The developed markets of the West are depriving the Global South of wealth due to huge differences in nominal wages, bne IntelliNews reports citing a new study published in Nature Communications.
The author of the study, Professor Jason Hickel from L’Institut de Ciència i Tecnologia Ambientals (ICTA-UAB) and visiting senior fellow at LSE, states:
First, a crucial point: workers in the global South contribute 90% of the labour that powers the world economy, and 91% of labour for international trade. The South provides the majority of the world’s labour in all sectors (including 93% of global manufacturing labour).
He then concludes that wages in the South are 87-95% lower than in the North for work of equal proficiency.
The North-South wage gap widened sharply between 1995 and 2021 across all skill categories and sectors. Southern wages are 87-95% lower than Northern wages for equal-skilled jobs as of 2021, and 83-98% lower for equal-skilled jobs in the same sector, according to the study.
Economists tried to account for the difference in nominal wages by comparing what goods can be bought with the average wage packet, rather than simply exchanging them for dollars and comparing dollar incomes.
In this respect, China is now the largest economy in the world, while Russia has recently overtaken Japan to become the fourth largest economy based on PPP (purchase power parity). Similarly, Russia and Mexico have just displaced the UK from the top ten global manufacturing powers, rising to eighth and seventh place respectively.
West’s supremacy over Global South
In nominal terms, however, China is not expected to catch up with the US until 2075, as wages in the Global South remain significantly lower than in the West. The result is a flow of wealth from emerging markets to the West as Western companies set up factories in the Global South to take advantage of the differences.
“While Southern workers contribute 90% of the labour that powers the world economy, they receive only 21% of global income. (…) And the wage gaps are getting worse. These wage inequalities are a result of imperialist dynamics in the world economy that act to suppress wages and consumption in the global South. Why? Because it massively benefits Northern capital.”
Systematic price inequality means that for every hour of labour that the South imports, it has to export 11 hours to “pay” for it. This leads to large net flows of value from South to North.
The South’s contribution to total global production has increased steadily over the period since 1995, across all skill categories. The largest increase has occurred in the high-skill category, with the South’s contribution to high-skill production increasing from 66% of the world’s total in 1995 (1.9x more than the North) to 76% in 2021.
If the labour of the Global South were valued in terms of North wages by skill level, it would amount to €16.9 trillion in 2021, or €310 trillion between 1995 and 2021. This is labour that could be mobilised to meet human needs and national development goals in the South, but instead it is pumped to support consumption and accumulation in the West.
As part of the East-West geopolitical clash that has intensified since the outbreak of the war in Ukraine, leaders, such as Russian President Vladimir Putin and Chinese President Xi Jinping, have been actively promoting closer co-operation among the countries of the Global South by strengthening aligned organisations like the expanded BRICS+, the G20, the Eurasian Economic Union (EAEU), the Shanghai Co-operation Organisation (SCO), and others.
