The true scale of the global North’s economic appropriation of the South

This article is a summary of a report “Imperialist appropriation in the world economy: Drain from the global South through unequal exchange, 1990–2015” published in the international journal Global Environmental Change by Jason Hickel, Christian Dorninger, Hanspeter Wieland and Intan Suwandi.

A newly published report has found that the “advanced economies” of the global North rely much more intensively on appropriation of resources and labour from the global South than previous studies have suggested.

The authors of the study bring forward the hidden costs of traded goods from the South by evaluating the scale of exploited raw materials, land use, energy use and labour requirements in the process of production and by also evaluating the inequalities in international economic governance.

The study found that in 2015 alone, the North net appropriated from the South 12 billion tons of raw material, 822 million hectares of land, 21 exajoules of energy, and 392 billion hours of labour, worth $10.8 trillion in Northern prices – enough to end extreme poverty 70 times over.

That was just one year. From the period of 1990-2015, drain from the South totalled $242 trillion, which is equivalent to nearly a quarter of Northern GDP.

Results also indicated that 58 percent of the North’s excess consumption is supported by net appropriation from the South. The world’s largest economy according to GDP, the United States, imports 60 percent of all manufactured goods from developing countries.

As a large proportion of the South’s resources and labour is organised around servicing capital accumulation in the North, this means that it is not available to meet local human needs, explains economic anthropologist and one of the authors of the report, Dr Jason Hickel.

“The 21 exajoules of energy appropriated from the South every year would be enough to build out infrastructure to ensure that everyone in the global South has access to healthcare, education, housing, food, etc, but instead it is used to produce fast fashion and tech gadgets for richer countries,” Hickel told TRT World.

“This pattern perpetuates deprivation in the global South while propping up high levels of income and consumption in the North.”

The designation of “developing country” across much of the global South has therefore very little to do with levels of production and access to resources and entirely to do with the fact that countries of the region have been “integrated into the global economy on fundamentally unequal terms.”

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Unequal economic governance

Europe’s industrial growth was largely due to forcibly extracted labour and natural resources from the global South during the colonial era. This appropriation of resources was also used to finance the expansion of European settler colonies such as the United States, Canada, Australia and New Zealand, which adopted Europe’s imperialist aims toward countries of the global South.

The countries that quickly grew rich during the colonial period have been able to leverage their dominance to cheapen the prices of resources and labour in the global South - the primary reason Northern companies offshore their production.

Offshoring has helped Northern companies evade taxes, which total more than $1 trillion per year - an amount that would be of great use to the global South if it could be reinvested domestically.

Northern states hold a majority of votes in the World Bank and International Monetary Fund (IMF), giving them control over key economic policy decisions.

“In the World Trade Organization (which controls tariffs, subsidies, and patents), bargaining power is determined by market size, enabling high-income nations to set trade rules in their own interests.”

Industrial production shifted overwhelmingly to the global South in the 1980s with at least 79 percent of the world’s industrial workers living in the South. Since the 1980s, the World Bank and IMF have imposed programs that have cut public sector salaries and employment, cut back labour rights, diminished unions, and practically removed environmental regulations.

Patents also play a key role in economic inequality. Ninety-seven percent of all patents are held by corporations in high-income countries.

The South has contributed the majority of the world’s industrial production, including high-technology products such as cars and computers, but price inequalities remain fixed and wage disparities are so extreme that highly skilled labour performed in the South is likely to receive lower pay than “unskilled” labour in the North.

The dominant narrative is that developing countries are poor because of their own internal failings, without considering the structural inequalities set up and entrenched in the world economy.

At the same time, global poverty figures are said to be alleviated through the process of globalisation - with industrialisation giving more work “opportunities” to people around the world.

The World Bank estimates that the number of people living in poverty around the world has fallen from 1.9 billion in 1990 to about 736 million in 2015.

However, according to Hickle, this figure is inaccurate.

“The World Bank typically reports global poverty figures using an extremely low threshold - $1.90/day. This line has no empirical grounding in human needs, however, and we know that it is not enough to achieve even basic nutrition,” Hickle told TRT World.

When incomes go above this very low threshold, it is determined that people have risen above the poverty line, which gives a much lower number of people living in poverty than is actually the case.

“Scholars propose using a threshold of $7.40/day, which is closer to what is required to meet basic needs. At this threshold, we see that about 4.2 billion people live in poverty,” Hickle explained.

The report explains that developing countries need justice and reparations, not charity.

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Reparations for economic and ecological damage

Due to the high levels of inequality in the world economy, the South has to export on average five units of raw material to “pay” for every unit it imports from the North. “ For land the average ratio is also 5:1, for energy it is 3:1 and for labour it is 13:1.”

Such levels of drain from the South have immense ecological consequences.

According to the study “Resource Footprints are Good Proxies of Environmental Damage” (Steinmann et al., 2017), natural resource use in material and energy production accounts for more than 90 percent of variation in environmental damage indicators and according to the UN’s 2019 International Resource Panel, it also accounts for more than 90 percent of biodiversity loss and water stress.

With the majority of industrial production offshored to the South and unequal prices contributing to over-consumption in the North, the vast majority of benefits continue to flow to the latter while the damage is suffered by the former.

“Industrial ecologists hold that global extraction and use of materials should not exceed 50 billion tons per year (Bringezu, 2015). In 2015, the global economy was using 87 billion tons per year, overshooting the boundary by 74 percent and driving ecological breakdown. This overshoot is due almost entirely to excess resource consumption in global North countries.”

Fossil fuels account for the majority of energy appropriated from the South and the North is responsible for 92 percent of carbon dioxide emissions in excess of the planetary boundary.

According to independent non-profit organisation DARA, the South bears 82–92 percent of the costs of climate change, and 98–99 percent of the deaths associated with climate change.

“Rich countries must reduce their exploitation of the planet’s resources to reverse the ecological breakdown but also to liberate the South from the grip of extractivism, so that Southern countries can organise their economies around meeting local needs, ending poverty and achieving development goals,” Hikel said.

Meanwhile, developed countries do little but provide an image of generous aid flow to developing countries.

However, the report’s findings indicate that unequal trade between the global north and south from the years 1990 to 2015 has actually outstripped northern aid spending by a factor of nearly 80. This means that for every dollar of aid, 80 dollars worth of resources are appropriated from the south through unequal exchange.

The report’s conclusion calls for reparations for the continuous economic and ecological damage in accordance with the “polluter pays” principle, which operates in the European Union, United Kingdom, United States and other member countries of the Organisation for Economic Co-operation and Development.

But true reparations cannot be measured in monetary terms alone, the researchers say.

“True repair requires permanently ending the unequal distribution of environmental goods and burdens between the global North and global South, restoring damaged ecosystems and shifting to a regenerative economic system.”

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