The Divide: Global Inequality from Conquest to Free Markets

by Jason Hickel

The second was that the wages that workers in developing countries were paid for the goods they traded remained much lower than in the West, even when corrected for productivity and purchasing power, so the South was undercompensated for the value they shipped abroad. Together, these two patterns lie at the heart of what economists call ‘unequal exchange’ between the core and the periphery. By the end of the colonial period, the periphery was losing $22 billion each year as a result of unequal exchange, which is equivalent to $161 billion in 2015 dollars. That is twice the amount of aid and investment that the periphery was receiving each year during the same period. This arrangement became a major driver of global inequality. In 1820, at the dawn of the second wave of imperialism, the income gap between the richest country and the poorest country was only 3 to 1. By the end of colonialism in the middle of the 19th century, the gap was 35 to 1.