World-System (1872-1908) Expanded Outputs of the Classical Model for Germany

 

In a prior post (here) I tested Higgins (1968) Classical Model on Germany in the late Nineteenth Century. The Higgins model had a number of shortcomings, particularly in the output variables. A market wasn't included and designating Capital as the only Capitalist output could equally be applied to a State Capitalist model and a market based Capitalist system. In this post, I will expand Higgins for Germany and see where it takes us.

Higgins model did allow us to define the essential variables and construct a system state for the Classical model. We can now break out any variables we want and consider them as outputs. The two I will deal with in this post are the Marxist model and the Market model (see the graphic above).

Even though Capital was the primary output for Marx, it is also clear that Ownership was also very important and had to be removed from private hands for the Communists State to emerge. So, let's add a measure of ownership, the GINI Coefficient, to the model. The coefficient is a percentage in the range [0,1] where zero indicates perfect equality (everyone owns an equal share of output) to one (100%) which indicates perfect inequality (Capitalists own al the Capital stock). A similar measure would be the Share of Wealth, another percentage with similar meaning. For Marx, a Capitalist system required not only investment in Capital stock but also a high degree of wealth concentration.

To capture Adam Smith's insights, we would need to add a free market as another output of the system.