Evidence for the global value transfer

While most recognize the existence of imperialism, many are unwilling to understand the accompanying processes. One of these processes, one that we have fought hard to reassert, is what we call imperialist rent: the way in which First World (core) wages/income/etc. are appropriated from Third World (periphery) exploitation.

To provide evidence for this process, calculations from Zak Cope’s Divided World, Divided Class: Global Political Economy and the Stratification of Labour Under Capitalism* have been provided which show estimates of value transfer from the Third to the First World. A series of original graphs have also been provided to help illustrate some of the data to the reader.

Below is that data. Keep in mind this is only a few pieces of evidence in a spacious field of research. Far more data exists, and more evidence will continue to appear.

NOTE: All math done is the work of Dr. Cope, not my own. 

To determine the real value transfer from the unequal exchange of commodities (equal cost prices but different labor values) a few steps must be taken.

1. Determine the price value of non-OECD exports to the OECD [1].

Nominal World GDP was 62.2trillion (USD) of which 34.2trillion was in world trade. Non-OECD exports to the OECD accounted for 7.7trillion in GDP. Considering 15% of non-OECD exports are services, and about half of these go to the OECD, this means that non-OECD goods exports to the OECD are worth about 7trillion.

2. Determine the portion of non-OECD export sector goods prices that is value-added domestically and the weighted average of OECD goods-producing labour productivity (value added divided by hourly wages in domestic industry and agriculture) and non-OECD to OECD goods-export sector productivity [2].

Considering that 37% of total OECD exports to the non-OECD are intermediate goods and capital goods consume 25% of the same sum then we can estimate the value-added domestically of non-OECD exports to the OECD to be about 35% (following the assumption that intermediary and capital goods are destined for re-export, a line that favors the Euro-Marxist argument of lower Third World productivity). Because non-OECD goods exports to the OECD consume about 40% of non-OECD GDP, IMF calculations indicate that around 1billion non-OECD laborers must be involved in the sector exporting goods to the OECD. When we weigh this number by our domestic value-added (35%) we find that around 350million non-OECD workers are involved in producing goods for the OECD market. If each works 1400 hours annually (the average number worked by a non-OECD laborer, including figures of underemployment) then this means 490 billion hours are expended annually on the production of non-OECD goods exported to the OECD. Using the same methodology we can determine that the OECD goods production sector works approximately 256billion hours per year. This means it required 746billion hours to generate the 20trillion (USD) of which 7trillion was from non-OECD exports and 13trillion from OECD goods production. While male wage rates between the OECD and non-OECD hover at a ratio of 11:1 the average productivity according to this methodology is about 2.9.

3. Divide the price of non-OECD exports to the OECD at the weighted mean “productivity” by their actual price [3].

Here we shall use a formula to determine the ‘real’ value-transfer of the non-OECD to the OECD in goods.

t = -vp + vdp +p +evd / p +evd

Where t is the uncompensated value-transfer from the unequal exchange, v is the value-added percentage for non-OECD exports, p is the total goods value-added produced in the OECD, d is the OECD-non-OECD export sector price-value distortion parameter (productivity ratio) and e is the actual price of non-OECD goods exports to the OECD.

This calculation shows a net value transfer to the OECD of approximately 2.8trillion (USD) annually through unequal exchange in commodities alone.

However, this is not the only form of global value-transfer.

Assuming the principal of equalizing wage rates we can estimate the value-transferred to the core regions from the relative underpayment of labour-power in the non-OECD countries [4].

The 500 million non-OECD workers receive wages worth about 1.5trillion (USD) annually or 3.036 on average. This consumes about 8% of non-OECD GDP (2010). The combined wages of the 600million OECD workers equates to about 17trillion or 28.536 on average. This consumes about 38% of OECD GDP (2010). Ergo, the wage-share of non-OECD export product prices to the OECD is worth 616billion (8% of 7.7trillion) and the wage-share of OECD export prices to the non-OECD is approximately 2.8trillion (38% of 7.3trillion). Understanding the average ratio in wages between the OECD and non-OECD is 11:1, we can deduce an average wage factor.

OECD workers: 600 million at factor 11 = 6.6billion

Non-OECD workers: 500million at factor 1 = 500million

Total number: 1.1billion at average factor = 7.1billion

Average wage factor: 7.1billion / 1.1billion = 6.5

This factor represents the mean average wage rate pertaining between male workers in the OECD and non-OECD [5].

If paid by this average wage rate the wage-share of exports would then be worth:

Non-OECD, 4.4trillion (616billion x 6.5/1)

OECD, 1.7trillion (2.8trillion x 6.5/11)

Now we can determine the ‘real’ price of exports by adding the adjusted totals to the remaining production costs.

Exports from non-OECD to OECD: 11.5trillion (USD)

Exports from OECD to non-OECD: 6.2trillion (USD)

Therefore we can determine that from low import prices the OECD receives 3.8trillion (USD) from the non-OECD (11.5trillion – 7.7trillion) and from high export prices 1.1trillion (7.3trillion – 6.2trillion). In total, this means a global value transfer in trade of 4.9trillion annually.

Now let us make some final calculations. Considering the trade deficit, total OECD profits amounted to about 6.8trillion (USD). If we add the average value of unequal exchange to the OECD, 3.9trillion (2.8trillion + 4.9trillion / 2), and the value of capital exported to the OECD (including debt payments, weighed for wage rates), 2.6trillion, we find that the total value of unequal exchange plus capital export equates to 6.5trillion. Roughly 95.5% of OECD profits can be accounted for from the exploitation of the non-OECD.

In short, the material wealth and high wages of the First World are rather directly built off the superprofits extracted from the Third World.

Now, let’s make a few points. No where in this article is it claimed that the First World is populated solely by leeching parasites who are the eternal enemy of the working class. Rather, this evidence indicates how the wealth of the labor aristocracy is appropriated from the exploitation of the global working class, residing largely in the periphery. While the workers of the core are not capitalists in class, they do empirically benefit from the processes of imperialism. This reality should not discourage us from organizing core workers but rather guide our strategy in doing so.

In the end, if you’re a communist like me, then this information should be moving. The social reality of imperialism seems all but undeniable at this point. The question is, what shall we do with this knowledge? We can ignore it, continue down the path of core-centric thought, and forfeit real socialist revolution. Or, we can embrace this knowledge, reanalyze our material conditions, reassess class nature, and redefine how we struggle against imperialism and towards a socialist future.

As Che Guevara said:

Our every action is a battle cry against imperialism, and a battle hymn for the people’s unity against the great enemy of mankind: the United States of America.

*I strongly encourage all readers to purchase Dr. Cope’s book. It has been instrumental in my own understanding of Third Worldist political economy and all the credit to him for the time and research it took to compile such a work. 

References:

[1] Cope, Zak. 2012. Kersplebedeb. Divided World, Divided Class: Global Political Economy and the Stratification of Labour Under Capitalism.

[2] Ibid. p. 185

[3] Ibid. p. 186

[4] Ibid. p. 192

[5] Ibid. p. 195-7