The term ‘crisis’ played a central role in many national political debates during the 1970s, although definitions of it varied widely. Towards the end of the century it had largely been replaced by another, more optimistic term, ‘globalization’.footnote1 Since 2008, however, the tone has turned sombre again, and the notion of ‘crisis’ has abruptly resurfaced; but its usage is just as loose as ever. The questions of how to define a crisis, and how to explain its origins, have once again come to the fore.

In the late 1960s and early 1970s both the hegemonic cycle and the overall economic cycle of the modern world-system entered a phase of decline. The period from 1945 to circa 1970—aptly referred to in French as les trente glorieuses—had marked the height of us hegemony and also coincided with the most expansive Kondratieff A-upturn that the capitalist world-economy had ever known. The downturns were absolutely normal, not only in the sense that all systems have cyclical rhythms—it is how they live, the way they deal with the inevitable fluctuations of their operations—but also because of how capitalism as a world-system functions. There are two key issues here: how producers make profit; and how states guarantee the world order within which producers may make profit. Let us take each in turn.

Capitalism is a system in which the endless accumulation of capital is the raison d’être. To accumulate capital, producers must obtain profits from their operations, which is possible on a significant scale only if the product can be sold for considerably more than it cost to produce. In a situation of perfect competition, it is impossible to make profits on such a scale: a monopoly, or at least a quasi-monopoly, of world-economic power is required. The seller can then demand any price, as long as he does not go beyond what the elasticity of demand permits. Whenever the world-economy is expanding significantly some ‘leading’ products are relatively monopolized, and it is from the profits on these that large amounts of capital can be accumulated. The forward and backward linkages of such products form the basis for an overall expansion of the world-economy. We call this the A-phase of a Kondratieff cycle. The problem for capitalists is that all monopolies are self-liquidating, due to the fact that new producers can enter the world market, however politically well defended a given monopoly may be. Of course, entry takes time; but sooner or later the degree of competition rises, prices go down and therefore profits go down too. When profits for the leading products decline sufficiently, the world-economy ceases to expand, and enters into a period of stagnation—the B-phase of a Kondratieff cycle.

The second condition for capitalist profit is that there be some kind of relative global order. While world wars offer some entrepreneurs opportunities to do very well, they also occasion enormous destruction of fixed capital and considerable interference with world trade. The overall balance-sheet of world wars is not positive, a point Schumpeter repeatedly made. Ensuring the relatively stable situation required for profit-making is the task of a hegemonic power strong enough to impose it on the world-system as a whole. Hegemonic cycles have been much longer than Kondratieff cycles: in a world of multiple so-called sovereign states, it is not easy for one to establish itself as the hegemonic power. It was done first by the United Provinces in the mid-17th century, then by the United Kingdom in the mid-19th century, and finally by the United States in the mid-20th century. The rise of each hegemonic power has been the result of a long struggle with other potential hegemons. Up to now the winner has been the state that has been able to assemble the most efficient productive machinery, and then to win a ‘thirty years’ war’ with its principal rival. The hegemon is then able to set the rules by which the interstate system operates, to assure its smooth functioning and to maximize the flow of accumulated capital to its citizens and productive enterprises. One could call this a quasi-monopoly of geopolitical power.

The problem for the hegemonic power is the same as that facing a leading industry: its monopoly is self-liquidating. Firstly, the hegemon has on occasion to exercise its military power to maintain order. But wars cost money and lives, and have a negative impact on its citizens, whose initial pride in victory may evaporate as they pay the increasing costs of military action. Large-scale military operations are often less effective than expected, and this strengthens those who wish to resist in the future. Secondly, even if the hegemon’s economic efficiency does not immediately falter, that of other countries begins to rise, making them less ready to accept its dictates. The hegemon enters into a process of gradual decline relative to the rising powers. The decline may be slow, but it is nonetheless essentially irreversible.

What made the moment of 1965–70 so remarkable was the conjoining of these two kinds of downturn—the end of the historically most expansive Kondratieff A-phase, and the beginning of the decline of the historically most powerful hegemon. It is no accident that the world revolution of 1968 (actually 1966–70) took place at that turning point, as an expression of it.

The world revolution of 1968 marked a third downturn—one that has occurred only once, however, in the history of the modern world-system: the decline of the traditional anti-systemic movements, the so-called Old Left. Composed essentially of the Communists, Social-Democrats and national-liberation movements, the Old Left arose slowly and laboriously across the world-system, primarily throughout the last third of the nineteenth century and the first half of the twentieth; ascending from a position of political marginality and weakness as of, say, 1870, to one of political centrality and considerable strength around 1950. These movements reached the summit of their mobilizing power in the period from 1945 to 1968—exactly the moment of both the extraordinary Kondratieff A-phase expansion and the height of us hegemony. I do not think this was fortuitous, although it might seem counter-intuitive. The world economic boom led entrepreneurs to believe that concessions to the material demands of their workers cost them less than interruptions to the productive process. Over time, this meant rising costs of production, one of the factors behind the end of the quasi-monopolies in leading industries. But most entrepreneurs make decisions that maximize short-term profits—over the succeeding three years, say—and leave the future to the gods.