The Global South has lost $152 trillion through unequal exchange since 1960 — Dylan Sullivan

Dependency and world-systems theorists have long argued that “unequal exchange” is a key driver of global inequality. Since wages and natural resource prices are much lower in the global South than the North, poor countries must export many more units of embodied labour and resources than they import in order to achieve a monetary balance of trade. This creates a constant transfer of labour and ecology from the periphery to the core, developing the latter but impoverishing the former.

In a recent paper in New Political Economy that I co-authored with Jason Hickel from the University of London, and Huzaifa Zoomkawala, a data analyst based in Karachi, we quantify the value that has been appropriated from the South through unequal exchange since 1960. To do this, we use a method developed by the economist Gernot Köhler. Köhler proposes that we can use purchasing power parity (PPP) exchange rates constructed by the World Bank to value the South’s exports at the North’s price level. By subtracting the actual market price that the South received for its exports from this figure, we can measure the commodities appropriated by the imperialist states, in terms of the Northern price of those commodities.

Using Köhler’s method, we find that in 2017 the ‘emerging and developing economies,’ as defined by the IMF, lost $2.2 trillion worth of goods to the ‘advanced economies.’ This represents an enormous loss for the South. These resources could have ended extreme poverty 15 times over, but instead they were transferred gratis to the core. This windfall is of enormous benefit to the centres of empire. For instance, in 2017 the US gained $2,634 per person through unequal exchange, while the average Australian citizen received $3,116 from the South. Since 1990, the North’s annual gains from unequal exchange have sat at 5.2% of GDP, considerably higher than the North’s annual growth rate. In other words, if not for imperialist plunder, aggregate income in the North would have been declining for decades. The extraordinary levels of material consumption currently enjoyed in the North are predicated upon exploitation and poverty in the periphery.

Figure 1 shows total value transfer since 1960. All up, the South has lost $62 trillion (constant 2011 dollars), equivalent to 97% of its 2017 GDP. If this surplus had been available to the South, it could have been reinvested in domestic economic development. If we assume this surplus would have grown at the same rate as Southern GDP, it would now be equivalent to $152 trillion....