Structural Inequality,Quasi-rents and the Democratic Peace: A Neo-Ricardian Analysis of International Order

Introduction

Is there a causal relationship between the wealth of some and the poverty of others in the world economy? Are national struggles for autonomy and democracy influenced by a nation’s position in international political hierarchies and the global division of labour? Are political conflicts between states significantly influenced by structures and processes within the world economy? These questions are central to the structuralist perspective in international relations, which answers ‘yes’ to all three. This article contributes to a defence of the structuralist perspective on international relations by advancing a novel argument connecting the structure of the global division of labour to one of the most salient features of contemporary international security: the long peace amongst advanced industrialised democracies.

This analysis is based on a neo-Ricardian approach to political economy focusing on quasi-rents, temporary above-market returns that accrue to actors temporarily shielded from normal market competition. The asymmetric process of bargaining over quasi-rents constitutes a key causal mechanism in the maintenance of inequalities operating on multiple scales within the world economy. The present global division of labour gives rise to quasi-rents in some geographical regions and not others within the world economy. Within the advanced industrialised economies, workers have been able to bargain for a share in the quasi-rents that arise at the ‘leading edge’ of production, giving rise to enfranchised working classes occupying niches which provide a level of security against global competition. Insulated through unionisation and occupationalisation, the majority of the working populations of the industrialised North have not had to sell their labour at its bare market price in a fluctuating world economy. The institutions of a regulated social market economy, established through class-based political mobilisation, further consolidated the economic security enjoyed by large segments of the population within the North. These material and organisational structures are identified as exerting a probabilistic influence on diffuse patterns of values and ideational beliefs within advanced industrialised nations. As the ‘cultural materialist’ approach in anthropology claims, normative values can be interpreted as being grounded in the concrete material circumstances of agents. ¹ Connecting the neo-Ricardian sociology of global inequality with recent contributions to the democratic peace theory debate, the article contends that the values of openness to cooperation which arise from widespread economic security in the advanced industrialised states contribute to pacific relations amongst democracies. In doing so, the article grounds the long peace within the democratic North in a sociology and political economy of global inequality.

This article thus makes the case for the continuing relevance of the structuralist perspective focusing on the role of global material inequalities in international relations. Specifically, it addresses two of the most serious criticisms of the structuralist perspective: that extant structuralist theoretical frameworks have failed to specify clearly and adequately the mechanisms which supposedly maintain structures of inequality within the ‘world-system’; ² and that structuralism has little to contribute to debates dealing with the core issues of international order and the use of organised violence which concern international relations. By offering a quasi-rent-based analysis of the causal connections between global inequality, class formation and the democratic peace, this article presents a new case for the relevance of structuralism in international relations theory.

Structuralism: The Missing Perspective in International Relations Theory

Structuralist perspectives contend that the social world is shaped by enduring, structurally unequal relationships within the world economy. At one time considered one of the ‘big three’ perspectives in international relations theory (albeit often grouped together with Marxism), structuralism nonetheless lost out in the ‘paradigm wars’ within the discipline. The upward mobility of the South East Asian economies in the 1980s revealed the claims of the more absolutist structuralist perspectives – such as Wallerstein’s world-systems approach ³ – as being too pessimistic about the economic prospects of late-developing economies. More moderate structuralist analyses of how such economies managed to ‘swim against the tide’ of the world economy were, by contrast, absorbed into mainstream debates within development studies and international political economy. ⁴ Within these disciplines, scholars abandoned the fatalism of earlier structuralist theories but continued to investigate the role of structurally unequal relationships in producing global poverty and maldevelopment. Absorbed into such debates, structuralism ceased to exist as a clearly identifiable multi disciplinary school of thought. Within international relations, strongly organised by the rivalries between competing ‘isms’, the result was that structuralism began to disappear as an identifiable position – a trend accelerated by the consolidation of international political economy as a distinct subdiscipline.

As Waever has argued, ⁵ materialist perspectives focusing on systemic inequalities in international relations were largely replaced in disciplinary debates by constructivist and post-structuralist perspectives. Such perspectives have been concerned primarily with discursive/ideational structures and the possibility for their intersubjective renegotiation. For example, in his ‘International/Inequality’, Walker notes the enormous material inequalities in the world but displays no particular interest in the mechanisms which sustain such inequality, even expressing scepticism about whether such systematic explanations are possible. ⁶ What matters for Walker are the forms of discourse which make it possible to conceive of and represent actors as being equal or unequal in various ways. This is emblematic of the retreat from a concern with material inequalities within the discipline.

Marxist approaches might have been expected to address such questions. But, somewhat surprisingly, Marxist scholars – with the exception of some neo-Gramscian theorists ⁷ – have been concerned less with the specifics of international/inter-regional economic inequality than the issue of how capitalism as a system of social relations helps constitute the states-system. ⁸ Their attention has been focused on the asymmetries intrinsic to capitalism and the apex of the capitalist international order in the form of empire and hegemony, not with economic inequalities within the world economy. Furthermore, most Marxist perspectives in international relations remain reliant on the highly problematic labour theory of value (LTV). This framework suffers from unresolved technical problems serious enough for many Marxist social scientists to have abandoned it as untenable. ⁹ These problems also present difficulties for strong structuralist approaches reliant on the concept of ‘unequal exchange’ derived from the LTV. Thus, this family of approaches does not provide a promising starting point from which to mount a new case for the relevance of structuralism to international relations theory.

The debate over ‘globalisation’ did not remedy the lack of systematic theoretical analysis of the relationship between global material inequalities and world politics – perhaps because ‘globalisation’ was a confused and unhelpful concept to begin with. ¹⁰ Thomas and Wilkin note that interest in questions of global physical and economic insecurity within the discipline has grown, but that such questions have still tended to be neglected as peripheral to the debates between the major theoretical perspectives. ¹¹ By contrast, research influenced by Wallerstein’s world-systems theory continues within sociology. ¹² Engagement between this research programme and the international relations discipline has been limited, but what engagement there has been has generated valuable theoretical insights into the interrelationship and co-evolution of the world economy and the global political order. ¹³ Unfortunately, world-systems researchers are not in consensus about the set of mechanisms that operate to maintain patterns of global economic stratification ¹⁴ – arguably the central question for structuralism as a theoretical perspective. One possible mechanism, suggested by Reuveny and Thompson in their discussion of systemic economic leadership by hegemonic states, is the existence of limits on the diffusion of technology amongst states within the world economy and the advantage this confers on early developers. ¹⁵ This mechanism is discussed at a fairly abstract level by Reuveny and Thompson, but provides a fruitful starting point for developing a substantive structuralist theory linking global economic structures to social structures within industrial societies to patterns of international political order.

Demonstrating the relevance of a reformulated structuralist perspective demands an analytically clear restatement of the core claims of the approach. This requires that we identify a plausible mechanism which connects global economic inequalities to patterns of international order. This article argues that asymmetric bargaining over quasi-rents within the world economy provides such a mechanism.

A Neo-Ricardian Approach to Political Economy: Rents and Quasi-rents

Quasi-rents are a special class of economic rents. ¹⁶ The concept of rent refers to an economic return on a resource greater than the opportunity cost of the use of that resource. Rent arises where the supply of a resource is fixed and the resource itself is not depleted by its employment. A rise in demand for such a resource will therefore generate a higher market-clearing price, and therefore greater rent, but no greater supply. Land is the classical example of such a resource. The attempt to acquire rent-producing resources is referred to as rent-seeking. Resources expended on rent-seeking are ‘lost’ to the economy, and rent-seeking therefore takes place at the expense of other economic actors, because it does not result in a greater supply of the rent-producing resource. Examples of rent-seeking include property speculation, corruption in government procurement, corporate lobbying for favourable legislation and gate-keeping in the professions.

Quasi-rents are temporary rents which arise where the supply of a resource is fixed over the short term but not over the long term. Technology can be thought of as providing a source of quasi-rents in that economic actors in possession of more advanced techniques of production or distribution may possess an advantage over their competitors, generating a super-profit. However, over time technological know-how is likely to become diffused more widely and thus the quasi-rent to the innovator will dissipate. The possibility of a secure flow of quasi-rents may therefore encourage technological innovation and investment in technologically specific resources by providing a return to actors greater than their post-investment opportunity cost. But actors in possession of a source of quasi-rents may seek to convert it into a perpetual source of true rents by establishing a permanent monopoly, resulting in costs to other economic actors. Contemporary attempts to protect intellectual property beyond what is necessary to ensure incentives for technological innovation might constitute an example of such rent-seeking.

An important further subcategory are composite quasi-rents: returns above opportunity cost to specific resources which accrue when they are utilised in combination with one another. In such cases the return from using a set of resources together is greater than the return which each resource would ordinarily receive if utilised separately. For example, specialised industrial equipment might require workers possessing specific skills and/or training. A composite quasi-rent would arise in this case, as the labour of the workers and the industrial equipment owned by the employers can achieve a higher productivity when employed in conjunction with one another. Where a composite quasi-rent exists, its distribution amongst the actors possessing the resources being used in combination will depend entirely on bargaining – as any share of the quasi-rent, however minimal, will be preferred by actors to the return which their resources could otherwise fetch. This makes actors who participate in the production of a quasi-rent vulnerable to expropriation by one another.

A neo-Ricardian approach to political economy focusing on quasi-rents rejects the standard neo-classical assumption that wage levels are determined by the marginal productivity of workers within a given capitalist firm. Rather, it sees wages as reflecting the ability of workers to bargain for a share of composite quasi-rents. This puts it in some level of agreement with a Sraffian perspective, which insists that wage levels are set by political, institutional and technological factors. ¹⁷ Indeed, the neo-Ricardian perspective is in some ways congruent with certain Marxist approaches to political economy. Both perspectives regard pre-capitalist society as being characterised by the extra-economic extraction of rents by those in possession of the means of violence. ¹⁸ Both agree that within a capitalist society there exists a qualitatively different form of conflict: that between workers and employers over the economic surplus within the sphere of production. But a neo-Ricardian perspective does not depend on the Marxian LTV. Rather than being the result of attempts by capitalists to appropriate the labour power of workers, conflict within the firm arises from the open question of how composite quasi-rents will be shared. The interests of workers and employers are not, however, antithetical – as both have an interest in maintaining the flow of composite quasi-rents. Nor are the interests of all workers necessarily identical, as quasi-rents might be captured by some groups of workers rather than others. More generally, the neo-Ricardian perspective argues that a conflict of interests exists between multifarious social groups seeking to acquire and retain flows of rents and/or quasi-rents. ¹⁹

Unlike the LTV and Lockean ‘entitlement’ theories of justice, a neo-Ricardian approach does not provide the basis for a theory of distributive justice. ²⁰ It does not insist that particular economic actors are entitled to a specific share of the economic product and thus does not imply commitment to a moralised theory of exploitation. But it may help inform normative debates over questions of economic justice by providing a clearer basis for the analysis of inequality and distributional struggle. As examined in the following section, a quasi-rent-based analysis can be used to develop a compelling analysis of many aspects of global socio-economic inequality.

Quasi-rents and the Political Economy of Global Inequality

Influential mainstream perspectives within economics and political science suggest that problems of socio-economic development are largely exogenous to the world economy. Global economic integration is a win–win proposition as it allows all participants to benefit from their comparative advantage through specialisation according to local availability of factors of production. ²¹ This might not necessarily result in a convergence in incomes between different regions of the world, but it would at least raise the absolute incomes of all. ²² Such an outcome, according to this perspective, is retarded by weak systems of property rights and rent-seeking coalitions of actors who stifle economic growth. ²³

Such a perspective should not be dismissed lightly. Nonetheless, it remains myopic in that it disregards factors endogenous to the world economy that maintain the bifurcated structure of incomes between regions. An important analysis of such factors was put forward by Raúl Prebisch, who claimed that the barter price of primary commodities has a tendency to fall relative to manufactured goods, worsening the position of late-developing economies over time. ²⁴ Working within this tradition of moderate structuralism, other scholars have provided compelling accounts of the impediments to economic development faced by late-developing economies – impediments which can only be overcome with specific policies and institutional innovations. ²⁵ One strand within this broad tradition focuses on the governance of global value chains. The intellectual precursors of value chain research include research within the world-systems paradigm aimed at identifying the mechanisms underlying the structure of global income inequality. Arrighi and Drangel argued that certain economic activities within the global division of labour could be characterised as ‘core-type’ and others ‘periphery-type’, the relative concentration of these two types of activity determining an economy’s position in global income hierarchies. ²⁶ Global value chain research, which provides an analysis of the distribution of economic benefits from participation in global supply chains, has since emerged as a flourishing field of research in its own right. ²⁷ The tendency amongst scholars in this field has been to move away from the macro-level to focus on the governance of specific value chains, but the development economist Raphael Kaplinsky has sought to use value chain research to elaborate a more general quasi-rent-based account of the global structural barriers to economic development.

According to Kaplinsky, a centrally important determinant of global income inequality is the differential capacity of actors located in different regions to establish and retain rents, particularly in the form of natural resource rents or quasi-rents. ²⁸ In the context of global economic integration, without some means of extracting quasi-rents, producers in competitive markets will receive only the bare market price for the utilisation of their resources. This return equates to poverty wages for those who sell their labour-power. ²⁹

To avoid this fate, producers must find some way to insulate themselves from competition. The most effective way of accomplishing this is to obtain a competitive advantage through innovations, which are difficult to emulate or copy in the short term. Such a quasi-monopoly generates a rent so long as it is maintained. Kaplinsky identifies five kinds of innovation which generate such quasi-rents within firms: innovation in technology, human resource management techniques, logistics, marketing and design, and in relations with other participants in a supply chain. ³⁰ These endogenous sources of rents are potentially cumulative due to reinvestment of profits and accumulated learning. As a result, firms in late-developing regions of the world economy often find it difficult to erode the quasi-rents of established firms in the advanced industrialised world and establish their own sources of quasi-rents. This problem is compounded by the exogenous sources of quasi-rents, such as those arising from public investments in infrastructure and education, enjoyed by firms located in already wealthy regions. ³¹ Finally, innovative firms in similar industries often provide positive externalities to one another and thus tend to be located in geographic clusters – providing an advantage to early innovators for reasons similar to those identified by theorists of spatial economics. ³²

These mechanisms have resulted in what Wade calls ‘cumulative causation’, ³³ producing tendencies that have tended to maintain income hierarchies between regions in the world economy. Innovations tend to originate and diffuse rapidly in the advanced industrial ‘core’ but diffuse only slowly to the ‘periphery’ – by which time firms in the core may have established new sources of quasi-rents. Empirical research has confirmed that the distribution of national incomes is strongly bimodal, ³⁴ with a small ‘convergence club’ of advanced economies sharing similarly high average incomes (the North) and a larger, broader group of substantially poorer economies (the global South).

The treadmill of competitive innovation puts pressure on late developers of the global South. Amsden provides historical evidence that technological change in the most advanced economies has imposed a necessity to innovate on other regions in the world economy. Those who cannot compete on the basis of quality are forced to compete on price – and thus accept lower real wages. ³⁵ As Kaplinsky summarises:

Sustained income growth [depends] on developing the capacity to stay ahead of the pack, to generate and/or appropriate rents. Unless this dynamic capability can be endogenized into the production system, participating in intensively competitive global markets is unlikely to provide sustainable incomes. ³⁶

Kaplinsky’s framework allows us to update classical structuralism in the contemporary context of more rapid global economic integration and the shifting transnational division of labour. In particular, it revises and updates Prebisch’s claim that the barter price of primary commodities tends to fall relative to manufactured goods by providing evidence that all generic goods have a tendency to fall in their barter price relative to other goods. ³⁷ Primary commodities may well retain their barter price if they are unique commodities able to fetch a premium such as specialist varieties of coffee or other supply-limited niche products. Conversely, manufactured goods may well decline in their barter price once the techniques involved in their production become widely enough diffused and the quasi-rent associated with their production dissipates. Thus, the terms of trade for producers depend on their ability to establish and protect quasi-rents through various forms of innovation and/or product differentiation. A related change in the distribution of rents across the world economy identified by Kaplinsky is the rise of buyer-driven supply chains. ³⁸ Certain large buyers located in the North have achieved an oligopsonistic position within global supply chains for consumer commodities such as textiles and furniture. This has allowed them to bargain down producers of generic manufactures, minimising the share of the latter in the quasi-rents generated by global supply chains.

Detailed examination of the distribution of national incomes suggests that there is an enduring but small third cluster of middle-income economies, ³⁹ providing an empirical basis for the much-maligned concept of the ‘semi-periphery’. This group seems to comprise those economies that have developed a level of generic manufacturing capacity but have not established quasi-rents outside of a few specific sectors. The trajectory of such economies has been diverse and dependent on negotiated compacts between the state and local capitalist classes, geographic proximity to the core economies, geopolitics, and fluctuations in world markets. For example, whilst many Latin American economies suffered deterioration in their relative position in the 1980s and 1990s, producers in Pacific Asia succeeded at achieving upward mobility – with Hong Kong, Singapore, South Korea and Taiwan graduating to Northern levels of income per capita. ⁴⁰ This has been explained as the result of successful industrial policies, pursued by high-capacity states possessing an ‘embedded autonomy’ within their own societies, aimed at directing capital investment, education and research in order to establish successful national firms. ⁴¹ These policies were aided by a favourable external environment: the US provided support to the state-building projects of the anti-communist regimes of the region, whilst Japanese firms sought to increase their competitiveness by offshoring productive capacity within the region with the encouragement of the Japanese government. ⁴² As a result, the Pacific Asian economies were able to participate in some of the leading sectors of the world economy such as electronics manufacturing, ⁴³ giving rise to successful national firms such as Acer and Samsung that are able to compete globally on the basis of quality.

By contrast, this form of public–private sector cooperation has been absent in Central American economies such as Mexico and Honduras. Although significant textile exporters to the United States, the assembly subcontract model of supply chain governance that predominates in the textile sector of these economies does not seem to have offered significant opportunities for moving beyond low value-added processes and competition based on price. ⁴⁴ These supply chains remain driven by powerful buyers close to US consumers and thus Mexico and Honduras have not been able to take full advantage of participation in the North American Free Trade Agreement. Unfortunately, similarly to how the success of the more laissez-faire policies of the original industrialisers prevented others from being able to follow in their path, the success of the graduates from the periphery may have placed obstacles in the path of economies hoping to emulate them. The spread of productive capacity across the global South and the emergence of ‘new semi-peripheries’ ⁴⁵ may have generated greater competitive pressures for the less successful late-developing economies. ⁴⁶ Simultaneously, the growth of the populous Asian industrialisers has put sustained upward pressure on primary commodity prices ⁴⁷ – increasing natural resource rents but also the probability of natural resource dependence for primary commodity exporters. ⁴⁸

The reconfiguration of the global division of labour has also impacted the advanced industrialised core, where quasi-rents in the production of many tradeable goods have largely been eliminated by outsourcing. The earlier structuralist claim that labour market rigidities in advanced economies would prevent the transfer of productive capacity to the global South has been rendered obsolete. For now, however, substantial differences between the incomes of the ‘labour aristocracy’ of the North and the working populations of the global South remain (see Table 1).

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Table 1.

Wages in Selected Cities of the North and the Global South.

	Unskilled Manual Worker		Skilled Manual Worker
	Hourly Nominal $ Wages, 2009	Adjusted by National PPP	Hourly Nominal $ Wages, 2009	Adjusted by National PPP
New York	16.6	16.6	2.0	29.0
London	9.7	9.7	19.0	19.0
Beijing	0.8	1.5	2.3	4.2
Delhi	0.5	1.4	2.1	5.8
Nairobi	0.6	1.3	2.0	4.3

Notes: Hourly nominal $ wages for 2009 are from Branko Milanovic, ‘Global Inequality: From Class to Location, from Proletarians to Migrants’, World Bank Development Research Group Poverty and Inequality Team, Policy Research Working Paper 5820 (2011), 15; National Purchasing Power Parity (PPP) conversion values for 2009 based on World Bank World Development Indicators. Available at: http://data.worldbank.org/indicator/PA.NUS.PPPC.RF.

The aggregate consequence is that over the past three decades, within-nation inequality has increased almost worldwide, whilst population-weighted between-nation inequality of purchasing power-adjusted incomes has decreased slightly – largely as a result of moderate increases in per capita incomes in China and India. ⁴⁹ The Stolper–Samuelson theorem of orthodox economics suggests that trade will eventually equalise returns to factors such as labour. This would likely be an unwelcome prospect to less-skilled workers in the North accustomed to a higher material standard of living than that enjoyed on average in Indonesia or Bangladesh. In the interim, multi national corporations at the apex of global supply chains stand to reap quasi-rents from arbitrage arising due to the huge wage differentials in the global economy. Whilst production has been disaggregated, sections of global value chains where quasi-rents are most abundant, such as design and marketing as opposed to assembly and manufacture, remain under the control of these Northern actors. ⁵⁰

Kaplinsky’s approach provides powerful analytic tools for understanding the structures on which patterns of global inequality rest, and the way in which global economic integration and the new global division of labour are changing the distribution of quasi-rents in the world economy. The impact of such changes has already been disruptive: some groups of actors have consolidated their control over flows of quasi-rents, others have gained new opportunities to bargain for a share in quasi-rents, whilst others have lost access to quasi-rents and find themselves engaged in fierce competition with those in a similar position. The sociological implications of such potential changes are considered from a neo-Ricardian perspective in the next section.

Quasi-rents and the Formation of Classes in Industrialised Democracies

Within the discipline of sociology, the late Aage Sørensen sought to advance an analysis of class formation in industrialised societies that would overcome the problems with existing Weberian and Marxian accounts. The limitation of the influential class schemes put forward by Weberian scholars such as Goldthorpe ⁵¹ is that, however useful empirically, they are largely descriptive rather than causal and structural. ⁵² Neo-Weberian scholars have provided a detailed analysis of the processes of social closure and occupationalisation which give rise to class structure. Yet Sørensen finds fault with these approaches for failing to identify what exactly it is that members of certain social classes possess that they seek to prevent others from having access to. ⁵³ Although not discussed by Sørensen, neo-Weberian scholar Charles Tilly did attempt to address this question. Tilly sought to build ‘a bridge from Max Weber on social closure to Karl Marx on exploitation, and back’, ⁵⁴ by generalising the Marxian account of exploitation to include the non-class forms of social closure that enable some groups to hoard certain resources and/or deprive others of the full value added of their efforts.

Tilly is not clear on whether he actually endorsed Marx’s LTV, but if so, this leaves his otherwise very compelling account hostage to the problems with that theory. Tilly’s approach does, however, recognise the problem: sociological theories of class, theories which do not simply attribute life chances to pre-social differences between individuals, require an adequate basis in political economy. Sympathetic to the Marxian approach but rejecting the LTV, Sørensen advanced a neo-Ricardian analysis which identifies class formation as the product of efforts by groups of individuals in a structurally similar position within the economy to establish and protect different kinds of rents. ⁵⁵ Rents provide the enduring commonality of interest that establishes the basis for the emergence of class consciousness and class-based political mobilisation. ⁵⁶ Acting on their shared interests, actors enjoying a specific flow of rents will seek to protect it and exclude other actors. As analysed perceptively by Tilly, such forms of exclusion may be stabilised through the creation and maintenance of categorical boundaries on the basis of ethnicity, gender, skin-tone, citizenship and so on. ⁵⁷ The excluded actors, however, have a common interest in destroying that rent. Sørensen’s approach therefore agrees with Marxism that classes arise out of latent antagonistic economic interests between groups of actors. ⁵⁸

Classical rents, such as those extracted from tenants by landlords, are the basis of class conflict in many societies and have been throughout history. Particularly relevant to advanced capitalist societies, however, are the quasi-rents which are created and rapidly dissipated by technological change and innovation by firms. Temporary quasi-rents produce lasting fortunes for successful capitalists. Yet empirical research demonstrates that substantial wage differentials for similar work exist within different industries. These differentials are difficult to account for in terms of productivity or other individual characteristics of workers. ⁵⁹ It seems, therefore, that employees within certain industries are able to bargain for a share of quasi-rents. ⁶⁰ This may be because some workers have industry-specific skills which are limited in supply, and/or due to principal–agent problems faced by firms in monitoring employees.

In any case, the evidence implies that workers in advanced capitalist societies can successfully bargain for wages greater than the opportunity cost of selling their labour power. Occupying a similar structural position within industrial capitalism and possessing a common set of interests provides the basis for workers to develop a cognisance of these shared interests and a sense of solidarity. Workers may, however, collectively pursue their interests at the level of the firm, industry or occupation rather than on a class-wide basis, seeking to maintain positions of relative advantage against other workers. Sørensen’s approach therefore disagrees with Marxist approaches about the degree of uniformity of interests amongst members of the same socio-economic class as well as the Marxist claim that the conflict of interests between workers and capitalists tends towards polarisation and revolution. Class struggle is central to the sociology of industrialised societies but, where overt labour repression is absent, occurs within bounded limits due to cross-class interests in maintaining quasi-rents. ⁶¹ Instead, organised working classes have successfully, and often tenaciously, fought for economistic goals and for the establishment of social insurance schemes. ⁶²

Capitalist firms, for their part, have an interest in bargaining their employees down and maximising their own share of composite quasi-rents. Firms could push wages down by eliminating the need for industry-specific skills amongst their employees, thus excluding them from sharing in a composite quasi-rent. But this might not be possible without eliminating the quasi-rent itself. An alternative is to construct an internal labour market with career structures designed to elicit effort and encourage employees to invest in industry-specific skills. If such structures are in place, more junior employees may be willing to accept below-market wages in the expectation of eventually achieving the above-market wages which accrue to those at the top of professional career ladders. ⁶³

The existence of such internal labour markets, which may be intra-firm or within an occupationalised profession, sheds light on the structural basis of labour market segmentation. ⁶⁴ Although scholars now believe that it is too simplistic to draw a straightforward divide between a primary and secondary labour market, certain occupations are nonetheless characterised by higher wages, greater employment stability, greater workplace protection and a structured career pathway. Outside of these occupations, the labour market is more fluid: workers face greater insecurity and fewer possibilities for advancement. From a neo-Ricardian perspective, the natural interpretation is that this segmentation corresponds to the divide between those industries in which employees share in quasi-rents and those in which they do not. In the latter group of industries, the labour power of workers is a homogeneous commodity, fetching only its bare market price. Segmentation between ‘insiders’ and ‘outsiders’, the acquisition of assets by enfranchised ‘insider’ working classes, the organisation of internal labour markets to elicit competitive individual effort, and the creation of social insurance schemes to limit the worst insecurities of the market help to explain the amelioration of class conflict within industrial democracies in the post-war era.

Sørensen did not attempt to develop the international and global implications of his approach, but there is no reason to suppose that the same mechanisms will not operate on multiple scales. ⁶⁵ Earlier structuralists suggested that labour market segmentation had both domestic and international dimensions, with primary labour markets located overwhelmingly in the North. ⁶⁶ Although the global division of labour has become too complex for such a dichotomous categorisation, Kaplinsky’s analysis suggests that quasi-rents are not available to many economic actors outside of the advanced industrial core and specific sectors within semi-peripheral economies. As classical development economists argued, wages in much of the global South are held down by the large, chronically underemployed ‘reserve army of labour’ outside of the formal sector. ⁶⁷ From a neo-Ricardian perspective, it is not surprising that actors without access to quasi-rents will attempt to secure other kinds of rent in order to avoid having to accept economic insecurity and subsistence-level wages. The consequence can be seen in the kaleidoscopic array of idiosyncratic neo-patrimonial states in the global South. Their diversity arises due to the different kinds of rents available locally, their position within the global division of labour and the relevant boundaries between local ascribed social categories. The stylised consequence is the predominance of patron–client networks over class as a mode of mobilising political action.

The reorganisation of the global division of labour and the changing distribution of quasi-rents examined by Kaplinsky are clearly of great importance to a political sociology based on Sørensen’s approach. The defeat of organised labour in much of the advanced industrialised world, combined with the dispersion of productive capacity to the new semi-peripheries, seems to have eroded the quasi-rents of workers in tradeable sectors in the North. The increase in inequality within the advanced industrialised economies due to income growth amongst top earners and stagnation amongst low earners is well documented. ⁶⁸ Sørensen argues that managers of capitalist firms have become more adept at eliminating the quasi-rents of other employees. ⁶⁹ Consistent with this claim is the finding that between 1980 and 2006 productivity grew faster than wages in 17 out of 20 Organisation for Economic Co-operation and Development (OECD) economies. ⁷⁰ Contrary to conventional ‘skills based technological change’ accounts of the new inequality, skilled workers have not received uniform wage increases. ⁷¹ Rather, inter-industry wage differentials seem to have fallen amongst lower socio-economic groups but risen amongst the highest socio-economic groups, ⁷² supporting Sørensen’s view that the control over flows of quasi-rents has shifted towards management. ⁷³

Sørensen notes that the social consequence is that labour markets have become more fluid and structureless for a significant proportion of workers. ⁷⁴ Perhaps due to the rapid growth in secondary and tertiary education in parts of the global South, ⁷⁵ this insecurity seems to have affected white-collar workers in the North as well as the unskilled. Both global-economic and domestic-institutional factors seem to matter, as nations with institutionally embedded systems of corporatist bargaining have experienced less significant increases in income inequality. ⁷⁶

Even within the successful industrialising economies of the global South, many groups have lost access to rents they previously enjoyed. These groups include the often relatively privileged former beneficiaries of welfare states, ⁷⁷ employees of parastatal firms, as well as the victims of what Marxists call ‘primitive accumulation’ ⁷⁸ – the theft of rent-producing assets such as land through naked force. Working classes in both North and South find themselves being ‘unmade’. ⁷⁹ Nonetheless, Silver has argued that, historically, when productive capacity in the world economy has shifted, so too has the locus of labour activism. ⁸⁰ If new quasi-rents have arisen for firms in the global South, then this implies that the potential scope for distributional struggle on the part of the employees of those firms has increased. The recent upsurge in industrial disputes in coastal China suggests that new bargains over the divisions of quasi-rents may be in the process of being formed, whilst the example of Brazil’s Partido dos Trabalhadores indicates that class-based strategies of political mobilisation can still achieve success even in a neo-liberal era.

The global division of labour has become more complex and transnationally articulated, beginning to blur some of the familiar distinctions between the North and the global South. But if this is indeed the case, the consequences may well be profoundly disruptive to the polities of the advanced industrialised world. For most of the post-Second World War era, Marx’s claim that workers under capitalism had nothing to lose but their chains was invalid. Unionisation and occupationalisation enabled workers to bargain for a share of quasi-rents arising from the technological advancement of the North. This enabled the incorporation of reformist parties representing the interests of labour into democratic party-systems and the pursuit of modest egalitarian goals through the welfare state. By contrast, a society in which quasi-rents are successively diminished for the majority of the population is likely to be one in which larger numbers of people experience insecurity and material deprivation: ‘nothing guarantees that efficient labor markets create good lives’. ⁸¹ Selling one’s labour power for its global market price in a fluid and ever-shifting labour market is unlikely to encourage the values, commitments and structures on which democracy in the North has hitherto depended. Such changes in the global division of labour and the political sociology of advanced industrial societies may also have surprising implications for patterns of stability and conflict within international politics, as will now be examined.

Social Market Democracy and the Democratic Peace

The ‘fact of the democratic peace’ – that there are no unambiguous cases in which consolidated democratic states have engaged in military hostilities with one another resulting in over a thousand battlefield casualties – is well known. Democratic states have, however, participated in wars against non-democratic states. Since the Second World War, inter-state conflict has had a pronounced North–South asymmetry: states of the global South have fought one another, states of the North and the global South have fought one another, but states within the North have remained at peace. This situation prompted the, rather hyperbolic, description of the post-Cold War world as being divided into a ‘zone of peace’ and a ‘zone of turmoil’. ⁸²

Influential explanations of these observed facts include institutional theories of the democratic peace, which hold that political institutions restrain the leaders of democratic states, ⁸³ as well as normative approaches, which argue that democratic norms of peaceful conflict resolution are externalised in the foreign policies of democratic states. ⁸⁴ The majority of democratic polities have been located in the advanced industrialised world and there is extensive evidence of a positive correlation between national prosperity and democratic government. Political scientists broadly agree that either prosperity tends to lead towards democratisation, or alternatively that prosperity does not induce democratisation but does prevent autocratic reversion. ⁸⁵ Thus there seems to be a clear indirect relationship between the distribution of wealth within the global economy and the general pattern of conflict within international relations: wealthier nations are more likely to be consolidated democracies and thus much less likely to engage in international hostilities with one another.

Michael Mousseau, however, has developed a theoretical perspective which connects the peace amongst democracies to the process of socio-economic development at a much deeper level. Alongside other scholars, Mousseau has provided evidence that the democratic peace effect is dependent on the wealth of the states in question. ⁸⁶ Advancing what might be called a social market explanation of the democratic peace, he argues that democracy and peace are both outcomes of the process of economic development. According to Mousseau, normative variants of the democratic peace thesis are correct that it is the values held by democracies, not the specifics of their institutions, which explain their mutual non-belligerence. ⁸⁷ But these normative approaches are limited as they fail to identify the deep congruence of interests amongst many democracies. They also lack an adequate explanation of why non-belligerent and pro-democratic values are held by certain societies.

Mousseau’s solution is influenced by Harris’s cultural materialist approach, which argues that there exists a probabilistic relationship between the material organisation of a society and its culture, or diffuse system of values. ⁸⁸ Actors are not rational utility-maximisers, but they do adapt to the structural circumstances they find themselves in: ‘individuals economize on the costs of decision making by forming cognitive habits – heuristics – for situations they repeatedly encounter’. ⁸⁹ Such habits become internalised and accorded with intrinsic validity. Thus, practical heuristics form the basis of public action-guiding norms and systems of values.

In an argument which parallels North’s distinction between ‘natural orders’ and ‘open access orders’, ⁹⁰ Mousseau argues that socio-economic development involves the transition between two distinct modes of life, each with its own corresponding value system. The distinction between these two systems of social organisation turns on whether individuals are in the habit of engaging in mutually beneficial transactions with strangers. In societies organised by patron–client networks, such as many neo-patrimonial states in the contemporary global South, actors are dependent on their extended families and/or patrons who can provide material benefits in exchange for loyalty. Networks of friends and family look after their own, whilst patrons maintain the loyalty of their followers through acquisition and distribution of resources. Such a system discourages respect for individual rights and encourages a sharp distinction between those who are inside and those who are outside the in-group. ⁹¹

Alternatively, societies may be organised on the basis of voluntary but binding transactions between independent persons granted equality under the law. Under circumstances in which ‘the majority of people regularly engage in, and primarily benefit from, the market place’, ⁹² actors will tend to approve of individual rights and the role of an impartial state in enforcing agreements between persons. Mousseau calls these contract-intensive societies. ⁹³ Because individuals within such societies learn the benefits of cooperation with strangers, their values are less parochial and more universalist than those of clientelist societies. The belief that society should be a mutually beneficial enterprise gives rise to the idea of a social contract encoding a system of reciprocal responsibilities amongst actors who share in the opportunities of a market-based society. ⁹⁴

In the contemporary world, contract-intensive societies have tended to be social market democracies in which the benefits of economic development are distributed fairly widely. Once the transition to such a socio-economic system takes place, liberal values are likely to take hold – as argued by Ingelhart and Welzel in their notion of the ‘human development sequence’. ⁹⁵ But whereas Inglehart and Welzel focus on the role of rising wealth in bringing about value change by empowering individuals, Mousseau argues that liberal values are not generated by wealth per se but by economic development within contract-intensive societies alone. Oil-rich states are, he notes, wealthy but clientelist and consequently illiberal. ⁹⁶

Mousseau’s approach takes the debate over the democratic peace forward by providing an account of the way in which liberal values are grounded in concrete material circumstances of a particular, historically specific social configuration. This allows us to understand the democratic peace within the context of the political sociology of advanced industrial societies and the political economy of the global division of labour. Mousseau himself notes that his approach is not incompatible with structuralist theories, as it is agnostic about the conditions which make market-oriented development a possibility in the first place ⁹⁷ – relative position within the global division of labour may be a necessary part of an adequate explanation. Indeed, social market theory is of relevance to structuralism because it implies that clientelist values may reinforce peripheral nations’ positions in the global income hierarchy by preventing the emergence of states possessing embedded autonomy and capable of pursuing industrial upgrading policies. However, a structuralist perspective must take issue with Mousseau’s claim that underdevelopment is an equilibrium that only external agency can shift, ⁹⁸ as studies within political economy suggest that it is the policy autonomy of developmentalist states that enabled them to manage the process of global economic integration and promote socio-economic development. ⁹⁹

If the neo-Ricardian accounts of Kaplinsky and Sørensen are accepted as valid together with social market theory, then what emerges is the basis for a compelling structuralist account of the economic and sociological foundations of the democratic peace. Mousseau is clear that for actors to internalise liberal values, they must be able to benefit from participation in contractual exchange within a market economy. This requires that ‘a solid majority in a society is freed from subservience to group leaders because it can obtain economic security from strangers in the market’. ¹⁰⁰ Drawing on Polanyi, ¹⁰¹ Mousseau suggests that when the market fails to provide economic security for actors, they will turn to anti-market political ideologies, as occurred in inter war Germany as a result of hyperinflation, ¹⁰² or to clientelist networks, as in situations of high structural unemployment in both industrialised and less economically developed states. ¹⁰³ But if Sørensen’s analysis is correct, then the economic security provided by social market economies is a consequence of workers being able to share in quasi-rents with firms through participation in internal job markets and occupationalised professions. If Kaplinsky’s analysis is correct, then the availability of such quasi-rents is, in part, a function of a given economy’s position within the overall global division of labour. Those who participate in the labour markets of the advanced industrialised world can share in the leading-edge sectors where quasi-rents from innovation and technological development are available before they are dissipated by the ceaseless competition between rival firms.

Where workers have no access to quasi-rents, they must sell their labour power as a homogeneous commodity and experience the consequent insecurity which arises from fluctuations in supply and demand. Under such circumstances, participation in patron–client networks may provide the necessary source of security by ensuring a flow of rents in return for loyalty to a patron. To maintain their position, patrons of clientelist networks must maintain a flow of rents to their supporters. As a result, politics tends towards negative-sum competition between rival patron–client networks. Such circumstances provide little opportunity for the internalisation of norms of personal autonomy and openness to cooperation with strangers on which liberal values rest. Because rent-seeking is an intrinsically rivalrous activity, it is not surprising that participation in such networks instead encourages strong in-group identification and hostility to out-groups – values which Mousseau argues are externalised in the foreign policy of states which are not social market democracies. ¹⁰⁴ But whether ‘a solid majority’ can enjoy economic security within the market seems dependent on the extent to which quasi-rents are available in a particular economy. Because of their greater socio-spatial distance from the leading edge of innovation and technological development, the democratic peace has not extended to the majority of states of the global South.

Structuralism and social market theory are also in agreement that the advanced industrialised democracies are status quo actors in international relations, united by their highly congruent interests and values. ¹⁰⁵ A neo-Ricardian perspective would identify this status quo posture as having its basis in a distribution of quasi-rents in the global economy favouring these actors. As Mousseau suggests, because they benefit from the institutional framework of an open world economy, dominant actors within these states have come to identify with the principles of a ‘market civilisation’. ¹⁰⁶ The advanced industrialised democracies have thus acted with a historically unprecedented degree of unity in pushing forward the global integration of the world economy, ¹⁰⁷ rebuffing the demand by states of the global South for a New International Economic Order based on non-liberal principles of economic allocation in the 1970s ¹⁰⁸ and advancing an ambitious agenda to establish the security of new flows of quasi-rights in emerging industries through the aggressive pursuit of agreements over intellectual property rights within the World Trade Organisation in the 1990s. ¹⁰⁹ The status quo powers of the North have sought to protect a particular distribution of quasi-rents in the world economy, a distribution that provides them with both security and prosperity.

However, if large sections of the workforces of advanced industrialised states were to lose access to stable and well-remunerated employment, by the logic of the argument above, the liberal values on which Mousseau claims the democratic peace rests might go into decline. Concerted attempts to exclude workers from access to quasi-rents as well as the changing global division of labour may, therefore, undermine the sociological foundations of the peace amongst the advanced industrial democracies. With the related weakening of class-based coalitions supportive of redistributive policies, the social contract which Mousseau sees as necessary to social market democracy seems to be under attack from coalitions that represent welfare recipients as undeserving rent-seekers rather than participants in a system of mutual aid and needs-based reciprocity. ¹¹⁰

But reducing existing social security provision leaves an increasing number of actors in the insecure position of selling their labour power at its bare price. In the current context of post-financial crisis fiscal austerity after three decades of wage stagnation throughout much of the industrialised world, it is questionable to what extent a ‘substantial majority’ of actors will be able to find economic security within the marketplace. In the past, social market economies have, as Mousseau acknowledges, ¹¹¹ participated in human rights violations. These have included hostile actions short of war against other democratic states, such as the destabilisation of Mossadegh’s government in Iran after it pursued a programme of nationalisation of the petrochemical industry, and support for resource-rich states effectively at war with their own peoples, such as Mobutu’s Zaire and apartheid South Africa. When seeking to maintain the global political and economic status quo, liberal values have exercised less constraint on the advanced industrialised nations. ¹¹² If the socio-economic foundations of this status quo were to come under more serious strain, actors within the core might actively reject these liberal values. For example, some citizens of social market democracies have supported anti-immigrant political coalitions when they have perceived their locational rents as being under threat from immigration – rejecting the notion of mutually beneficial contracting with outsiders. If these quasi-rents become slimmer, support for anti-immigration and xenophobic policies might rise – as suggested by the resurgence of the European Far Right, which seems to have received support from those who have lost out from global economic integration.

This is emphatically not to make a confident predictive claim that we can expect inter-state hostilities between advanced industrialised states to resume if quasi-rents come under pressure. New leading sectors of production providing new opportunities for widely shared quasi-rents could well emerge in the North. Furthermore, even if social market democracies and the liberal values which they support are undermined by shifts in the distribution of quasi-rents, relations amongst non-social market states are not uniformly belligerent. Twentieth-century Latin America has been described as a ‘no-war zone’ in which military disputes took place infrequently and only on a limited scale. ¹¹³ A ‘cool peace’ prevailed in contrast to the ‘warm peace’ amongst the advanced industrialised democracies. In any case, the shifting distribution of quasi-rents might well be beneficial to regional security in some areas of the world, as it could bring about value change and enable new political coalitions for the establishment of new social market democracies. Likewise, it would be unwise to underestimate the capacity for agency on the part of majorities within the advanced industrial world to, once again, resist proletarianisation, achieve economic enfranchisement and build social market institutions founded on reciprocity and mutual aid.

Conclusion

This article has sought to demonstrate that a structuralist perspective focusing on the material inequalities within the world economy retains the capacity to make relevant contributions to international relations scholarship by highlighting the connections between these inequalities, the process of class formation and patterns of order within world politics. The neo-Ricardian perspective presented here might serve as a basis for renewing some of the lines of argument made by earlier iterations of structuralism. The perspective advanced is in substantial agreement with the neo-Gramscian perspective on international relations and might be employed by neo-Gramscian scholars not strongly committed to Marx’s LTV. Furthermore, linking the political economy of quasi-rents to Mousseau’s social market peace thesis might open up new lines of research, potentially bridging the study of regional security complexes and that of international political economy at the regional level. In particular, the validity of the arguments presented here might be evaluated in the case of regions that have experienced both democratisation and upward mobility in the global division of labour in recent decades such as southern Europe, the South American cone and Pacific Asia. As Mousseau has applied his social market thesis to the analysis of the social roots of security issues such as terrorism, ¹¹⁴ so the structuralist approach developed in this article might have wider applicability for the study of the socio-economic basis of global insecurity.

By adopting a neo-Ricardian perspective focusing on quasi-rents, this article has sought to locate the sociological and material roots of the democratic peace within the advanced industrialised world. In doing so, it has presented an argument that the democratic peace is not a permanent fixture of international relations but dependent on the asymmetric process of bargaining over the distribution of quasi-rents within the world economy. Material structures do not just act as constraints and/or incentives for state-based actors; they form the substratum of the international. The values and diffuse systems of belief which shape international relations rest on a bedrock of asymmetric economic relationships. Thus, the democratic peace may ebb and flow with the waxing and waning of liberal values, which in turn are predicated on the success of social market democracies in providing their citizens with economic security. If the new global division of labour that has arisen due to technological change, neo-liberal economic policies and capitalist restructuring gives rise to new distributions of quasi-rents, patterns of peace and conflict might likewise undergo change.

The purpose of this article is not, however, to engage in social-scientific soothsaying about the future of world order. Rather, it is to advance a structural analysis of the social market democratic peace – helping to reveal the conditions that make possible the prosperity, social order and international peace enjoyed at present within the North.