Non-equivalent Exchange: Democracy’s Unequal Playing Field

• In Event: Democracy and Governance from above and Below: Vulnerability and Possibility

Abstract

The struggle for democracy does not unfold in the abstract. It is concretely structured by the position of states within the world economy. This paper will argue that those positions are socially constructed, and can be concretely measured. The paper will begin by reviewing and revising contemporary approaches to mapping the hierarchical nature of the world economy. It will then outline and demonstrate the mechanisms of non-equivalent exchange, enforced by structured inequalities in the relative value of national currencies, which constantly create and reinforce this hierarchy.

The theoretical framing of non-equivalent exchange as a mechanism for surplus-transfer within the world system, was first mooted by Evgenii Preobrazhenskii in his pathbreaking 1926 book, The New Economics. Shortly thereafter, Preobrazhenskii like so many others would be caught up in the web of Stalin’s Great Terror, and he was unable to pursue his 1926 insights. The concept was, however, picked up by others. Importantly, Ranjit Sau developed a concrete methodology for measuring this non-equivalent exchange, and the paper will develop and deploy a revised and expanded version of his methodology, using contemporary data sources. Applying Preobrazhenskii’s theory and the revised version of Sau’s methodology, clearly demonstrates the transfer of surplus, from the Global South to the Global North. It also clearly poses the need to revise our understanding of key formulae from Capital Volumes I and III – specifically, formulae on the circulation of commodities and the rate of profit. These modifications are not minor and have implications both economic and political.

In terms of politics, non-equivalent exchange creates a vastly uneven playing field, making democratic advances much more difficult in the Global South as opposed to the Global North. In theory – taking a page from the first years of ALBA – this non-equivalent exchange could be substantially modified by displacing the US dollar from its role as “world money”. Late in life, John Maynard Keynes argued unsuccessfully for precisely this – a structured internationally-managed system by which national economies could meet in the world market and exchange their goods and services, independent of the relative valuation of their national currencies. Whether or not the solutions posed by the ALBA countries or Keynes are complete, they are addressing the right problem – how structured inequality of currencies distorts the international trading and investment system, creating recurring crises, entrenching economic underdevelopment, and creating barriers to movements for democratic transformation.

Author

• Paul Kellogg, Athabasca University