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Raúl Prebisch and the Origins of the Doctrine of Unequal Exchange

Published online by Cambridge University Press:  24 October 2022

Joseph L. Love
Joseph L. Love*
Affiliation:
University of Illinois at Urbana-Champaign
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The perception of the international economic system as one of industrial center and agrarian periphery, in which the former dominates the latter, has had a tremendous influence in the analysis of underdevelopment; the significance of the idea is impossible to gauge because its acceptance is still expanding. Raúl Prebisch's analytical terms, and the concomitant theory of trade relations, now known as unequal exchange, have been adopted not only by the followers of a dependency theory tradition in Latin America, stemming directly from Prebisch, but also by non-Latin American writers (assuredly, with extensive modifications) such as Arghiri Emmanuel, André Gunder Frank, Immanuel Wallerstein, Johan Galtung, and Samir Amin.

Type
Research Article
Information
Latin American Research Review , Volume 15 , Issue 3 , 1980 , pp. 45 - 72
Copyright
Copyright © 1980 by Latin American Research Review

Footnotes

*

I wish to thank Raúl Prebisch, Hans Singer, Enrique Iglesias, and the ECLA staff in Santiago, Chile, for their kind assistance in my research for this paper, and Albert Hirschman for a critique of it. The opinions and errors herein are, of course, my own.

References

Notes

* The early theory of unequal exchange was of course part of a larger problem of economists' and demographers' recognition of underdevelopment and the “population explosion” in the years after the War; such recognition was inevitably influenced by the Cold War, decolonization, new nationalisms, neutralism, and the rise of a host of U.N. and other international agencies. The Third World-including the perception of its inhabitants' common interests against the West-was in most respects reified in the years between the end of the War and the Afro-Asian Conference at Bandungin 1955. In particular, the demographer and economic historian Alfred Sauvycoined the term “Tiers Monde” in 1952 on the model of the Abbe Sieyes revolutionary Tiers Etat of 1789, and the journal Tiers Monde and a collection of essays with the same title appeared in 1956. (L'observateur, 14 Aug. 1952, p. 5; Sauvy to author, Paris, 15 Dec. 1978.) But Latin America, where centerperiphery theory was born, was not generally considered part of the Third World until after the Cuban Revolution (1959).

* Celso Furtado, a veteran cepalista and one of the most creative minds on Prebisch's team, later offered a different, marxisant explanation of labor's role in the “stickiness” of center export prices: in industrial economies, class struggle is the basis for capitalist growth; workers' organizations seek to expand labor's share of the national product, while in underdeveloped countries this does not occur because labor (and especially agricultural labor) is disorganized, and the supply of labor is extremely wage-elastic. Diagnosis of the Brazilian Crisis, tr. Suzette Macedo (Berkeley, Calif.: University of California Press, 1965), pp. 48-51, 61. (Presumably ECLA never vigorously promoted rural labor organization because ofthe immense socialand political problems this policy would haveencountered, including the probable hostility ofmany memberstates ofthe Commission.)

* Sombart's division of the history of capitalism into “early,” “high,” and “late” phasesapparently drawn from the periodization of the Middle Ages-has found a certain currency among Marxists; e.g., Late Capitalism is the title of a recent bookby Ernest Mandel. Fora brief survey of Sombart's views on the history of capitalism, see his article “Capitalism” in the Encyclopedia of Social Sciences (vol. 3, pp. 195-208), where he also lays claim to being the first writer to use “capitalism” to describe a historical economic system. Sombart's work has perhaps been neglected because of his acceptance of the Nazi regime in the 1930s.

1. See Arghiri Emmanuel, Unequal Exchange: A Study of the Imperialism of Trade (New York: Monthly Review Press, 1972), p. 263 (“center-periphery”); Andre Gunder Frank, Capitalism and Underdevelopment in Latin America: Historical Studies of Chile and Brazil, rev. ed. (New York: Monthly Review Press, 1969), p. 8 (“metropolis-satellite”); Immanuel Wallerstein, “The Rise and Future Demise of the World Capitalist System: Concepts for Comparative Analysis,” Comparative Studies in Society and History 16, 4 (Sept. 1974), p. 401 (“core-semiperiphery-periphery”); Johan Galtung, “A Structural Theory of Imperialism,” Journal of Peace Research, no. 2 (1971), p. 81 (“center-periphery”).

2. Celso Furtado, Economic Development of Latin America: A Survey from Colonial Times to the Cuban Revolution, tr. Suzette Macedo (Cambridge: Cambridge University Press, 1970), p. 192 (CACM), p. 208 (Kubitschek); Luis di Marco, “Introduction,” in di Marco, ed., International Economics and Development: Essays in Honor of Raúl Prebisch (New York: Academic Press, 1972), p. 11 (LAFTA); Jerome Levinson and Juan de Onís, The Alliance that Lost Its Way (Chicago: Quadrangle, 1970), pp. 39–40, 72 (Alliance). Furthermore, in 1954 the cepalista economist Celso Furtado applied Prebisch's argument on international terms of trade to problems of interregional trade in Brazil, and thereby helped justify the creation of the Superintendency of Development of the Northeast (SUDENE). A similar analysis of the Northeast's terms of trade was made independently and more or less simultaneously by Hans W. Singer, whose theories on international trade paralleled Prebisch's (see below).

3. Brazilian Embassy, Washington, D.C., Boletim Especial, no. 31, 21 June 1977, p. 1.

4. In 1918, Luis Gondra introduced South America's first course in mathematical economics at the University of Buenos Aires. Gondra et al., El pensamiento económico latinoamericano (México: Fondo de Cultura Económica, 1945), p. 32.

5. Prebisch interview, Washington, D.C., 10 July 1978.

6. Prebisch, Anotaciones demográficas a propósito de los movimientos de la población (Buenos Aires: n. pub., 1926), p. 3.

7. Duhau, “Prólogo,” in Prebisch, ed., Anuario de la Sociedad Rural Argentina, no. 1 (Buenos Aires: Gotelli, 1928), p. vii.

8. Among other works, Prebisch's articles in the 1920s published in the Revista de Ciencias Económicas include “1a conferencia financiera internacional de Bruselas” (1921); “Anotaciones sobre nuestro medio circulante” (1921–22); “Anotaciones sobre la crisis ganadera” (1922); “La caja internacional de conversión” (1923); and “El régimen de pool en el comercio de carnes” (1927).

9. Who's Who in the United Nations and Related Agencies (New York: Arno Press, 1975), pp. 455–56; Prebisch, “Versión taquigráfica de la conferencia de prensa … 15 de noviembre de 1955,” pp. 23–24 (Prebisch file, ECLA, Santiago, Chile); Carlos F. Díaz Alejandro, Essays on the Economic History of the Argentine Republic (New Haven, Conn.: Yale University Press, 1970), p. 97; Banco Central de la República Argentina, La creación del Banco Central y la experiencia monetaria argentina entre los años 1935–1943 (Buenos Aires: [Banco Central], 1972), 1:267 et seq. The last-named work details the differences in the Niemeyer plan and that actually adopted by the Argentine government. (Niemeyer was also an advisor to Brazil, another major recipient of British capital, and played a similar role on the east coast of South America that the American financial advisor, Edwin Kemmerer, did on the west coast—where U.S. investment predominated.)

10. For example, see Richard E. Caves and Ronald W. Jones, World Trade and Payments: An Introduction, 2d ed. (Boston: Little, Brown, 1977), pp. 12, 109. For another summary, see Fernando H. Cardoso, “The Originality of a Copy: CEPAL and the Idea of Development,” CEPAL Review (2d half of 1977, [UN: ECLA]), 4, pp. 9–10.

11. Díaz Alejandro, Essays, p. 2.

12. Rodolfo Puiggrós, Historia crítica de los partidos políticos argentinos (Buenos Aires: Editorial Argumentos, 1956), p. 276; Peter H. Smith, Politics and Beef in Argentina: Patterns of Conflict and Change (New York: Columbia University Press, 1969), pp. 52, 74–75. As late as 1940, Finance Minister Federico Pinedo had to defend the promotion of industrial production before the Argentine Senate by distinguishing between “natural” industries, for which the nation had the necessary raw materials, and “artificial” industries, for which it lacked inputs. Javier Villanueva, “Economic Development,” in Mark Falcoff and Ronald H. Dolkart, eds., Prologue to Perón: Argentina in Depression and War: 1930–1943 (Berkeley: University of California Press, 1975), p. 78. All the same, the country's tariff structure was so complex (confused?) that Díaz Alejandro believes that “on balance protectionist and revenue considerations prevailed” over free trade sentiment between 1906 and 1940 (Essays, p. 307). Perhaps no one in the period understood the net effects of the tariff system; in any event, revenue may have been the primary motive for tariff levels, and from 1916 to 1930, Radical governments favored the Sociedad Rural over other groups in their tariff policy. (On the last point, see Carl Solberg, “The Tariff and Politics in Argentina: 1916–1930,” Hispanic American Historical Review 53, 2 [May 1973], p. 284.)

13. Charles P. Kindleberger, The World Depression: 1929–1939 (London: Penguin, 1973), pp. 102, 104; ECLA, The Economic Development of Latin America and Its Principal Problems (Lake Success, N.Y.: United Nations, 1950), p. 29.

14. Kindleberger, World Depression, p. 181.

15. Jorge Fodor and Arturo A. O'Connell, “La Argentina y la economía atlántica en la primera mitad del siglo XX,” Desarrollo Económico 13, 9 (Apr.–June, 1973), pp. 18, 30.

16. D. M. Phelps, “Industrial Expansion in Temperate South America,” American Economic Review 25 (1935), pp. 273–74.

17. Data in Vicente Vásquez-Presedo, Crisis y retraso: Argentina y la economía internacional entre las dos guerras (Buenos Aires: EUDEBA, 1978), pp. 253, 272.

18. Fodor and O'Connell, “La Argentina,” pp. 52–54. Britain was to eliminate tariffs on cereal imports, but the emphasis was on beef. Argentina also agreed to spend all sterling sums earned in trade with the United Kingdom. Villanueva, “Economic Development,” pp. 65–66. On the negotiations, see Joseph S. Tulchin, “Foreign Policy,” in Falcoff and Dolkart, Prologue to Perón, pp. 91–98.

19. When the War began in September 1939, a secret pact between the Bank of England and Argentina's Central Bank established that the South American nation would accept sterling for its sales to Britain, and that this money would be used exclusively for paying for British exports to Argentina or to buy back Argentine bonds and purchase British-owned railways. That is, the sterling was held in a blocked account that could not be converted into other currencies, and would constitute payments in a captive export market for British goods after the War. No interest was to be paid on this account, and Britain did not have to use its precious dollars, which Argentina sorely needed. According to Fodor and O'Connell, “During this period [and for a time after the 1943 coup] … Argentina did not use its sterling to liquidate its foreign debt nor to buy up [British-owned] railroads, with the result that while Argentina's debts to Britain paid interest, British debts to Argentina did not.” (Argentina was apparently willing to accept the lopsided pact of 1939 because of the collapse of cereal prices again at the outset of the War, and the probable loss of her remaining continental markets as the conflict developed.) Even in the postcoup years (i.e., after Prebisch left the Central Bank), the pro-Axis government continued to bow to the economic demands of Britain, for fear of losing its only large market. Fodor and O'Connell, “La Argentina,” pp. 56 (quotation), 57, 59.

20. ECLA, External Financing in Latin America (New York: U.N., 1965), p. 25. Argentina did default on some of its nonfederal debts.

21. Prebisch, “Versión,” p. 28; Prebisch interview.

22. Prebisch, “La conferencia económica y la crisis mundial,” in [Banco de la Nación Argentina], Revista Económica 61, 1 (Jan. 1933), pp. 1, 3.

23. Prebisch interview; Keynes, The Collected Writings of John Maynard Keynes 9 (London: Macmillan, 1972), pp. 335–66, esp. 360.

24. Prebisch, “La inflación escolástica y la moneda argentina,” Revista de Economía Argentina, año 17, no. 193 (July 1934), pp. 11–12; no. 194 (Aug. 1934), p. 60. Later it was discovered that the purchasing power of Argentina's exports fell by about 40 percent between 1925–29 and 1930–34. Between these two periods the capital flow was also severely curtailed, so Argentina's capacity to import fell in 1930–34 to 46 percent of what it had been in the preceding five years. Aldo Ferrer, The Argentine Economy, tr. Marjory M. Urquidi (Berkeley: University of California Press, 1967), p. 162.

25. See Villanueva, “Economic Development”; Díaz Alejandro, Essays, pp. 94–105; Vásquez-Presedo, Crisis y retraso, pp. 137–86; and in particular, Roger Gravil, “State Intervention in Argentina's Export Trade between the Wars,” Journal of Latin American Studies 2, 2 (1970), pp. 147–73; and Rafael Olarra Jiménez, Evolución monetaria argentina (Buenos Aires: EUDEBA, 1968), pp. 83–99 and passim.

26. Gravil, “State Intervention,” p. 171; Wilfred Malenbaum, The World Wheat Economy: 1885–1939 (Cambridge, Mass.: Harvard University Press, 1953), pp. 205–9. A statement by Prebisch on Argentina's role is found in an interview he gave during the Roca-Runciman negotiations in London. See La Prensa, 9 Feb. 1933, p. 9.

27. Kindleberger, World Depression, pp. 278–79.

28. Walter Beveraggi-Allende, “Argentine Foreign Trade under Exchange Control” (Ph.D. thesis, Harvard University, 1952), pp. 219 (quotation), 246.

29. Phelps, “Industrial Expansion,” p. 274; Economic Review [i.e., English ed. of Revista Económica], series 2, 1, no. 1 (1937), p. 69.

30. Phelps, “Industrial Expansion,” p. 281.

31. Banco Central de la República Argentina, Memoria … 1942 (Buenos Aires: Banco Central, 1943), pp. 30–31.

32. Economic Review, series 2, 1, no. 1 (1937), pp. 26–27.

33. Ibid., p. 69.

34. Olarra Jiménez, Evolución, p. 13.

35. Banco Central, Memoria … 1938 (Buenos Aires: Banco Central, 1939), pp. 5–8; Prebisch to author, Washington, D.C., 9 Nov. 1977. In 1945 the Federal Reserve Bulletin came to a similar conclusion about Argentina's recent economic history. Using that country to illustrate Latin America's problems, the Bulletin noted the country's rapid industrial expansion between 1940 and 1944 through import substitution; but it also pointed out the high export to national income ratio in Argentina, making the economy sensitive to international cyclical movements. The journal concluded that Latin America's monetary authorities could not control central bank reserves or changes in credit based on them: “Thus every surplus in the balance of payments tended to bring about a multiple expansion, and every deficit a multiple contraction, in the total money supply.” See “Monetary Developments in Latin America,” Federal Reserve Bulletin 31, 6 (June 1945), pp. 523–25.

36. Prebisch interview.

37. Prebisch, “La moneda y los ciclos económicos en la Argentina” [class notes by assistant, approved by Prebisch], 1944, pp. 61–65, mimeo. Located at Facultad de Ciencias Económicas, Universidad de Buenos Aires.

38. Prebisch, “La moneda,” summarized in Olarra Jiménez, Evolución, p. 76.

39. Villanueva's words quoted, p. 78. On Prebisch as probable author of Pinedo's plan, see Díaz Alejandro, Essays, p. 105, note 37.

40. At the same time Prebisch gave a series of lectures at the Banco de México on “the Argentine monetary experience (1935–1943),” i.e., covering the period in which he was the Director-General of the Central Bank. See Banco Central, La creación 1:249–588; 2:599–623.

41. “El patrón oro y la vulnerabilidad económica de nuestros países” [a lecture at the Colegio de México], Revista de Ciencias Económicas, año 32, serie 2, no. 272 (Mar. 1944), p. 234; Banco Central, Memoria … 1942, p. 30.

42. Prebisch, “Análisis de la experiencia monetaria argentina (1935–1943)” in Banco Central, La creación 1:407.

43. Prebisch, “Observaciones sobre los planes monetarios internacionales,” El Trimestre Económico 11, 2 (July–Sept. 1944), pp. 188, 192–93.

44. Prebisch, “Panorama general de los problemas de regulación monetaria y crediticia en el continente americano: A. América Latina,” in Banco de México, Memoria: Primera reunión de técnicos sobre problemas de banco central del continente americano (México: Banco de México, 1946), pp. 25–28; “Observaciones,” p. 199.

45. Prebisch, “Apuntes de economía política (Dinámica económica)” [class notes], 1948, pp. 96, 97, mimeo. Located at FCE, UBA.

46. Prebisch, “A Critique of Peripheral Capitalism,” CEPAL Review, 1st half of 1976, p. 60.

47. J. Fred Rippy, British Investments in Latin America, 1822–1949: A Case Study in the Operations of Private Enterprise in Retarded Regions (Minneapolis: University of Minnesota Press, 1959).

48. See Gunnar Myrdal, “Diplomacy by Terminology” in An Approach to the Asian Drama: Methodological and Theoretical (New York: Vintage, 1970), pp. 35–36.

49. For a brief but effective critique of “stages of growth” for individual countries as ahistorical nonsense, see Wallerstein, “The Rise and Future,” pp. 387–90.

50. See Hernán Santa Cruz, Una página de la historia de las Naciones Unidas en sus primeros años (Santiago: PLA, 1966); John A. Houston, Latin America in the United Nations (New York: Carnegie Endowment, 1956); pp. 223–32; David H. Pollock, “Some Changes in United States Attitudes toward CEPAL over the Past 30 Years,” CEPAL Review, 2d half of 1978, pp. 57–59.

51. UN ECOSOC E/CN.12/17 (7 June 1948), p. 2; E/CN.12/28 (11 June 1948), p. 6; E/CN.12/71 (24 June 1948). These documents were consulted at ECLA headquarters in Santiago.

52. Benjamin Higgins, United Nations and U.S. Foreign Economic Policy (Homewood, Ill.: Irwin, 1962), p. 102; C. C. Stewart, “Center-Periphery and Unequal Exchange” [African Section], paper presented at the Seventh National Meeting of the Latin American Studies Association/Twentieth Annual Meeting of the African Studies Association, Houston, Texas, Nov. 1977, p. 4.

53. Aldo Ferrer interview, Buenos Aires, 2 Aug. 1978.

54. Prebisch interview. For support of the League's lack of interest in underdeveloped areas, see H. W. Arndt, “Development Economics before 1945,” in Jagdish Bhagwati and Richard S. Eckaus, eds., Development and Planning (Cambridge, Mass.: MIT Press, 1973), p. 18.

55. Albert O. Hirschman, “Ideologies of Economic Development in Latin America,” in Hirschman, ed., Latin American Issues: Essays and Comments (New York: Twentieth Century Fund, 1961), p. 13.

56. United Nations: Department of Economic Affairs, Relative Prices of Exports and Imports of Under-Developed Countries: A Study of Postwar Terms of Trade between Under-Developed and Industrialized Nations (Lake Success, N.Y.: United Nations, 1949), p. 7.

57. ECLA, Economic Development, pp. 8–14.

58. Ibid., pp. 15–16; ECLA, Economic Survey of Latin America: 1949 (New York: United Nations, 1951), pp. 20, 35–38.

59. H[ans] W. Singer. “The Distribution of Gains between Investing and Borrowing Countries,” American Economic Review: Papers and Proceedings 40, 2 (May 1950), pp. 473–85 (quotation from p. 479). Income elasticity of demand for a good refers to the relative response of demand to a small percentage change in income ( Δq/qΔy/y , where q is the quantity demanded, and y is disposable income).

60. Prebisch to author, 29 June 1977; Singer to author, Brighton, England, 21 Aug. 1979.

61. E/CN.12/221 (18 May 1951), p. 30.

62. ECLA, Economic Survey 1949, p. 59. More ambiguously, Economic Development stated that “the income of entrepreneurs and of productive factors” in the center increased faster than did productivity in the center from the 1870s to the 1930s, but in another passage the document placed exclusive emphasis on the role of wages in the center (pp. 10, 14).

63. Samir Amin, Accumulation on a World Scale: A Critique of the Theory of Underdevelopment, tr. Brian Pierce (New York: Monthly Review Press, 1974), 1: 83–84.

64. ECLA, Economic Development, p. 48.

65. U.S. Department of State, Havana Charter for an International Trade Organization and Final Act and Related Documents (Dept. of State pub. 3117, Washington, D.C., n.d.), pp. 39–43; Singer to author, 21 Aug. 1979.

66. Alejandro E. Bunge, La economía argentina (Buenos Aires: Cia. Impresora Argentina), 2 (1928), pp. 229–31; 4 (1930), p. 131 (Carl Solberg brought this work to my attention); Tulio Halperín Donghi, “Argentina: ensayo de interpretación,” in Roberto Cortés Conde and Stanley J. Stein, eds., Latin America: A Guide to Economic History, 1830–1930 (Berkeley: University of California Press, 1977), pp. 67, 115.

67. League of Nations: Economic Financial and Transit Department, Commercial Policy in the Interwar Period: International Proposals and National Policies (Geneva: League of Nations, 1942), p. 133.

68. Harry G. Johnson, “The Ideology of Economic Policy in the New States,” in Johnson, ed., Economic Nationalism in Old and New States (Chicago: University of Chicago Press, 1967), pp. 131–32 (Carl Solberg brought this work to my attention). Rosenstein-Rodan, for example, wrote in 1943 that the market system in Southeastern Europe did not by itself transform peasants into workers; he believed that Engel's law pointed to the dead end of agricultural exports, and advocated a state-induced industrialization program that would result in the export of industrial goods. He also recognized the value of industrialization as an employment policy for the unemployed or underemployed rural masses. See “Problems of Industrialization of Eastern and Southeastern Europe,” in A. N. Agarwala and S. P. Singh, eds., The Economics of Underdevelopment (London: Oxford University Press, 1958), pp. 246, 253–54. (Originally in Economic Journal.)

69. Daniel Chirot, “Neoliberal and Social Democratic Theories of Development:The Zeletin-Voinea Debate Concerning Romania's Prospects in the 1920s and Its Contemporary Importance,” in Kenneth Jowitt, ed., Social Change in Romania, 1860–1940: A Debate on Development in a European Nation (Berkeley: Institute of International Studies, 1978), p. 44. Also see note 76 on the Rumanian Marxist Dobrogeanu-Gherea.

70. Viner, International Trade and Economic Development (Glencoe, Ill.: Free Press, 1952) [a series of lectures delivered in Rio de Janeiro in 1950], pp. 61–64; Schmitter, “Still the Century of Corporatism?,” The Review of Politics 36, 1 (Jan. 1974), p. 119.

71. Mihail Manoïlesco, Théorie du protectionnisme et de l'échange international (Paris: Marcel Giard, 1929), pp. 61, 65, 184; Le siècle du corporatisme: Doctrine du corporatisme intégral et pur (Paris: Felix Alcan, 1934), p. 28. See a general discussion of “the Manoïlesco argument” that labor should be moved out of subsistence agriculture into industry in W. M. Corden, Recent Developments in the Theory of International Trade [Special Papers in International Economics no. 7] (Princeton, N.J.: Dept. of Economics, Princeton University, 1965), pp. 60–61. Corden attributes “the modern development of the Manoïlesco argument” to W. Arthur Lewis, E. E. Hagen, and Hla Myint, not to ECLA economists.

72. Manoïlesco, Théorie, p. 184; Le siècle, pp. 28–30.

73. Théorie, pp. 261–62.

74. Mario Pugliese, “Nacionalismo económico, comercio internacional bilateral, e industrialización de los países agrícolas, desde el punto de vista de la economía argentina,” Revista de Ciencias Económicas, año 27, serie 2, no. 219 (Oct. 1939), p. 917; Luis Roque Gondra, “El teorema ricardiano de los costos comparados,” RCE, año 25, serie 2, no. 194 (Sept. 1937), p. 810. In Argentina, Manoïlesco's works were usually cited to be attacked; they seem to have been much more influential in Brazil, where they were championed by the industrialist and publicist Roberto Simonsen. Manoïlesco also corresponded with São Paulo's Centro das Indústrias. See Simonsen, Á margem da profissão (São Paulo: São Paulo Editora, n.d.), pp. 250–51; Manoïlesco, Teoria do proteccionismo e da permuta internacional (São Paulo: Centro das Indústrias, 1931), pp. 5–6.

75. Manoïlesco, Le siècle, p. 33, note 1.

76. Constantin Dobrogeanu-Gherea (1855–1920), a Rumanian Marxist, distinguished between “global” society and “local” societies. He used the former term to describe the dynamic capitalist nations, in a way roughly equivalent to Prebisch's center; local societies, a group of “feudal,” dependent countries, were similar to the periphery. Gherea's idée maitresse, according to Henri Stahl, was that Rumanian society's development could not be understood except as a “fragment of an expanding world capitalist system.” Aside from Gherea's work, Marxist texts on imperialism before World War I reveal little interest in underdevelopment as imperialism seen “from below.” In the view of Fred Gottheil, for Lenin, Kautsky, Luxemburg, and Hilferding, “The colonized regions were regarded simply as depositories for capitalism's surplus commodities, labor, and capital. Whatever became of these surpluses in the regions … was clearly peripheral to their interest.” Yet Lenin's position began to change after the Soviets seized power, and this fact was reflected in the pronouncements of the Communist International, as early as its second congress in 1920. At its sixth congress in 1928 the Comintern declared capitalism in colonial areas to be a reactionary force, because capitalists allied with comprador bourgeoisies and other traditional groups. As Paul Singer notes, this analysis brought into focus for the first time the relations of social classes in underdeveloped countries.

Prebisch in the early years of ECLA had nothing to say about class relationships in the periphery; but his emphasis on relative prices between agricultural and industrial goods had a precedent among Soviet theorists (though once again there is no indication of any influence on Prebisch's thinking). I refer to the Soviet industrialization debate between 1924 and 1928, resulting in Stalin's decision in the latter year to develop heavy industry and to collectivize agriculture as part of the First Five-Year Plan. Evgeni Preobrazhenski, an advocate of rapid industrialization during the period of the “semi-capitalist” New Economic Policy (1921–28), contended that the agricultural sector should subsidize industrial development in the U.S.S.R., through a pricing policy for industrial goods “on the basis of monopoly,” as Preobrazhenski put it. This was part of what Preobrazhenski called “socialist primitive accumulation,” the allegedly more humane counterpart of the capitalist primitive accumulation described with such passion in chapters 26 and 27 of Marx's Capital. At the end of the 1920s, collectivization terminated the peasants' freedom to choose when and at what terms to sell their surpluses. In Prebisch's scheme, unequal exchange between agricultural and industrial producers largely occurs through the action of the business cycle, but, as we have seen, monopolistic pricing played some role.

On these matters, see Henri H. Stahl, “Théories de C. D. Gherea sur les lois de la pénétration du capitalisme dans les pays retardataires,” Review [of the Fernand Braudel Institute] 2, 1 (Summer 1978), pp. 106, 108–09; Fred M. Gottheil, “On an Economic Theory of Colonialism,” Journal of Economic Issues 9, 1 (Mar. 1977), p. 93; Paul Singer, “Divisão internacional do trabalho e empresas multinacionais,” in CEBRAP Caderno 28: Multinacionais: internacionalização e crise (São Paulo: Brasiliense, 1977), pp. 55–56 (Albert Hirschman brought this article to my attention); and Alexander Erlich, The Soviet Industrialization Debate, 1924–1928 (Cambridge, Mass.: Harvard University Press, 1960), pp. 49, 50, 55, 121.

77. Sombart, Der moderne Kapitalismus, III: Das Wirtschaftsleben im Zeitalter des Hochkapitalismus, erster Halbband (München, 1928), pp. xiv–xv.

78. Ibid., pp. 64; zweiter Halbband, p. 1019.

79. Prebisch to author, Washington, D.C., 26 June 1979. We may also note on this point that William A. Brown, Jr., an American economist, used the terms center and periphery in 1940 with respect to the international gold standard: “The center countries, by the very fact of their domination of the world, can never shift to the periphery, and the periphery countries have to consider the sum total of their relations to this central system of [exchange] rates in determining their currency policy.” Again, the terms do not figure in a cyclical theory, but Brown's work was in an area in which Prebisch was reading in the early 1940s. See Brown, The International Gold Standard Reinterpreted: 1914–1934 (New York: National Bureau of Economic Research, 1940) 2: 862. (Paul Drake brought this work to my attention.) In 1977 Prebisch did not recall how he came to use the terms center and periphery. Prebisch to author, 29 June 1977.

80. Hirschman, “A Generalized Linkage Approach to Development, with Special Reference to Staples,” Economic Development and Cultural Change 25, 1977 supplement, p. 68. Samuelson's articles were “International Trade and the Equalisation of Factor Prices,” Economic Journal 58 (June 1948), pp. 163–84 and “International Factor-Price Equalisation Once Again,” Economic Journal 59 (June 1949), pp. 181–97.

81. Viner, International Trade, especially pp. 61–62; Prebisch to author, 29 June 1977.

82. The data base (for Britain), which showed long-term deterioration of the periphery's terms of trade, was criticized: it allowed for no change in the quality of goods, a process that presumably affected industrial more than agricultural commodities, because of a higher rate of technological progress in the center. Furthermore, P. T. Ellsworth pointed out that the British series included exports F.O.B. but imports C.I.F., and argued that a fall in the prices of primary goods from 1876 to 1905 was largely due to a fall in transportation costs (owing to a combination of advances in steamship and rail networks). But the same writer showed that the evidence for the 1930s supported Prebisch—British export prices did not fall because of resistance to cuts in wages and profits.

Using data for the period 1950–60, Werner Baer showed that there was substantial evidence that the deterioration of the terms of trade in many parts of the underdeveloped world owed to low income elasticity of demand for its complement's goods at the center, and high elasticity at the periphery. While acknowledging that monopolistic pricing at the center was difficult to prove, Baer found that for 1950–60 the periphery's export prices tended to decrease or to fluctuate widely. Wages (in constant terms) for the years 1950–59 rose in selected center countries, while those in peripheral countries fell.

More recently Paul Bairoch has attacked Prebisch's terms-of-trade argument as a long-term phenomenon. Bairoch contends that, contrary to Prebisch, primary goods benefited in the secular trends of the terms of trade from 1870 to the early 1950s. To begin with, Bairoch challenges the choice of the terminal year (1938) of the original U.N. study (Relative Prices) as an abnormal one. He also cites trade figures for the United States and France (data not available in 1949), which diverge from the trends of the British experience (Robert Lipsey had already shown this for the U.S.). Furthermore, Bairoch demonstrates that the internal terms of trade for several developed countries moved in favor of agricultural goods in the years 1876–80 to 1926–29. Finally, he cites long-term studies of terms of trade for several primary-exporting countries which contradict the U.N.'s findings. Yet Bairoch does think the terms of trade moved against the Third World countries from 1954–55 to 1962–63. Among the several causes of this trend was a factor Prebisch had cited—“a difference between the less-developed and the developed countries in the manner in which the gains from increased productivity accrued.” Despite Bairoch's forceful arguments on the long-term trends, the dispute about the effects of terms of trade between developed and underdeveloped countries remained very much alive in the year he published (1975).

See Ellsworth, “The Terms of Trade between Primary Producing and Industrial Countries,” Inter-American Economic Affairs 10, 1 (Summer 1956), pp. 55–57, 63: Baer, “The Economics of Prebisch and ECLA,” in Charles T. Nisbet, ed., Latin America: Problems in Economic Development (New York: Free Press, 1969), pp. 215–17; Bairoch, The Economic Development of the Third World since 1900 (Berkeley: University of California Press, 1975), pp. 111–34, especially 120, 125, 132, 134 (quotation); Robert E. Lipsey, Price and Quantity Trends in the Foreign Trade of the United States (Princeton, N.J.: Princeton University Press, 1963), especially pp. 12–17; “Idea of Growing Disparity in World Prices Disputed,” New York Times, 25 May 1975, pp. 1, 8; Jonathan Power, “Of Raw Materials, Raw Statistics, and Raw Deals,” New York Times, 31 Aug. 1975, p. E15.

83. Joseph L. Love, “Centro-Periferia e troca desigual: Origens e crescimento de uma doutrina econômica,” Dado 19 (1978), pp. 47–62, especially 56–57.

84. Amin, Accumulation 2: 609–10.

85. Octavio Rodríguez, “Sobre la concepción del sistema centro-periferia,” Revista de la CEPAL (1st half of 1977), p. 240.

86. See note 76.

87. Prebisch, “A critique,” pp. 11–12, 37, 60, 66. Prebisch defines the surplus as the gains in productivity resulting from technological progress (p. 13).

88. Ibid., p. 59.