Re: mechanisms of core wealth

There are a number of mechanisms.  (I suggest, to begin, some short and easy
essays by Wallerstein, in Politics of the World-Economy, on the
developmental illusion, or just as good,  read "Development: Lodestar or
Illusion?" in Unthinking Social Science.)

The mechanisms include unequal exchange, colonialism, neo-colonialism (which
include all sorts of mechanisms, such as IMF and World-Bank loans [Uganda,
for instance, pay $17 per person to repay IMF loans, but only $5 per person
on health care]).

The most basic fact is that the core areas monopolize the most profitable
(high-tech, high-capital intensive [read highly productive]), sectors of the
world-economy, and this enabled them to create strong states to enforce
policies that bring greater wealth and profits.   In contrast, the periphery
is stuck with the least profitable, most competitive sectors of the
world-economy, producing goods which are used in core production processes
(including the reproduction of labor via foodstuffs) and sold back to the
periphery, but also to core workers.

Also, core firms are more productive, which, combined with their
monopoliziation of the most profitable areas of the world division of labor,
means that core commodities embody less labor power (greater purchasing
power) than commodities from the periphery.  But of course, in view of the
division of labor, the core more often buys goods from the periphery that
aren't produced in the core (or don't compete in the same consumer market).
So then we are talking about the different purchasing powers of the
currencies exchanged for goods (which has the same results): an hour of core
labor buys more labor-value (hours of labor) from the periphery than vice
versa.  This is the essense of unequal exchange.

The way I put this issue in my dissertation was to describe the commodity
chains of production from periphery to core as funnel-like.  Huge quantities
of material produced by huge quantities of labor is processed by far fewer
workers using mass production machinery at the core end (which was accurate
for the Japan-US silk network).

But this raises the issue of the great importance of historical specificity
when discussing the mechanisms.  Since the division of labor and states are
evolving, so are the mechanisms and their nature: modern slavery/colonialism
have their own "internal logic" that cannot be reduced to "coerced labor"
and which were part of the logic of the unequal exchange during their day.

Here's an excerpt of one of my replies to Peter Grimes that we just had on
the side which emphasizes the role of the market in creating unequal
exchange:

I don't deny that peripheral coercion contributes to low wages, and
naturally political action also creates high wages.  But these are
deviations from what prices TEND to be anyway.

Market mechanisms cause peripheral workers to have low wages and core
workers to have high wages in general.  There are thousands who can pick
coffee beans and only a few who can design computer chips.  (BTW, US
professional workers are not organized, yet they are paid enormous amounts,
from $40,000 to 100,000 a year. Their high wages are largely
determined by the local, truncated, labor market, not political
organization.)

And since the rich generally choose to live and invest in the same states as
the scarce high-wage workers they employ,  the combination of both of their
high earnings forces up the costs of living (the basket of goods upon which
relative price indexes are based).

Consequently, all capitalists in core states must pay relatively higher
wages to all
workers in order to provide even the least skilled workers with a minimal
standard of living (here too politics enters in to the process and keeps the
minimum wage from not being so low that people starve to death).

I contend that core capital is relatively fixed, even in B phases of fiscal
crisis when the core is getting rid of old industries and creating a new
technologies.  If it was not, then the core-periphery gap would
disintegrate.  That doesn't seem to be happening.  On the contrary, the gap
is growing (although you might point out that the gap is also growing in the
core, which I think is to be expected in a B phase).

It is precisely the fixed nature of core capital (including the currencies
that core workers receive their wages in) which, in combination with the
truncated labor market, accounts for the shortage of skilled labor and leads
to higher wages across the board in the core.

The core's middle class thus lives off of the peripheral working class via
imports of the cheap consumer and production goods, but also the lower
working class of the core.  Commodities in the US have labor components of
both -- Walmart, for example, is today essentially the China Warehouse
staffed by
US contingency workers who, in addition to service, also sell Wendy's
hamburgers that are produced by less-skilled workers -- including the beef,
bread, etc.