A new look at one of the five dimensions

These last weeks I finished reading The second volume of Braudel's magisterial Civilization and Capitalism (The Wheels of Commerce) and started Giovanni Arrighi's The Long Twentieth Century: Money, Power and the Origins of our Time and both shed a new light on one of the constructs I've been working on in my dissertation, that of five pairs of essential dimensions for describing both the socioeconomic reality and the dominant way of thinking that I've noticed tend to vary in unison (as presented in this post: The Five Dimensions I).

In my own work I had identified as one of those leading dimensions for describing socioeconomic reality what I termed "dominant means of payment", which varies between the extremes of full credit and full cash, and which correlates in the realm of ideas with the "epistemology of causes", which in turn varies between the extremes of causal determinism and full blown scepticism (the belief that there is no causal relation we can have true, well-founded knowledge of, as all we can say about the physical -or for what matters, of the psychical- world is that certain events typically follow other events, and that no conclusion is ever granted regarding the nature of that succession). The causal link I proposed between both dimensions was  the amount of social upheaval: in times full of conflict between classes and of redefinition of traditional roles (like in 1750 with the Industrial Revolution and the promulgation in England on Poor and vagrancy laws, of corn laws and of enclosures of communal lands to push the rural population into the more productive areas of the new industrial economy; and again in 1900 with a second wave of urbanization and the rise of class based parties in most of Europe, when a -relatively- peaceful takeover of power by the proletariat seemed more plausible) there is such an uncertainty about the future that contracts credit and forces both everyday (retail) transactions and commercial (wholesale) ones to be settled in cash or equivalent. Whilst when things settle down and the social compact seems more solid and durable people are more willing and able to save, and those surplus savings end up financing new investments in a more liquid credit market (as happened around 1800 -mainly in Europe, and again in the last decades of the XXth Century).

The new perspective I've gained from Braudel, and Arrighi (and originated in Henri Pirenne, which I have yet to read) is that another way of looking at it is in terms of the cycles of development of Capitalism itself, starting some centuries before. I think Arrighi is the one that has articulated it more clearly: according to him we have gone through four distinct cycles, each lasting more than a Century and dominated by a geosocial unit (lately a Nation State, but started before they existed in their modern sense): the Genoese, the Dutch, the English and the North Americans.Each of those cycles have two phases, a first one centered around production, harnessing new technologies (enabled both by scientific developments and by social evolution) to generate surplus value in new industries or new commercial routes (that are in turn created by advances in transportation, storage, or demographic growth); and a second one centered around finance when the new ways of producing and distributing goods have been exhausted (and have attracted enough competitors as to drive the rate of return down enough), and there is more profit to be made lending money than manufacturing or buying and selling goods.

Both perspectives fit nicely, as the "productive phases" of Braudel and Arrighi tend to coincide with phases of social upheaval, caused by the decline of traditional activities that depress wages and force whole populations to move to the new sectors, and, lacking a history of trustworthiness in their new occupations, the displaced masses tend to resort to cash more easily. Also, as most capital is employed in creating the new industries there is little credit available for retail consumption, and the rapid pace of technological advance created by that capital enhances productivity, comparatively lowers the price of goods and creates an abundance of money that makes it easier to resort to it. Whilst in the "financial phases" social structures are more stable (which in turn allows for a higher rate of savings by the workers in the new industries), the return of investments in additional capacity becomes so low that it is all but abandoned and thus we witness a "financialization" of the economy, when capital turns to lending and borrowing, and ends up financing the wildest unproductive schemes and inflating all sorts of bubbles, and requires consumers to go deeper and deeper into debt to keep production expanding, although that expanded production delivers less and less benefits to the producers (we have seen the latest incarnation of that dynamic in the crisis of 2008). An interesting side effect of the financial phase of each capitalist cycle is the slowdown of technological advance, caused by the drying up of funds for research (as private money is more profitably employed being lent to speculative enterprises or in whatever bubble is keeping the economy afloat -typically in real state, and state money, which has been able to counteract this tendency until recently, ends up being too tied in keeping intergenerational income transfer promises to help much), which nicely confirms that in this supposedly brave new world since the turn of the Century we have been caught in a classical end of cycle dynamic that may spell the end of the North American dominated way of organizing the world-system (the question being what new power may take the mantle of the not-yet-past hegemon, China being the most obvious candidate -but those who know me won't be surprised to hear I'm quite bearish on China, a giant with clay feet if there ever was one, although that opinion merits a post of its own).

So by the joining of my previous perspective with that of Pirenne, Braudel, Arrighi and Wallerstein I feel I've arrived to a much more solid understanding of why the world is as it is (both from the socioeconomic standpoint and, to a lesser degree, from the intellectual one, which was my main interest from the start), and which allows me to reason with a clearer mind about how I want it to be.