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THE DYNAMICS OF ECONOMIC INEQUALITY IN EURO AREA BASED ON THE MARXIST THEORY OF EXPLOITATION

This doctoral dissertation investigates the origins and dynamics of the euro area economic inequalities through the reintroduction and revision of the unequal labour exchange and dependency theories. Inspired by the works of Prebisch-Singer, Lewis, and Emmanuel, the following exposition refutes the mainstream, market- fundamentalist narrative regarding the inequalities in two ways. The first one challenges the incentive-oriented and merit-oriented systems via the development of a model which studies inequality as a derivative of labour force exploitation. The second opposes the notion of international trade as a positive-sum game. The cornerstone of this research is a Marxian, desert-based principle which defines the inequalities as a result of the capital- labour antagonism originating from the class monopoly over the ownership of the means of production. The point of departure is that the euro area’s unequal exchange, arising from the innercountry labour force exploitation, plays a key role in governing cross- country inequality. On these grounds, the axis of this research evolves around the premise that the euro area countries, with distinct exploitation rates, realize vastly unequal gains from trade. This implies that the euro area’s structure generates new and amplifies existing inequalities, leading to the cross-country divergence in the social recognition of the used labour. The arguments being advanced in this study are examined through three sections. The first section presents the theoretical model of the unequal labour exchange used to explain the creation and the nature of the inequality. Backed by the static economic analysis between 2004 and 2013, the findings indicate that the euro area’s cross-country inequality is determined by the country-specific utilization of the existing market disequilibria, by the country-specific capital-labour ratios, and by the country- specific economic efficiencies. The effects of these inequality determinants are manifested through the cross-country deviations in the labour incomes, profit incomes, and labour force exploitation. Consequently, this forms a division between the exploitative (net-winning) countries and the exploited (net-losing) countries, thus confirming that the unequal labour exchange phenomenon is the driving cause of the euro area’s cross-country inequality. Building upon these foundations, the second section accounts for the changes occurring over time and captures the dynamic influence of the economic cycle on the euro area’s inequality. The empirical employment of the aforementioned inequality determinants and their effects allows for the trend-cycle decomposition and the clustering of the euro area countries in accordance with the similarities in exhibited trends. Within the reference period between 2003 and 2014, the euro area member countries failed to demonstrate a tendency to uniformly share economic cycles, thus proving their differentiability based on the distinct utilization of advantages arising from the cyclical influence. Certain euro area members became less resilient to shocks and downturns while asymmetrical benefit distribution, inflicted by the unequal labour exchange, resulted in cross-country divergence. The economic cycle exacerbated the conflicting interests between the euro area’s core and the periphery. This brought to the surface structural inconsistencies, as a result of the underlying economic laws that set in motion the exploitative cross-country dynamics. The third section furnishes empirical content based upon the proposition that the euro area’s inequalities emerge from country-specific economic structures. The panel data analysis between 2003 and 2016 confirms the asymmetrical consequences of the euro area’s development and demonstrates that the geographical distribution of the economic output is disproportionate to the labour consumed in its production. The latter was connected to the country-specific sectoral and technological compositions. The research disclosed that a country’s heterogeneity in structural compositions is a crucial component of the unequal recognition of the consumed labour that constitutes the cross-country inequality and determines the countries’ profit rates, wage rates, and exploitation rates. This investigation contributes to the field from both theoretical and empirical viewpoints. The arguments raised within this doctoral dissertation represent a novel extension of the unequal exchange theory, carried out by abandoning previously criticized aspects. This includes an exclusive focus on the capitalist mode of production, discarding the labour immobility assumption and the equivalence between the market prices and prices of production, and choosing the sample size for which the international and national law of value operate in a like manner. The advanced postulates remedy the disputed conceptual and methodological issues and contribute to the theory. This adds to the understanding of the complex nature of cross-country inequalities and enables a straightforward empirical assessment of the hypothesised effects. Such an innovative approach quantitatively confirms that the euro area is in a deadlock regarding the fact that the current state serves the affluent countries at the expense of their less-developed neighbours. This proves that the euro area integrates countries into relations of unequal exchange and that its structure intrinsically contradicts the aims of effective single market integration. The existence of the value-transferring mechanism of the unequal labour exchange exposes the tension between countries and challenges the sustainability of the European social model. Given the lack of adequate supranational institutional arrangements, which should serve as corrective institutes to prevent a growing disintegration bias, this investigation is a platform for re-questioning the euro area’s neoliberal policy discourse, which is deeply rooted in and incentivized by the inequalities that favour the interests of capital over labour as well as affluent countries over destitute ones.

economic inequality, unequal labour exchange, labour force exploitation, trend-cycle decomposition, structural decomposition.

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