Raúl Prebisch and the challenges of development of the XXI century

Raúl Prebisch was an original thinker who challenged head-on the dominant economic ideas of his time concerning the role of international trade in the development of countries on the periphery of the world economy and the strategies they should follow in order to achieve it. A central feature of Prebisch's career was his acute appreciation of the historical reality in which he was living, his ambition to change it, and his capacity to revise his ideas in light of his experience and of contemporary changes. It would be very difficult to call him dogmatic.

Osvaldo Sunkel: Vigencia del legado de Prebisch (Abril 2013 -2:26)

A summary of some of his principal ideas is described.

Prebisch did not provide all the answers, but it would be a great mistake not to see in his writings and in his spirit a source of inspiration for deepening the critical analysis and discussion of policies for transforming the region's current reality.

International integration, asymmetry and some of its consequences

As Prebisch saw it, the world system was composed of countries with differing productive structures, with distinct capacities to promote technological change, and with diverse social structures, all of which would condition the ways in which the fruits of technical progress are distributed. The industrialized countries specialized in producing goods for which demand was highly income-elastic, they exhibited rapid and relatively homogeneous technical progress, and they had social and economic structures to guarantee that the fruits of that technical progress would be appropriated primarily by businesses, workers and the State.

The classical notion that productivity increases were expressed in ever lower prices for industrial goods did not always hold true. On the contrary, countries on the periphery of the world economy, specialized in producing raw materials and food, had dynamic export sectors but they were inserted in a society with low productivity and an abundance of unskilled labour, living at near subsistence level. The scanty technical progress of the periphery did not trickle down to society as a whole and, in international terms, productivity increases merely sparked a relative decline in the prices of primary goods.

This trend was reinforced by the low income-elasticity of demand for primary goods, which also had to compete with synthetic and artificial products and therefore received less stimulus to expand output and boost productivity.

The role of the State and the economic cycles

The role of the State

The central message, then, was that countries of the periphery must promote radical changes in their productive structure, with a view to reorienting it to goods for which demand was growing more strongly and which would offer greater possibilities of technological change. This process would not happen spontaneously: the State would have to take firm action to promote industrialization.

The economic cycles

Prebisch was quick to detect the potent impact of business cycles on economic life and he put forward some fundamental ideas about how those cycles generated different effects in the centre and the periphery. This also led him to consider that the countercyclical measures adopted by the centre and by the periphery should not necessarily be the same. His view of the deteriorating terms of trade was closely bound up with his analysis of economic cycles.

Industrialization and regional integration

The incipient process of industrialization undertaken by Latin American countries was quickly confronted with the constraint imposed by the narrowness of domestic markets, which would have to be broadened through a process of regional economic integration that would open the doors to greater specialization and more intensive industrialization so as to produce goods with greater technological content. The Latin American common market (the idea for which was conceived at the same time as the European common market) should not be seen as an end in itself but rather as an access route to the global market.

Aspectos Centrales del Pensamiento de Prebisch: Mario Cimoli (Abril 2013 - 3:26)

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Structural, institutional and social weaknesses of the development process

The problems confronting the many efforts to promote structural change and Latin American integration led Prebisch and ECLAC to devote greater attention to the internal obstacles holding back the development process. Thus, their concerns were increasingly focused on problems relating to the weaknesses of the State, social structures and inequalities, ownership concentration, elite consumption patterns, education, urbanization, the functioning of labour and goods markets, and a set of related issues that made of ECLAC a centre of profound and diverse analysis and thinking on development, equal to its most eminent peers of the time.

Prebisch in the twenty-first century

The world has undergone many transformations both during and after the life of Raúl Prebisch. Yet the basis of his analysis remains fully valid. Present-day reality still reveals marked hierarchies and highly divergent capacities to promote technological change. International relations still betray a series of asymmetries of power and serious misalignments, provoking sharp fluctuations that affect economies in different ways. Latin America still faces the problem of weak national states, although in recent times there has been considerable progress in this regard. The same can be said of regional integration: Latin America is still far from achieving its full integration potential and there has been a sore want of leadership for moving forward on this score. The challenge of technological change and the profound transformation of productive structures is more urgent than ever, in a context where international market signals favour renewed emphasis on primary production, something that offers opportunities but also carries risks. Again, when it comes to generating quality employment and transforming labour markets to make them more equitable, the task ahead is truly enormous.