Understanding Unequal Exchange: How does trade imperialism affect the global working class?

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By Amal Samaha


I was initially inspired to write this explainer by Abdul Nasir’s reexamination of Dependency Theory. It is wonderful to see the fruitful and diverse theories of Imperialism of the late 20th century being revived and discussed on Anticonquista. We must do all we can to resume the important debates that were muted by the collapse of global workers’ institutions at the close of the last century, and overcome the grey orthodoxy that has reasserted itself in radical critiques of imperialism.

Unequal exchange was once considered one of the most important new developments in imperialism studies of the 20th century. The theory, first proposed by French-Greek theorist and resistance fighter Arghiri Emmanuel in the 1960s, was quickly taken up by many of the underdevelopment and imperialism theorists of the day, from Walter Rodney to Samir Amin. Dependency theorists like Andre Gunder Frank had proven that the imperialism had developed to a point where empire was best understood not in terms of capital exports from the core (as in Hobson, Bukharin, Hilferding and Lenin’s models), but in terms of the wealth extracted from the periphery. However, they were not always clear on how this wealth was generated. Emmanuel was the first to propose an original theory of where exactly that extracted wealth came from. This was the theory of unequal exchange, the idea that the bulk of imperialist superprofits stemmed not from monopolies, noncompetition or securing captive markets, but rather from the difference in wages between nations.

To Emmanuel, Marx’s factors of production were not only fixed quantities of labour and material inputs, they also represented the stake each class holds in the total surplus value produced by a society (whether this stake is recognised is another matter). A given quantity of labour hours invested in production represents a stake workers hold over an end product, while a given quantity of raw materials or fixed capital represents the stake a capitalist holds.

 In pre-capitalist artisanal production, the labourer is the only one who holds a stake over the end product of their labour. The labourer controls both the tools and the resources required for production, and can work whenever they choose. The labourer can move freely between industries, and will move to whichever one yields the best prices. Many artisans will move into an industry if the prices are very high, and begin producing greater quantities of that commodity, forcing prices down. In pre-capitalist production, the market will reward labourers for fulfilling particular needs, and that reward falls in relation to the degree that need is met, and so wages and profitability both equalise freely.

All that changes in a society with two classes involved in production. Under capitalist production, both the labourer and capitalist have stakes in the final product, and thus the degree to which wages and prices equalise depends on different factors. When capital moves freely between industries, this tends to equalise the rate of profit. When labour moves freely between industries, this tends to equalise wages. Both wages and profitability must be considered when setting prices. 

This is all well and good in the context of individual countries. In most countries, labour and capital moves freely between industries, and so wages, profitability, and prices are all relatively consistent between towns and cities in one country.

On an international level however, wages, profitability and prices are often completely inconsistent, especially between richer and poorer countries. This is because capital often moves freely between the core and the periphery, shifting to wherever has the highest rate of profit, while labour is constrained. Workers cannot move between countries due to militarised borders, repressive governments, and migration quotas. In the end, the rate of profit slowly equalises between countries, while wages only become more and more dissimilar between countries due to different levels of unionisation, and other “historical and moral determinants” like the degree of reactionary violence, market suppression and underdevelopment.

At the end of the day, a situation is produced wherein, as Charles Bettleheim explains, “on the world market the poor nations are obliged to sell the product of a relatively large number of hours in order to obtain in exchange from the rich nations the product of a small number of hours of labour.”

This inequality in trade can be further explored in a number of ways. In the past, unequal exchange has been explained through equations and figures, but this topic is too important to be bound up in academic language and convention. What follows is my attempt to explore the consequences of unequal exchange through the eyes of two fictional workers in countries separated by a small stretch of South Pacific ocean.

An example: Natia and Tim

Unequal Exchange can be hard to understand in human terms. By its nature it deals with abstract transfers of wealth in the spaces between nations, never really connecting with our human experience of work and life. But it does have a human dimension, and it extends outwards from a web of interconnected human experiences and struggles. Compare Natia and Tim.

Natia works at a copra plantation in Savai’i, in Samoa. She spends her day collecting coconuts, halving them, and leaving them out to dry in the sun in large batches. Sometimes she helps at the kilns, where the sun-dried coconuts are fully dried, and the desiccated meat is crushed into oil and meal. It is a hard process, and sometimes whole batches develop mold and have to be thrown out. The market for the meal is shrinking, as the New Zealand farmers who used to buy it as animal feed have now shifted to Palm Kernel Expeller, much of it grown by debt slaves in Malaysia.

In the end, Natia gets about $350 USD per month for her full-time labour. It’s considered a decent wage in Samoa. Her employer has few ongoing costs aside from her low wages. However, considering the need to compete with PKE and other copra producers, the employer can only sell the copra meal for a very low price: just above the amount needed to pay for Natia and the other workers’ labour.

3,000 kilometres away from Natia, Tim is just starting his shift. He works at a plastics factory in Auckland, New Zealand. The factory is designed to turn mineral oil into a range of commodity plastics and tupperware, and while Tim works hard, his productivity is mostly due to the wide variety of factory machines at his disposal. Tim is able to produce a large amount of plastic products in just one hour, and the market for the products is always high, since the factory is generally able to out-produce and out-compete its smaller competitors.

Tim has been working at the company for a while, and has always participated in his union. The most recent strike was 2 years ago, when the union representatives were able to secure a new collective bargaining agreement that raised Tim’s wages to $3,150 USD per month. It’s nowhere near as much as his many managers get, but Tim is pretty thankful, since it’s considered a living wage by New Zealand standards. The company fought tooth and nail against the pay increase, but in the end it didn’t hurt business too much, and they were able to compensate by raising prices, thanks to their healthy market share.

The products of Natia and Tim’s labour are often exported around the Pacific. A handful of New Zealand farmers still import Pacific copra meal, while stores in Savai’i often stock the tupperware containers and commercial plastics Tim produces. The problem is that the products of their equivalent labour hours are sold at wildly different prices. The amount of tupperware that Time produces in one labour hour gets sold for enough to pay for nine hours of Natia’s work. 

Is Tim’s labour itself worth nine times more than Natia’s? Not really; if Natia went to New Zealand and performed similar agricultural work, she would be paid at a rate much more comparable to Tim, if only due to labour laws and the higher cost of living in New Zealand. The product of her labour would also be exchanged at a vastly higher rate, even without additional machinery to help her. The real problem is that Natia could only access those wages if she won a visa through the ballot system, and only a few were given out each year, even before it was shut down entirely due to Covid.

The disparity between the two only becomes more extreme as time goes on. Thousands of other workers produce commodities that are traded between New Zealand and Samoa, and all of them have very similar wages to Natia and Tim. Samoa is limited in how many New Zealand imports it can buy, since its products are worth nine times less than New Zealand’s by default. Meanwhile, New Zealand exporters are making a killing: their products could buy nine times their own value in Samoan commodities! Over time, Samoan industry becomes more and more specialised and export-oriented, and less able to supply domestic consumers with cheaper local goods, processes covered by Samir Amin in Unequal Development. Instead, imported western goods become the norm, and Natia is forced to spend much more on necessities. Competition in the animal feed market threatens to force Natia’s wages down further, or even put the plantation out of business entirely.

Meanwhile, Tim’s wages are enough to buy plenty of consumer goods. He can’t always afford the boutique local brands, but he can afford as much imported produce as he could ever need. Over time, his wages are supplemented by these cheaper goods, and he can afford to save. In addition, the state mandates access to a superannuation fund for workers, and Tim’s contributions are invested in all sorts of foreign industry and international trade futures. Tim doesn’t ever have enough to stop working for a living, but he has enough to perhaps retire comfortably, or even to ensure that his kids don’t have to work as hard as he did. He is secure in the knowledge that in the long run, things seem to be getting better.

Workers like Natia represent the bulk of the global working class, labouring in low-paid labour producing much of the world’s most basic commodities. Their conditions are deteriorating due to the increased dependency, specialisation, and export-orientation of industry in the global periphery, as this means there is less local industry devoted to local needs. They are unable to save, or move to countries with better conditions. Their main hope is an increase in the total global mobility of labour, which might equalise wages and prices between countries. For them, freedom of migration is liberation, as even if they don’t migrate themselves, the resulting wage equalisation benefits everyone.

Workers like Tim represent a minority in the global working class: he is at the bottom end of a labour aristocracy. As we have seen, Tim’s conditions aren’t wonderful, or somehow post-scarcity, but he has the ability to save, to move between industries freely, to invest his surplus wages, and to send his kids to be educated. These are all rights Tim ought to enjoy, ones which he fought hard to keep, but the institutions which enable those rights are also unwittingly contributing to global inequality.

In rich countries, prices and wages are caught in an upward death spiral. Since prices are determined by the interrelationship between wages and profitability, and wages tend to gravitate around the ability to purchase a fixed number of commodities, we can see how wages might push prices higher and vice versa. Other factors push wages and prices higher, including the efforts by unions to stay ahead of the cost of living, and increases in the overall standard of living enabled by external debt. 

To break out of that spiral means acting internationally, securing better wages for all workers up and down the supply chain. An alternative approach would involve pressuring western governments to impose price ceilings: a hard limit on the cost of living set in a fixed number of commodities. Theorists like Emmanuel singled out western unions as a major cause of unequal exchange, and it is certainly true that many cannot be relied upon, but it is not necessarily unions themselves so much as the underlying upward spiral of prices and wages. A world with fewer unions, even the most compromised ones, is nonetheless one in which workers wield less power, and have less potential energy to turn towards international organisation.

The global consequences of Unequal Exchange

The relationship between Natia and Tim is just one tiny part of the global problem of unequal exchange. The true scale of unequal exchange has only been explored relatively recently thanks to the work of Zak Cope, in his book The Wealth of (Some) Nations, as well as recent studies that have built upon his findings. 

Much of Cope’s recent work is devoted to quantifying and exploring various forms of imperialist superprofits (or the Imperial Transfer of Value). In Cope’s analysis, unequal exchange is not the sole form of imperialist superprofits, but it does constitute a majority. By measuring wage differentials between core and peripheral countries, and comparing those wages to a midpoint (the global median wage), Cope was able to find the total value gained each year through unequal exchange: roughly 2.8 trillion dollars per year.

To put this in perspective, the value gained through unequal exchange is 53.8% of all superprofits flowing from the periphery to the core. It is also 31.5% of the core’s profits available for reinvestment (calculated as the core’s GDP multiplied by rate of savings), in other words, nearly a third of all profits in the core are purely the result of being able to sustain higher wages.

Decades ago, Samir Amin predicted that as the rate of profit fell in core industries, unequal exchange would slowly come to be the dominant source of profits for western capitalists, locking the periphery into a permanent state of dependency in order to prop-up the decayed husk of domestic industry in the core. In many of the world’s richest nations, that prediction is being borne out today. 

Shifting the locus of value creation from the core to the periphery means that the core relies less and less on the unprofitable exploitation of its own workers. Instead, many core workers are increasingly being placed in menial office and managerial jobs which produce little to no real value. Such workers are ostensibly there to increase the value of other labourers’ work – so-called “reflexive” labourers – but in practice this is economically impossible, and many of these managers, administrators, and functionaries are simply paid consumers, shifting and manipulating various forms of debt, sitting at the heights of increasingly top-heavy finance and tech juggernauts.

As the core systematically underdevelops itself, taking away its own ability to autogenously produce value, the periphery stands at a crossroads. Many nations are now choosing to promote trade between peripheral partners, effectively disengaging from the predatory trade imperialism of the core. This too has dangers, in that it risks imperialist intervention, and some peripheral nations still side with the core out of fear of repercussions, out of a bribed ruling class, or out of a lack of alternatives. 

Workers in the core are still able to organise against trade imperialism directy, even if such activism will always be opposed by sections of the labour aristocracy. Pushing for increased migrant quotas and rights is one proven way to mitigate global wage inequality, as remittances and competition tend to raise peripheral average wages. To return to our Pacific example, compare Samoa with the Cook Islands: both nations were colonised and dominated by New Zealand imperialism, but the Cooks have at least gained an average wage more comparable to the core, entirely thanks to the ability to migrate to a core nation.

Another step would be to encourage labour organisation across national boundaries. As we have seen, a narrow-minded focus on only improving the wages of core workers can actively harm peripheral workers by encouraging greater differences in wages. If the entire supply chain of an industry can be organised, not only would workers exercise greater control over their workplaces by influencing the factors of production, they would also be able to raise the lowest-paid workers up to a greater standard.

One of the greatest lessons we can draw from recent advances in unequal exchange theory is that business-as-usual activism can have unintended consequences. Do we fight to perpetuate labour aristocracy, wealth extraction, and the further stratification of our class? Or do we fight to bring about unity between workers of all nationalities, no matter their position in the hierarchies of industry and empire?

Further Reading
  • Arghiri Emmanuel, Unequal Exchange: A Study of the Imperialism of Trade, 1972

    Emmanuel’s most rigorous examination of Unequal Exchange is still highly relevant reading today, even if sections on Organic Composition of Capital have been questioned by later writers. It also includes an interesting debate between Emmanuel and his mentor Charles Bettleheim.

  • Zak Cope, The Wealth of (Some) Nations: Imperialism and the Mechanics of Value Transfer, 2019

    Cope’s most recent book builds on his ideas from 2013’s Divided World, Divided Class into one of the most rigorous analyses of imperialist value transfer yet attempted. Cope’s analysis of Unequal Exchange is limited to two small chapters, but the rest of the book is well worth a read and covers an enormous swathe of leftist and colonial history.

  • Anthony Brewer, Marxist Theories of Imperialism: A Critical Survey, 1980

    Brewer’s book is a great overview of theories of imperialism, from Marx to Emmanuel and Amin. He takes particular interest in charting the development of Unequal Exchange discourse, and makes a few of his own additions to the theory.

  • Walter Rodney, How Europe Underdeveloped Africa, 1974

    Rodney was one of the first writers in the colonised world to pick up the idea of Unequal Exchange, and wove it into his masterful history of European colonisation in Africa, which also serves to discredit the “whiggish history” of perpetual progress in the colonised world.

  • Samir Amin, Unequal Development: An Essay on the Social Formations of Peripheral Capitalism, 1976

    Amin was one of the first writers able to explore the various international implications of Unequal Exchange rather than having to develop his own economic framework from scratch. As such his work is often more holistic than the narrow economic focus of Emmanuel. His theory of development is excellent, even if his autarkic conclusions are sometimes flawed.

  • Esteban Ezequiel Maito, The historical transience of capital: the downward trend in the rate of profit since the 19th century, 2014

    Maito’s study represents a rigorous effort to analyse the declining rate of profit. Crucially, Maito accounts for the rate of turnover, something similar studies sometimes fail to do. Maito identifies three separate rates of profit, the core, peripheral, and China, and demonstrates that these are all equalising as they decline. This confirms many of the assumptions of the Unequal Exchange theorists.

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