Reproducing the North–South Divide: The Role of Trade Deficits and Capital Flows

Abstract

The North-South divide can be conceived in several different ways and demarcated along many different dimensions. This essay emphasizes two interrelated aspects of the divide: (1) the gap in economic performance between rich and poor nations and (2) the dependency induced by the transactions that link them. It explores the intertemporal flows and asymmetric exchanges surrounding trade imbalances as a key mechanism that perpetuates both.The yawning income gap between the richest and poorest nations is the most dramatic and visible dimension of the North-South divide and one that has marked the global political economy for at least two centuries (e.g.

Differentiation Theory and the Global South as a Metageography of International Relations

“…The terminological shift to north and south could be interpreted as a move from tripartite political to binary economic difference, driven by econometric data on increasing “North–North” links between the United States, the European Union, and Japan, whereas “South–South trade flows stagnated” (Ominami & Vale, 1988, p. 94). The “North–South divide” was described as a divide between rich and poor (for a more recent example, see Moon, 2007), or in structuralist IR, as a global economic hierarchy—with the south as a commodity provider for the industrialized north, and therefore limited in its evolutionary possibilities (Lees, 2012). The reference of inequality thus shifted from political power to countries’ role in the world economy.…”