Photo: iStock 
The World Inequality Lab, a think-tank fronted by the economic historian Thomas Piketty, has produced a new study that looks at the unequal North-South wealth exchange through the prism of global trade flows and balance of payments over the longue durée from 1800 to 2025.
Piketty is a prolific author and public intellectual whose work is focused broadly in readable and insightful ways on the history of inequality.
Read more: Book review - Piketty’s survey of inequality has some salient lessons for South Africa
Piketty's latest effort is typically trailblazing and is erected from the foundations of a vast new database on global trade flows and the world balance of payments from 1800 to the present.
The study, co-authored by Gastón Nievas, covers a lot of ground but one of the many things that stands out is how financial transfers are now moving in a North-South direction – largely because of remittances. This is a striking contrast to the colonial era that defined the 19th century.
“No country or world region has ever received foreign income inflows approaching the magnitude of Europe’s in the 19th century,” the study says.
This accumulation of foreign wealth to the European colonial powers – an extractive process – had many taps: France imposed a large debt in Haiti in 1825 to compensate former French slave owners for the loss of their property(!), Britain saddled China with a debt from the Opium War, and there were also massive transfers of tax revenues from colonies to the metropolis.
“Today, financial transfers mostly flow from North to South, particularly through private remittances, rather than from South to North, via colonial transfers. For instance, sub-Saharan Africa received very large cumulated net transfer inflows between 1970 and 2025 (the equivalent of +64% of its 2025 GDP), approximately as much as the cumulated foreign income outflows (-55%),” the authors write.
So one of the many trends the study has unearthed is that Africa’s inflow of financial transfers since 1970 has exceeded its outflows, and this is mostly explained by wage and salary earners from the continent working abroad and sending part of their income home – and in a big way.
These findings come against the backdrop of a rising tide of xenophobia and racism in Europe and North America, fuelled on the far right by the “Great Replacement” conspiracy theory which holds that white folks up North are being “replaced” by a tsunami of dark-skinned migrants from the South.
Of course, there has been significant migration in recent decades from South to North, not least because of the labour market needs in advanced economies with ageing populations. Far-right shrills in the US and France who want to shut down such migration will shut down their own economies in the process.
The findings also underscore the importance of remittances to regions such as Africa. For families these can be literal lifelines of income support, and multiplied many, many times they amount to vast inflows of capital which are at odds with perceptions of capital flight.
Remittances, of course, can also create a dangerous economic dependency for the countries on the receiving end that can evaporate if the needs of the labour market change or an isolationist regime builds a wall.
Lesotho offers an arresting example on this front.
As this correspondent has previously reported, during the peak of South Africa’s gold production under apartheid – which relied on a ruthlessly exploited pool of migrant, rural labour – remittances from the wages of Basotho working underground here amounted in 1987 to an astonishing 236% of the mountain kingdom’s GDP.
Read more: How the twilight of SA’s migrant labour system spawned a social apocalypse
They now equal 21% of GDP, according to World Bank data – a “remittance shock” without parallel in modern global economic history.
South Africa’s mines once employed almost 500,000 foreign workers. That number, according to the last available data, stood at 35,000 in 2022.
This explains why so many Basotho are now “zama zamas” at the bottom of the exploitative and transnational criminal pyramid of illicit gold mining.
Lesotho’s economy has not developed or industrialised in meaningful ways to provide jobs and domestic economic opportunities for its labour force. Exploited by the legal gold industry in the past, many of its young men are now exploited by the illicit sector in the precious metal.
Does that stand as a warning for Africa more widely?
Certainly there is a lot of talk these days about industrialisation and the “beneficiation” of minerals and stuff like that. And remittance inflows to Africa are clearly important and at a scale larger than many have perhaps assumed.
Africa notably between 1970 and 2025 had a cumulated trade surplus from primary commodities that equalled close to 200% of its GDP, but a trade deficit in manufactured goods equal to 169% of its GDP.
It is surely no bad thing to develop your economy and raise the living standards for most of your population through processes such as industrialisation, and not just as a precaution if the remittance flows are suddenly staunched.
But for now, remittances are flowing one way, and that in itself speaks to enduring global disparities in economic opportunity. DM