go beyond Europe and America in telling the story of the origins of contemporary world-historical shifts in economic and political power.

Arrighi’s starting and ending point is China, with the tale pivoting on the state of the American empire today.  China’s astounding economic development of the last generation poses a huge problem for American hegemony, one that the US higher circles are puzzling over.  To Arrighi, the outcome is clear: the American Century of global dominance is in terminal crisis.  China is bound to resume its historic place as the eastern pole of (economic) civilization and America’s day in the sun is sure to be eclipsed, both by virtue of China’s deep well of human and cultural resources and by the geographic logic of historical capitalism.   

At this level of generality, one is hard pressed to disagree: only a fool (and his Vice President) would think that the United States is forever destined to be the center of the world; that China would not be back one day from a century of chaos and defeat (1850-1950); and that the US military can keep a lockdown on a global system of six billion people.  Arrighi’s political motivations, at the broadest level, are equally difficult to differ with.  He detests the thuggery of the Bush/Cheney years and wishes to ring down the curtain on the whole beastly arrogance of American power.  He disdains Eurocentricism and its corrupting influence on the ideology of the Euro-American axis, including that of the Left.  And he wants to bring the world of humanity together, at the very least by a recognition of its common, interconnected history.

On the theoretical front, Arrighi comes well armed for his worldly task.  He brings an impressive theory of sequential re-centering of historical capitalism, taken from Fernand Braudel and developed in his opus, The Long Twentieth Century.  He returns to the father of modern political economy, Adam Smith, whom he seeks to reclaim from the death-grip of his über-liberal disciples in bourgeois economics.  And he draws on Marxism through a dialogue with two of its major avatars of our time, David Harvey and Robert Brenner.  Arrighi is a formidable and respectful interlocutor, who never takes his subjects lightly.

Arrighi really shines in two regards.  One is to make geographical dynamics central to world history.  This means, on the one hand, to see the global economy as more than the adding up of the development histories of many places or, worse, the simple spread of capitalism from one country to another.  On the other hand, it means embedding economic history in the politics of the international state system, featuring the use of force, imperial expansion, and the role of hegemonic powers. (He actually seems to relish diving into debates over imperial strategy in Foreign Affairs).  

Nevertheless, Arrighi’s fails to take his economics – the third leg of the tripod – seriously enough, in the end.  It is there that his analysis fails to convince on a number of critical points, such as the origins of industrial revolution, why Europe overtook China in early modern times, why the US economy faltered after 1970, why finance has run amuck in our time, how Japan grew so enormously after World War II, or why China is expanding so prodigiously today.

Adam Smith in Beijing unfolds according to a theoretical plan, in four parts.  Part I starts with Adam Smith versus Karl Marx on the theory of development, showing Smith’s awareness of China and its vastly different path to development from that of Europe.  Part II takes on Bob Brenner’s work on the economics of the long slowdown of the late 20th century, comparing it with the last quarter of the 19th century at the end of the Pax Britannica, and grappling with the causes of American economic decline.  Part III wrestles with David Harvey’s geographic theory of imperialism and the spatial fix, the inevitability of shifts in the geographic core of capitalism, and the futility of US imperialists’ efforts to keep the world under their thumb.  Part IV finishes with a look at East Asian development, its historical foundations in labor-intensive production and interstate politics over the long term, and China’s rise to global prominence today.

I want to engage Arrighi’s views on each of these subjects and argue that Marx is still the best foundation for understanding European, Chinese and global development, notwithstanding his shortcomings in geography, world history, and state theory.  Nonetheless, Arrighi shows, once again, the imperative to keep Marxism an open theoretical system that can engage with (and take on board) elements of Smith, Schumpeter, and Braudel, not to mention Asian thinkers who are not such household scholarly names. 

Part I:  Adam Smith in Scotland

I am all for reviving Adam Smith, as Arrighi does in Chapter 1.  Smith was always more than the ideological hack that he has become in the hands of neo-classical economists and neo-liberal political thinkers.  As Arrighi says, Smith is more honored in the breech than actually read.  A good example of this is that historians of 18th century Chinese development, such as Kenneth Pomeranz and Bin Wong, have turned to Smith’s idea about economic growth, given that Smith made some telling observations on China in his time.  Who knew?  Meanwhile, Marxists have been mostly missing in action on China, past and present, for reasons that say a good deal about the shortcomings of much economic thinking from that school

Moreover, Arrighi has evidently been bothered for many years by the schism within the Left between Marxism and his favored school of Braudel-cum-World Systems, as crystallized in the 1970s debate between Andre Gundar Frank (a dear friend of Arrighi’s, to whom the book is dedicated) and Robert Brenner over what the latter denounced as ‘neo-Smithian Marxism’.  To make matters worse, Brenner has reappeared with a Marxist critique of Pomeranz, Wong and the new school of thought that says China was ahead of Europe in the 18th century and on the brink of a similar breakthrough to capitalism.

Can’t we all just be friends?  Well, yes, to a certain degree we can, starting with a reconciliation between Adam Smith and Karl Marx.  To begin with, Smith’s ideas in The Wealth of Nations, including the role of labor value, the detail division of labor, and capital accumulation, were taken over by Marx and pressed into service in the latter’s theory of capitalist development.  Smith was also a liberal of social conscience (so rare today), as shown by his Theory of Moral Sentiments, as well as many comments about the need to restrain the market and division of labor in The Wealth of Nations.   He was clearly a worldly observer and a keen political thinker at a time when the British model of market-led development and liberal government was by no means evidently going to triumph over the absolutist, statist forms dominant on the European continent.    

Marx was, by contrast, writing at a height of British triumphalism, which he loathed, and he took capitalism of Britain as an ideal type that would spread across the globe in short order. Marx was certainly right about surplus value and the class basis of capital, about the imperatives leading to the industrial revolution, about the power of capital accumulation, and about the spread of capitalism far and wide.  Both men have their limits, however.  Smith was a capitalist farmer in Scotland, and he therefore took agrarian development, not industrial, to be the ‘natural’ path.  Smith was right to see the possibilities within such a pre-industrial market economy, but wrong to think this state of things would last.  Marx, on the other hand, was certainly right about the power of capital to blows things open; about the inexorable spread, if not the timing, of capitalism; and about what constitutes the essence of capital, if not about the variety of forms it must necessarily take in different times and places.

So how does this inform the debate over China versus Europe?  China had grown quite rich, on a per capita basis, by the 18th century, but did not achieve the breakthrough to “industrial revolution” that occurred in Britain and Europe after the agrarian age of Smith – the so-called Great Divergence of East and West.   Arrighi offers up Kaoru Sugihara’s theory of the “industrious revolution” in China and East Asia as a way of understanding the possibilities for growth of an agrarian-artisan economy with a thick integument of commerce and wide social division of labor (pp ??).   In such a context, it is possible to push labor-intensive technologies much farther than usually acknowledged (especially in rice-based agriculture).  East Asia’s historical wealth of nations was based on such a strategy, which echoes Smith’s ideas about the natural path of development

One does not need to be a Sinologist to see the merit in this argument, because European craft and ‘manufacture’ (in Marx’s pre-industrial sense) were pressed extremely far by such a logic in the Early Modern Era, long before the industrial revolution (think of Flemish cloth and Italian musical instruments).  Indeed, France, Italy and Germany have relied on such a strategy, in part, to this day.   We are normally blinded to these facts by an Anglo-American fetish of the British industrial revolution and mechanical technology. Even Marx fell prey to the view that all lesser forms of production were doomed to extinction; yet they live on, get more productive, and reappear in new forms (like software).

The puzzle nonetheless remains of what drove Europe over the brink into an industrial revolution, while China fell back at the end of the 18th century.  Arrighi rehearses some of the usual lame, neo-classical theories of Britain’s industrial revolution (caused by steam engines, hence by coal) and, thankfully, sees through them (after all, China had plenty of coal)(pp ??).  But he still needs an answer.  

Arrighi takes the deferens specifica of the European path of economic growth to be “extroversion”, or the greater importance of long-distance trade relative to domestic trade (75).  Adam Smith regarded this as the “unnatural path” of national development (making China more ‘natural’ than Europe in his eyes).  Arrighi quotes Marx approvingly to the effect that the “modern history of capital dates from the creation in the sixteenth century of world-embracing commerce and world-embracing market”, but he reads Marx through Braudel’s glasses; that is, long-distance trade and local markets are separate spheres that touch very little. Unfortunately, this (dare I say it?) “circulationist” view leaves us with no internal logic for European mercantile expansion.  One has to fall back on inter-state competition drive external conquest, which, in turn, drives commercial development. 

But Marx’s view was quite otherwise, and this is where Brenner and “Eurocentric” Marxists have something to say that the World Systems School and Sino-centric historians do not.  That is, the internal development of markets was very rich in Europe before the great conquests and, most important, the commodity form generalized earliest in Europe.  As a result, modern commerce starts to revolutionize European life and production from at least the 15th century – and most thoroughly in Britain where the dispossession of the peasantry and independent commodity production had gone the farthest.  The “extroversion” of Europe comes with the explosion of the commodity frontier to eastern Europe, the Baltic, the Levant, and the Americas, and the external and internal development of markets feed off each other. 

This commodity revolution did not seize everyone and everything immediately, of course, but it brought more and more agricultural and handicraft production under its wing, from Florence to Flanders.  Much of this was still organized as petty commodity production by independent farmers and artisans, as Marx says in one of the sketchy chapters on primitive accumulation. It was extended by the merchants through the putting-out system, from Derbyshire to Westphalia (creating what Peter Kriedte calls ‘industrialization before industrialization’).  It went the farthest, as Brenner (and Philip Huang writing on China) insist, where there was full dispossession of the workers and competition among the owners, as in large-scale agriculture (tenant farming) in Britain (hence the agrarian revolution, which preceded the industrial revolution).  It also went farthest in realms many Marxists have been blind to, the frontiers of extraction and processing in mining, forestry, and plantations.  These arenas of commodification, production and capital accumulation were often the leading edge of European enrichment and expansion after 1450, both on the margins of Europe and across the Atlantic, as Jason Moore reminds us.  

Unfortunately, Arrighi doesn’t get Marx’s theory of capitalism’s unique powers of development.  The Marxian argument begins with private property, commodification of goods, land and labor, and competition between producers, as has been outlined by Brenner for the earliest period of England’s transition to capitalism.  Of course, the capitalist system is born in class struggle, as Brenner emphasizes, and maintained by class power against the rebellions of the subaltern.  But once it starts to flourish, the capitalist economy develops a certain logic of its own that promotes the growth of productivity and evolution of the forces of production.

The next step in grasping Marx’s theory is the idea of ‘endless accumulation’, which Arrighi takes a shot at, but misses.  How can someone whose forte is the history of money and finance not understand the meaning of ‘Accumulate, accumulate, that is Moses and the Prophets’? (75) Generalized commodity circulation gives rise to abstract value, which takes the form of money; money becomes capital by investment to make more money; and the abstraction of money means there’s no limit to how much one can acquire (unlike wives, castles, serfs, slaves or land, as in earlier ages).

Finally, the key to industrial revolution is not energy inputs, steam power, or machinery by itself, in Marx’s view, but the capture, control and transformation of the labor process by capital, first in manufacture and the detail division of labor,  then machinofacture and the factory system.

Where Smith has some purchase over Marx is in his attention to the social division of labor as a force of production and the ongoing importance of nature’s economy in the countryside.  Even Arrighi makes this mistake, like most of my generation of leftists.  He can see Europe’s external trade only in terms of “primary products”, or the inferior sectors of natural resource supply – not real industry, or manufacture.  But this is a false dichotomy, popularized by mid-20th century liberal and left theorists in North and South America.  Contrary to such views, the most advanced industrial powers, Britain and the United States, were also the greatest resource extraction and processing economies, and the primary sectors loomed large as arenas of industry, innovation and labor struggles.  In fact, the division of labor between city and countryside resonated with vitality, advancing economic development by leaps and bounds.   We have to drop old-fashioned and undialectical oppositions of city versus country, industry versus extraction, social division of labor versus detail division of labor, and so forth.

Returning to the failure of China to make the great leap into modern industry, what was lacking?  Clearly, China, like India, Japan and other advanced parts of the late medieval or early modern world, were not stagnant, feudal backwaters, as Europeans often like to think.  Nor did they lack markets and internal trade, rising productivity at times, agrarian prosperity, or technical innovation in certain realms.  They certainly did develop production to a high degree on a Smithian basis.   But it is equally indisputable that, in the end, China and the others did not undergo the same degree of penetration and expansion of commodity exchange, the same revolutionary transformation of production, or explosive extroversion as Europe.  Not that they might not have, eventually, but they did not do so before the European voyages of exploration, trade and conquest changed everything.  

In China, the ability of the state to suppress the merchant class and their expansionary tendencies appears to have been critical to that country’s ‘involution’ (xx).  On this point, Arrighi’s statist view of politics complements the Marxist model of class struggle (the Ming administration was obsessed with danger from the north) -- although the state’s ability to defeat the southern merchants surely depended on their relative weakness in the overall social order, unlike the English merchants who helped oust the Stuart Kings in the 17th century.

It is vital in this debate, however, to keep to Arrighi’s spirit of open-mindedness about such vexing issues as the dialectics of state and class, small and large producers, internal and external expansion, circulation and production, Europe and the world.  In other words, the old denunciations of neo-Smithian Marxism just won’t do, nor the new denunciations of Eurocentrism; nor will it do to draw a clean line between Marx and Weber’s theory of the state, or between division of labor and the realm of production.  Which does not mean, of course, that anything goes and we’re all Smithians, Weberians, or Wallersteinians now!

Part II:  Bob Brenner in Britain

In the second part of Adam Smith in Beijing, Arrighi takes on Robert Brenner’s writing on the economics of global turbulence.  He does a good job, in Chapter 4, of recapitulating the essentials of the latter’s argument about the long slowdown in the advanced capitalist countries.  Brenner’s model is one of overaccumulation of capital, with a build up of capacity and output of tradable goods glutting the market with every upswing.  Entry of new producers, first from the rapid recovery of Japan and Europe after World War II, then from East Asia, keeps adding to the pressure.  Meanwhile, a failure of exit of old capacity plagues the system, because individual producers do not have an incentive to close down as long as their fixed capital is still returning a positive cash flow.  Overall, the rate of profit falls due to the weight of excess capital.  It did so dramatically in the world economy around 1970, and has never fully recovered, keeping growth in the key economies of the global north sluggish to the present.

Arrighi follows with a thought-provoking discussion of the parallels between the present time and the so-called Long Depression at the end of the Victorian era in Britain, 1875-1900.  Taking Brenner back to Britain reinforces the notion that a long downturn is a critical turning point in global economic history and suggests that the United States is in danger of losing its primacy in the world economy, just as Britain did by the early 20th century.  It also suggests the same intensification of imperial rivalries as occurred prior to the First World War.

Having thus bolstered his case for the imminent decline of US hegemony, Arrighi immediately backs off from Brenner.  Arrighi is, above all, a political theorist, and he, like so many other leftists, is uncomfortable with any explanation that smacks too much of economism and automatic feedback.  He thus repeats the oft-made rebuke that worker power and wage struggles in the late 1960s had to be cause of the dramatic fall in profits across the industrial world at the time.  But he fails to provide any sustained, empirical rebuttal of Brenner’s immense mustering of facts, which I find quite convincing.  

In fact, Arrighi ultimately declares that “the root problem of the US and world capitalism in the 1980s was not low rates of profit as such” (159).  Rather, it had to do with a crisis of US hegemony due to defeat in Vietnam and a financial unraveling that brought down the American dollar (Bretton Woods) system of international monetary regulation.  Arrighi attributes “financialization” to the “indirect effects of the US escalation on the balance of payments” (134).  Later, however, he contradicts himself, saying, “Hard as it is to know what exactly lay behind this explosion, it is plausible to suppose that it was triggered by the joint crisis of profitability and US hegemony of those years.” (157)  So falling profits do figure in the model, apparently, and Arrighi says elsewhere (142) that faced with low profit prospects, corporations will shift their surplus from reinvestment to cash and other financial assets, prompting expansion of the financial sector.  

It’s disappointing that someone who is known as for his emphasis on financial bubbles at the end of long epochs of accumulation has so little to say about financial dealings themselves.   After all, the credit system and capital markets have a dynamic all their own, which propels capital accumulation and periodic spins out of control in financial bubbles.  Whether it’s the Eurodollar explosion, the international bank lending explosion of the 1970s, or the mortgage explosion of the 2000s, they are all driven by an internal financial logic that includes the inherently speculative nature of all credit, inter-bank competition, broker zeal, casino effects of stocks, speculating on margin, and asset wealth effects, among many others.   As Marx put it, and Arrighi agrees, finance capital in a boom seeks the short-circuit of accumulation, M-M’. I would, therefore, like to have seen more engagement with the credit theory of David Harvey in Limits to Capital and more appreciation of Brenner’s financial analysis of the bubble of the 1990s.

I would also liked to have seen a more serious take on the industrial decline of the United States in the late 20th century, since it is pivotal to the crisis Arrighi is considering in Chapter 6 and beyond.  But all we get is a few hasty pages on the fading glory of the American integrated corporation, the proof of which is that subcontracting has grown rapidly and that Wal-Mart has supplanted General Motors as the world’s largest corporation.  This is not much of a proof.  For one thing, the large corporation was not the sum of US industrial might (there was a good deal more to it than that).  For another, Wal-Mart is not unprecedented:  A&P and Sears were the world’s largest corporations in the 1930s and 40s, before General Motors.  Furthermore, the growth of subcontracting by American corporations has much to do with adaptability in the face of global opportunity and vastly improved management systems for handling dispersed design, production and circulation. Wal-Mart, Intel, and Apple are more than false-fronts for Chinese goods.

Financialization and industrial organization are really an afterthought in Adam Smith in Beijing.  Arrighi’s primary targets are imperialist politics and the geographical history of capitalism, to which he turns in the second half of the book.




Part III:  David Harvey in Holland

The third part of Adam Smith in Beijing starts off, in Chapter xx, with the Bush Gang’s attempt to restore US global hegemony through the Project for a New American Century.  This was, in Arrighi’s view, a vain hope, since US hegemony was already deeply flawed.  At first, the US offered a certain legitimate protection to cooperating capitalist countries, allowing them to rebuild in Europe and the Asian rim under the American military umbrella.   But defeat in Southeast Asia gave rise to the Vietnam Syndrome, in which American citizens no longer had the stomach for the perpetual warfare needed to patrol the empire and the rest of the world came to see the US as something of a Paper Tiger.  

Reagan was able to restore America’s prestige by a judicious mix of spending and borrowing, aggression and not overplaying his hand.  But this revival was less a protective shield, in Arrighi’s view, than a global “protection racket” by which the US extracted massive sums from Japan and other allies in order to fund its military build-up and the first Gulf War.  But the time of Bush’s Iraq debacle, however, the empire had degenerated to domination by brute force, and any aspirations to hegemony in the sense of collective approval of US leadership were finished.

Economics plays a role in Arrighi’s analysis of hegemony unraveling.  The weakening position of the United States is revealed in the rapid deterioration of the US trade balance, from Reagan onward.  The trade deficit had become critical since the late 1990s, with the biggest flow going to China since 2005 (though Japan, which led the way for the last twenty years, is not far behind). Ironically, globalization and free trade–so much heralded by American ideologues in the 1990s–have served to undermine the United States’ position in the world, offering up its uncompetitive industrial base to the lions of Asia for a feast of a trillion dollars per year over the last decade or so.  Foreigners are now sitting on a pile of US assets, the bones of our faded industry, amounting to over $11 trillion, as of 2004 (198).

In Chapter 8, Arrighi turns to his theory of the inevitable shift in the center of capital accumulation in the world, or “The Territorial Logic of Historical Capitalism”.  He does so in dialogue with David Harvey’s theories of the logic of capitalist geographic expansion: the spatial fix and accumulation by dispossession.   Arrighi wants to incorporate them under his own broader scheme, as “[A] series of spatial fixes of increasing scale and scope that created the conditions for the resolution of the preceding over-accumulation crisis, and the take-off of a new phase of material expansion.” (234).

Harvey’s theory of the “spatial fix”, as originally stated in The Limits to Capital and restated in The New Imperialism,   is that capitalism must construct a geographical landscape commensurate with the conditions of accumulation in every era of growth, one consisting of fixed capital investments, social infrastructure, working housing, and so forth, and one that locks in certain institutional arrangements of the time.  As capital, in its dynamism, exhausts the possibilities of the era and comes up with new outlets for investment, new forms of production, new labor relations, and the rest, it bursts the old integument and reconstructs a new landscape according to its new requirements.  This can mean a quite violent clearing away of the landscapes of the past and rapid build-up of new places.

Harvey’s theory is, as Arrighi points out (237), an economic version of Lefebvre’s “production of space” and a spatial version of Schumpeter’s theory of “creative destruction”, to which have been added Harvey’s sophisticated ideas about fixed capital, the credit system, and the geographic dimension of capitalist development.  This is a powerful theory of the spatial expansion and reconfiguration of capitalism over time.   Harvey (with whom Arrighi has co-taught at Johns Hopkins University) provides an economic-geographic theory to bolster Arrighi’s own thesis of financialization and the flow of surplus capital from old centers to new.  

Having introduced the spatial fix idea, Arrighi proceeds to outline the two historic shifts that precede the American Century: from the Genoese-Spanish system of the long 16th century to the Dutch system of the long 17th century, and thence to the British system of the long 19th century.  David Harvey does, it seems, have something to tell us about the rise and fall of Holland, as well as the current imperial troubles of the United States.

Nonetheless, there are two basic flaws in the theory of the spatial fix that go against Arrighi’s own themes about the rise of China (and centers before it), which pass unnoticed by the author.   The first is that capitalists have to make a trade-off between technological change and location shifts as methods of raising their profits (check?? P# in Arrighi).  The other is that expansion takes place through rechanneling of surplus capital from old centers to new.

On the first point, there is not always a trade-off between technical change and spatial relocation; in fact, as the recent globalization of manufacturing shows, factories in China and other new centers of production can incorporate both the latest technology and the advantages of cheaper land and labor.  The capitalists thus get the best of both worlds.  I have made this case at length elsewhere. 

On the second point, the rise of new growth centers does not depend fundamentally on overaccumulation and capital export from the old cores (though it may complement such growth).  China supports the case for the relative autonomy of peripheral centers of production and accumulation that shake up the geographical order of global capitalism.  Moreover, China is now exporting capital to the United States, not the other way around! 

The difference is even clearer in the case of Harvey’s theory of “accumulation by dispossession”, or ongoing primitive accumulation.   Harvey argues that the US, because of its profit and industrial woes, has had to turn to a kind of “vulture capitalism”, that cannibalizes old values and poaches new sources of value from peasants and nature.  But this notion flies in the face of the greatest sources of new surplus value in the global economy: China and the doubling of the world-wide working class (to more than 2 billion today).

In the end, however, Arrighi leaps right over Harvey’s economic geography to reiterate his key theme for all transitions: “mastery of the balance of power in the interstate system was essential to the empowerment of the rising hegemonic state.” (249)  In this, the exercise of military state power has been absolutely essential.  It is hard to disagree, and, no doubt, the triangulation of politics, economics and geography is one of the greatest challenges facing Marxism and the left.  In Chapter 9, Arrighi shows how the United States in the mid-20th century would attempt the most ambitious hegemonic project yet: creation of a world state.  The failure of that project sets up the confrontation with China in the fourth and final part of Adam Smith in Beijing.

Part IV:  Giovanni Arrighi in Asia

The last part of Arrighi’s book brings us, at last, to “The new Asian age”, with China as “the locomotive for the rest of East Asia” (206).   It begins with Chapter 10 on the debates among US security state types like Henry Kissinger about what to do with the coming Chinese challenge to US hegemony.   Arrighi is evidently quite at home in these airy heights of global strategy, but they make me a little nauseous, so I’ll leave it to him and Chalmers Johnson, and more power to them.

The following chapter, by contrast, plunges us back into the depths of Chinese and East Asian history.  It’s a refreshing dip, to be sure, from which Arrighi extracts some essential lessons.  The first is that East Asian state system was quite unlike the European one, with one absolutely hegemonic power, China, and far less internecine warfare.  As a result, East Asia enjoyed a 500-year era of relative peace from the 14th to 19th century, while the Europeans were more or less continuously at war.  For Arrighi, this interstate competition promoted “endless territorial expansion” on the European side (320), while China was content with a few border wars and a benign tribute system with surrounding states.

Equally, China’s well-developed internal markets did not lead to external expansion because the unified state did not see the point, and it had the power to quash any serious moves in that direction by the merchant class.  Southeast Asian trade prospered out of Guangzhou and other southern ports in the Song and Yuan Dynasties, and the south remains to this day the most trade-oriented part of China.  But the coming of the Ming in late 14th century shifted the capital north to Peking and focused attention on the northwestern land frontier.  The famous expeditions of Admiral Zheng He into the Indian Ocean in the 15th century (actually state-sponsored) were terminated by the Ming administration as not worth the money.  

The Mongol conquest ushered in the Qing Dynasty in the mid-17th century, which undertook extensive reforms to solidify peasant landholdings and infrastructural projects to expand irrigation and the ‘ever-normal granary’.  This unleashed a period of unprecedented prosperity in the 18th century.  But the Qing conquest also dealt harshly with the rebellious southern merchants and their external trade, and inter-Asian commerce contracted.  Only the overseas Chinese kept up a vigorous mercantile tradition that has come back to serve China’s development today.

China turned out, therefore, to be utterly unprepared for the global turn to sea power that the Europeans had ushered in, and it would ultimately fall under the sway of the West as a result.  Arrighi makes it quite clear that Britain did not enter China by way of its superior or cheaper industrial goods, but by means of its superior industrial warships, in the Opium Wars of the mid-19th century.  Japan, in particular, learned from the harsh lessons meted out to its larger neighbor and, with the Meiji revolution of the 1860s, sought to industrialize, militarize and expand on the western model.   

When Arrighi gets to postwar Japan, however, he has almost nothing to say about the reasons for its phenomenal success (344ff).  This seems a dire oversight, since, after all, Japan would be the model for the rest of East Asia.  All he has to say is that Japan grew under the US military umbrella and that “its main foundation was organizational”, meaning the use of informal networking and subcontracting with subordinate small business (346).  This is weak tea, indeed.  Yes, Japan did make exceptional strides in the organization of capital, but this included the factory labor process, external subcontracting (not always with small firms), interfirm horizontal networks, financial controls, ministry directives, and more.  How much this relied on generic “East Asian” antecedents is debatable, and Arrighi has a lot more work to do to convince anyone of his thesis on the Japanese front.  If anything, he demonstrates a regrettable Sino-centrism that many Asians are unlikely to accept!

At last, we arrive in modern day China, the economic dragon of the 21st century, in the final chapter.  Arrighi has lots of sensible things to say about recent developments in China.  For one, the world-shaking transformation of China is not a case of neo-liberal restructuring, because the central government has kept a firm hand on reform since 1979 and has steered a remarkably consistent, gradualist path.  Equally important, China’s development has been driven from within, starting from Deng’s reforms in the countryside and a new economy built first of all on the country’s enormous home market.   All this goes against common misconceptions that China’s transformation has been the product of foreign investment and foreign trade.    

Furthermore, China’s amazing success with its turn to the capitalist road has relied heavily on the social progress previously achieved during the Maoist period -- much as liberals would like to ascribe it all to the wonders of the free market.   China has also taken advantage of certain longer historical traditions: the emphasis on labor-intensive production (and technology), the southern legacy of trade and entrepreneurship, and the overseas Chinese diaspora.

Nonetheless, I take exception to Arrighi’s core argument regarding the non-capitalist nature of the post-Mao reform era. Contemporary China, in his view, steers closer to its East Asian past and Smithian ‘natural’ path than to Western capitalism as modeled by Marx (358).  Indeed, he “suggests caution in characterizing it as a transition to capitalism” (359). On the contrary, all the earmarks of a transition are in place, however much they are embedded in the particular characteristics of Chinese civilization.  Arrighi, in an echo of most China scholarship, attributes too much to the singularity of China and is unable to adequately handle the dialectic of capital’s universal logic and its embedding in local conditions, which produces multiple paths to capitalism.

Arrighi misses the essentials on four fronts.

The first is the creation of a working class – a term he eschews until the second-to-last page of Chapter 12 (377).   He is so keen to show that China has hung on to the vestiges of socialism that he believes it has achieved “accumulation without dispossession” (361), somehow missing the now well-known fact that the greatest migration in history has just taken place in China, with some 100 million people moving from the countryside to the cities in less than 30 years.  To be fair, Arrighi is correct to emphasize that the privatization of farmland (the household responsibility system) and the explosion in small-scale rural industry (Town and Village Enterprises, or TVEs) meant that the peasants did not have the world cut out from under them immediately (as in so many parts of the world).  No doubt, in China, as in the rest of East Asia, land reform that kept holdings in the hands of small farmers has played a virtuous role in economic development throughout the region.  But Arrighi does not appear to realize that thousands of TVEs went under in the downturn of the late 1990s, yielding up new bodies for recruitment to the urban proletariat (where they joined some 50 million former workers from collapsing state-owned enterprises, or SOEs).  Nor is he aware of the way new agricultural policies are softening up the peasantry for further incorporation into the labor force of capital.

Second, Arrighi is far too cautious in acknowledging the emergence of a capitalist class, though he does observe that, “various forms of accumulation by dispossession—including appropriations of public property, embezzlement of state funds, and sales of land-use right— became the basis of huge fortunes.” (369) All indications are that privatization of TVE and SOE assets, the multiplication of private firms, and buildup of personal wealth are proceeding apace in the booming economy of the 2000s.  Moreover – and, oddly, Arrighi the historian of finance does not even mention this – recent reforms and buildups of profits have spurred the privatization of banking, the growth of stock markets, and an explosion of credit, that essential vehicle of rapid accumulation of capital in all times and places.

In a footnote, he avers that the shift in Communist Party leadership from Jiang Zemin to Hu Jintao has staunched the bleeding into private ownership and wealth, but this is a rather weak reed to grasp. Where Arrighi is on more solid ground is in holding that this emergent capitalist class has not yet seized “control of the commanding heights”  of economy, society and the state.  The Communist Party is still in power at the center, to be sure.  On the other hand, the new capitalists – who were themselves often the creatures of state-led development -- did not gain control of the central state in Taiwan or Korea until the 1990s, well down the road to capitalism in those countries.  

Third, Arrighi has nothing at all to say about land in the cities, where the semi-privatization and circulation of leaseholds has allowed the emergence of a full-fledged land market.  One of the most obvious elements of the capitalist transition in China today is the skyrocketing of land values and bristling skylines of every big coastal city.   Not only is construction one of the greatest arenas of production in China today (the production of space!), it is probably the single largest source of wealth for the rising minions of millionaires, a veritable gusher of surplus value as rent flowing into the pockets of a large portion of the new capitalist class (and new petty bourgeoisie, or upper middle class).  Land development on the edge of cities is, in addition, another major avenues of dispossession of the peasantry.

Finally, Arrighi’s treatment of the Chinese state leaves much to be desired.  While it is true that the Central Committee of the CCP and the Beijing government have kept their grip on the overall strategy of reform, i.e., unlocking the forces of the market, wage-labor, private property, and capital, the great public secret of China is that local and provincial governments have been free to carry out the reforms in a manner that is quite the opposite of centralized control.  In fact, China has one of the most decentralized state systems in the world today, and its lower levels of officials and cadres have been enthusiastic promoters of the capitalist road.  They have led the way in land development, privatization of public assets, paving the way for industrialization, control of the new proletariat, and, in many cases, jumping ship to join the new capitalist class.  Not only does this resemble very little the halcyon days of Maoist rectitude, it smacks of the local state’s role in the heyday of American continental expansion and industrialization.  So, pace Arrighi, there is statism and there is statism, and we would do well to pay closer attention to the internal dynamics of states and not just the macro picture of inter-state conflict.

Summing up such a huge and sprawling book as Adam Smith in Beijing is a bit daunting, and after so much criticism it may seem that I have tried to diminish the author’s achievement.  On the contrary, only a good book is worthy of sustained engagement.  Giovanni Arrighi has done us all a service by attempting to see global capitalism as a whole – the proverbial Big Picture.  It’s a task that is beyond the talents of most of us, and it’s a task that is bound to put the writer at risk of sticking his neck out too far at times.  But seeing things in such world-historical terms is something we badly need.  As Arrighi demonstrates, it means grasping a geographic whole that escapes the boundaries of our western obsessions with Europe and North America.  It means embracing a political economy that gets beyond simple economic logic and keeps a close eye on states, warfare, and imperial maneuvers.  And, finally, it means a historical sweep that views our own times through the inverted telescope of deep time and space, and keeps our own moment from taking on such inflated proportions that the lessons of the past are blocked from sight.