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Imperialist appropriation in the world economy

This paper quantifies the resources (raw materials, land, energy and labour) exchanged between the global North and South. It argues that despite the popular perception that imperialist extraction of resources ended when colonial powers withdrew from the global South, rich countries and large corporations exert power to depress the price of resources and labour in the global South. The result is “unequal exchange”: for each unit (defined below) of resources the South imports from the North, the South must export many more units to pay for it.

The paper relies on environmental input-output data to ascertain the scale of embodied labour and resources between the global North and South over the period 1990 to 2015. It finds that for every unit of embodied materials imported to the South, the South must export an average of five units to pay for it. (Embodied materials are measured in Gigatons of raw material equivalents, i.e. accounting for total material use that goes into producing goods and services; a similar definition is used for embodied land, energy and labour.) For embodied land, five units must be exported by the South to pay for one unit imported from the North; for embodied energy, the South must export three units to pay for one; and for embodied labour, the South must export 13 units to pay for one.

The paper refers to these flows as “net appropriation” by the North and as “net drain” from the South, noting that the term used depends on the perspective chosen. The figure below shows how the flows between North and South have changed over the time period studied.

 

Image: Figure 1, Hickel et al. Resource drain from the South. The bars beneath the horizontal axis show resources moving from the South to the North; the bars above the axis show resources moving from the North to the South.

 

To put the net flow of resources into perspective, the authors also calculate the net flows of resources as a proportion of Northern consumption. The net drain of raw material equivalents from the South to the North is equivalent to 38% of the North’s material consumption over the period 1990 to 2015. For land, the drain is equivalent to 29% of the North’s land use; for energy, it is 11%; and for labour, it is 34%.

The paper argues that the resources appropriated from the South could instead be used to meet needs in the South, rather than enabling consumption in the North. For example, it finds that the net energy transferred to the North in 2015 (21 exajoules) is enough to cover the annual energy requirements of building infrastructure to give all 6.5 billion people in the South access to decent housing, healthcare, transport, sanitation and so on. The embodied land drained in 2015 (822 million ha, or more than twice the size of India) could in theory provide food for 6 billion people.

The authors also discuss the ecological implications of these patterns of trade, arguing that unsustainably high consumption in the North is mostly supported by net appropriation of resources from the South, meaning that negative environmental impacts often take place in the South for the benefit of the North.

The paper also converts the net flows of resources to monetary terms using multiple methods. When resources are priced according to global North prices (as opposed to global average), the estimated drain in 2015 was $10.8 trillion - enough to end extreme poverty 70 times over. This financial representation of the scale of the drain is not reflected in the actual exchange of money between North and South. On the contrary, the authors note that the actual monetary trade deficit between North and South (i.e. the difference in money received by the South and by the North through trade between the two regions) is very small (about 1% of global trade) and that its direction fluctuates. Hence, they conclude, the large net transfer of resources from the South to the North is essentially free to the North.

The authors discuss several forms of power that maintain the system of unequal exchange, including:

  • Northern firms can use their monopolist (being the only seller) and monopsonist (being the only buyer) power to keep Southern suppliers’ prices low while keeping final prices high.
  • Patents, 97% of which are held by corporations in high-income countries, support monopoly power.
  • High-income countries exert more power over economic policy decisions through their majority of votes in the World Bank and International Monetary Fund; in the World Trade Organization, the level of bargaining power is set by market size.
  • Subsidised agricultural exports from the North undercut subsistence economies in the South.
  • Wage convergence between the South and North is prevented by the difficulty of migrating across militarised borders.
  • The IMF has imposed structural adjustment programmes that limit the public sector as well as labour and environmental regulations.
  • Various trade agreements have prevented the South from protecting its young industries, making it hard for the South to develop industrial capacity that is not controlled by global actors.

 

Abstract

Unequal exchange theory posits that economic growth in the “advanced economies” of the global North relies on a large net appropriation of resources and labour from the global South, extracted through price differentials in international trade. Past attempts to estimate the scale and value of this drain have faced a number of conceptual and empirical limitations, and have been unable to capture the upstream resources and labour embodied in traded goods. Here we use environmental input-output data and footprint analysis to quantify the physical scale of net appropriation from the South in terms of embodied resources and labour over the period 1990 to 2015. We then represent the value of appropriated resources in terms of prevailing market prices. Our results show that in 2015 the North net appropriated from the South 12 billion tons of embodied raw material equivalents, 822 million hectares of embodied land, 21 exajoules of embodied energy, and 188 million person-years of embodied labour, worth $10.8 trillion in Northern prices – enough to end extreme poverty 70 times over. Over the whole period, drain from the South totalled $242 trillion (constant 2010 USD). This drain represents a significant windfall for the global North, equivalent to a quarter of Northern GDP. For comparison, we also report drain in global average prices. Using this method, we find that the South’s losses due to unequal exchange outstrip their total aid receipts over the period by a factor of 30. Our analysis confirms that unequal exchange is a significant driver of global inequality, uneven development, and ecological breakdown.

 

Reference

Hickel, J., Dorninger, C., Wieland, H. and Suwandi, I., 2022. Imperialist appropriation in the world economy: Drain from the global South through unequal exchange, 1990–2015. Global Environmental Change, 73, p.102467.

Read the full paper here. See also the TABLE explainer What is land use and land use change? and the TABLE project Power in the food system: what’s powering the future of protein?

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Publication
24 Feb 2022
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Image: Tom Fisk, Top-view Photography of Cargo Ship With Intermodal Containers, Pexels, Pexels Licence
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