Unequal exchange
불평등 교환
The Marxist theory that when countries with very different wage levels trade at "normal" prices on the world market, the low-wage periphery receives in return goods embodying less labour than it put into its own products, so that value moves to the core. Arghiri Emmanuel systematised it in a 1962 paper and in L'échange inégal (1969). Its core is that capital moves between countries and profit rates equalise while labour is bound by borders and wage gaps persist, so that international prices depart systematically from values. Charles Bettelheim replied by putting differences in productivity and capital composition first, and Samir Amin broadened it into a "global law of value".
In depth
How can exploitation arise from a trade that looks fair?
The theory of comparative advantage since Ricardo and neoclassical trade theory, which defend free trade, say that if each country makes what it makes relatively well and exchanges it, everyone gains. The theory of unequal exchange rejects that premise. Even when trade is free and prices are set by the market, the price structure itself can be a device that moves one side's labour to the other.
The idea has its roots in Marx's analysis. Marx showed that the transaction between capitalist and worker is formally an equal exchange in the market, but that in substance the worker creates more value than the wage received and the capitalist takes the surplus value. His point was that exploitation can occur even on the basis of formally equal exchange. Marx did not discuss unequal exchange in trade in detail in Capital, but in a note in the Grundrisse he wrote:
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.
How does Emmanuel's calculation work?
Emmanuel applied the logic of prices of production that Marx set out in the third volume of Capital to trade between countries. Under competition capital moves to where the rate of profit is higher, so profit rates tend to equalise, and commodities sell not at their values but at prices of production, "cost price plus average profit". Emmanuel made two assumptions. Capital moves freely between countries, so that the profit rate equalises internationally. Labour, however, is bound by borders, and wages stay at levels set politically and historically in each country. Against the then dominant Heckscher–Ohlin–Samuelson theory, in which relative prices determine wages, he held that politically and historically set wage levels determine relative prices.
Take a small calculation as an illustrative assumption. A core country A and a peripheral country B each use 50 of raw materials and machine wear (constant capital, c) and set workers to 100 hours of labour to make a product. A hundred hours of labour create a new value of 100, so each product has the same value, 50 + 100 = 150. The difference is the wage (variable capital, v). Workers in A receive 80, leaving a surplus value of 20; workers in B receive 20, leaving 80.
Now let the profit rate equalise. Capital advanced is 50 + 80 = 130 in A and 50 + 20 = 70 in B, 200 in all, and total surplus value is 20 + 80 = 100, so the average rate of profit is 100 ÷ 200 = 50 percent. Prices of production become 130 × 1.5 = 195 in A and 70 × 1.5 = 105 in B. The total, 300, equals total value, but two products that each took 100 hours exchange at 195 and 105. B sells a value of 150 for 105 and A sells a value of 150 for 195, so a value of 45 passes from B to A through trade. Emmanuel called this unequal exchange arising from the difference in rates of surplus value produced by wage differentials, and saw it as the mechanism by which the core exploits the periphery. With it he tried to explain the falling trend in the terms of trade of underdeveloped countries that Prebisch, Singer and Arthur Lewis had tried to account for, and dismissed their explanations as half-hearted attempts.
What did it mean for international workers' solidarity?
What made the theory a heated subject among Marxists and dependency theorists was its implication for international workers' solidarity. Emmanuel pointed out that his theory fitted the observed absence of such solidarity between high- and low-wage countries, and went further, making nationally enclosed workers' movements the principal cause of unequal exchange. His 1969 article in Le Monde, "The proletariat of the privileged nations takes part in the exploitation of the 'Third World'", appeared in Monthly Review in 1970 as "The Delusions of Internationalism" together with Bettelheim's reply under the heading "International Solidarity of Workers: Two Views". The dispute touches the theory of the labour aristocracy that goes back to Lenin.
Emmanuel had worked in commerce in the Belgian Congo from 1937, and in April 1944 took part in the left-wing uprising of the Greek forces in the Middle East and was sentenced to death before being pardoned. Observations from the Congo appear often in his writings and are thought to explain the peculiarity of his approach and its differences from the French Marxism of the day.
How did Bettelheim and Amin differ?
Charles Bettelheim, Emmanuel's supervisor, wanted to make unequal exchange arising from wage differentials a subcategory of unequal exchange arising from differences in the organic composition of capital (capital intensity). Most later versions, those of Amin, Oscar Braun, Jan Otto Andersson and others, and almost every critic since Bettelheim, preferred to make higher productivity the cause, and so the justification, of higher wages, and "monopolies" the cause of unequal exchange. Bettelheim and Christian Palloix argued that because rich countries control the world economy monopolistically, they can sell commodities above their market value, while peripheral economies' prices are often below their prices of production.
Samir Amin, like Emmanuel, put wage differences at the centre but broadened the idea into a "global law of value". In his account the wage gap between nations is greater than the productivity gap. Free trade and open borders let multinationals move to wherever labour is cheapest, while the mobility of labour is restricted. With a massive global reserve army in the periphery and social movements repressed there, wages stay low, while in the centres accumulation is cumulative and wages rise with productivity. This is the "super-exploitation" of the periphery, and the "imperial rents" that accrue to corporations in the centre are elsewhere called "global labour arbitrage". Amin saw the lower rate of exploitation in the North and the higher rate in the South as one of the main obstacles to the unity of the international working class. Raúl Prebisch is also counted among the first to point to unequal exchange, in the falling prices of the raw materials the periphery exports relative to the manufactures of developed countries.
How is it measured today?
Amin calculated unequal exchange assuming equal productivity and using Northern prices, and Gernot Köhler measured the drain from the difference between purchasing-power-parity and market exchange rates. More recently a study combining Marx's value theory with Leontief's input–output analysis for 43 countries in 2000–2014 estimated that unequal exchange may have reduced North–South convergence by about 34 percent over the period. Jason Hickel and his co-authors calculated that the drain from the Global South in 1990–2015 amounted to 242 trillion dollars at 2010 prices. In ecological economics a theory of ecologically unequal exchange counts the drain of land and resources as well as labour.
Hickel and others note that Southern commodity chains include managerial, engineering, logistics and IT work as well as manual labour, yet because of wage disparities skilled labour in the South may be paid less than "unskilled" labour in the North. They also cite as forces sustaining price inequality the 97 percent of patents held by corporations in high-income countries, the Northern majority in the IMF, the World Bank and the WTO, and the structural adjustment programmes and free trade agreements that cut Southern wages and labour rights. A common objection is that the North–South wage gap is explained by the higher productivity of Northern workers. Unequal exchange theorists reply that productivity in conventional economics is measured by prices, not actual productivity, so when Northern firms use their power in commodity chains to move prices, their productivity seems to rise though the production process is unchanged. The debate continues in research on global value chains. In the socialist bloc the Council for Mutual Economic Assistance (COMECON) gave subsidies to members deemed underdeveloped, such as Cuba, to counteract unequal exchange among its members.