Re: unequal exchange

Patrick, you mention Zimbabwe and South Africa.  [By the way, I hope Arno did not break any hidden wsn code by praising a fellow wsn'er.]

 

What do you think about the following, comrade? The discussion whether the Zimdollar is overvalued or undervalued takes place in the context of really existing global capitalism. Such a discussion is as tricky as a discussion on whether women's labour is overvalued or undervalued in a context of sexism, or a discussion on whether wages are overvalued or undervalued in a context of capitalism. This is, in my opinion, not just a problem of doing proper econometrics, but a problem for value theory as well.

 

The question must be raised: What is the criterion (standard) by which "overvaluation" or "undervaluation" are determined? Such a criterion is necessarily a value criterion (and not just an empirical fact).

 

From the viewpoint of an employer, a wage tends to be "too high" (overvalued), no matter how low, because wage paid = profit not made.

From the viewpoint of global investors, a currency exchange rate tends to be "too high" (overvalued), no matter how low, because an even lower exchange rate would mean that the global investor could buy the land or the factory or the coffee in that other country for an even lower price.

The economic thinking (doctrines, theories, ideology) of global neoliberalism is biased toward employers and global investors. Thus, mainstream economists tend to come up with the conclusion that Third World exchange rates (or those of Eastern European countries) are "overvalued".

 

But are the evaluation criteria the right ones? That is a question for value theory. For example, is the wage paid to a worker the right wage? Here you get into theory of surplus value. Similarly, you could ask: Is the exchange rate of a Third World country "right"or "fair" from the viewpoint of the Third World worker? Here you get into alternative views of (international) value, which Prebisch tried to get at with his "unequal terms of trade", Emmanuel with his "unequal exchange", Amin with his "superexploitation".

 

Regarding your concrete question regarding the Zimdollar, there seem to be two completely different sets of answers, depending on whether you use global neoliberal (capitalist) standards of evaluation (biased toward pleasing global investors, IMF, etc.) or alternative standards of evaluation (trying to be fair to the working people of the Third World). In my opinion, the global wage structure (and the global structure of prices)(and consequently exchange rates between core and periphery countries) are fundamentally screwed up, in the sense of being racist (or quasi-colonialist) already before "market forces" kick in. It would be nice if one could prove this thesis somehow. [Unfortunately, many leftists are, in effect, siding with neoliberals on this issue - i.e., by accepting international market forces.]

 

[As a parallel - in a sexist society the valuation of women's work [in the heads of the dominant economic players] is already screwed up (biased against women) before "the market" does its miraculous thing.]

 

Gert

 

 

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Original message

 

Re: Unequal exchange
by Patrick Bond    02 March 2001

 

Great stuff, Arno. Where, however, do you factor in specific exchange
rate policies aimed at overvaluing or undervaluing a currency? E.g.,
in Zimbabwe now, there is a huge debate about whether the Zimdollar
is over or undervalued, with parallel rates at Z$80/US$1, but
official still steady (for last six months) at Z$55/US$1 (Zim's
inflation is roughly 65% over that period). There's tight control
over forex which explains the ability to peg. But in last week's main
business rag, the finance minister (a bourgeois guy, well respected)
claimed the Zimdollar is overvalued and it's only speculators pulling
the black market price way down. If it's as easy to get these kind of
distortions and deviations from "value" (whatEVER the hell that
means! -- and who after all has ever found out scientifically!) in
wee (relatively defenseless) Zimbabwe, I wonder about countries that
are regular victims of speculative attacks.

 

Here in South Africa, for instance, we've suffered three crashes of
the Rand (of 25% in nominal terms, over a few weeks or months) in
spite of single-digit inflation, since exchange controls were lifted
in 1995.

 

So, the enormous fluctuations makes me wary of too much reliance on a
single exchange-rate indicator of unequal exchange. It's much too
much a factor of policy and of speculation to be scientific, I would
guess.

 

But am I wrong somewhere here, or do you have sufficiently lengthy
time series to wash out my objections??

 

Cheers,
Patrick