Drain from the Global South

Recent research shows that growth in the global North relies on a large net appropriation of labour and resources from the global South.¹ This happens because powerful states and corporations leverage their commercial and geopolitical clout to depress the prices of labour, resources, and suppliers in the periphery. The resulting price inequalities mean that for every unit of embodied labour and resources that the South imports from the North, they have to export many more units to pay for it. This dynamic, known as unequal exchange, imposes a substantial drain on the South. In 2015, net South-North flows amounted to 12 billion tons of embodied raw materials, 21 Exajoules of embodied energy, 820 million hectares of embodied land, and 188 million person-years of embodied labour. 

This drain deprives the South of resources necessary for development, perpetuating impoverishment.  These productive capacities could be used to meet human needs in the South, but instead they are appropriated to service capital accumulation in the North. For instance, the 21 Exajoules of appropriated energy would be enough to build infrastructure sufficient to ensure decent living standards for 6.5 billion people, but instead it is used to produce fast fashion and tech gadgets for corporate supply chains, supporting growth and consumption in the North.

If measured in terms of Northern prices for traded goods, the appropriated resources would be worth roughly $10.8 trillion per year. That would be enough to end extreme poverty seventy times over.  

This graph shows Northern gains as a share of the North's total consumption. On average, about 28% of total consumption the global North is net-appropriated from the global South through unequal exchange.

The global South suffers a drain through unequal exchange that is equivalent to 18% of its total consumption, on average. In other words, in the absence of drain, consumption in the South would be 18% higher.

An earlier study on unequal exchange assessed the scale of drain between core and periphery by country.² The methodology used in this study does not capture the full scale of physical flows and the resources embodied in production, but the results nonetheless give a reasonable picture of the share of drain by country. 

These dynamics help explain the persistence of inequality in the world economy (see our entry on global inequality). Economists often assume that the global South is "behind", and will be able to follow the same development trajectory as rich countries, eventually catching up to them. But catch-up development cannot occur within a system that is predicted on imperialist appropriation. It physically cannot occur in the context of net South-North flows. This is why the income gap between the global South and global North has continued to increase since the end of colonialism. There is no catch-up development happening. This is not because poor countries are “behind”.  It is because they are exploited.