We live in a capitalist world economy in which production is controlled overwhelmingly by capital (the major financial firms, large corporations, and the 1 percent who own the majority of investible assets). For capital, the purpose of production is explicitly not to meet human needs or achieve social progress. Its main purpose is to maximize and accumulate profit — that is the overriding objective.
Jason Hickel is a professor at the Institute for Environmental Science and Technology at the Autonomous University of Barcelona, and the author of several books including The Divide: A Brief Guide to Global Inequality and its Solutions and Less Is More: How Degrowth Will Save the World.
To sustain a process of perpetual accumulation, capital must obtain an ever-rising quantity of inputs at the lowest possible price, meaning cheap labour and cheap nature. The problem for capital, however, is that obtaining these inputs sooner or later entails very severe contradictions. During the rise of capitalism in the West, capitalists discovered that if they intensified the exploitation of their domestic working classes too much, they would eventually face a revolution. By the same coin, as they intensified the exploitation of domestic natural resources, they successively undermined the ecological basis of production itself. Capital therefore required some kind of “outside” — an external frontier where it can exploit labour and nature with impunity, and where it can externalize social and ecological costs.
In other words, capitalism requires an imperial arrangement in order to stabilize accumulation. Imperialism is thus a structurally necessary feature of capitalism. Even today, some 60 years after the formal end of colonialism, our world-system continues to be structured by a fundamental imbalance between North and South and the economic domination of the latter by the former. Transforming this arrangement is the key political challenge of our time.
Colonial and Neo-Colonial Domination
The unequal nature of the world-system was glaringly obvious during the colonial period. The industrialization of the West relied heavily on the mass-scale appropriation of resources from the colonies, as well as the use of enslaved and indentured labour. To achieve this, colonizers systematically destroyed indigenous industries and reorganized the Global South’s production away from servicing local human needs and development towards servicing consumption and accumulation in the core. Indeed, doing so constituted the central objective of the colonial project. There are countless examples of this process. In southern Africa, subsistence economies were ripped up so people were forced to get wages by working on colonial mines and plantations. In India, the British physically smashed the country’s textile industry to make it dependent on imports of British goods.
Colonial domination was forcefully challenged during the twentieth century. Radical anti-colonial movements across Asia, Africa, and Latin America overthrew their colonizers and immediately set about pursuing strategies of economic sovereignty. Most of these movements were inspired in some way by socialist and Communist ideas, which provided a blueprint for reclaiming domestic control over production and organizing it around human needs and development. They used land reform to reclaim territory from foreign firms, nationalized key resources like oil and minerals, used subsidies and protective tariffs to develop their national industries, and used planning to build public services and develop industrial capacity.
For every unit of labour embodied in traded goods that the South imports from the North, the South has to export at least ten times more to pay for it.
All of this posed an extraordinary threat to the states of the capitalist core, as it jeopardized their access to cheap labour and resources. Sovereign development in the South meant that Southern countries were producing and consuming more for themselves, which in turn meant that those resources were no longer cheaply available for the core. That manifested as rising supply prices, destabilizing the imperial arrangement and making capital accumulation in the core increasingly difficult to sustain.
The governments of the core faced a fork in the road: they could either accept economic sovereignty in the South, abandon capital accumulation, and shift to a post-capitalist economy — or they could try to maintain capital accumulation by somehow restoring the imperial arrangement. They opted hard for the latter, intervening militarily to destroy radical Southern governments, but also by using the IMF and World Bank to impose structural adjustment programmes that forced governments to privatize public industries and cut public services, tariffs, subsidies, and labour and environmental protections, thereby reversing the policies of the anti-colonial era.
Structural adjustment restored the imperial arrangement, re-establishing the South as suppliers of cheap raw materials, but this time also as manufacturers of light industrial goods in subordinate positions within global supply chains dominated by Northern firms. Structural adjustment also depressed wages and prices in the Global South, including through currency devaluation. Meanwhile, the North monopolized technology and capital goods, and set high prices.
In- and Outflows
The results of structural adjustment had very severe implications for international trade, as all imports need to be paid for with exports. Systematic price inequalities mean that for every unit of embodied labour and resources the South imports from the North, it has to export many more units to pay for it. This leads to what the Egyptian economist Samir Amin called a “hidden transfer of value” from South to North — “hidden” because there is a monetary balance of trade, but in reality, the South is sending a net-transfer of real value to the North. This enriches the core, but drains the periphery of resources necessary for development. Global South economists like Amin and others described this as “unequal exchange”, arguing that it enabled a continuation of imperialist appropriation from the periphery even in the absence of formal colonial rule.
Today, we can observe this unequal exchange in empirical data, using multi-regional input-output models. For every unit of labour embodied in traded goods that the South imports from the North, for example, the South has to export at least ten times more to pay for it. However, this is not primarily because Southern labour is less productive. On the contrary, Southern labour in export industries tends to be highly productive. Rather, it is because Southern wages are cheapened compared to Northern wages. Southern workers earn about 90 percent less than Northern workers for labour of the same skill level in the same sector. In fact, the inequalities are so extreme that highly skilled workers in the Global South such as engineers and scientists are paid 68 percent less than low-skilled workers in the Global North. We also see similar systematic trade imbalances when it comes to materials, land, and energy embodied in traded goods.
This unequal exchange leads to truly massive net-transfers from South to North. In the final year of data, we see the following:
- A net South-North flow of 12 billion tons of embodied materials, and 21 exajoules of embodied energy. According to recent research, this quantity of materials and energy would be enough to provide infrastructure and supplies to provision decent living standards — universal healthcare, education, modern housing, sanitation, electricity, heating and cooling, induction stoves, refrigerators, freezers, washing machines, public transit, computers, and mobile phones — for the entire population of the Global South, but instead it is siphoned off for accumulation and consumption in the core.
- A net flow of 820 million hectares of embodied land — twice the size of India. That land could be used to provide nutritious food for up to 6 billion people, but instead is used to produce goods consumed in the North like sugar for Coca-Cola and beef for McDonald´s.
- A net flow of 826 billion hours of embodied labour — more than the total labour rendered annually by the entire US and EU workforces combined. That labour could be used to staff hospitals and schools in the Global South or produce food and goods for local needs, but instead is used to churn out tech gadgets and fast fashion for Northern corporations.
These figures suggest that the high levels of consumption and growth in the core rely heavily on net appropriation from the South, today just as much as during the colonial era. In the case of materials and labour, around half of total consumption in the core is net-appropriated from the South. Moreover, while the North benefits from the extra consumption, the social and ecological costs are effectively externalized to the Global South. That is where the damage happens — not primarily in England or Finland, but in the Congo, Indonesia, or Brazil.
Furthermore, the data on unequal exchange helps us understand the persistence of inequality between core and periphery in the world economy. The mainstream development narrative holds that, if given enough time, the South will gradually “catch up” to the Global North. Yet no such catching up is happening. In fact, the income gap is getting bigger every year. The reason why is self-evident: because catch-up development cannot happen within a system predicated on imperialist appropriation and net South–North flows.
Finally, this data helps us understand the persistence of mass poverty and underdevelopment in the Global South. The South is impoverished not because it is somehow “naturally poor”, but because its income is compressed and its productive capacities drained to support development in the core.
The Chinese Model and the Second Stage of Decolonization
Unequal exchange also affects China, despite it being the most dynamic and fastest growing economy in the Global South, if not the world. China has historically suffered a substantial net drain of materials, energy, and labour to the core, although it recently has become a net-importer of land. Even today, drain from China comprises about 20 percent of the North’s total net appropriation from the Global South.
However, China’s exchange ratio with the core has improved over time. During the 1990s, the exchange ratio averaged 34 to one. In other words, for every unit of embodied labour, materials, land, or energy that China imported from the core, it had to export 34 units to pay for it. By 2015, that ratio had declined to four to one.
This improvement occurred mostly because China experienced an increase in wages and prices. These represent positive changes for China — and specifically for Chinese workers — but pose a very severe problem for Western capital, as higher prices in China reduce the core’s ability to appropriate value, and thus place a constraint on Northern profits. That is one of the reasons why the core states are now trying so hard to push Chinese wages back down and restore access to cheap labour. It is also what Trump is trying to do with his tariffs: he wants to force countries to concede by cutting export prices.
The existing arrangement is not working for the vast majority of humanity. The capitalist world economy cannot deliver meaningful development in the periphery. This system can and must be overcome.
So, what is to be done? The fundamental point is that Southern governments need to find ways to escape the imperial arrangement. They need to achieve the second stage of decolonization: reclaim control over their national productive capacities, and reorganize them around meeting human needs and achieving national development.
Remember, the South is not poor — it is rich. It is endowed with vast tracts of fertile land, abundant labour, extraordinary resources, and productive power. The problem is that the nations of the Global South do not have sovereign control over their capacities. How can such control be achieved? Do everything possible to reduce dependence on imports from the core in order to reduce exposure to drain through unequal exchange. Also, implement industrial policy to develop sovereign industrial capacity, and deploy public finance and credit policy to mobilize labour and production for national development, rather than for foreign capital.
China shows how it can be done, but China can still improve its position. China currently suffers a net-drain to the core of 100 billion hours of labour per year. That can be resolved by reducing unnecessary imports from the core such as luxury goods and goods that can be substituted with domestic production, therefore reducing export pressure and thus retaining billions of hours of labour power that can be redirected towards things like social reproduction, ecological regeneration, and human development. China can also play an important role in helping the rest of the Global South by providing an alternative source for finance, technologies, and capital goods, thus enabling Southern nations to reduce their import dependencies on the core and develop their own industrial base.
We are at a juncture in history. The existing arrangement is not working for the vast majority of humanity. The capitalist world economy cannot deliver meaningful development in the periphery. This system can and must be overcome. In that regard, the Southern struggle for liberation is the true agent of world-historical transformation today.
This article is based on a presentation given at the symposium “Socialist Perspectives on Global Governance in a Multipolar World”, held by the Fudan University School of Marxism and the Rosa Luxemburg Foundation’s Beijing Office in April 2025.
