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Unequal exchange is used primarily in Marxist economics, but also in ecological economics (more specifically also as ecologically unequal exchange), to denote forms of exploitation hidden in or underwriting trade. Unequal exchange is usually calculated by assuming that any trade between a country with a high price level and a country with a low price level, is exploitation.[1] Originating, in the wake of the debate on the Singer–Prebisch thesis, as an explanation of the falling terms of trade for underdeveloped countries, the concept was coined in 1962 by the Greco-French economist Arghiri Emmanuel to denote an exchange taking place where the rate of profit has been internationally equalised, but wage-levels (or those of any other factor of production) have not. It has since acquired a variety of meanings, often linked to other or older traditions which perhaps then raise claims to priority.

In the works of Paul A. Baran, and subsequently adopted in the dependency approach of Andre Gunder Frank, there is a related but distinct concern with the transfer of values due to superprofits. This did not refer to the terms of trade, but to the transfer taking place within multinational corporations (called "monopolies"). Versions of unequal exchange originating within the dependency tradition are commonly based on some such concern with monopoly and center-periphery trade in general. Here, if unequal exchange occurs in trading, the effect is, that producers, investors and consumers incur either higher costs or lower incomes (or both) in the buying and selling of commodities than they would have, if the commodities had traded at their “real” or "true" value. In that case, they are disadvantaged in trading, and their market position is worsened, rather than strengthened. On the other side, the beneficiaries of the trade obtain a superprofit. This term implies that the beneficiaries of unequal exchange are capitalists or entrepreneurs, whereas as understood by Emmanuel the beneficiaries are the high-wage country consumers or workers.

The most renowned of those adopting the term is Samir Amin, who tried to link it to his own argument on the interdependent uneven development of rich and poor countries. Ernest Mandel also adopted the term, although his theory was based rather on that of the East-German Marxist Gunther Kohlmey. The most common approach within Marxism is to talk about unequal exchange whenever unequal labour values are being exchanged (e.g., John Roemer), and this type of approach has then been elaborated in recent decades by ecological economists, based instead on, e.g. ecological footprints or energy.

Depending on definition, the historical occurrence of unequal exchange can be traced to anything from the origins of trade itself, not limited to the capitalist mode of production, to the origins of significant international wage-differentials, or to the post-war appearance of a significant net-inflow of raw-materials to the developed countries. In the approach of Immanuel Wallerstein the origins of the modern world-system, or what others, such as Ernest Mandel, would call the rise of merchant capitalism, is said to have entailed unequal exchange, although the idea was criticised by Robert Brenner.

Another aspect of these theories is the criticism of fundamental assumptions of Ricardian and neoclassical theories of comparative advantage, which could be taken to imply that international trade would have the effect of equalising the economic position of the trading partners. More generally, the concept was a criticism of the idea that the operation of markets would have egalitarian effects, rather than accentuating the market position of the strong and disadvantaging the weak.

Modern liberal economists work under the assumption that value is essentially a question of style, moral behavior and the spirituality of individuals, not an economic issue. If unfair trading practices occur, it must be that there is an impediment to freely competitive markets; and if those markets or market access could be open, all would be fair. Marxian economists, on the other hand, argue that the cheap labor found in undeveloped economies allows for profit which would not be possible where wages are higher. Raul Prebisch and Hans Singer hypothesized that the price of raw materials declines relative to finished industrial products. This makes "peripheral" countries rich in resources tend towards less power in trade.[2]

In Marxian economics

Karl Marx aimed to go beyond moral discussion, in order to establish what, objectively speaking, real values are, how they are established, and what the objective regulating principles of trade are, basing himself principally on the insights of Adam Smith and David Ricardo (but many other classical political economists as well). He was no longer immediately concerned with what a "morally justified price" is, but rather with what "objective economic value" is, such as is established in real market activity and real trading practices.

Marx's answer is that "real value" is essentially the normal labour cost involved in producing it, its real production cost, measured in units of labour time or in cost-prices. Marx argues that the "real values" in a capitalist economy take the form of prices of production, defined as the sum of the average cost price (goods used up + labour costs + operating expenses) and the average profit reaped by the producing enterprises.

Formally, the exchange between Capital and Labour is equal in the marketplace, because, assuming everybody has free access to the market, and an adequate legal-security framework exists protecting people against robbery, then all contractual relations are established through free and voluntary consent, on the basis of juridical equality of all citizens before the law. If that equality breaks down, it can only be, because of immoral behaviour by citizens.

But Marx argues that, substantively, the transaction between Capital and Labour is unequal, because:

In Das Kapital, however, Marx does not discuss unequal exchange in trade in detail, only unequal exchange in the sphere of production. His argument is that unequal exchange implied by labour contracts, is the basis for unequal exchange in trade, and without that basis, unequal exchange in trade could not exist, or would collapse. His aim was to show that exploitation could occur even on the basis of formally equal exchange.

Marx however also notes that unequal exchange occurs through production differentials as between different nations. Capitalists utilized this differential in several ways:

That, Marxian economists argue, is essentially why the international dynamic of capital accumulation and market expansion takes the form of imperialism, i.e., an aggressive international competition process aimed at lowering costs, and increasing sales and profits.

As Marx put it,

"From the possibility that profit may be less than surplus value, hence that capital [may] exchange profitably without realizing itself in the strict sense, it follows that not only individual capitalists, but also nations may continually exchange with one another, may even continually repeat the exchange on an ever-expanding scale, without for that reason necessarily gaining in equal degrees. One of the nations may continually appropriate for itself a part of the surplus labour of the other, giving back nothing for it in the exchange, except that the measure here [is] not as in the exchange between capitalist and worker." [1]

To counteract unequal exchange between socialist countries that were members of the Council for Mutual Economic Assistance (COMECON), members countries like Cuba which were deemed underdeveloped received subsidies.[3]: 76 

Empirical indicators

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Quantification of Unequal Exchange

In a 2022 article for the journal Global Environmental Change, Jason Hickel et. al. sought to quantify the amount of unequal exchange between the global south and the global north between 1990 and 2015. Their results found unequal exchange to amount to over $10 trillion per year in Northern prices, creating a drain of raw materials, energy and labor.[1]

Criticism

Peter Somerville, writing for the journal Capitalism Nature Socialism, criticized ecological unequal exchange theory as "confused, internally inconsistent, and misrepresents the nature of global extractivism and labour exploitation."[4]

See also

References

  1. ^ a b Hickel, Jason; Dorninger, Christian; Wieland, Hanspeter; Suwandi, Intan (2022). "Imperialist appropriation in the world economy: Drain from the global South through unequal exchange, 1990–2015". Global Environmental Change. 73 (102467): 102467. doi:10.1016/j.gloenvcha.2022.102467.
  2. ^ Ricci, Andrea (2018). "Unequal Exchange in the Age of Globalization" (PDF). Review of Radical Political Economics. 21: 21 – via Sage pub.
  3. ^ Cederlöf, Gustav (2023). The Low-Carbon Contradiction: Energy Transition, Geopolitics, and the Infrastructural State in Cuba. Critical environments: nature, science, and politics. Oakland, California: University of California Press. ISBN 978-0-520-39313-4.
  4. ^ Somerville, Peter (2022-01-02). "A Critique of Ecologically Unequal Exchange Theory". Capitalism Nature Socialism. 33 (1): 66–70. doi:10.1080/10455752.2021.2010107. ISSN 1045-5752.