At the Historical Materialism conference, the Saturday discussion between Professor David Harvey and myself on Marx’s double-edge law attracted more than 250 people. Sunday’s session on the economics of modern imperialism that I had organised also attracted a good turnout of around 60 people, many of which were clearly experts on the subject. Unfortunately for them, the four speakers (including myself) went over their allotted times and used up the available discussion time – apologies all round!
Anyway, at least the speakers presented some important arguments. I spoke last. But I think in this post, I shall outline my presentation first because I think it sets the scene for the others. G Carchedi and I have been working on some new empirical work, trying to gauge which countries are the imperialist ones and how much value they are able to extract from the dominated or periphery (we prefer those names rather than ‘Global North’ and ‘Global South’, which is too geographical). We emphasise that we are looking at the economic foundations of imperialism, not the political aspects or the superstructure if you like, ie the political control by imperialist countries over the periphery, or military might or interventions etc. Direct political control through colonies has mostly disappeared (although not completely); so imperialism operates mainly through economic control now (while throwing in the occasional coup or proxy war). After all, that is the aim of the imperialist powers: to appropriate as much value and resources from the dominated as possible. In that sense, the economic determines the political.
If we focus on the transfer of value from the periphery to the imperialist economies, there are several ways that this is achieved. There is value transfer through unequal exchange in international trade; through global value chain flows (transfer pricing) within multi-nationals; through factor income flows (debt interest, equity profits and property rents); through seignorage (ie control of the money supply: dollar is king) and through capital flows (foreign direct investment inflows and portfolio flows. ie buying and selling financial assets).
So which are the imperialist countries? Carchedi and I define them as those countries which get a long-term appropriation of value from subaltern countries. And this is achieved by the appropriation of surplus value by high technology companies (and countries) from low technology companies (countries). So imperialist countries can be defined as those with a persistently large number of companies as measured by their high national average organic composition of capital (OCC) and whose average technological development is higher than the national average of other countries.
In our work, we used the IMF data on net primary income flows between countries. These are cross-border flows of profit, interest and rent. We found that when these flows are netted out, there are about 10 countries at the most that fit the bill as imperialist. Indeed, nothing much has changed in the 100 years since Lenin wrote his analysis of imperialism: it’s still the same countries. No others have made it from dominated to imperialist status. Net primary income per head is concentrated in the G7 plus a few other small states and the tiny tax haven states). Every other country is an ‘also-ran’.
The G8-plus countries own the vast bulk of all the foreign-owned assets. Even the so-called BRICS (Brazil, Russia, India, China and South Africa) own little abroad compared to the imperialist countries. The G8 has six times as much FDI stock as the BRICS.
The main way that value is transferred from the periphery to the imperialist nations is still through international trade. There has been a large increase in intra-firm trade by affiliates to the parent company using price mark-ups (transfer pricing). For example, UNCTAD reckons that trans-national companies (TNCs) are involved in 80% of global trade. And of TNC trade, about 40% is intra-firm; 15% through fixed contracts with suppliers and 40% with so-called arms-length firms (ie not owned affiliates but ‘captive’ domestic firms). Actual intra-firm trade (affiliates to parent company) is about 33% of all annual trade. So the main way is still export trade on world markets with internationally set prices.(UNCTAD GVC)
In Capital, Marx shows that, through competition, there is a tendency for the profit rates measured in value (labour time) to equalise into prices of production. There is a transfer of value from some capitals to others to bring about this equalisation of profit rates. This transfer process in competition also applies to international trade. The transfer of value from the dominated to the imperialist economies is achieved by the tendency to equalise rates of profit between nations in the international market for goods and capital.
The periphery has less technology and more labour and so produces more value (in labour time) to make the same product. The imperialist countries have more technology and less labour and so produce less value (in labour time). When profit rates are equalised through competition in world markets, then a portion of the extra surplus value that has been extracted from the workers by the capitalists in the South gets transferred to the capitalists of the North. So, although international trade in goods and services appears to work through equality of exchange (money for goods, goods for money at set prices), beneath the surface, there is an unequal exchange of value (UE). The imperialist capitals gain extra value while the peripheral capitalists lose value. Figure 13 of my PP presentation shows how this transfer of value works. (The economics foundations of imperialism)
Carchedi and I have made calculations of the magnitude of this transfer of value. We used some aggregate databases and applied a formula for the transfer. Details of this are in Figure 14 of the PP presentation and excel files are available for anybody who wants to replicate and check our methods and workings. We found that the transfer of value from the dependent bloc (defined as below) to the G7 rose from $20bn a year in the 1960s; to $90bn in the 1970s, dropping off to $50bn in the 1980s. Then with China becoming the great trading force, there was a take-off from the late 1990s to reach over $120bn by the time of the Great Recession.
So there is annual value transfer from these countries to the G7 through their international trade of $120bn or more a year. This annual transfer of value to the imperialist countries (G7) is equivalent to about 2-3% of their combined GDP. But the transfer from the dominated countries is much more, around 10% of their combined GDP. So there is a substantial transfer out of the South through unequal exchange.
Recently, other authors have tried to compute the magnitude of the transfer of value to imperialist countries. Using the World Input-Output database, Italian economist Andrea Ricci of Urbino University, Italy found that for the developed countries “the global amount of value transfers corresponded to 1.8 percent of global value added… while for developing economies, the relative size of outflow transfers ranged from 10 to 20 percent of the domestic value added.” Ricci unequal exchange And Greek Marxist economists, Lefteris Tsoulfidis and Persefoni Tsaliki, looked at the transfer of value in trade between the US and China. They find a similar magnitude of bilateral transfer of value between the US and China as we do. URPE_CHN_2019
In our view, based on the Marxian theory of unequal exchange, the transfer of value from the periphery to the imperialist countries through international trade and competition takes place because the imperialist countries have a much higher organic composition of capital. That expresses their technological superiority and delivers much higher labour productivity. The G7 economies on average are five times more technologically superior than the BRICS and so four times more productive per worker.
This is where the other speakers at the session come in. John Smith is author of the highly commended, award-winning book, Imperialism in the 21st century. The book’s main argument is that imperialism rests and thrives on the ‘super-exploitation’ of workers in the ‘Global South’.
What do we mean by ‘super-exploitation’? Well, Marx referred briefly to the idea that some workers may end up receiving wages that are below the value of their labour power (the amount needed to live and reproduce). But he did not base his theory of surplus value on ‘super-exploitation’. For Marx, even without super-exploitation, workers were still exploited for surplus value and profit under capitalism.
However, John Smith reckons that super-exploitation is now the main generator of imperialist value gains in the 21st century and technological superiority and ‘normal’ exploitation are no longer in the driving seat, so to speak. For John, this is almost self-evident, given the incredibly low wages in the sweatshops of many Global South countries and the huge mark-ups in the global value chain for imperialist multi-nationals. Anybody who denied this and argued that workers in the North were just as or even more exploited would be denying the very existence of imperialism.
At the HM session, Andy Higginbottom from Kingston University provided some of the theoretical support for the thesis of ‘super-exploitation’ as the economic driver of imperialism (HM 2019 Labour super-exploitation plus transformation makes for international value (1). He pointed out that Marx’s transfer of value model as shown in our PP Figure 13 assumed equal rates of surplus value. That clearly could not be reality. If you relaxed that restriction, then different rates of surplus value between imperialist and peripheral economies come into play in the transfer of value, and not just differing rates of organic composition and labour productivity. And then it can be argued that the rate of exploitation is not just affected by labour intensity, productivity etc, but also by differences in wages (ie super-exploitation).
But I don’t think Marx’s theory of unequal exchange must assume equal rates of surplus value in all countries. In Figure 20 of our presentation, we show that value is transferred from South to North through trade in the same way even with differing rates of exploitation; indeed if the rates of surplus value are higher in the South, then the North gains even more value in the transfer. But the Southern capitalists also gain more, because they are exploiting their workers even more, either by longer hours and intensity and/or by poverty wages.
The point is that the transfer to the North takes place because of the imperialist countries’ superior technology and labour productivity. That enables them to sell their goods in world markets at costs below the international average. The Southern capitalists try to compensate for their lower technical level and productivity by driving the wages of their workers down. So the higher rate of exploitation in the South, whether by super-exploitation or not, is a reaction to the failure to compete against the North.
In our empirical analysis, we found that the contributions to the transfer of value from South to North came from both higher organic composition in the North and higher rates of exploitation in the South – it is both, not just technical superiority, nor just exploitation. But there is also a transfer of value between imperialist countries through trade. And indeed, competition there remains fierce. The annual flows of FDI show that, until very recently, flows between advanced capitalist economies were higher than between the imperialist and the less developed South. In the decade from 2007, inflows to developed economies exceeded inflows to developing economies. Last year was the first reversal of that.
In his paper for the HM session, Smith developed an analysis of the rate of exploitation (s/v). Exploitation and super-exploitation in the theory of imperialism. He reminds us that Marx recognised a so-called ‘moral and historical’ component in the value of labour-power, i.e. “the extent to which the class struggle and general social evolution (different ways of saying the same thing) has resulted in the incorporation of new needs into those necessary for the reproduction of labour-power.”
That means that the value of labour power is partly set by the class struggle. But super exploitation is not part of Marx’s theory of value, or s/v. In the process of production, capitalists might force a lower wage. If the necessities of life and their production prices remain the same, the lower wage purchases less wage goods (consumption falls) as the price of labour power (wages) falls below its value (the production price of those socially determined necessities). That is super exploitation. But if this low wage is maintained permanently, workers must eventually accept a lower value of labour power in the goods and services that they can buy with it. In that sense, super exploitation becomes simply a higher level or rate of (“normal”) exploitation because the value of labour power has been lowered by the class struggle. Yes, there is more exploitation, but not ‘super-exploitation’ as a new category of capital.
So I don’t think that super-exploitation is proven either theoretically or empirically as “the single-most important means of increasing the rate of surplus value and countering the tendency of the rate of profit to fall.” (Smith). Or that imperialism has an “insatiable lust for super-exploitable labour”. Imperialism has a lust for profit and is the result of the drive for more profit beyond national borders as the rate of profit at ‘home’ fell. Denying the dominance of super-exploitation as the main form of exploitation under imperialism is not “imperialism denial”, like global warming or climate change denial, as Smith suggests.
Moreover, it just might be that the days of ‘super-exploitation’, as Smith categorises it, are ending. At the launch of a new book at HM, Ashok Kumar, a lecturer in International Political Economy at Birkbeck University, argued that there are signs that the ‘monopsony’ power of the imperialist buyers of the products of suppliers in the global South is weakening because the number of producers is also shrinking. This increases the countervailing power of the Southern capitalists (producers) against the Northern capitalists (retailers). And that gives a window of opportunity for the workers of the Southern sweat shops to push up wages through successful struggles – of which Kumar gives examples.
While it is possible to argue any super exploitation of the workers in the low technology countries (the so-called “South) is caused by the technological backwardness of the South’s capitalists, it is impossible to argue the opposite; that this technological backwardness is caused by super exploitation. And if super exploitation is determined, it cannot be the main determinant element. In sum, the productivity of labour is key to the transfer of value in trade between imperialist countries and the periphery. The major cause of UE is technological superiority. Differences in the rates of surplus value are significant but play a lesser role. Exclusive emphasis on only one of these two factors is misleading.
Moreover, even it were the case that super-exploitation is the main cause of higher rates of surplus value in the peripheral economies, a transfer of value has to take place. And that can only go to countries with vastly superior technology and labour productivity and can maintain that superiority through monopolising that technology. Indeed, that was one of the arguments made by Sam King, from Victoria University Australia, at the HM session, based on his upcoming book on imperialism.
Sam reckoned that Lenin’s Imperialism was still valid. There were still only a few countries reaping these value transfers. Although Lenin refers to ‘monopoly capital, he did not mean that there was no competition between capitals. Competition still took place voraciously between various imperialist economies but also with ‘Southern’ capitalists. The monopoly was in the technical superiority of the imperialist companies, which they jealously guarded. The labour productivity gap between these countries and the periphery had not altered since Lenin’s time. Now in the 21st century, the US is worried that its technology ‘monopoly’ may be threatened by China’s move up the value-added ladder. This is the real reason for the current trade war.
The empirical evidence shows that imperialism is an inherent feature of modern capitalism. Capitalism’s international system mirrors its national system (a system of exploitation): exploitation of less developed economies by the more developed ones. The imperialist countries of the 20th century are unchanged – it’s still the G7/10. There are no intermediate, ‘sub-imperialist’ economies. And China is not imperialist on these measures. And the transfer of value from the periphery to the imperialist core is continually rising.
Finally, Marx’s model of unequal exchange shows that the economics of imperialism works through the transfer of value by the exploitation of the workers of the South by the capitalists of the South and then through the transfer of some of that surplus value appropriated to the capitalists of the North in international markets and internal global value chains. The workers of the North do not benefit in any way from this imperialist transfer.
To suggest, as some do, that the welfare state, pensions and national health services in the North were only possible because of the imperialist exploitation of the South is economic nonsense. After all, the great period of imperialist exploitation was in the neo-liberal period of globalization since the 1980s, when the welfare and wage gains of workers in the North were taken back. Globalisation of the late 20th century was a response to falling rates of profit in the North (as it was in the late 19th century). It is also a political insult against the class struggles made by Northern workers to achieve those gains in the first place. Both the workers of the South and the North are exploited by capital. It is capital that is the enemy of both.