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).
“If things stay the same, the center will continue to gain
from the periphery.”
Periphery = Primary Product producers = LDC’s
Center = Industrial Sector = Developed countries
The Demand Side
•The center being relatively, rich will spend Proportionally
less on primary products:
1.) Engle’s Law:  (food) << 1
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.
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 1936.
•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
= ?
Conclusion
Although Singer did most of the hard
Reserch, Prebisch got most of the longterm credit.
He was much Bigger
For a visual, refer to previous slide