Raúl Prebisch
Encyclopedia
Raúl Prebisch was an Argentine
economist
known for his contribution to structuralist economics
, in particular the Singer–Prebisch thesis that formed the basis of economic dependency theory
. He is sometimes considered to be a neo-Marxist
though this label is misleading. His brother Alberto Prebisch
was a well-known architect
.
settlers and studied at the University of Buenos Aires
, where he later taught. As a young man his writing was marked by a complete adherence to the idea of free-trade but in the 1930s, as a result of the Great Depression
he "converted" to protectionism
. His previous beliefs had been supported by the spectacular economic growth of Argentina from the 1860s to 1920s as the country exported large amount of beef and wheat to Britain
. However, by the 1930s the Great Depression
and the growing economic dominance of the United States
, which exported beef and wheat rather than buying them, had significantly hurt the Argentinian economy.
described by David Ricardo
, marking the creation of a new school of economic thought in the late 1940s. Prebisch separated out the purely theoretical aspects of economics from the actual practice of trade and the power structures that underlie trading institutions and agreements. His resulting division of the world into the economic "centre", consisting of industrialised nations such as the U.S., and the "periphery", consisting of primary producers, remains used to this day. As president of the Central Bank of Argentina he had noticed that during the Great Depression the prices of primary products, such as agricultural goods, fell much more than the prices of manufactured secondary products. However, he and his colleagues were unable to specify the exact mechanism for the difference, beyond hypothesizing that supply conditions of primary and secondary goods were different in that while farmers planted the same amount every year regardless of the price they would get, manufacturers were able to reduce or increase capacity to respond to expected changes in demand.
However, these ideas remained unformed until he was appointed director of the Economic Commission for Latin America
(ECLAC or CEPAL) in 1948. In 1950, he released a study The Economic Development of Latin America and its Principal Problems that stated what is now known as the Singer-Prebisch thesis
. German economist Hans Singer
had separately arrived at a similar conclusion as Prebisch at roughly the same time, although his paper used a more empirical approach based on analysis of world trade statistics. The thesis begins with the observation that in the present world system the periphery produces primary goods to export to the center, and the centre produces secondary goods for export to the periphery. According to the thesis, as technology improves, the centre is able to retain the savings made, since it can retain higher wages and profits through developed unions and commercial institutions. At the periphery, companies and workers are weaker, and have to pass on technical savings to their customers in the form of lower prices. Prebisch pointed to the decline in the terms of trade
between industrialised and non-industrialised countries, which meant peripheral nations had to export more to get the same value of industrial exports. Through this system, all of the benefits of technology and international trade would accrue to the centre.
Due to Prebisch's influence the ECLAC became the center of Third World
activism in the UN, giving birth to the Latin American school of structuralist economics
. At ECLAC, Prebisch became firmly associated with import substitution industrialization (ISI), in which a nation isolates itself from trade and tries to industrialize using only its domestic market as an engine. As ECLAC became the target of increasingly harsh criticisms, and as ISI began to show serious flaws, Prebisch left.
The International Institute of Social Studies
(ISS) awarded its Honorary Fellowship to Raúl Prebisch in 1977.
(UNCTAD). Selected for his unparalleled reputation, he tried to forge UNCTAD into a body advocating the case of the whole developing world. His approach to development took a more trade-focused approach, advocating preferential access to the markets of developed countries and regional integration
- building up trade between peripheral countries. Increasingly he stressed the extent to which developing countries had to bring growth through internal reforms, rather than through external help. He publicly condemned ISI as having failed to bring proper development. Prebisch found years at UNCTAD frustrating and "sterile", as it became increasingly bureaucratic and failed at its main objectives. His sudden resignation in 1969 signified his lack of patience with the organisation's failures.
developed an extension of Prebisch's thoughts on structuralism into dependency theory
, in which economic development of the periphery is seen as a nearly impossible task. While dependency theory was the polar opposite of Prebisch and the ECLAC's original purpose, he continued to criticize the neo-classical economic forces
that he felt were victimizing the global poor.
Argentina
Argentina , officially the Argentine Republic , is the second largest country in South America by land area, after Brazil. It is constituted as a federation of 23 provinces and an autonomous city, Buenos Aires...
economist
Economist
An economist is a professional in the social science discipline of economics. The individual may also study, develop, and apply theories and concepts from economics and write about economic policy...
known for his contribution to structuralist economics
Structuralist economics
Structuralist economics originated with the work of the Economic Commission for Latin America and is primarily associated with its director Raul Prebisch and Brazilian economist Celso Furtado. Key to structuralist analysis is the idea that the structural features of developing economies need to be...
, in particular the Singer–Prebisch thesis that formed the basis of economic dependency theory
Dependency theory
Dependency theory or dependencia theory is a body of social science theories predicated on the notion that resources flow from a "periphery" of poor and underdeveloped states to a "core" of wealthy states, enriching the latter at the expense of the former...
. He is sometimes considered to be a neo-Marxist
Neo-Marxism
Neo-Marxism is a loose term for various twentieth-century approaches that amend or extend Marxism and Marxist theory, usually by incorporating elements from other intellectual traditions, such as: critical theory, psychoanalysis or Existentialism .Erik Olin Wright's theory of contradictory class...
though this label is misleading. His brother Alberto Prebisch
Alberto Prebisch
Alberto Prebisch was a distinguished Argentine architect whose numerous works included private houses, apartment and office blocks, cinemas, shops and banks...
was a well-known architect
Architect
An architect is a person trained in the planning, design and oversight of the construction of buildings. To practice architecture means to offer or render services in connection with the design and construction of a building, or group of buildings and the space within the site surrounding the...
.
Early years
He was born in Tucumán, Argentina, to GermanEthnic German
Ethnic Germans historically also ), also collectively referred to as the German diaspora, refers to people who are of German ethnicity. Many are not born in Europe or in the modern-day state of Germany or hold German citizenship...
settlers and studied at the University of Buenos Aires
University of Buenos Aires
The University of Buenos Aires is the largest university in Argentina and the largest university by enrollment in Latin America. Founded on August 12, 1821 in the city of Buenos Aires, it consists of 13 faculties, 6 hospitals, 10 museums and is linked to 4 high schools: Colegio Nacional de Buenos...
, where he later taught. As a young man his writing was marked by a complete adherence to the idea of free-trade but in the 1930s, as a result of the Great Depression
Great Depression
The Great Depression was a severe worldwide economic depression in the decade preceding World War II. The timing of the Great Depression varied across nations, but in most countries it started in about 1929 and lasted until the late 1930s or early 1940s...
he "converted" to protectionism
Protectionism
Protectionism is the economic policy of restraining trade between states through methods such as tariffs on imported goods, restrictive quotas, and a variety of other government regulations designed to allow "fair competition" between imports and goods and services produced domestically.This...
. His previous beliefs had been supported by the spectacular economic growth of Argentina from the 1860s to 1920s as the country exported large amount of beef and wheat to Britain
United Kingdom
The United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...
. However, by the 1930s the Great Depression
Great Depression
The Great Depression was a severe worldwide economic depression in the decade preceding World War II. The timing of the Great Depression varied across nations, but in most countries it started in about 1929 and lasted until the late 1930s or early 1940s...
and the growing economic dominance of the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
, which exported beef and wheat rather than buying them, had significantly hurt the Argentinian economy.
Centre and periphery
The plight of Argentina forced Prebisch to reexamine the principle of comparative advantageComparative advantage
In economics, the law of comparative advantage says that two countries will both gain from trade if, in the absence of trade, they have different relative costs for producing the same goods...
described by David Ricardo
David Ricardo
David Ricardo was an English political economist, often credited with systematising economics, and was one of the most influential of the classical economists, along with Thomas Malthus, Adam Smith, and John Stuart Mill. He was also a member of Parliament, businessman, financier and speculator,...
, marking the creation of a new school of economic thought in the late 1940s. Prebisch separated out the purely theoretical aspects of economics from the actual practice of trade and the power structures that underlie trading institutions and agreements. His resulting division of the world into the economic "centre", consisting of industrialised nations such as the U.S., and the "periphery", consisting of primary producers, remains used to this day. As president of the Central Bank of Argentina he had noticed that during the Great Depression the prices of primary products, such as agricultural goods, fell much more than the prices of manufactured secondary products. However, he and his colleagues were unable to specify the exact mechanism for the difference, beyond hypothesizing that supply conditions of primary and secondary goods were different in that while farmers planted the same amount every year regardless of the price they would get, manufacturers were able to reduce or increase capacity to respond to expected changes in demand.
However, these ideas remained unformed until he was appointed director of the Economic Commission for Latin America
United Nations Economic Commission for Latin America and the Caribbean
The United Nations Economic Commission for Latin America and the Caribbean was established in 1948 to encourage economic cooperation among its member states. In 1984, a resolution was passed to include the countries of the Caribbean in the name...
(ECLAC or CEPAL) in 1948. In 1950, he released a study The Economic Development of Latin America and its Principal Problems that stated what is now known as the Singer-Prebisch thesis
Singer-Prebisch thesis
The Singer–Prebisch thesis postulates that terms of trade, between primary products and manufactured goods, deteriorate in time...
. German economist Hans Singer
Hans Singer
Sir Hans Wolfgang Singer was a development economist best known for the Singer-Prebisch thesis, which states that the terms of trade move against producers of primary products. He is one of the primary figures of heterodox economics.-Biography:Singer was born in Elberfeld, Germany in 1910...
had separately arrived at a similar conclusion as Prebisch at roughly the same time, although his paper used a more empirical approach based on analysis of world trade statistics. The thesis begins with the observation that in the present world system the periphery produces primary goods to export to the center, and the centre produces secondary goods for export to the periphery. According to the thesis, as technology improves, the centre is able to retain the savings made, since it can retain higher wages and profits through developed unions and commercial institutions. At the periphery, companies and workers are weaker, and have to pass on technical savings to their customers in the form of lower prices. Prebisch pointed to the decline in the terms of trade
Terms of trade
In international economics and international trade, terms of trade or TOT is /. In layman's terms it means what quantity of imports can be purchased through the sale of a fixed quantity of exports...
between industrialised and non-industrialised countries, which meant peripheral nations had to export more to get the same value of industrial exports. Through this system, all of the benefits of technology and international trade would accrue to the centre.
Due to Prebisch's influence the ECLAC became the center of Third World
Third World
The term Third World arose during the Cold War to define countries that remained non-aligned with either capitalism and NATO , or communism and the Soviet Union...
activism in the UN, giving birth to the Latin American school of structuralist economics
Structuralist economics
Structuralist economics originated with the work of the Economic Commission for Latin America and is primarily associated with its director Raul Prebisch and Brazilian economist Celso Furtado. Key to structuralist analysis is the idea that the structural features of developing economies need to be...
. At ECLAC, Prebisch became firmly associated with import substitution industrialization (ISI), in which a nation isolates itself from trade and tries to industrialize using only its domestic market as an engine. As ECLAC became the target of increasingly harsh criticisms, and as ISI began to show serious flaws, Prebisch left.
The International Institute of Social Studies
Institute of Social Studies
The International Institute of Social Studies of Erasmus University Rotterdam in The Hague is a unique, independent and international graduate school in the social sciences...
(ISS) awarded its Honorary Fellowship to Raúl Prebisch in 1977.
UNCTAD secretary-general
Between 1964 and 1969 he served as the founding secretary-general of the United Nations Conference on Trade and DevelopmentUnited Nations Conference on Trade and Development
The United Nations Conference on Trade and Development was established in 1964 as a permanent intergovernmental body. It is the principal organ of the United Nations General Assembly dealing with trade, investment, and development issues....
(UNCTAD). Selected for his unparalleled reputation, he tried to forge UNCTAD into a body advocating the case of the whole developing world. His approach to development took a more trade-focused approach, advocating preferential access to the markets of developed countries and regional integration
Regional integration
Regional integration is a process in which states enter into a regional agreement in order to enhance regional cooperation through regional institutions and rules...
- building up trade between peripheral countries. Increasingly he stressed the extent to which developing countries had to bring growth through internal reforms, rather than through external help. He publicly condemned ISI as having failed to bring proper development. Prebisch found years at UNCTAD frustrating and "sterile", as it became increasingly bureaucratic and failed at its main objectives. His sudden resignation in 1969 signified his lack of patience with the organisation's failures.
Dependency theory
During the 1960s, economists at ECLAUnited Nations Economic Commission for Latin America and the Caribbean
The United Nations Economic Commission for Latin America and the Caribbean was established in 1948 to encourage economic cooperation among its member states. In 1984, a resolution was passed to include the countries of the Caribbean in the name...
developed an extension of Prebisch's thoughts on structuralism into dependency theory
Dependency theory
Dependency theory or dependencia theory is a body of social science theories predicated on the notion that resources flow from a "periphery" of poor and underdeveloped states to a "core" of wealthy states, enriching the latter at the expense of the former...
, in which economic development of the periphery is seen as a nearly impossible task. While dependency theory was the polar opposite of Prebisch and the ECLAC's original purpose, he continued to criticize the neo-classical economic forces
Economic growth
In economics, economic growth is defined as the increasing capacity of the economy to satisfy the wants of goods and services of the members of society. Economic growth is enabled by increases in productivity, which lowers the inputs for a given amount of output. Lowered costs increase demand...
that he felt were victimizing the global poor.
Works
- Raúl Prebisch, “Commercial Policy in the Underdeveloped Countries,” American Economic Review 49 (May 1959): 251–273
- Raúl Prebisch, The Economic Development of Latin America and Its Principal Problems (New York: United Nations, 1950)
Further reading
- Joseph L. Love, “Raúl Prebisch and the Origins of the Doctrine of Unequal Exchange,” Latin American Research Review 15 (1980): 45–72.
- Flechsig, Steffen (1999), "Raul Prebisch's Contribution to a Humane World" in Global capitalism, liberation theology, and the social sciences: An analysis of the contradictions of modernity at the turn of the millennium (Andreas Mueller, Arno Tausch and Paul Zulehner (Eds.)), Nova Science Publishers, Hauppauge, Commack, New York
- Dosman, Edgar J. (2008), The Life and Times of Raúl Prebisch, 1901–1986, McGill-Queen's University Press, Montreal, Kingston
External links
- Paul Berthoud, A Professional Life Narrative, 2008, worked with Raúl Prebisch in CEPAL and UNCTAD, and offers testimony from the inside.
- Raúl Prebisch: Latin America's Keynes, The EconomistThe EconomistThe Economist is an English-language weekly news and international affairs publication owned by The Economist Newspaper Ltd. and edited in offices in the City of Westminster, London, England. Continuous publication began under founder James Wilson in September 1843...
, Mar 5th 2009 - Profile at The International Institute of Social Studies (ISS)
- Prebisch in Argentina