The “modern” in “modern finance”: A multi-paradigmatic look

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The “modern” in “modern finance”: A multi-paradigmatic look Kavous Ardalan School of Management, Marist College, Poughkeepsie, New York 12601-1387, USA

AR TI CLE I NF O

AB S T R A CT

Keywords: Modern Finance Modern finance Paradigms Worldviews Multi-paradigmatic approach

Any adequate understanding of “modern finance” necessarily requires fundamental understanding of what is “modern”. For this purpose, this paper takes the concept of “modern” and discusses it from four different viewpoints, each of which corresponds to one of the four broad worldviews or basic paradigms: functionalist, interpretive, radical humanist, and radical structuralist. The paper emphasizes that the four views expressed are equally scientific and informative; they look at the phenomenon from their certain paradigmatic viewpoint; and together they provide a more balanced understanding of the phenomenon under consideration, i.e., the “modern” in “modern finance”.

1. Introduction Any adequate understanding of “modern finance” necessarily requires fundamental understanding of what is “modern”. For this purpose, this paper takes the concept of “modern” and discusses it from four different viewpoints, each of which corresponds to one of the four broad worldviews or basic paradigms: functionalist, interpretive, radical humanist, and radical structuralist. The paper emphasizes that the four views expressed are equally scientific and informative; they look at the phenomenon from their certain paradigmatic viewpoint; and together they provide a more balanced understanding of the phenomenon under consideration, i.e., the “modern” in “modern finance”. These different perspectives should be regarded as polar ideal types. The work of certain authors helps to define the logically coherent form of a certain polar ideal type. But, the work of many authors who share more than one perspective is located between the poles of the spectrum defined by the polar ideal types. The purpose of this paper is not to put people into boxes. It is rather to recommend that a satisfactory perspective may draw upon several of the ideal types. The ancient parable of six blind scholars and their experience with the elephant illustrates the benefits of paradigm diversity. There were six blind scholars who did not know what the elephant looked like and had never even heard its name. They decided to obtain a mental picture, i.e. knowledge, by touching the animal. The first blind scholar felt the elephant’s trunk and argued that the elephant was like a lively snake. The second bind scholar rubbed along one of the elephant’s enormous legs and likened the animal to a rough column of massive proportions. The third blind scholar took hold of the elephant’s tail and insisted that the elephant resembled a large, flexible brush. The fourth blind scholar felt the elephant’s sharp tusk and declared it to be like a great spear. The fifth blind scholar examined the elephant’s waving ear and was convinced that the animal was some sort of a fan. The sixth blind scholar, who occupied the space between the elephant’s front and hid legs, could not touch any parts of the elephant and consequently asserted that there were no such beasts as elephant at all and accused his colleagues of making up fantastic stories about nonexisting things. Each of the six blind scholars held firmly to their understanding of an elephant and they argued and fought about which story contained the correct understanding of the elephant. As a result, their entire community was torn apart, and suspicion and distrust became the order of the day.

E-mail address: [email protected]. http://dx.doi.org/10.1016/j.ribaf.2017.08.001 Received 12 August 2017; Accepted 18 August 2017 0275-5319/ © 2017 Elsevier B.V. All rights reserved.

Please cite this article as: Ardalan, K., Research in International Business and Finance (2017), http://dx.doi.org/10.1016/j.ribaf.2017.08.001

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This parable contains many valuable lessons. First, probably reality is too complex to be fully grasped by imperfect human beings. Second, although each person might correctly identify one aspect of reality, each may incorrectly attempt to reduce the entire phenomenon to their own partial and narrow experience. Third, the maintenance of communal peace and harmony might be worth much more than stubbornly clinging to one’s understanding of the world. Fourth, it might be wise for each person to return to reality and exchange positions with others to better appreciate the whole of the reality.1 Social theory can usefully be conceived in terms of four key paradigms: functionalist, interpretive, radical humanist, and radical structuralist. The four paradigms are founded upon different assumptions about the nature of social science and the nature of society. Each generates theories, concepts, and analytical tools which are different from those of other paradigms. The functionalist paradigm has provided the framework for current mainstream academic fields, and accounts for the largest proportion of theory and research in academia. In order to understand a new paradigm, theorists should be fully aware of assumptions upon which their own paradigm is based. Moreover, to understand a new paradigm one has to explore it from within, since the concepts in one paradigm cannot easily be interpreted in terms of those of another. No attempt should be made to criticize or evaluate a paradigm from the outside. This is selfdefeating since it is based on a separate paradigm. All four paradigms can be easily criticized and ruined in this way. These four paradigms are of paramount importance to any scientist, because the process of learning about a favored paradigm is also the process of learning what that paradigm is not. The knowledge of paradigms makes scientists aware of the boundaries within which they approach their subject. Each of the four paradigms implies a different way of social theorizing. Before discussing each paradigm, it is useful to look at the notion of “paradigm.” Burrell and Morgan (1979)2 regard the: … four paradigms as being defined by very basic meta-theoretical assumptions which underwrite the frame of reference, mode of theorizing and modus operandi of the social theorists who operate within them. It is a term which is intended to emphasize the commonality of perspective which binds the work of a group of theorists together in such a way that they can be usefully regarded as approaching social theory within the bounds of the same problematic. The paradigm does … have an underlying unity in terms of its basic and often “taken for granted” assumptions, which separate a group of theorists in a very fundamental way from theorists located in other paradigms. The “unity” of the paradigm thus derives from reference to alternative views of reality which lie outside its boundaries and which may not necessarily even be recognized as existing. (pages 23–24) Each theory can be related to one of the four broad worldviews. These adhere to different sets of fundamental assumptions about; the nature of science (i.e., the subjective-objective dimension), and the nature of society (i.e., the dimension of regulation-radical change), as in Exhibit 1.3 Assumptions related to the nature of science are assumptions with respect to ontology, epistemology, human nature, and methodology. The assumptions about ontology are assumptions regarding the very essence of the phenomenon under investigation. That is, to what extent the phenomenon is objective and external to the individual or it is subjective and the product of individual’s mind. The assumptions about epistemology are assumptions about the nature of knowledge − about how one might go about understanding the world, and communicate such knowledge to others. That is, what constitutes knowledge and to what extent it is something which can be acquired or it is something which has to be personally experienced. The assumptions about human nature are concerned with human nature and, in particular, the relationship between individuals and their environment, which is the object and subject of social sciences. That is, to what extent human beings and their experiences are the products of their environment or human beings are creators of their environment.

1 2 3

This parable is taken from Steger (2002). This work borrows heavily from the ideas and insights of Burrell and Morgan (1979). See Burrell and Morgan (1979) for the original work. Ardalan (2008) and Bettner, Robinson, and McGoun (1994) have used this approach.

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The assumptions about methodology are related to the way in which one attempts to investigate and obtain knowledge about the social world. That is, to what extent the methodology treats the social world as being real hard and external to the individual or it is as being of a much softer, personal and more subjective quality. In the former, the focus is on the universal relationship among elements of the phenomenon, whereas in the latter, the focus is on the understanding of the way in which the individual creates, modifies, and interprets the situation which is experienced. The assumptions related to the nature of society are concerned with the extent of regulation of the society or radical change in the society. Sociology of regulation provides explanation of society based on the assumption of its unity and cohesiveness. It focuses on the need to understand and explain why society tends to hold together rather than fall apart. Sociology of radical change provides explanation of society based on the assumption of its deep-seated structural conflict, modes of domination, and structural contradiction. It focuses on the deprivation of human beings, both material and psychic, and it looks towards alternatives rather than the acceptance of status quo. The subjective-objective dimension and the regulation-radical change dimension together define four paradigms, each of which share common fundamental assumptions about the nature of social science and the nature of society. Each paradigm has a fundamentally unique perspective for the analysis of social phenomena. The aim of this paper is not so much to create a new piece of puzzle as it is to fit the existing pieces of puzzle together in order to make sense of it. Sections II to V, first, each lays down the foundation by discussing one of the four paradigms. Subsequently, each examines the concept of “modern” from the point of view of the respective paradigm. Section VI concludes the paper. 2. Functionalist paradigm The functionalist paradigm assumes that society has a concrete existence and follows certain order. These assumptions lead to the existence of an objective and value-free social science which can produce true explanatory and predictive knowledge of the reality “out there.” It assumes scientific theories can be assessed objectively by reference to empirical evidence. Scientists do not see any roles for themselves, within the phenomenon which they analyze, through the rigor and technique of the scientific method. It attributes independence to the observer from the observed. That is, an ability to observe “what is” without affecting it. It assumes there are universal standards of science, which determine what constitutes an adequate explanation of what is observed. It assumes there are external rules and regulations governing the external world. The goal of scientists is to find the orders that prevail within that phenomenon. The functionalist paradigm seeks to provide rational explanations of social affairs and generate regulative sociology. It assumes a continuing order, pattern, and coherence and tries to explain what is. It emphasizes the importance of understanding order, equilibrium and stability in society and the way in which these can be maintained. It is concerned with the regulation and control of social affairs. It believes in social engineering as a basis for social reform. The rationality which underlies functionalist science is used to explain the rationality of society. Science provides the basis for structuring and ordering the social world, similar to the structure and order in the natural world. The methods of natural science are used to generate explanations of the social world. The use of mechanical and biological analogies for modeling and understanding the 3

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social phenomena are particularly favored. Functionalists are individualists. That is, the properties of the aggregate are determined by the properties of its units. Their approach to social science is rooted in the tradition of positivism. It assumes that the social world is concrete, meaning it can be identified, studied and measured through approaches derived from the natural sciences. Functionalists believe that the positivist methods which have triumphed in natural sciences should prevail in social sciences, as well. In addition, the functionalist paradigm has become dominant in academic sociology and mainstream academic fields. The social world is treated as a place of concrete reality, characterized by uniformities and regularities which can be understood and explained in terms of causes and effects. Given these assumptions, the individual is regarded as taking on a passive role; his or her behavior is being determined by the economic environment. Functionalists are pragmatic in orientation and are concerned to understand society so that the knowledge thus generated can be used in society. It is problem orientated in approach as it is concerned to provide practical solutions to practical problems. In Exhibit 1, the functionalist paradigm occupies the south-east quadrant. Schools of thought within this paradigm can be located on the objective-subjective continuum. From right to left they are: Objectivism, Social System Theory, Integrative Theory, Interactionism, and Social Action Theory. Functionalist paradigm’s views with respect to the concept of “modern” are presented next.4 Modernization is a function of national characteristics. That is, national characteristics act as the causal factor and modernization of society acts as the effect. Modernization is the result of the organization of political, economic, and social institutions, or national socio-economic policies. Modernization at the individual level requires the diffusion and adaptation of Western values and beliefs. Modernization at the societal level requires a set of social and political structural organization found at the ends of the traditional-modern continuum. The extent to which less-developed societies can incorporate these characteristics of modernity, they enhance their potential for sustained progress. Differentiation is one of the central concepts in the evolutionary model of social systems and social change. It emphasizes the sudden increase in the number of new structures and roles that emerge out of previously multifunctional structures. Specifically, in traditional societies the family structure simultaneously performs several functions and roles: biological reproduction, economic production, education, medical care, and so on. In the process of progress toward modernization, both structures and roles tend toward specialization. Specialized institutions and structures emerge in order to produce goods and services, train people, and provide health care. These specialized institutions are based on specialized and trained personnel. Structural differentiation is the process whereby one social role or organization differentiates into two or more roles or organizations that function more effectively in the new historical circumstances. Although the new social units are structurally distinct from each other, taken together they are perform the same function as the original unit. The process of structural differentiation involves a number of fundamental transitions: (1) technological transition: the move from simple traditional techniques toward the application of scientific knowledge; (2) economic transition: the shift from subsistence to commercial farming and the evolution from human/animal to industrial power; (3) ecological transition: the migration from farm to urban areas. Each of these changes further helps to differentiate other structures and systems. Scientific knowledge provides for new forms of secular rational understanding that lead to the differentiation and specialization of religious systems. Commercial farming contributes to the differentiation of the kinship-family-community unit as specialized economic units emerge that are oriented toward market production. The growth of the urban industrial system contributes to the decline of the multi-functional extended family unit, which becomes a more specialized structure formed by choice and providing for expressive needs. Scientific knowledge, commercial farming, industrial power, and urbanization are the most common stereotypical elements of modern society. The level of differentiation and specialization are correlated with pattern variables. These specify the basic forms of social interaction and organization in social systems. The three variables most commonly used to contrast modern and traditional societies are specificity-diffuseness, achievement-ascription, and universalism-particularism. These three polar concepts describe value systems, interaction patterns, modes of organization, and social systems. They define how roles are organized, allocated, and evaluated in traditional and modern societies. Specificity-diffuseness focuses on how narrowly or broadly roles are defined. In modern differentiated societies individuals play specialized roles with formal and explicit expectations and responsibilities. Role specificity in a modern society is based on a complex and interdependent division of labor that enhances the effectiveness of the larger system. In contrast, in traditional societies there is role diffuseness, i.e., people perform many roles simultaneously. Diffuseness creates difficulty in defining and accounting for areas of authority and responsibility. Achievement-ascription focuses on what constitutes the basis for role allocation and reward. In modern societies achievement primarily determines how positions are rationed and rewarded. Positions in society are achieved through higher education, skills development, competent performance, and experience. Accordingly, the specialized roles are performed by the most capable individuals and consequently the society becomes more productive. In traditional societies, by contrast, role allocation and reward are based on ascription. This involves the achievement of positions and the distribution of rewards on the basis of family background, race, sex, and other unqualified or ascribed characteristics. Traditional societies are therefore economically irrational and inefficient because positions are not taken on the basis of competence and merit. Universalism-particularism focuses on the extent to which individuals in society are treated equally. In modern universalistic

4

See, for example, Eisenstadt (1970), Harper (1993), and Smelser (1966). This section is based on Jaffee (1990).

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organizations the same rules and regulations apply to every member. Universalism is a feature of modern bureaucracy that guarantees that universal and impersonal standards would determine the allocation of rewards and sanctions. Universalism contributes to organizational effectiveness and legitimacy. In traditional particularistic societies, in contrast, rewards and sanctions favor some groups and individuals over others. The rules and regulations are not applied in a universal manner, but in a selective and discriminatory fashion. Particularism characterizes traditional societies and reduces the effectiveness of their social institutions. Traditional societies must adopt the structural patterns of modern societies − specificity, achievement, and universalism − if they wish to develop socially and economically. That is, traditional societies must aim at the modern end of the pattern variable continuum if they wish to industrialize effectively. The pattern variables define and describe individuals’ different orientation and interaction patterns. In a “machine society” − i.e., a society based on industrial machines − individuals must follow the modern patterns of interaction. The distinguishing feature of the modern industrialized world from traditional societies is the workplace: the factory. Thus, individuals must recognize the fact that work is no longer performed with the members of family and community but with unfamiliar individuals on a “specific” and “universalistic” basis. Relations and interactions with coworkers are instrumentally designed for the achievement of organizational goals. Therefore, the “diffuse” roles of workers, which are non-work-related, are irrelevant in the machine society. In a machine society, machines are both expensive and complicated. Accordingly, recruitment to industrial positions is “achievement-based.” This generates a “specific” demand for workers with the ability to operate machines, and leaves no room for “diffuse” or “ascriptive” standards of selection and evaluation. The machine society is also characterized by the division of labor, specialization, and interdependence among producers of goods and services. Through impersonal market exchanges workers buy food and clothing, and satisfy their various other needs. Consequently, these market exchanges require a “specific” orientation with regard to the buyers and sellers of goods. That is, the only requirement is the adequacy of a person as a supplier of some product and the ability of the buyer to pay for the product. Again, there is no room for “diffuse” roles and “ascribed” characteristics. In sum, in the process of industrialization, structural differentiation and role specialization require their corresponding patterns of inter-personal behavior and interaction. The expressive freedoms of multifunctional roles are replaced by the instrumental, goaloriented role specialization. Individuals suppress their immediate desire for a long-range goal because they must do their work regardless of their private desire for the moment. These social structural patterns both define and promote modernization. In the process of modernization, societies structurally become increasingly differentiated. These differentiated structures would need institutions to integrate and coordinate them. Such a need would be met by the emergence of subsystems that facilitate the system to adapt and maintain continuity and stability. One of these subsystems is the polity, which facilitates the attainment of common goals. Since some important goals are economic, there are direct connections between the structure of the political subsystem and the structure of the economic subsystem. Political structures, through the functioning of political institutions, contribute to socio-economic modernization. In this way, political institutions play a critical role in the structural evolution of modern social systems. The process of modernization involves political differentiation and secularization. That is, roles increasingly become specialized and autonomous; social interactions increasingly become based on cause-and-effect relationships; and belief systems increasingly become determined by science and technology. Modern political systems are structurally differentiated with a secularized political culture and have an increased capability to shape their domestic and international environment. Modern political systems have three key elements. The first element is equality which takes the form of mass participation and citizenship. Equality ensures that the legal system is founded on universalistic laws and procedures and that positions are filled based on achievement rather than ascription. The second element is the increased capacity of the political system. This is because the rational and secular orientation toward administrative matters leads to effective and efficient governmental performance and the implementation of policy outputs. The third element is the differentiation and specialization of political structures. This involves the functional specificity of political roles and institutions and the integration of the various specialties and structures. When the existing structure and culture of the political system are unable to handle problems or challenges then the existing political system needs to move towards modern political system, which has structural differentiation and cultural secularization. In most traditional societies effective political structures are absent that result in political instability. This is because their political institutions are not capable of absorbing the expansion of political demands and political participation. These societies have low levels of institutionalization but high levels of participation. In these societies, various socio-political movements resort to unconventional methods and act directly on the political system. In these societies, there is an absence of effective political institutions capable of mediating, refining, and moderating groups’ political action. As a result, each group employs means which reflect its particular nature and capabilities. The wealthy bribe, students riot, workers strike, mobs demonstrate, and the military coup. Highly institutionalized modern political structures − characterized by adaptability, complexity, autonomy, and coherence − are best capable of handling social mobilization and, therefore, of providing for the smooth and stable modernization of their societies. 3. Interpretive paradigm The interpretive paradigm assumes that social reality is the result of the subjective interpretations of individuals. It sees the social world as a process which is created by individuals. Social reality, insofar as it exists outside the consciousness of any individual, is regarded as being a network of assumptions and intersubjectively shared meanings. This assumption leads to the belief that there are shared multiple realities which are sustained and changed. Researchers recognize their role within the phenomenon under investigation. Their frame of reference is one of participant, as opposed to observer. The goal of the interpretive researchers is to find 5

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the orders that prevail within the phenomenon under consideration; however, they are not objective. The interpretive paradigm is concerned with understanding the world as it is, at the level of subjective experience. It seeks explanations within the realm of individual consciousness and subjectivity. Its analysis of the social world produces sociology of regulation. Its views are underwritten by the assumptions that the social world is cohesive, ordered, and integrated. Interpretive sociologists seek to understand the source of social reality. They often delve into the depth of human consciousness and subjectivity in their quest for the meanings in social life. They reject the use of mathematics and biological analogies in learning about the society and their approach places emphasis on understanding the social world from the vantage point of the individuals who are actually engaged in social activities. The interpretive paradigm views the functionalist position as unsatisfactory for two reasons. First, human values affect the process of scientific enquiry. That is, scientific method is not value-free, since the frame of reference of the scientific observer determines the way in which scientific knowledge is obtained. Second, in cultural sciences the subject matter is spiritual in nature. That is, human beings cannot be studied by the methods of the natural sciences, which aim to establish general laws. In the cultural sphere human beings are perceived as free. An understanding of their lives and actions can be obtained by the intuition of the total wholes, which is bound to break down by atomistic analysis of functionalist paradigm. Cultural phenomena are seen as the external manifestations of inner experience. The cultural sciences, therefore, need to apply analytical methods based on “understanding;” through which the scientist can seek to understand human beings, their minds, and their feelings, and the way these are expressed in their outward actions. The notion of “understanding” is a defining characteristic of all theories located within this paradigm. The interpretive paradigm believes that science is based on “taken for granted” assumptions; and, like any other social practice, must be understood within a specific context. Therefore, it cannot generate objective and value-free knowledge. Scientific knowledge is socially constructed and socially sustained; its significance and meaning can only be understood within its immediate social context. The interpretive paradigm regards mainstream academic theorists as belonging to a small and self-sustaining community, which believes that social reality exists in a concrete world. They theorize about concepts which have little significance to people outside the community, which practices social theory, and the limited community which social theorists may attempt to serve. Mainstream academic theorists tend to treat their subject of study as a hard, concrete and tangible empirical phenomenon which exists “out there” in the “real world.” Interpretive researchers are opposed to such structural absolution. They emphasize that the social world is no more than the subjective construction of individual human beings who create and sustain a social world of intersubjectively shared meaning, which is in a continuous process of reaffirmation or change. Therefore, there are no universally valid rules of science. Interpretive research enables scientists to examine human behavior together with ethical, cultural, political, and social issues. In Exhibit 1, the interpretive paradigm occupies the south-west quadrant. Schools of thought within this paradigm can be located on the objective-subjective continuum. From left to right they are: Solipsism, Phenomenology, Phenomenological Sociology, and Hermeneutics. Interpretive paradigm’s views with respect to the concept of “modern” are presented next.5 Most sociological perspectives or theories have the tendency to locate in modern societies a single dominant institutional nexus: capitalistic or industrial. Such perspectives are based on the premise of reductionism because they see either industrialism as a subtype of capitalism or vice versa. In contrast to such reductionism, the institutional dimensions of modernity should be seen to involve both capitalism and industrialism as two distinct organizational clusters or dimensions, which are here defined as follows. Industrialism has the chief characteristic of using objects as the sources of material power in the production of goods. In industrialism, machinery plays the central role in the production process. A machine can be defined as an artifact that performs certain tasks by using inanimate power sources as the means of its operation. Industrialism requires the social organization of production that coordinates human activity, machines, and the inputs of raw materials and the outputs of goods. Industrialism should be understood as not only to include the coal- and steam-powered large, heavy machinery used in workshops and factories, but also to include the high-technology machinery that use electricity as the only power source and their only mechanized devices are the electronic microcircuits. Industrialism affects the workplace, transportation, communication, and domestic life. Capitalism is a commodity production system. At the center of this system is the relation between private ownership of capital and propertyless wage labor. This relation plays the main role of a class system. Capitalist enterprises produce for competitive markets. Prices act as signals for investors, producers, and consumers. Capitalist societies can be recognized as one distinct subtype of modern societies. A capitalist society is a system with a set of specific institutional features. First, its economic order has a set of characteristics which were noted above. The capitalist enterprise, with its strongly competitive and expansionist nature, leads to continuous and pervasive technological innovations. Second, the economy is to a large extent distinct, or insulated, from other social institutions, especially political institutions. The economy, with its high rate of innovation, has considerable sway over other institutions. Third, the insulation of polity and economy (which may take many different forms) is based on the private property in the means of production. Private property refers to the widespread private ownership of investments. The ownership of capital is directly connected to propertylessness, the commodification of labor power, and the class system. Fourth, the autonomy of the state depends on, though not determined by, capital accumulation, over which its control is far from complete.

5

See, for example, Latouche (1996), Nettl and Robertson (1968), and Toulmin (1990). This section is based on Giddens (1990).

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A capitalist society is a society only because it is a nation-state. The characteristics of the nation-state should be considered separately from either capitalism or industrialism. This is because capitalism has always been international in scope. Capitalistic economy has expansionist characteristics and only in a few respects is confined to the boundaries of specific social systems. The administrative system of the capitalist state, or modern states in general, should be interpreted in the context of its coordinated control over delimited territorial areas. Pre-modern states did not in any way reach the level of administrative coordination developed in the modern nation-states. The third institutional dimension (the first two were capitalism and industrialism) associated with the rise of modernity is the apparatus of surveillance used by capitalist states to deepen their administrative concentration. Their development of surveillance capacities has gone well beyond those of traditional civilizations. Surveillance can be defined as the supervision of the activities of the people in the political arena − although its use as a basis of administrative power is not limited to that sphere. Supervision may be direct (such as prisons, schools, or open workplaces), but more often it is indirect and based on the control of information. The fourth institutional dimension of modernity is the control of the means of violence. In pre-modern civilizations, military power was always a central feature. But, in these civilizations, the political center was never able to gain a long-lasting stable military power and consequently was unable to secure a monopoly control of the means of violence within its territories. The military strength of the political center depended on its alliances with local princes and warlords, who always had the tendency either to break away from or directly challenge the political center. It is the distinctive characteristic of the modern state to have the successful monopoly of the means of violence within territorially precise borders. In addition, there is the connection to industrialism, which permeates both the organization of the military and the weaponry at the disposal of the state. The “industrialization of war” has radically changed the character of warfare, i.e., the era of “total war” and the “nuclear age.” The four basic institutions of modernity are interrelated. Capitalism involves the insulation of the economy from the polity within the context of competitive labor and product markets. Surveillance is fundamental to all modern organizations, especially the nationstate, which has been intertwined with capitalism in their mutual historical development. There are substantive connections between the surveillance operations of nation-states and the military power in the modern period. The modern state obtained the monopoly of the means of violence based on the new codes of criminal law and the control of deviance. The military acts only as a backup to the internal hegemony of the civil authorities, and the armed forces are directed towards other states. Industrialism and military power have direct relations, of which the most important one is the industrialization of war. Industrialism and capitalism are intimately connected, which is well-known, in spite of the existing debate about which one has the priority over the other one. Industrialism is quite closely connected with surveillance. This can be seen in the consolidation of the administrative power within plants, factories, and workshops. Industrialism mainly forms the interaction of human beings with nature in the modern era. In the pre-modern era, even in their large civilizations, human beings saw themselves mainly as the continuation of nature. Their livelihoods were closely related to nature’s vagaries: the availability of natural sources of sustenance, the flourishing of crops and pastoral animals, and the occurrence of natural disasters. Industrialism is shaped by the alliance of modern science and technology. It transforms the nature in unimaginable ways. In the industrialized segments of the globe, human beings live in created and controlled environment, which is physical but no longer natural. Not only the urban areas but also most other landscapes become subject to human coordination and control. It is turn for looking at how the different institutional clusters were connected with one another in the development of modern institutions. Capitalistic enterprise played a major role in moving the modern institutions of social life away from the institutions of the traditional world. By its very nature, capitalism is highly dynamic because of the connections between competition and commodification. The capitalist economy is unstable and restless, both within and outside the purview of the nation-state. In capitalism, all economic reproduction is expanded reproduction, because the economic order is dynamic and cannot standstill, as in a typical traditional system. Capitalism emerged before industrialism and provided a great deal of impetus to its emergence and development. Industrialism together with constant advancements in technology led to more efficient and cheaper production processes. The commodification of labor power provided an important linkage between capitalism and industrialism, because abstract labor can be programmed into the technological design of production. The abstract labor power also connected capitalism, industrialism, and the control of the means of violence. In pre-modern states, class systems were seldom entirely economic and exploitative class relations were partly maintained by force or by the threat of using force. In capitalism, labor contract became a focal point of the new class system. The labor contract incorporated class relations in the framework of capitalist production, rather than being covert and supported by violence. The labor contract emerged in historical conjunction with the emergence of the monopoly of the control of the means of violence by the state. In effect, violence was taken away from the labor contract and handed in to state authorities. In addition to capitalism, the nation-state was the other great institutional element promoting the acceleration and expansion of modern institutions. Nation-states, and the nation-state system, cannot be explained in terms of the rise of capitalism, even though their interests have been convergent at times. The nation-state system emerged as a result of many contingent events from the loosely scattered order of post-feudal kingdoms and principalities that distinguished Europe from centralized agrarian empires. Modern institutions originated in the West and were affected by the major four institutional dimensions. Later, modern institutions were spread across the world. Nation-states are far more capable of effectively concentrating their administrative power than traditional states. Even small nation-states can mobilize social and economic resources far beyond what could be done in pre-modern systems. Capitalist production, especially in combination with industrialism, provided a massive increase in both economic wealth and military power. The combination of the four institutional dimensions made Western expansion irresistible. Behind the four institutions of modernity lie three sources of the dynamism of modernity: time-space distanciation, disembedding, 7

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and reflexivity. These are not institutions of modernity rather they facilitate the historical transition from the pre-modern to the modern conditions. They made the tearing away of modernity from traditional orders to happen so radically, so rapidly, and so widely on the world stage. They affect and are affected by the institutional dimensions of modernity. Modernity is by its very nature globalizing, due to the most basic characteristics of its institutions. The focus on society, i.e., a bounded system, would be replaced by a focus on social life as is ordered across time and space, i.e., the problematic of time-space distanciation. The concept of time-space distanciation considers the relations between local involvements (circumstances of copresence) and interaction across distance (the connections of presence and absence). In the modern era, the time-space distanciation reaches a much higher level than in any previous era. That is, the relations between local and distant social forms and activities become increasingly stretched to the extent that they become networked across the earth’s surface. Thus, globalization refers to the intensification of social relations in distant localities to the extent that local social life is shaped by events in distant locales and vice versa. This is a dialectical, reflexive, process because such local social life may move in the opposite direction to the distanciated events that shape them. An example would be the rise of nationalisms in Europe and elsewhere. Globalization might diminish some aspects of nationalist feeling, but might also intensify nationalist sentiments. That is, due to globalization, while social relations become laterally stretched, there appear pressures for local autonomy and regional cultural identity. 4. Radical humanist paradigm The radical humanist paradigm provides critiques of the status quo and is concerned to articulate, from a subjective standpoint, the sociology of radical change, modes of domination, emancipation, deprivation, and potentiality. Based on its subjectivist approach, it places great emphasis on human consciousness. It tends to view society as anti-human. It views the process of reality creation as feeding back on itself; such that individuals and society are prevented from reaching their highest possible potential. That is, the consciousness of human beings is dominated by the ideological superstructures of the social system, which results in their alienation or false consciousness. This, in turn, prevents true human fulfillment. The social theorist regards the orders that prevail in the society as instruments of ideological domination. The major concern for theorists is with the way this occurs and finding ways in which human beings can release themselves from constraints which existing social arrangements place upon realization of their full potential. They seek to change the social world through a change in consciousness. Radical humanists believe that everything must be grasped as a whole, because the whole dominates the parts in an all-embracing sense. Moreover, truth is historically specific, relative to a given set of circumstances, so that one should not search for generalizations for the laws of motion of societies. The radical humanists believe the functionalist paradigm accepts purposive rationality, logic of science, positive functions of technology, and neutrality of language, and uses them in the construction of “value-free” social theories. The radical humanist theorists intend to demolish this structure, emphasizing the political and repressive nature of it. They aim to show the role that science, ideology, technology, language, and other aspects of the superstructure play in sustaining and developing the system of power and domination, within the totality of the social formation. Their function is to influence the consciousness of human beings for eventual emancipation and formation of alternative social formations. The radical humanists note that functionalist sociologists create and sustain a view of social reality which maintains the status quo and which forms one aspect of the network of ideological domination of the society. The focus of the radical humanists upon the “superstructural” aspects of society reflects their attempt to move away from the economism of orthodox Marxism and emphasize the Hegelian dialectics. It is through the dialectic that the objective and subjective aspects of social life interact. The superstructure of society is believed to be the medium through which the consciousness of human beings is controlled and molded to fit the requirements of the social formation as a whole. The concepts of structural conflict, contradiction, and crisis do not play a major role in this paradigm, because these are more objectivist view of social reality, that is, the ones which fall in the radical structuralist paradigm. In the radical humanist paradigm, the concepts of consciousness, alienation, and critique form their concerns. In Exhibit 1, the radical humanist paradigm occupies the north-west quadrant. Schools of thought within this paradigm can be located on the objective-subjective continuum. From left to right they are: French Existentialism, Anarchistic Individualism, and Critical Theory. Radical humanist paradigm’s views with respect to the concept of “modern” are presented next.6 A set of processes led to the emergence of modern societies. The origin of modern societies can be traced back to the rapid and extensive social and economic development that followed the decline of feudalism in Western Europe. Modern societies have now become a global phenomenon; and the modern world has emerged as the unexpected and unpredicted outcome of a series of major historical transitions. An explanatory framework can be used to not only map the historical process of the formation of modern societies, but also the development of modern societies. The word “modern,” which means recent or up-to-date, can be used to locate these societies, but it lacks a theoretical or analytical logic. In contrast, the passage to modernity can be analyzed in terms of a theoretical model which is based on the interaction of a set of deeply structured processes of change taking place over long periods. These processes cannot be collapsed into a single process (such as modernization or industrialization) rather they should be treated as different processes, 6

See, for example, Kellner (1989), Offe (1996), and Smart (1999). This section is based on Hall (1992).

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working over different historical time-scales, whose interactions have variable and contingent outcomes. The stress should be placed on processes, factors, and causal patterns. A mono-causal explanation should be avoided. That is, no single phenomenon or set of phenomena can fully explain their rise. An explanation should begin with a view on a combination of factors. Four major social processes can be identified: the political, the economic, the social, and the cultural. They form the basis of the model used for the explanation of the emergence of modern societies. They provide the framework for an analysis of the form and functioning of developed industrial societies. They also provide the basis for identifying the emergent social forces and contradictory processes which are currently re-shaping modem societies in a radical way. The Enlightenment signifies the explosion of intellectual energy in eighteenth-century Western Europe. This movement gave birth to the idea of “modernity” and formed the original matrix of the modern social sciences. That is, the Enlightenment led to the emergence of social science. Of course, the study of society was not something new. Observers of social life had been writing about social life for millennia. However, it was the discourse of the Enlightenment that finally led to crystallization of the distinctly modern idea of treating “the social” as a separate and distinct form of reality, which could be analyzed in entirely material terms and laid out for rational investigation and explanation. The definition of “the social” as an object of knowledge led, for the first time, to its systematic analysis and investigation, which is called “the social sciences.” An examination of the historical and geographical context of the European Enlightenment leads to an understanding of the vision of intellectual emancipation which seized its principal tablefigures: including major precursors of modern social theory such as Montesquieu, Diderot, Voltaire, Rousseau, and the “Scottish Enlightenment” such as David Hume, Adam Smith, and Adam Ferguson. The Enlightenment critiqued traditional authority and brought up leading ideas, such as progress, science, reason, and nature. These ideas shaped the Enlightenment “promise,” − that is, the prospect of a perpetual material progress and prosperity, the abolition of prejudice and superstition, and the mastery of the forces of nature, based on the advances in human knowledge and understanding. Other contributing factors were the Romantic Movement, the French Revolution, and the major theorists of nineteenth-century social science, such as Saint-Simon and Comte. At the end of the nineteenth century, the social sciences were once again reorganized. This second stage in the development of the social sciences − between 1890 and 1920–reflects the work of the “founding figures” of sociology: Durkheim, Weber, Simmel, and Tonnies. Subsequently, the social sciences became more compartmentalized into their separate disciplines, more specialized and empirical, more “scientific” (i.e., positivistic), and more involved in application to the “real world” through social engineering. The founding figures of modern sociology made a deep examination of the modern world, and its “laws of development,” in line with the Enlightenment. Social sciences have continued, to the present time, their adherence to the Enlightenment thoughts. There has been a remarkable renewed interest in historical sociology, which examines long-term transformation and development. Such examinations are being conducted in a more interdisciplinary manner, i.e., drawing together sociologists, economists, social historians, political theorists, and philosophers. The important questions about the origin and destiny of the modern world are posed again at the time when modernity itself − its promise and its vicissitudes − is questioned. The modern state emerged from the interplay of the national and international systems. In its development, the state has taken a variety of historical forms: the classical European empires; the divided authority of the feudal states (Papacy and Holy Roman Empire); the estates system and the absolutisms of the early modern period; and finally the emergence of the modern “nation-state” with characteristics such as political authority, secular power, legitimacy, and sovereignty. The supremacy of this nation-state form heavily depends on warfare, militarism, and capitalism. The nation-states system is the foundation of the modern international order. Corresponding changes in the conceptions of politics are elaborated by western political philosophers such as Hobbes, Locke, Rousseau, Mill, Marx, and Weber. In the twentieth century, liberal democracy emerged as the form of privileged state in modern societies in the West. The economy emerged as a distinct sphere of life. It was characterized by new economic relations, new economic regulations, and new economic ideas. The traditional economy was gradually transformed and gave rise to the capitalism in Europe. It resulted in the spread of commerce and trade, the expansion of markets, the new division of labor, and the growth of material wealth and consumption − “opulence” − in eighteenth-century British society. As early as the fifteenth century, Europe began its economic development, which was centered on the expansion of trade and the market. Thereafter for a long time, capitalism developed under the protection of state monopolies at home and mercantilism abroad. By the eighteenth century, the market forces of the private economy − laissez-faire − began to unleash the productive capacities of the capitalist system. The driving forces behind this development were the commercial and agrarian revolutions. The economic model introduced by Adam Smith − as expressed in his book “The Wealth of Nations,” which has been regarded as the bible of capitalist development − was agrarian and commercial capitalism, not the industrial smokestacks and factory-hands analyzed by Marx and Engels. The formation of the modern economy brought about the new ways of speaking and thinking about economic life, i.e., the economic discourse. The historical move forward from the agrarian and commercial revolutions of the eighteenth century to the Industrial Revolution of the nineteenth century was accompanied by the changing social relations that resulted in the new type of social structure that prevailed in industrial capitalist society. One of the main outcomes of this process is the emergence of new social and sexual divisions of labor. That is, the class and gender formations of pre-industrial, rural society can be contrasted with those of the industrial society to note: (1) the rise of the new social classes, which are organized based on capital and waged labor; (2) the work patterns associated with the new forms of industrial production; and (3) the new relations between men and women, which are organized based on the new distinctions between the public and the private, work and home, the public world and household. The analyses of social classes have resulted in important sociological theories and models of class formation. The analyses of the role of gender in society has resulted in the deployment of the concepts of gender, patriarchy, and family which have increasingly questioned “class” as the most important explanatory social category. That is, this type of analyses can be used to explain the social structure of industrial society in 9

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terms of the deep interpenetration of class and gender. They also show how these class and gender structures evolved over time and how they were complicated by issues of race and ethnicity in the twentieth century. In contemporary social theory, an increasing importance has been given to the analysis of culture, meaning, language, and the symbolic structures of social life. There are three key cultural themes in the transition from traditional society to modern society. First, there has been a shift from a religious to a secular world-view; and the consequent shift from a sacred to a profane foundation for social and moral values. Second, it is the role that religion played in forming the “spirit of capitalism” − as discussed by Max Weber in his book “the Protestant ethic.” Third, the growing awareness among western philosophers and social theorists of the negative aspects of the modern culture − what Freud called civilization’s “discontents,” and what Weber saw as the increasing rationalization and “disenchantment of the modern world.” This third theme has been captured in recent critiques of the “promise” of the Enlightenment, which show that a pessimistic assessment of enlightenment and modernity has always been part of the Enlightenment reason − i.e., its “dark shadow.” The evolution of modern societies and modernity in the West should be considered in the wider global context. This would then lead to the recognition that the early analysis of Western Europe was indeed Europe-centered or Euro-centric. More specifically, Western Europe’s gradual integration, its embarking on sustained economic growth, its emerging system of powerful nation-states, and its acquiring of other features of modern societies are often theorized by a purely internal model. That is, such developments are often theorized as if Europe provided all the necessary conditions, materials, and dynamics for its development from within itself. This view is challenged when it is noted that this process also had external and global conditions of existence. The particular form of “globalization” which is recently undermining and transforming modernity (the internationalization of production, consumption, markets, and investment) is not a new phenomenon, but only the latest phase of a very long process. The European’s expansion of their maritime empires in the fifteenth century, their exploration of new worlds, their encounter with new peoples and civilizations very different from their own, and their harnessing of these new people to the dynamics of the development of Europe through commerce, conquest, and colonization are key neglected components in the analysis of the modern societies and the modern age. The integration of Western Europe also constructed a new sense of cultural identity for Western Europe. Europe discovered and produced this new identity when it represented itself as a distinct, unique, and triumphant civilization, and at the same time it emphasized its difference from other cultures, peoples, and civilizations. These “Others” constituted part of the West’s image of itself, i.e., its language, its systems of representation, its forms of knowledge, its visual imagery, and its conception of which people did or did not have access to reason. The Europeans encounter with difference and their construction of “otherness” reflect their exploration and conquest of the Americas, Asia, Africa, and the Pacific between the fifteenth and nineteenth centuries. Thus, the discourses of “self” and “otherness” reflect the efforts through which the West came to represent itself as being different from “the Rest.” After several centuries, the images of “the West” and “the Rest” still resurface in contemporary discourses of race and ethnicity, but this time “the Other” is questioning and contesting the West’s “centeredness,” which western civilization and western social science have for a long time taken for granted. 5. Radical structuralist paradigm The radical structuralist paradigm assumes that reality is objective and concrete, as it is rooted in the materialist view of natural and social world. The social world, similar to the natural world, has an independent existence, that is, it exists outside the minds of human beings. Sociologists aim at discovering and understanding the patterns and regularities which characterize the social world. Scientists do not see any roles for themselves in the phenomenon under investigation. They use scientific methods to find the order that prevails in the phenomenon. This paradigm views society as a potentially dominating force. Sociologists working within this paradigm have an objectivist standpoint and are committed to radical change, emancipation, and potentiality. In their analysis they emphasize structural conflict, modes of domination, contradiction, and deprivation. They analyze the basic interrelationships within the total social formation and emphasize the fact that radical change is inherent in the structure of society and the radical change takes place through political and economic crises. This radical change necessarily disrupts the status quo and replaces it by a radically different social formation. It is through this radical change that the emancipation of human beings from the social structure is materialized. For radical structuralists, an understanding of classes in society is essential for understanding the nature of knowledge. They argue that all knowledge is class specific. That is, it is determined by the place one occupies in the productive process. Knowledge is more than a reflection of the material world in thought. It is determined by one’s relation to that reality. Since different classes occupy different positions in the process of material transformation, there are different kinds of knowledge. Hence class knowledge is produced by and for classes, and exists in a struggle for domination. Knowledge is thus ideological. That is, it formulates views of reality and solves problems from class points of view. Radical structuralists reject the idea that it is possible to verify knowledge in an absolute sense through comparison with socially neutral theories or data. But, emphasize that there is the possibility of producing a “correct” knowledge from a class standpoint. They argue that the dominated class is uniquely positioned to obtain an objectively “correct” knowledge of social reality and its contradictions. It is the class with the most direct and widest access to the process of material transformation that ultimately produces and reproduces that reality. Radical structuralists’ analysis indicates that the social scientist, as a producer of class-based knowledge, is a part of the class struggle. Radical structuralists believe truth is the whole, and emphasize the need to understand the social order as a totality rather than as a collection of small truths about various parts and aspects of society. The financial empiricists are seen as relying almost exclusively 10

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upon a number of seemingly disparate, data-packed, problem-centered studies. Such studies, therefore, are irrelevant exercises in mathematical methods. This paradigm is based on four central notions. First, there is the notion of totality. All theories address the total social formation. This notion emphasizes that the parts reflect the totality, not the totality the parts. Second, there is the notion of structure. The focus is upon the configurations of social relationships, called structures, which are treated as persistent and enduring concrete facilities. The third notion is that of contradiction. Structures, or social formations, contain contradictory and antagonistic relationships within them which act as seeds of their own decay. The fourth notion is that of crisis. Contradictions within a given totality reach a point at which they can no longer be contained. The resulting political, economic crises indicate the point of transformation from one totality to another, in which one set of structures is replaced by another of a fundamentally different kind. In Exhibit 1, the radical structuralist paradigm occupies the north-east quadrant. Schools of thought within this paradigm can be located on the objective-subjective continuum. From right to left they are: Russian Social Theory, Conflict Theory, and Contemporary Mediterranean Marxism. Radical structuralist paradigm’s views with respect to the concept of “modern” are presented next.7 The world social science reached the cul-de-sac known as modernization theory without recognizing what lie on the horizon ahead of it. Until 1945 people assumed that Europe was the center of the world. Even anti-imperialist movements that were against Europe often tended to assume that Europe was the center of the world. But the inexorable progress in the world expanded everyone’s geographical horizons. In this changing world, Western scholars invented development, invented the Third World, and invented modernization. The meaning of progress which was embodied in Westernization is now embodied in modernization. These new modernization-related concepts offered the hope that underdeveloped countries can become developed if they follow certain steps. In fact, this is not a modernizing world but it is a capitalist world. This world does not work based on the need for achievement but the need for profit. The problem of the oppressed people is not how to communicate in this world but how to overthrow it. Neither the Great Britain nor the United States can act as a model for any country’s future. This is because these are state-structures of the present time and they are partial (not total) institutions operating within a single world-system, which is and always has been evolving. When the system of capitalism was consolidated and there was no turn-back, it had the following consequences: the search for maximum profit as the internal logic of its functioning led capitalism to continuously expand − extensively to cover the globe, and intensively to accumulate capital; the desire to further expand production led to the further mechanization of work, the tendency to facilitate and optimize rapid response to the permutations of the world market led to the proletarianization of labor and the commercialization of land. This is what modernization involves, if one wants to use the term modernization. Several decades ago, “modern” had two distinct connotations. One “modern” was positive and forward-looking that signified the most advanced technology. This was part of the conceptual framework that presumed endless technological progress with constant innovation. This was a fleeting modernity, i.e., what is modern today will be outdated tomorrow. This modernity had a material form: airplanes, air-conditioning, television, and computers. This kind of modernity is still very appealing to many people in the world. This was about the triumph of humanity over nature, about intellectual discovery, and boundless wealth. The second major connotation of the concept of “modern” was more oppositional than affirmative. This was more militant (and also self-satisfied) and more ideological. This was anti-medieval, i.e., opposed to narrow-mindedness, dogmatism, and authority. This signified the belief that human freedom triumphed over the forces of evil and ignorance. This was as progressive as technological advance. This was about the triumph of humanity over itself, or over those with privilege. This was about social conflict. This was about liberation, about democracy (the rule of the people as opposed to the rule of the aristocracy, the rule of the best), about human fulfillment, and about moderation. This modernity of liberation was an eternal modernity, i.e., once achieved, it had to be defended. The two modernities were quite different, even contrary to one another. However, they were historically deeply intertwined with one another. This symbiotic pair has formed the central cultural contradiction of the modern world-system, the historical capitalist system. This contradiction has grown most acute and has led to moral and institutional crises. The history of the symbiosis of the two modernities − the modernity of technology and the modernity of liberation − during the modern world-system, can be divided into three periods. First, the 300–350 years starting from the origins of the modern worldsystem in the middle of the fifteenth century to the end of the eighteenth century. Second, this period covers the nineteenth century and most of the twentieth century, or between the two symbolic dates of 1789 and 1968. Third, this period is the post-1968 period. During the first period, only part of the globe (primarily most of Europe and the Americas) constituted the capitalist worldeconomy. This designation is used because the system had the three defining features of a capitalist world-economy: (1) a division of labor within its boundaries, with economic activities that were polarized between core and periphery; (2) states were the principal political structures, and formed the interstate system whose boundaries coincided with those where the division of labor took effect; (3) those who ceaselessly accumulated capital prevailed over those who did not. Nonetheless, in this capitalist world-economy, there were no clear geocultural norms firmly in place yet. There existed no minimal social consensus regarding: whether states should be secular; in whom sovereignty should reside; the legitimacy of the autonomy of intellectuals; and the possibility of multiple religions. In these issues, those with power and privilege used their control over principal

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See, for example, Dussel (1998), McChesney, Wood, and Foster (1998), and Wallerstein (1984). This section is based on Wallerstein (2000).

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political and social institutions to contain the forces of progress. Those who defended the modernity of technology and those who defended the modernity of liberation fought in tandem against the common powerful enemies. The Enlightenment thought constituted a belief in the identity of the modernity of technology and the modernity of liberation. In this way, the capitalist world-economy was operating economically and politically within a system that did not have the necessary geoculture to sustain it and reinforce it. The French Revolution came to rescue, not only for France but for the modern world-system as a whole. The French Revolution led to decolonizations and connected with and stimulated struggles for liberation and nationalisms throughout Europe and elsewhere. The French Revolution not only evoked in other countries’ resonances of sympathy for French revolutionary doctrines, but also provoked reactions against French, that is, against Napoleonic imperialism that came under these very same French revolutionary doctrines. The French Revolution made it clear that the modernity of technology and the modernity of liberation were not identical at all. Indeed, those who primarily advocated the modernity of technology were frightened by the strength of the advocates of the modernity of liberation. From 1815 to 1848, a geoculture was designed to promote the modernity of technology to contain the modernity of liberation. This acted as a geoculture that legitimized the operations of the capitalist world-economy for the next 150 years or so. In this way, the ideology of liberalism became the ideology of the capitalist world-economy. Ideologies emerged out of the new cultural situation created as a result of the French Revolution. Two radically new ideas became widely accepted. The first was that political change was the norm, rather than an exception. The second was that sovereignty resides in “people.” Both ideas were explosive, in response to which three principal ideologies emerged. The first ideology was conservatism. It was the ideology of those who rejected modernity and believed that these two explosive ideas were morally wrong. The second ideology was liberalism. The liberals were completely supportive of the modernity of technology, but they were not fully supportive of the modernity of liberation, because it presented dangers. The third ideology was socialism. It was the ideology of the full defenders of modernity who supported the modernity of technology, but they supported even more the modernity of liberation. Among the three ideologies, the liberals located themselves in the political center. On the one hand liberals sought to remove the state from many areas of decision-making, on the other hand they insisted on placing the state in the center of rational reformism. This was because liberals needed the state to further the modernity of technology and simultaneously to appease the “dangerous classes,” that is, to check the sovereignty of the “people” that was derived from the modernity of liberation. In the nineteenth-century, in the core zones of the capitalist world-economy, liberal ideology led to three principal political objectives: suffrage, the welfare state, and national identity. Liberals hoped that the combination of these objectives would appease the “dangerous classes” and ensure the modernity of technology. The First World War ended with the triumph of liberal ideology in the core of the world-system, located in Europe and North America. But, at the same time the core-periphery political cleavage in the world-system came to the fore. Throughout East Asia, southern Asia, and the Middle East, Africa, and Latin America, national liberation movements emerged. They believed that modernity of technology would require achieving, in the first instance, modernity of liberation. From 1914 to 1945 Germany and the United States struggled for hegemony in the world-system, a struggle in which the United States triumphed. But, at the same time there was a far more fundamental North-South struggle. Once again, the dominant strata in the North tried to convince the dangerous classes that the two modernities were identical. They offered self-determination and economic development to the under-developed nations. These were the international counterparts of the national suffrage and the welfare state in the core zone. The dominant strata also offered “identity” to the under-developed nations in the form of the unity of the free world against the Communist world. But, the Third World opted for non-alignment, and did not “identify” itself with the core zone. In 1968, the identity of the two modernities was loudly and vigorously challenged throughout the world which primarily took the form of student uprisings. Their fundamental theme was that the modernity of liberation has not been achieved. It shook the dominance of the liberal ideology in the geoculture of the world-system and re-opened questions that were relegated to the margins of public debate. Liberalism lost its role as the defining ideology of the geoculture and the ideological spectrum returned to the original triad. In summary, there is at last a clear and open tension between the modernity of technology and the modernity of liberation. Between 1500 and 1800, the two modernities worked in tandem. Between 1789 and 1968, the latent conflict between the two modernities was kept in check by the liberal ideology that pretended that the two modernities were identical. But since 1968, the two modernities have been in open struggle with each other. 6. Conclusion This paper briefly discussed four views expressed with respect to the concept of “modern”. The functionalist paradigm believes that modernity should be expanded to cover the whole globe. The interpretive paradigm believes that the institutions of modernity have spread across the globe. The radical humanist paradigm believes that modernity has not fulfilled its promises both in the local arena and in the global arena. The radical structuralist paradigm believes that what is referred to as global modernity is in fact global capitalism. Each paradigm is logically coherent − in terms of its underlying assumptions − and conceptualizes and studies the phenomenon in a certain way, and generates distinctive kinds of insight and understanding. Therefore different paradigms in combination provide a broader understanding of the phenomenon under consideration. An understanding of different paradigms leads to a better understanding of the multi-faceted nature of the phenomenon. In particular, this multi-paradigmatic approach can be used in economics and finance in order to gain a more balanced and comprehensive understanding of concepts in economics and finance. 12

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