Raúl Prebisch (April 17, 1901April 29, 1986) was an Argentine economist known for his contributions to

structuralist economics Structuralist economics is an approach to economics that emphasizes the importance of taking into account structural features (typically) when undertaking economic analysis. The approach originated with the work of the Economic Commission for Lati ...

such as the Prebisch–Singer hypothesis, which formed the basis of economic

dependency theory Dependency theory is 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. A central contention of dependency theory is that poor ...

. He became the executive director of the Economic Commission for Latin America (ECLA or CEPAL) in 1950. In 1950, he also released the very influential study ''The Economic Development of Latin America and its Principal Problems''.

Early years

He was born in Tucumán, Argentina, to German settlers and studied at the

University of Buenos Aires The University of Buenos Aires ( es, Universidad de Buenos Aires, UBA) is a public research university in Buenos Aires, Argentina. Established in 1821, it is the premier institution of higher learning in the country and one of the most prestigi ...

Faculty of Economic Sciences, where he later taught. His brother Alberto Prebisch became a well-known

architect An architect is a person who plans, designs and oversees the construction of buildings. To practice architecture means to provide services in connection with the design of buildings and the space within the site surrounding the buildings that h ...

. As a young man his writing was marked by a complete adherence to the idea of

free-trade Free trade is a trade policy that does not restrict imports or exports. It can also be understood as the free market idea applied to international trade. In government, free trade is predominantly advocated by political parties that hold econo ...

but in the 1930s, as a result of the Great Depression he "converted" to

protectionism Protectionism, sometimes referred to as trade protectionism, is the economic policy of restricting imports from other countries through methods such as tariffs on imported goods, import quotas, and a variety of other government regulatio ...

. His previous beliefs had been supported by the spectacular economic growth of Argentina from the 1860s to 1920s as the country exported a large amount of beef and wheat to the

United Kingdom The United Kingdom of Great Britain and Northern Ireland, commonly known as the United Kingdom (UK) or Britain, is a country in Europe, off the north-western coast of the European mainland, continental mainland. It comprises England, Scotlan ...

. However, by the 1930s the Great Depression and the growing economic dominance of the

United States The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country primarily located in North America. It consists of 50 states, a federal district, five major unincorporated territori ...

, 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 advantage In an economic model, agents have a comparative advantage over others in producing a particular good if they can produce that good at a lower relative opportunity cost or autarky price, i.e. at a lower relative marginal cost prior to trade. Comp ...

described by

David Ricardo David Ricardo (18 April 1772 – 11 September 1823) was a British political economist. He was one of the most influential of the classical economists along with Thomas Malthus, Adam Smith and James Mill. Ricardo was also a politician, and a ...

, 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 executive director of the Economic Commission for Latin America (ECLA or CEPAL) in 1950. In 1950, he released a study ''The Economic Development of Latin America and its Principal Problems'' that stated what is now known as the Prebisch–Singer hypothesis. 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 hypothesis 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 hypothesis, 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 The terms of trade (TOT) is the relative price of exports in terms of imports and is defined as the ratio of export prices to import prices. It can be interpreted as the amount of import goods an economy can purchase per unit of export goods. An i ...

between industrialised and non-industrialised countries, which meant peripheral nations had to export more to get the same value of industrial imports. Through this system, all of the benefits of technology and international trade would accrue to the centre. Due to Prebisch's influence the ECLA became the center of

Third World The term "Third World" arose during the Cold War to define countries that remained non-aligned with either NATO or the Warsaw Pact. The United States, Canada, Japan, South Korea, Western European nations and their allies represented the " First ...

activism in the UN, giving birth to the Latin American school of

. While many scholars perceive Prebisch as supporting

import substitution industrialization Import substitution industrialization (ISI) is a trade and economic policy that advocates replacing foreign imports with domestic production.''A Comprehensive Dictionary of Economics'' p.88, ed. Nelson Brian 2009. It is based on the premise that ...

(ISI), in which a nation progressively changes its imports and internal production, focusing on industrialization, at the cost of imported "superfluous" goods in favor of capital and intermediate goods for a given period of time, Prebisch criticized protectionism, especially that practiced by Juan Perón in Argentina, since 1956 and ISI since at least 1963. He advocated industrialization and economic cooperation, including through trade, among developing countries. The International Institute of Social Studies (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 Development The United Nations Conference on Trade and Development (UNCTAD) is an intergovernmental organization within the United Nations Secretariat that promotes the interests of developing countries in world trade. It was established in 1964 by the ...

(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 by internal reforms rather than through external help. He publicly condemned ISI as having failed to bring proper development. Prebisch found his years at UNCTAD frustrating and "sterile" as it became increasingly bureaucratic and failed to achieve its main objectives. His sudden resignation in 1969 signified his loss of patience with the organisation's failures.

Dependency theory

During the 1960s, economists at the

United Nations Economic Commission for Latin America and the Caribbean The United Nations Economic Commission for Latin America and the Caribbean, known as ECLAC, UNECLAC or in Spanish and Portuguese CEPAL, is a United Nations regional commission to encourage economic cooperation. ECLAC includes 46 member States (2 ...

(ECLA) developed an extension of Prebisch's thoughts on structuralism into

, in which economic development of the periphery is seen as a nearly impossible task. While dependency theory was the polar opposite of Prebisch and ECLA's original purpose, he continued to criticize the neo-classical economic forces that he felt were victimizing the global poor.

Legacy

Prior to the takeover of Chile by the

Augusto Pinochet Augusto José Ramón Pinochet Ugarte (, , , ; 25 November 1915 – 10 December 2006) was a Chilean general who ruled Chile from 1973 to 1990, first as the leader of the Military Junta of Chile from 1973 to 1981, being declared President of ...

regime, economic thought in the country, particularly the

University of Chile The University of Chile ( es, Universidad de Chile) is a public research university in Santiago, Chile. It was founded on November 19, 1842, and inaugurated on September 17, 1843.

, was dominated by his ideas.

Works

* * Raúl Prebisch, ''The Economic Development of Latin America and Its Principal Problems'' (New York: United Nations, 1950) *

References

The Economist ''The Economist'' is a British weekly newspaper printed in demitab format and published digitally. It focuses on current affairs, international business, politics, technology, and culture. Based in London, the newspaper is owned by The Eco ...

'', Mar 5th 2009
Profile at The International Institute of Social Studies
(ISS)
Prebisch in Argentina

Raúl Prebisch and the challenges of development of the XXI century WebsiteDependency theory: the truth behind capitalist expansion?
{{DEFAULTSORT:Prebisch, Raul 1901 births 1986 deaths Development economists Dependency theorists Executive Secretaries of the United Nations Economic Commission for Latin America and the Caribbean University of Buenos Aires alumni People from Tucumán Province Argentine people of German descent 20th-century Argentine economists Argentine officials of the United Nations