ABSTRACT

I While thanks to Emmanuel (1972). 'unequal exchange' is by now a very popular expression in characterizing the nature of trade between rich and poor nations. its exact connotations have varied from one discussion to another. ' In particular. its interpretations by Marxist (and neo-Ricardian) value theorists have often been quite different from those by development economists in the tradition of Prebisch (1950) and Singer (l950).' In this chapter I address myself to the question of unequal exchange in the sense in which it has been a persistent theme in the writings of Arthur Lewis. first, in his most well-known paper on unlimited supply of labor (1954). then in his Wicksell Lectures on tropical trade (1969) and then. again, in his recent essay on the international economic order (1978). The only way to explain the problem lucidly and briefly is to quote him:

A farmer in Nigeria might tend his peanuts with as much diligence and skill as a farmer in Australia tended his sheep, but the.return would be very different. The just price, to use the medieval term, would have rewarded equal competence with equal earnings. But the market price gave the Nigerian for his peanuts a 700 Ibs. of grain per acre level of living. and the Australian for his wool a 1600 Ibs. per acre level of living, not because of differences in competence, nor because of marginal utilities or productivities in peanuts or wool, but because these were the respective amounts of food which their cousins could produce on the family farms. This is the fundamental sense in which the leaders of the less developed would denounce the current international economic order as unjust, namely that the factoral terms of trade are based on market forces of opportunity cost, and not on the just principle of equal pay for equal work. (Lewis. 1978)

This idea has also the important corollary that so long as productivity in the food sector remains vastly different across nations, the problem of unequal rewards of labor in open economies is not a matter of the alleged unfavorable terms of trade for primary products vis-a-vis manufactures:

The terms of trade are bad only for tropical products, whether agricultural or industrial, and are bad because the market pays tropical unskilled labor, whatever it may be producing, a wage which is based on an unlimited reservoir of low productivity food producers . . . If tea had been a temperate instead of a tropical crop its price would have been perhaps four times as high as it actually was. And if wool had been a tropical instead of a temperate crop it would have been had for perhaps one-fourth of the ruling price. (Lewis, 1978)

The fundamental question for Emmanuel, though couched in terms of a different value theory, is ultimately very similar:

Are there really certain products that are under a curse, so to speak; or is there . . . a certain category of countries that, whatever they undertake and whatever they produce, always exchange a larger amount of their national labor for a smaller amount of foreign labor? (Emmanuel, 1969)

But while Emmanuel starts from exogenously given wages in two sets of countries and considers the international transfer of value implied by equilibrium production prices, our focus in this chapter, like that of Lewis, is on the determination of the wage gap itself.