Raul Prebisch Born in Tucuman, Argentina Educated at the University of Buenos Aires and has received honorary degrees from universities in several countries His policy proposals have been influential in relation to the creation of a New International Order

THE FATHER Prebisch is noted to be the father of the Latin American School of Economic thought (LASET), which argues for a shift in the commercial policy of the developed countries to favor the less developed LASET is usually known as the PREBISCH DOCTRINE

This is not Raul Prebisch

Discarding Neoclassical Theories? Prebisch argued that underdevelopment may be the result of forces beyond the control of the LDC’s Also, that the LDC’s (or the Periphery) are faced with adverse terms of trade, high costs of foreign capital, and political intervention and economic control of their economies from the Developed countries (or the center).

Periphery = Primary Product producers = LDC’s Center = Industrial Sector = Developed countries “If things stay the same, the center will continue to gain from the periphery.”

The Demand Side The center being relatively, rich will spend Proportionally less on primary products: 2.) Technological advance generates a more efficient use of primary inputs, thus demand for the primary exports does not grow as fast as Developed countries’ output. 1.) Engle’s Law:  (food) << 1

The Supply Side Increased competition in primary products forces LDC’s to compete for a shrinking export market. --This tends to push prices of primary goods down. Thus it is difficult to finance development projects out of foreign exchange earnings. Prebisch argued further that industrial goods are produced in an environment of reduced competition: (i.e. Monopoly, oligopoly, Unions) So the price of Manufactured goods tends to rise or remain constant over time. Technological progress tends to translate to higher payments to factors, NOT LOWER PRICES.

Hans W. Singer Born in 1910, in the Rhineland Studied Economics and social problems at the University of Bonn where he was much influenced by his teacher Joeseph Schumpeter and Arthur Speithoff. Was able to leave Germany. Received Ph.D. Cambridge in Joined the United Nations in 1946

No. This is not HANS W. SINGER!!!

Singer’s main interests Interested in the problems of the “depressed areas”-- …..”those parts of the united Kingdom such as Wales, Scotland, Meryside, and the Northeast that had been hard-hit by unemployment and had distinctly fallen behind the rest of the country in terms of incomes and standards of living.” (Singer)

Singer’s Results The Basic Result : The Terms of Trade tend to turn against Primary Exporters. (Px/Pm) decreases. More resources are needed to purchase manufactured goods. Either price supports are needed, or LDC’s should ignore the old “comparative advantage” notion, and industrialize Empirical Findings: Share of world exports from LDC’s 1950 – 34% 1960 – 24% 1971 – 21% Food as a share of world trades 1963 –29% 1973 – 21% 1983 – 11%

What caused the downward trend in terms of trade for primary products in the years of the study? Was due to “general forces and the nature of relations both within and between industrial and developing countries, which could be expected to continue in the absence of major changes.” (Singer), ----(a New International Economic Order as we would now say)

What was meant for this study to show? I t was meant less as a projection than as a policy guide. “The developing countries were advised to diversify out of primary exports wherever possible, by development of domestic markets and by industrialization, either ISI of ESI or a combination of both.” (Singer) ----Note that ESI was a long was away for LDC’s at this time

The Prebisch-Singer Thesis There is no “Thesis”, it just so happens that these efforts happened at the same time and the understandings that came about from them became known as the Prebisch-Singer Thesis. Prebisch Singer VS = ?

Although Singer did most of the hard Reserch, Prebisch got most of the long- term credit. He was much Bigger For a visual, refer to previous slide Conclusion