Unequal Exchange

Alec Smith writes about unequal exchange and how capitalism subsequently enforces uneven development across the global south

“Ever since monopoly capital took over the world, it has kept the greater part of humanity in poverty, dividing all the profits among the group of the most powerful countries. The standard of living in those countries is based on the extreme poverty of our countries.” – Che Guevara

Theories of unequal exchange argue that trade between poor and rich countries involve the transfer of value from the former to the latter, as more labour is traded for less labour. Developed by Emmanuel Arghiri and Samir Amin amongst others, theories of unequal exchange are some of the most important additions to the Marxist theory of imperialism since Lenin’s publication of Imperialism: The Highest Stage of Capitalism just over one hundred years ago. In Imperialism, Lenin argued that the main cause of imperialism was the export of capital from the imperialist countries to poorer countries, with this export leading to the slowing of development in capital exporting countries and the acceleration of the development of capitalism in the countries where capital is exported to.

Theories of unequal exchange have helped deepen Lenin’s emphasis on the relationship between imperial capital and labour in peripheral countries. Since Imperialism’s publication, there has been little convergence between the rich and poor countries save for a select few East Asian nations. Unequal exchange helps us understand the continued division of the world into oppressor and oppressed nations and why there has been even less ‘catching up’ between core and peripheral countries than Lenin could have envisaged.

The cause of the unequal exchange between countries is the fact that wages vary in different parts of the planet because the price of wages is conditioned by what Marx termed a “historical and moral element” – the class struggle. The class struggle has been fought on an uneven basis internationally. Access to health care, education, nutritious food, transport, shelter, retirement income and safe working conditions are part of the value of labor-power in imperialist countries because of the way capitalism developed there. In contrast, the economic, political and military subjugation of exploited countries by the imperialist countries over centuries has means that workers in these countries receive significantly lower wages than workers in the rich countries even when levels of productivity are even. 

This system is enforced by immigration controls which ensure that unlike capital, labour does not have free movement. The unequal exchange between core and peripheral countries is self reinforcing because the low wages of workers in peripheral countries prevents investment in them as the low level of consumer demand creates underdeveloped internal markets. The result of this is that persistently high levels of unemployment in these countries creates a constant downward pressure on wages. This has the same effect as that which Marx observed the introduction of machinery as having, as the mass of unemployed workers “swamps the labor – market, and makes the price of labour power fall below its value.”

This division between a small number of rich countries surrounded by a large number of underdeveloped countries has its origins in the differing development of capitalism in the 19th century. In the last few decades of that century, the maturity of the working class and the exploitation of the colonies led to the gradual institutionalisation of the class struggle in the heartlands of capitalism. In Britain, the economic developments of the industrial revolution had centralised workers into towns and created needs for higher skills, creating favourable conditions for British workers to put increasing demands on their ruling class. From the 1870s onwards, these developments meant that the ruling class was forced to gradually allow workers to vote and form unions to improve their common lot. The success of these reforms lead to rising wages and shorter working hours, further increasing worker’s confidence that they could attain gains by acting within the system.

As Fidel Castro said “exploitation has much more terrible connotations in a third world country than a developed capitalist country, because it is exactly out of fear of revolution, out of fear of socialism, that developed capitalism came up with some distribution schemes that, to a certain degree, do away with the great hunger that European countries were familiar with in Engels’ day, in Marx’s day.’”

This class compromise in Britain emerged from the cheap consumer goods from the colonies being used to defuse class struggles at home. As Engels noted, “the English proletariat is actually becoming more and more bourgeois, so that this most bourgeois of all nations is apparently aiming ultimately at the possession of a bourgeois aristocracy and a bourgeois proletariat alongside the bourgeoisie.” This process led English workers to think about politics in the same way as the bourgeois. Over time, the enlarged consumption that was afforded to workers in imperialist countries due to cheap imports from poor countries has meant that these high wages have become a second nature to workers in imperialist countries. This has meant that what was previously an antagonistic contradiction between workers and capitalists in Britain and other core countries, gradually became a non – antagonistic contradiction. The domestic class struggle became largely resolvable within the limits of capitalist democracy because unequal exchange with peripheral countries allows capitalists to maintain profits whilst gradually raising wages for domestic workers.  

 Alec Smith

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