Unequal exchange

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Part of a series about
Imperialism studies
Theories Dependency theory Intercommunalism Neo-Gramscianism Neocolonialism Social imperialism Super-imperialism Three Worlds Theory Ultra-imperialism World-systems theory
Concepts Ecologically unequal exchange North–South model Unequal exchange Superprofit Uneven and combined development
People Samir Amin Giovanni Arrighi Paul A. Baran Charles Bettelheim Ľuboš Blaha Nikolai Bukharin Arghiri Emmanuel John Bellamy Foster Andre Gunder Frank Michael Hardt Rudolf Hilferding J. A. Hobson Vladimir Lenin Li Minqi Rosa Luxemburg Antonio Negri Kwame Nkrumah Huey P. Newton Walter Rodney Paul Sweezy Leon Trotsky Immanuel Wallerstein
Works The Accumulation of Capital Empire How Europe Underdeveloped Africa Imperialism Imperialism, the Highest Stage of Capitalism Monopoly Capital Multitude Naked Imperialism
Related Banana republic Economic development Illicit financial flows Global North and Global South Lumpenbourgeoisie Neo-Marxism Prebisch–Singer hypothesis Primitive accumulation of capital Third worldism
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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]