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The Origins and Interpretation of the Prebisch-Singer Thesis

September 2003
History of Political Economy 35(3)

DOI:10.1215/00182702-35-3-437

Authors:

John Toye

University of Oxford

Richard Toye

University of Exeter

Content uploaded by Richard Toye

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The Origins and Interpretation of the

Prebisch-Singer Thesis

John Toye and Richard Toye

The Prebisch-Singer thesis is generally taken to be the proposition that

the net barter terms of trade between primary products (raw materials)

and manufactures have been subject to a long-run downward trend. The

publication dates of the ﬁrst two works in English that expounded the

thesis were nearly simultaneous. In May 1950, the English version of

The Economic Development of Latin America and Its Principal Prob-

lems, by Raúl Prebisch, appeared under the UN’s imprint. In the same

month Hans Singer published an article, “The Distribution of Gains be-

tween Investing and Borrowing Countries,” in the American Economic

Review. The continuing signiﬁcance of the “Prebisch-Singer thesis” is

that it implies that, barring major changes in the structure of the world

economy, the gains from trade will continue to be distributed unequally

(and, some would add, unfairly) between nations exporting mainly pri-

mary products and those exporting mainly manufactures. Further, in-

equality of per capita income between these two types of countries will

Correspondence may be addressed to JohnToye, Department of Economics, University of Ox-

ford, Manor Road, Oxford OX1 3UQ, United Kingdom; e-mail: john.toye@economics.oxford.

ac.uk. The authors are grateful for the generous assistance they have received from José-

Antonio Ocampo and the staff of ECLAC and ILPES in Santiago; from Aurora Tang-Keko

at the UN Archive in New York; and from the United Nations Intellectual History Project and

its directors, Louis Emmerij, Richard Jolly, and Tom Weiss. We especially thank Sra. Adela

Prebisch for permission to quote from the Prebisch papers in her possession. Valuable com-

ments and materials were received from James Boughton, Edgar J. Dosman, Valpy FitzGerald,

James N. Miller, John Shaw, and two anonymous referees. Translations are the authors’ own,

and all errors remain their sole responsibility.

438 History of Political Economy 35:3 (2003)

be increased by the growth of trade, rather than reduced. This could be,

and has been, taken as an indicator of the need for both industrialization

and tariff protection.

Prebisch and Singer identiﬁed two types of negative effects on pri-

mary producers’terms of trade. One effect occurs because of systemati-

cally different institutional features of product and factor markets, such

as cost-plus pricing and the unionization of labor in industry. Another

negative inﬂuence is that of technical progress, both from the asymmet-

ric distribution of its fruits, but also from its asymmetric impact on future

demand, favorable to that of industry while unfavorable to that of agri-

culture. The empirical signiﬁcance of the thesis has been much disputed

and continues to be controversial after more than ﬁfty years. One recent

investigation has claimed that these two effects have operated strongly

in the forty years after the Second World War, and that they have indeed

outweighed the positive inﬂuences on primary producers’terms of trade

arising from capital accumulation and the growth of industrial produc-

tion. This particular study suggested that the economic mechanisms that

disfavor primary product producers, which were speciﬁed by Prebisch

and Singer, have had signiﬁcant impacts, even though the net secular

decline of primary producers’ net barter terms of trade has been found

to be relatively small, at around 1 percent a year (Bloch and Sapsford

1998).

The Prebisch-Singer thesis contradicted a long tradition of contrary

belief among economists. The nineteenth-century English political econ-

omists believed that the terms of trade of industrial manufactures relative

to agricultural produce would tend to decline. This belief underpinned

their pessimism about the sustainability of rapid population growth. That

manufactures’ terms of trade would decline, and that rapid population

growth was therefore unsustainable, were two propositions that caused

political economy to be dubbed the “dismal science.” This basic frame-

work of ideas remained remarkably stable throughout the entire century

and a quarter from Robert Malthus to the early works of John Maynard

Keynes. Although, by the late 1940s, this proposition was rarely stated

explicitly, when Prebisch and Singer came to reverse the classical ex-

pectation of declining terms of trade for manufactures, their conclusions

were immediately controversial, and are still so regarded by some to-

day.1

1. For an extended discussion, see Toye 2000, chap. 1. When criticizing the views of Pre-

bisch and Singer, Jacob Viner (1952, 114) and Gottfried Haberler (1988, 39–40) both made

reference to this doctrine, although without endorsing it themselves.

Toye and Toye / The Prebisch-Singer Thesis 439

Prebisch is frequently credited with having formulated the declin-

ing terms of trade thesis before Singer did. Joseph Love (1980, 58–59)

claimed that “Prebisch clearly seems to have reached his position earlier

than Singer.” Other authors have held that Singer discovered the the-

sis independently and simultaneously. Cristobal Kay (1989, 32) wrote

that “Singer...reached his conclusions independently from Prebisch

and around the same time [so that] the thesis on the deterioration in

the terms of trade is known in the economic literature as the ‘Prebisch-

Singer thesis.’” This second view was indeed that held by Singer him-

self.2Our account of the events surrounding the United Nations Eco-

nomic Commission for Latin America (ECLA) conference in Havana

in May 1949 reveals that Prebisch did not discover independently that

the terms of trade of primary products were secularly declining, but re-

lied wholly on the previous work of Singer. The false impression that he

had made the discovery (either ﬁrst or simultaneously) was the conse-

quence of political tensions between the developed and the underdevel-

oped countries that had welled up at Havana, and the way in which the

top administrators of the United Nations secretariat responded to those

tensions.

For at the time Prebisch and Singer made their respective contribu-

tions, both were working for the UN. Prebisch was working for ECLA

in Santiago de Chile and Singer was in the Department of EconomicAf-

fairs (DEA) at UN headquarters in NewYork. It might seem odd that the

United Nations, whose role it was to ﬁnd solutions to world economic

problems in order to promote peace, should be the cradle of such a con-

troversial doctrine, one that lent itself so readily both to the economic

nationalism of the underdeveloped countries and to the polemics of the

Cold War. Here we tell exactly how this came about, and show how, in

fact, it was the UN’s own eagerness to disclaim responsibility for the

doctrine that brought Prebisch into the limelight. The consequent wide-

spread belief that Prebisch had ﬁrst made the discovery in turn invested

the thesis with an enhanced signiﬁcance in hemispheric politics. More-

over, the UN’s failed stratagem for distancing itself from Prebisch’s ideas

had the unintended consequence of making the world organization itself

appear as a nursery of Latin American economic radicalism.

2. Singer recalled, “My discovery that Prebisch thought along lines that were so congenial

to me came after I had drafted my paper.” This suggests a belief that Prebisch had arrived at

both the secular decline thesis and an economic explanation of it independently. John Toye and

Richard Toye, interview with Singer, 12 May 2000.

440 History of Political Economy 35:3 (2003)

Precursors of the Prebisch-Singer Thesis

By the time of World War II, the belief had already begun to gain ground

that agricultural countries had better reasons than industrial ones to be

pessimistic about their economic prospects. The experience of the inter-

war years had appeared to demonstrate this. As the Swedish economist

Gustav Cassel noted in a League of Nations study in 1927, “From 1913,

a very serious dislocation of relative prices has taken place in the ex-

change of goods between Europe and the colonial world” (Love 1991,

2). The world crisis of 1929 drew further attention to such questions,

particularly in Latin America.As SanfordA. Mosk noted in 1944, when

reviewing trends in the continent’s economic thought, “The relatively un-

favourable price position for raw materials and foodstuffs that prevailed

in the interwar period, and especially during the depression of the 1930s,

profoundly affected the outlook of Latin Americans” (Whitaker 1945,

143). This perception had already led to the claim, which had become

increasingly commonplace in the region, that primary product exporters

were at a disadvantage in international trade, compared to exporters of

industrial products (see, for example, Simonsen 1939, 15).

Primary-commodity exporting countries like Brazil and Argentina

were starting to see their future economic security in terms of promot-

ing industrialization. The war years intensiﬁed such resolve, and also

raised conﬁdence that an industrialization drive, particularly if organized

by the government, could succeed.3Charles Kindleberger (1943b, 349)

bolstered this conviction, by suggesting as early as 1943 that industri-

alization was the path of the future, invoking Engel’s law of demand

against the classical orthodoxy on the terms of trade. In that year he

wrote that “inexorably...theterms of trade move against agricultural

and raw material countries as the world’s standard of living increases

(except in time of war) and as Engel’s law of consumption operates.” It

is well established that another of Kindleberger’s articles (1943a), with a

similar pro-industrialization message, based both on the differing elas-

ticities of demand for primary and manufactured products and on the

special “institutional organisation of production in industry,” was read

by Prebisch.4

3. Central European thinkers had advocated state-led industrialization in the 1920s on the

grounds of unequal exchange between groups of nations at the center and the periphery of the

world economy. This idea, particularly as used by Werner Sombart, was introduced to Latin

America by Ernest Friedrich Wagermann in his Evolución y ritmo de la economía mundial

(1933). See FitzGerald 1994, 94–95.

4. See the discussion in Love 1994, 421, 421 n. 84.

Toye and Toye / The Prebisch-Singer Thesis 441

Although many North American neoclassical trade theorists reacted

very critically to the Prebisch-Singer thesis in the 1950s, others among

them were not immune from this emerging current of opinion. Paul Sam-

uelson has been frequently caricatured as the high priest of an over-ab-

stract and ideological neoclassical orthodoxy.5Yet, remarkably, in 1948

he himself asserted the tendency of the terms of trade of primary pro-

ducers to decline. He wrote at the end of his famous article on the equal-

ization of factor prices as a result of trade: “[Now] the terms of trade are

abnormally favourable to agricultural production. Without venturing on

rash prophecy, one can venture scepticism that this abnormal trend of

the terms of trade, counter to historical drift, will continue” (Samuel-

son 1948, 183–84; emphasis added). Up to this time, however, anticipa-

tion of the Prebisch-Singer thesis remained in the category of remarks

en passant, or obiter dicta made during the course of the demonstration

of other, quite distinct, propositions. It is nevertheless surprising that one

of these stray anticipatory remarks was from the pen of Samuelson, the

economist who was later set up as the archenemy of structuralism, and

that this fact has been hitherto generally overlooked.

Prebisch’s Intellectual Formation

Prebisch was born in Argentina in 1901. By the time he entered the UN,

he had had a long career of public service in his home country, culminat-

ing in his tenure as head of its central bank. He was forced to resign this

post in 1943, as a result of a Perónist stratagem, and went on to spend

ﬁve years at the University of Buenos Aires, struggling as an isolated

intellectual to write a book, titled Money and the Rhythm of Economic

Activity, that was never completed or published.6He later recalled being

offered the post of executive secretary to ECLA just after it was estab-

lished in February 1948 (Love 1994, 414; Magariños 1991, 128). He said

that at this time he “emphatically refused.” His motives were that he did

not want to give up his university post, and also that he doubted that

an international organization would take seriously the point of view of

underdeveloped countries (Magariños 1991, 128–29). Gustavo Martínez

Cabañas, a Mexican, was appointed executive secretary instead, but he

5. See, for example, Cardoso [1980] 1984, 23, and Furtado 1987, 101. This view is also to

be found in Love 1980, 63, which was endorsed by Kay (1989, 5) and Love (1994, 422).

6. For an exposition of Prebisch’s outline of this planned book, drafted in October–

December 1943, see Dosman 2001.

442 History of Political Economy 35:3 (2003)

only took up his post in January 1949. Thus, Eugenio Castillo, a Cuban,

who was his deputy, was in effect running the commission before this

date.

Later in 1948, the Argentine government barred Prebisch from teach-

ing (Ferrer 1990). He deﬁnitively resigned his university post in Novem-

ber and began to consider working outside the country.7The managing

director of the International Monetary Fund (IMF), Camille Gutt, and

his deputy Edward M. Bernstein visited BuenosAires in November 1948

and offered Prebisch a senior post in the Fund. This followed up an offer

of a short-term assignment in Washington, made in the previous Janu-

ary. When in late December 1948 Gutt cabled that the terms of the offer

would have to be changed, Prebisch replied that he was “quite willing to

join the Fund on the basis proposed.” However, the executive board of

the IMF decided not to proceed. The U.S. government had reversed its

favorable position on the appointment, because it wanted to improve re-

lations with Perón, and Brazil also voted against Prebisch.8On 11 March

1949 Maurice L. Parsons, director of operations at the IMF, wrote an

extremely apologetic letter to Prebisch, expressing personal regret at the

Fund’s failure to secure his services.9

Simultaneously with Gutt’s approach, Eugenio Castillo of ECLA

asked Prebisch for help in preparing an economic survey of LatinAmer-

ica. Prebisch was at ﬁrst unwilling to commit himself, because he much

preferred to accept the IMF offer.10 It was only on 10 January 1949

that he agreed to work for ECLA as a consultant on a short-term con-

tract.11 His allotted tasks were to coordinate and pull together in ﬁnal

form the commission’s planned Economic Survey of Latin America,

which was to be presented to the ECLA conference in Havana in May

1949. Up to this point, he had made only one public contribution on the

terms of trade issue that needs to be noted. The depression of the 1930s

7. Letter from R. Prebisch to E. Castillo, 23 November 1948, Prebisch Papers (in the pos-

session of Sra. Prebisch).

8. This episode is examined in more detail in Dosman 2001.

9. Letter from J. Marquez to R. Prebisch, 23 January 1948; letter from R. Prebisch to E.

Bernstein, 17 December 1948; letter from M. L. Parsons to Prebisch, 11 March 1949, Prebisch

Papers. James Boughton, currently in-house historian of the IMF, passed on to us this comment

from Jacques Polak: “I have absolutely no recollection of any such offer, but it would not be

wholly out of character for Bernstein to make it without discussing it with me (a mere division

chief at the time).”

10. Letter from R. Prebisch to E. Castillo, 23 November 1948; letter from Francisco Coire

to R. Prebisch, 24 December 1948, Prebisch Papers.

11. Letter from R. Prebisch to E. Castillo, 10 January 1949, Prebisch Papers.

Toye and Toye / The Prebisch-Singer Thesis 443

had created exceptionally unfavorable terms of trade for exporters who

relied on agricultural products and raw materials. By 1932, export prices

had fallen in Argentina to 37 percent of what they had been in 1928,

and her net barter terms of trade were down to 68 from a 1928 value

of 100, indicating a less precipitous fall of import prices (Thorp 1998,

105, table 4.1). Prebisch had documented this when was he was direc-

tor of research at the National Bank of Argentina. He published an arti-

cle in 1934 arguing that “it is a well-known fact that agricultural prices

have fallen more profoundly than those of manufactured articles,” and

that Argentina had to export 73 percent more than before the depression

to obtain the same quantity of manufactured imports (Prebisch [1934]

1991, 341). However, Prebisch was merely noting a fact, and did not

provide any theoretical analysis of it (Magariños 1991, 63–64). He saw

it as a feature of depression economics, that is, as a short-run cyclical

problem. He believed that the remedy was to be found in expansionist

economic policies, not, as the Prebisch-Singer thesis would later imply,

in major changes in the structure of the international economy.12

Prebisch attended the World Economic Conference in 1933, and The

Means to Prosperity, which Keynes published at this time, powerfully

affected his hitherto orthodox thinking (Magariños 1991, 100).13 His

views must also be seen in the context of the emerging current of opin-

ion in Latin America, previously mentioned, that asserted that primary

producing nations were at a particular disadvantage in relation to indus-

trialized countries. Before 1949, Prebisch played only a marginal role in

promoting this discourse. During his years at the University of Buenos

Aires, the focus of Prebisch’s research was on the international business

cycle, in the tradition of Wesley Mitchell (1927) and Joseph Schumpeter

(1939), and on the prospects for the use of Keynesian countercyclical

policies.14 It was in this context that he ﬁrst used the terms cyclical cen-

ter and periphery.15 In his introductory class in 1945, he referred to the

12. He believed that “the normal oscillation in the economic life of an agrarian country

can be supported by the monetary system, if that system is in good condition” (Prebisch 1991,

2:566).

13. In March 1933, the Times of London published four articles by Keynes, which, ex-

panded by an introductory and concluding chapter, were published in pamphlet form as The

Means to Prosperity. The slightly enlargedAmerican edition is in Keynes 1973–89, 9:335–66.

14. “Prebisch’s main concern was the international propagation of the business cycle,” ac-

cording to Furtado (Kay 1989, 9).

15. In 1980, Prebisch did not recollect Sombart’s earlier use of these terms, according to

Love (1980, 63). However, FitzGerald (1994, 95) thinks that it is “most unlikely” that Prebisch

“was unaware of the origins of the contemporary center-periphery concept.”

444 History of Political Economy 35:3 (2003)

maintenance of full employment as the supreme responsibility of the

United States, as “the monetary and economic center of the world,” al-

though he did not use the term periphery in this particular lecture (Pre-

bisch 1945, 529). In an intervention in a meeting of American central

bankers in 1946, he used both terms together, to argue that the respon-

sibilities of the “cyclical center” had been too much emphasized, and

that the “countries of the periphery” themselves must resolve disequilib-

ria with internal causes (Prebisch 1946, 163–64).16 In 1948, he reverted

to his previous (1945) theme that the main responsibility for carrying

out a countercyclical investment policy rested with the cyclical centers

(Prebisch 1948b, 161).

A glimpse of Prebisch’s overall research program at this time can be

found in a letter to Eugenio Gudin.

I believe that the cycle is the typical form of growth of the capital-

ist economy and that this is subject to certain laws of motion, very

distinct from the laws of equilibrium. In these laws of motion the dis-

parity between the period of the productive process and the period of

the circulation of the incomes therefrom holds a fundamental impor-

tance. So I have tried to introduce systematically the concept of time

into economic theory and also that of space, which in the ultimate in-

stance resolves itself into a problem of time. It is precisely the concept

of space that has led me to study the movement in the center and the

periphery, not with the aim of establishing formal distinctions but to

point out transcendent functional differences.17

He also believed that, more generally, economic theory required “reno-

vation” in order to bring it nearer to reality.18

Love (1980, 57) has stated, on the evidence of a transcript of lec-

tures given by Prebisch in 1948, that “Prebisch implicitly already had

his opinions about the direction of Latin America’s long-range terms of

trade, since he had argued in the classroom in 1948 that the beneﬁts

of technological progress were absorbed by the center.” Furthermore,

16. Prebisch did not deﬁne cyclical center, but we infer from the context that he meant

those economies from which major depressions that can affect the rest of the world originate.

In 1945, this could have only referred to the economy of the United States.

17. Letter from R. Prebisch to Eugenio Gudin, 20 December 1948, original in Spanish,

Prebisch Papers.

18. Letter from R. Prebisch to E. Castillo, 23 November 1948, original in Spanish, Prebisch

Papers.

Toye and Toye / The Prebisch-Singer Thesis 445

“Prebisch had formulated the elements of his thesis before the appear-

ance, in 1949, of the empirical base on which the thesis rested in its

ﬁrst published form—the UN study, Relative Prices” (Love 1980, 65;

for more on both statements, see Love 1994, 417–18). Part of Prebisch’s

1948 lectures did discuss the case where one country (call it A) experi-

ences technical progress in some of its economic activities (manufactur-

ing) and then trades with another country (B) that does not experience

technical progress. Prebisch argued that country A can retain for itself

the fruit of technical progress, and speciﬁcally asserted that, historically,

both Great Britain and the United States had done so. His argument about

the conditions under which this happened was, however, confused, and

in the course of it he did not actually use the terms center and periphery

(Prebisch 1948a, 87–98). The argument is not sufﬁciently well speciﬁed

to permit the claim that it could have only one logical implication for

the net barter terms of trade of country B. In the context, one would cer-

tainly not have been surprised if Prebisch had asserted that country B’s

terms of trade would continuously decline, but the crucial point is that

he did not do so.

Before he became aware of the UN data, Prebisch never explicitly

stated the thesis that Latin America’s terms of trade had been subject

to long-term decline, as opposed to the sharp short-term decline that he

noted in 1934.19 Nor does Love claim that he did; he claims only that “he

implicitly already had his opinions.” Prebisch had clearly by 1948 ar-

rived at the idea that the fruits of technical progress could be distributed

unequally, an idea that he would later reﬁne and integrate into his ex-

planation of the secular decline phenomenon. But his chief concern at

the time was still the study of the business cycle, as the typical form of

growth of the capitalist economy; of the secular decline phenomenon

itself, he remained unaware. The following year, however, he publicly

stated that secular decline was taking place. To understand how this hap-

pened, why priority of discovery was subsequently claimed for Prebisch

and how this priority claim then affected the meaning that contempo-

raries attached to the thesis, it is necessary to trace a complex sequence

of political events and administrative decisions. We start with Singer’s

arrival at the United Nations.

19. Prebisch did, however, use the phrase “persistent fall in the international prices of our

exports” in the 1943 outline of his unpublished book, according to Dosman 2001.

446 History of Political Economy 35:3 (2003)

Singer Starts Work on the Terms of Trade

Singer, the younger of the two, came to the UN via a rather different

route than Prebisch, although his story also included escape from perse-

cution. He was born in the German Rhineland in 1910, and studied under

Joseph Schumpeter in his Bonn period. After the Nazi seizure of power

in 1933, Schumpeter used his contacts with Keynes to place Singer in

a scholarship to undertake a Ph.D., on secular trends in land values, at

Cambridge. In 1940, the Nazis put Singer on their “Special Wanted List

GB,” to be arrested by the Gestapo in the event of a German invasion

of Britain (Schellenberg 2000, 242). Singer’s doctoral work led him to

wartime employment in the Ministry of Town and Country Planning, but

he intended to return to academia after the war. However, David Owen,

the head of the UN DEA, invited Singer to join the United Nations. In

1946, Owen sent a formal request to this effect to Glasgow University,

Singer’s employer, and Singer quite reluctantly agreed to go on a two-

year leave of absence, one that ultimately turned into a twenty-two-year

period of UN service.20

He arrived in New York in April 1947, knowing there only Michal

Kalecki and Sidney Dell, while Owen was absent at the international

trade negotiations in Geneva. He found himself unrestricted in his choice

of research subject and immediately began to work on trade problems,

although his previous economic background had not been speciﬁcally

related to trade issues. Singer later recalled:

A strong inﬂuence among the early colleagues in the United Nations

was that of Folke Hilgerdt, the Swedish economist who had already

shaped the League of Nations publications on the Network of World

Trade. Working with him was Carl Major Wright, a Danish econo-

mist who was particularly interested in the relationship of primary

commodity prices to trade cycles and economic growth in industrial

countries. Two other staff members in the trade section were Walter

Chudson (United States) and Percy Judd (Australia), the latter being

very expert in the economics and details of commodity agreements.

Discussions with these four must have drawn my attention quickly to

problems of terms of trade. (Singer 1984, 280)

20. “I was not very happy....Iwent—though I really didn’t want to go. For me that was a

step down and I was quite looking forward to settling down in Glasgow.” Hans Singer interview

with Richard Jolly, 13 October 1995.

Toye and Toye / The Prebisch-Singer Thesis 447

The ofﬁcial stimulus for this work was the report of ﬁrst session of the

UN Sub-Commission on Economic Development. The members of the

subcommission were elected on 5 June 1947. Considering problems of

economic development in underdeveloped countries, the report of its

ﬁrst session contained the following comment:

The recent rise in the prices of capital goods and transport services

has made the task of economic development particularly difﬁcult in

the case of the under-developed and the least developed countries. The

Sub-Commission therefore considers it important that a careful study

be made of the prices of capital goods and of the relative trends of

such prices and of prices of primary products, so that it may be in a

position to make appropriate recommendations concerning the prob-

lem. (United Nations 1949b, 1)

As a result, the UN secretariat began to study the terms of trade. The task

was to address a short-term problem. The original objective was not to

discover the historical drift of the terms of trade, or what had happened

over the long run. The problem was that, during the war, a number of un-

derdeveloped countries had run export surpluses that they subsequently

wished to use to import capital goods for development. In the interval,

the prices of capital goods had risen, so the export surpluses were worth

less in terms of imports than they had been when they were earned. This

provoked the question of whether underdeveloped countries’ terms of

trade could be expected to continue to deteriorate in this way, and the

implication of this for their economic development. This was the ofﬁ-

cial purpose of the research on which Singer embarked.

Singer worked under the general guidance of Folke Hilgerdt, who,

as director of the UN Statistical Ofﬁce, provided a key link between its

work and the statistical work of the former League of Nations on trade.

Hilgerdt was the principal author of a series of studies on commerce

and commercial policy, which the Economic, Financial, and Transit De-

partment of the league issued as part of its program of studies on post-

war problems. The ﬁnal volume, Industrialization and Foreign Trade

(1945), included an appendix on the statistics of international trade be-

tween 1871 and 1938. Appendix tables 7 and 8, when read in conjunc-

tion, show that between those dates the price index of manufactured

articles fell signiﬁcantly less than that of primary products. However,

nothing was made of this in the summary of ﬁndings of the report. The

statistical base for this study was available for Singer’s research (League

448 History of Political Economy 35:3 (2003)

of Nations 1945, 154–67, 116–21). Moreover, Hilgerdt expressed puz-

zlement to Singer over the behavior of the British terms of trade data

(Singer 1991, 9).

In his Ph.D. dissertation, Singer had studied problems of the very

long run. Unlike Hilgerdt and Wright, he was not interested in cyclical

effects on the terms of trade produced by booms and slumps in indus-

trial countries. He, being more inﬂuenced by Gunnar Myrdal, focused

on structural differences between industrial and nonindustrial countries,

and their long-term effect on the evolution of the terms of trade between

them. His overarching concern was that of distributive justice. His ques-

tion was not whether gains from trade existed, which he did not doubt,

but the “fairness” of the distribution of those gains between the coun-

tries that traded. If there were power differences between countries—

disparities in market power or in technological power—did trade, and

changes in the terms on which it was conducted, become a mechanism

of “un-equalizing” growth between countries globally? His interest in

the commodity terms of trade was thus a derivative of the larger ques-

tion of worldwide un-equalizing growth. That question itself was framed

by the historical context of the process of decolonization, as in the tran-

sition of India to independence in 1947. Were the colonial powers, he

wondered, willing to relinquish control of their colonies only because

the international economic system would now spontaneously generate

the same world division of labor that had previously been enforced mil-

itarily and politically?

The results of Singer’s research were presented in a UN document

titled Post-war Price Relations between Under-developed and Indus-

trialized Countries that appeared on 23 February 1949 (United Nations

1949b).21 This was an advance version of the terms of trade study, sub-

ject to ﬁnal checking of the data, which was made available to the Sub-

Commission on Economic Development. The document was retitled Rel-

ative Prices of Exports and Imports of Under-developed Countries for

its general circulation in late 1949, with the subtitle A Study of Post-war

Terms of Trade between Under-developed and Industrialized Countries.

It was a remarkable piece of work. It included an attempt to see what

historical statistics indicated about the long-term trend in the agricul-

ture versus manufactures terms of trade, although its origin lay in devel-

oping countries’ concern with future relative prices as industrialization

21. It should be noted that this is available in the UNOG Library in Geneva, but not in the

Dag Hammarskjöld Library at the United Nations in New York.

Toye and Toye / The Prebisch-Singer Thesis 449

Table 1 Ratios of U.K. Imports to Exports, 1876–1948 (1938 =100)

Period (or year) Current Year Weights Board of Trade Index

1876–80 163

1881–85 167

1886–90 157

1891–95 147

1896–1900 142

1901–5 138

1906–10 140

1913 137 143

1921 93 101

1933 98 96

1938 100 100

1946 108

1948 117

drives gathered pace. It showed that the terms of trade of underdevel-

oped countries had improved between 1938 and 1946–48. This recent

improvement was, however, placed in a much longer historical perspec-

tive, showing that between 1876 and 1948 they had seriously deterio-

rated. The historical section contained the report’s most dramatic ﬁnding.

It was that “from the latter part of the nineteenth century to the eve of the

Second World War, a period of well over half a century, there was a sec-

ular downward trend in the prices of primary goods relative to the prices

of manufactured goods” (United Nations 1949c, 7). Singer recalled that

he and Hilgerdt together spotted this trend in the data.22 The cumulative

effect of secular decline was calculated to be substantial.

By 1938, the relative prices of primary goods had deteriorated by

about 50 points, or one-third, since (the 1870s) and by about 40 points,

somewhat less than 30 per cent, since 1913. (23)

The statistical evidence for this downward trend was given in table 5 of

the report, of which a simpliﬁed version is presented in our table 1.

What was the signiﬁcance of this secular decline? The report was

careful not to suggest that if a country’s terms of trade improved, its

welfare necessarily increased. It might or might not, depending on the

circumstances in which the rise in export prices takes place. If the price

rise was a result of a failure of supply, it might not leave the exporting

22. John Toye and Richard Toye, interview with Hans Singer, 12 May 2000.

450 History of Political Economy 35:3 (2003)

country better off. Nevertheless, in general, an improvement in terms

of trade would increase the availability of resources for development.

A secular decline for underdeveloped countries meant a loss of capac-

ity to absorb foreign ﬁnancing for development, and thus to respond to

the “added incentive towards industrialization” (United Nations 1949c,

16, 127). A further, far more controversial, implication was also drawn,

that “the under-developed helped to maintain...arising standard of liv-

ing in the industrialized countries, without receiving, in the price of their

own products, a corresponding equivalent contribution towards their own

standards of living” (126). This carried a clear message of historical in-

justice, and this message was, as we shall see, very shortly to be rejected

by the subcommission.23

Singer had already announced this message in a seminar that he gave

to the graduate faculty of the New School of Social Research, NewYork,

on 23 December 1948. There he said that “Marxist analysis, in which

rising standards of living for given groups and sections are somehow

held to be compatible with general deterioration and impoverishment, is

much truer for the international scene than it is for the domestic.” He at-

tributed the growing inequality in the distribution of world income to the

change in price relations between primary materials and manufactured

goods (Singer 1949, 2–3).24

How Prebisch Made Use of the Singer Study

The creation of ECLA had resulted from “an act of audacity” by Hernán

Santa Cruz, the Chilean representative on the UN Economic and Social

Council (ECOSOC) (Magariños 1991, 136). He felt that Latin Amer-

ica was being unjustly ignored by the great powers, and conceived the

idea of a UN commission to deal with the region’s economic and social

problems, on the model of the UN Economic Commission for Europe.

Receiving no orders to the contrary from his government, he took the

initiative and submitted his proposal as an item for the UN ECOSOC

agenda (Santa Cruz 1995). On 1 August 1947, he formally introduced

his resolution to a meeting of ECOSOC. Although the United States and

other industrial countries much disliked the idea, their opposition was

23. “I thought if you look at foreign trade from the point of view of the poor countries,

exporters of primary products, what does it look like?And it appears an unequal system that is

weighted against them.” Hans Singer interview with Richard Jolly, 11 October 1995.

24. We are most grateful to John Shaw for drawing this document to our attention.

Toye and Toye / The Prebisch-Singer Thesis 451

not sufﬁciently determined, and in early 1948 ECLA duly came into

being.25

One of the justiﬁcations for establishing ECLA was to provide better

information about economic conditions in the region as a whole.26 Origi-

nally, it was assumed that this could be achieved merely by collating sta-

tistics submitted by the individual Latin American governments. When

most governments failed to provide the required ﬁgures, the commission

realized that it would have to collect them itself, for the ﬁrst Economic

Survey of Latin America, which was due to be presented to the ECLA

conference in Havana in May 1949.Additionally, the ﬁrst ECLA confer-

ence, in June 1948, had passed a resolution asking for the preparation of

“a study of the movements of import and export prices, the determining

factors of such movements, and the consequences thereof on the balance

of payments.”27 By the autumn of 1948 it became clear that these tasks

were beyond the unaided capacity of the ECLA ofﬁce in Santiago.28 The

weak statistical abilities of the ﬂedgling commission thus form an im-

portant background factor in the preparations for Havana.

Accordingly, Louis Shapiro, a statistician in the Department of Eco-

nomic Affairs, was sent from the UN ofﬁce in NewYork on deputation to

Santiago for three months between December 1948 and March 1949, in

order to organize these tasks. It was during this mission that he received

from Hans Singer the provisional draft of his study on the terms of trade.

From Santiago, Shapiro wrote Singer a letter of acknowledgment dated

5 January 1949:

Thank you most kindly for your letter of 17th December 1948, and

for the enclosed provisional draft of the General Part of your study

25. On 25 February 1948, a motion establishing the new body was passed, with no votes

against, and four abstentions (Byelorussia, Canada, the United States, and the USSR). As Leroy

Stinebower, who was present on behalf of the United States, later recalled, “The forces of glob-

alism were being overwhelmed—or at least over shouted—at that moment by a lot of region-

alism stuff....eveninmyworst dreams I didn’t think that regionalism would go as far as it’s

gone in this world.” Leroy Stinebower Oral History, 9 June 1974, pp. 65–66, Harry S. Truman

Library, Independence, Missouri.

26. “The Economic Commission for Latin America...shall arrange for such surveys, in-

vestigations and studies to be made of the economic and technical problems (of the region) as

it may deem proper and participate in the same.” Extract from the Ofﬁcial Records of the UN

Economic and Social Council, second year, ﬁfth session, proposal addressed to the secretary-

general by the delegation of Chile, document E/468, 12 July 1947.

27. Resolution of the ﬁrst session of ECLA, 24 June 1948, UN document no. E/CN.12/71.

28. Celso Furtado (1987, 54–56) tells the story of how he, as a new recruit to ECLA, was

urged by the executive secretary, Martínez Cabañas, to bring to Santiago as many documents

on Brazil as possible for the purpose of strengthening the survey.

452 History of Political Economy 35:3 (2003)

on the Terms of Trade. I have also received via the pouch drafts of

the country sections of Terms of Trade for which many thanks. I have

read quite carefully the General Part and ﬁnd it most admirable.Your

note on the methodology and the statistical “caveats” are especially

noteworthy. I have passed this on to Mr Castillo who also agrees that

this is an excellent piece of work. ECLA plans to include a substan-

tial statistical section on the terms of trade in the forthcoming Survey

of Latin America and will, with your permission and clearance, rely

heavily on your data.29

The International Monetary Fund (IMF) had also promised to send

ECLA a study on the terms of trade. Shapiro reported to Singer that

he had not been encouraged by its progress and content when he had

visited Washington, but indicated that ECLA would study carefully the

IMF work in conjunction with Singer’s own, and that Castillo was “in

complete agreement with this procedure.” Shapiro also asked to be sent

revised drafts of the “general part” and of the Latin American country

sections as they were completed.30

A version of the IMF study was available by March 1949, although

it was not published as an IMF staff paper until the following year. It

dealt mainly with the period 1938 to 1946 and included no data at all

from before 1925. It found that the terms of trade of Latin America as

a whole had improved between 1938 and 1946. The IMF study made

no comment, however, on the UN study’s thesis of secular decline since

the 1870s (Ahumada and Nataf 1950). Nevertheless, the IMF study left a

larger imprint on the Economic Survey of Latin America than did Singer’s

study. In the event, the survey’s one mention of secular decline in the

terms of trade of primary producers was extremely brief (United Na-

tions 1949a, xix, 216–20), and almost certainly inserted after Prebisch

had completed and circulated the document that became The Economic

Development of Latin America (Prebisch 1950). Thus Singer’s work did

not create any real impact in ECLA until it had reached the hands of

Prebisch himself.

How did it get there? The second route by which the Singer study was

transmitted to Latin America was via Martínez Cabañas. Before arriving

29. Letter from L. A. Shapiro to H. W. Singer, 5 January 1949, UNArchive, NewYork. As

the reader will recall, Eugenio Castillo (“Mr Castillo”) was the deputy executive secretary of

ECLA.

30. Letter from L. A. Shapiro to H. W. Singer, 5 January 1949, UNArchive, NewYork.

Toye and Toye / The Prebisch-Singer Thesis 453

at ECLA, Prebisch had gone to Mexico to deliver lectures at the Univer-

sidad NacionalAutónoma de México, arriving in mid-February.31 In late

February or early March, Francisco Coire, head of the Latin American

section of the DEA in NewYork, sent him both the Singer study and the

IMF study.32 On 5 March, Martínez Cabañas wrote from New York to

Prebisch in Mexico drawing both these works to his attention.

Our friend Coire has informed me that he has already sent you two

studies on questions relating to foreign trade: one drawn up by Sr.

Singer which is to be found under the number E/CN.1/Sub3/W5 with

the title Post-war Price Relations in the Trade between Undeveloped

and Industrialised Countries....theother study is from the Interna-

tional Fund and refers more concretely to the theme of Foreign Trade.

He reported that the conclusions of the Singer study had been “much

debated.” He pointed out to Prebisch that both studies had a bearing on

a problem—the terms of trade—which was “one of the most important

of those that will be treated in the general study that we are going to

present at the Havana Conference.” He repeated to Prebisch that he (i.e.,

Prebisch) would have the ﬁnal responsibility for drawing up that report.33

Thus it was the Martínez Cabañas visit to NewYork, rather than the early

version seen and favorably commented upon by Castillo, that made the

effective link from Singer to Prebisch.

Prebisch must have arrived in Santiago soon after 9 March, when he

had received a telegram from Castillo asking him to come immediately.34

This was shortly after Shapiro’s return to New York. It seems that before

long Prebisch turned his mind to the question of the terms of trade, as

one would have expected, given the strong urgings of Martínez Cabañas.

Then, on 1 April 1949, Prebisch sent a request, through Castillo, to Sha-

piro in New York for three types of additional data—additional, that is,

to the data contained in United Nations 1949b, which it seems clear that

Prebisch had now read.35 Castillo did not explain the reasons behind Pre-

bisch’s request, but the wish for data starting in 1873, the year the British

31. Letter from E. Castillo to R. Prebisch, 16 February 1949, Prebisch Papers.

32. Letter from G. Martínez Cabañas to R. Prebisch, 5 March 1949, original in Spanish; F.

Coire to R. Prebisch, 8 April 1949, Prebisch Papers.

33. Letter from G. Martínez Cabañas to R. Prebisch, 5 March 1949, original in Spanish,

Prebisch Papers.

34. Telegram from E. Castillo to R. Prebisch, 9 March 1949, Prebisch Papers.

35. “1. Wholesale prices indices of the United Kingdom from 1873 to 1947, divided, if

possible, into indices of manufactured products and raw materials. 2. Price indices for exports

454 History of Political Economy 35:3 (2003)

Great Depression began, suggests an interest in the respective experi-

ence of the United Kingdom and the United States as “cyclical centers,”

a problem he returned to in the Economic Survey of Latin America in

the following year (United Nations 1951).36 Prebisch was also anxious

to see an early draft of Kalecki’s study on inﬂation and Coire’s draft of

part 2 of the survey.37

Celso Furtado, an ECLA staff member, later recalled how Prebisch

initially worked very much on his own, and then a month after his ar-

rival (presumably in mid-April), circulated within ECLA a ﬁrst draft of

an introduction to the Economic Survey. Furtado described this draft as

a digest (Fr. mouture) of the papers that Prebisch had brought with him

from Buenos Aires. The subjects covered were disequilibria in the bal-

ance of payments, the declining U.S. import coefﬁcient, capital controls,

low saving leading to domestic inﬂation, and the limits of industrializa-

tion. Thus, the ﬁrst draft of Prebisch’s introduction did not cover the

terms of trade, according to Furtado’s account of it.38 He did employ

his “center-periphery” terminology and acknowledged the importance

of industrialization. It seemed to Furtado (1987, 65) that “this text con-

tained extremely interesting ideas, but the author placed himself on the

defensive.”

Furtado (1987, 65–66) recalled as follows:

We had hardly started to discuss the document, when it was suddenly

discarded, without any explanation. Prebisch’s new text was not cir-

culated for discussion. I suppose that it was ready on the eve of the

Havana Conference, because it was sent to us typewritten, in its ﬁnal

version, shortly before we left. It was a much longer text including ta-

bles and charts. The tone had changed, now it was a manifesto urging

Latin American countries to launch into industrialisation. One could

discover there a deﬁnite taste for a polished and polemical style.

This account suggests that mid-April 1949 was the decisive point in Pre-

bisch’s drafting process. At this point, however, Prebisch had not had any

and for imports for the United Kingdom and for the United States for the same period. 3. United

States national income from 1910 to 1929.”

36. Letter from E. Castillo to L. A. Shapiro, 1 April 1949, UN Archive, New York.

37. Letter from E. Castillo to F. Coire, 1 April 1949, UN Archive, NewYork.

38. This ﬁrst draft does not appear to have survived among the manuscript papers and cor-

respondence currently in the possession of Sra. Prebisch, although these have not been fully

cataloged.

Toye and Toye / The Prebisch-Singer Thesis 455

reply to Castillo’s data requests of 1 April. The reply was not sent until

27 April, and it was the third channel of transmission of Singer’s study.

Shapiro scribbled the words “in Singer Paper” over Prebisch’s second

request, and this was the only one he could fulﬁll (apart from the U.S. na-

tional income ﬁgures for 1910–29).39 However, it is almost certain that

this data arrived too late to have any inﬂuence on Prebisch’s introduction.

There are no traces of it in the ﬁnished product, which, as far as the terms

of trade are concerned, contains only the U.K. part of the data in table 5

of United Nations 1949b, slightly reformulated. Prebisch spliced one of

the U.K. series down to 1913 with another of the U.K. series thereafter,

and put them on a base of 1876 −80 =100, instead of 1938 =100 as

originally (Spraos 1980, 107; 107 n. 2; 111–12, table 1 and the single-

asterisk note).

If it was not the arrival of additional information, then, what was it

that stimulated Prebisch to abandon his original draft? This remains un-

clear. Around this time Prebisch received Coire’s draft of part 2 of the

Economic Survey. Only one chapter of this was used in the ﬁnished prod-

uct (United Nations 1949a, 247 n. 1), and is now apparently lost, but

from Coire’s remarks to Prebisch it seems clear that it had a strong pro-

industrialization message and had a polemical tone in places.40 This, or

perhaps further reﬂection on the implications of the Singer study, may

have given Prebisch extra inspiration.

Prebisch dealt with the whole issue of secular decline extremely brief-

ly in his new text. The introduction that summarizes its argument does

not even mention the terms of trade. The subject is then handled in the

ﬁrst three pages of chapter 2. Prebisch’s only comment on the terms of

trade statistics, albeit one that was to resonate through the subsequent

critical debate, was that “it is regrettable that the price indexes do not

reﬂect the differences in quality of ﬁnished products” (Prebisch 1950,

8). This short but crucial section powerfully reinforced his other main

arguments—that the international division of labor was an “out-dated

schema,” and that “industrialization is the only means by which the Lat-

in-American countries may fully obtain the advantages of technical prog-

ress” (Prebisch 1950, 1, 16).

39. Letter from E. Castillo to L. A. Shapiro, 1 April 1949, and Shapiro’s reply, 27 April

1949, UN Archive, New York.

40. Letter from F. Coire to R. Prebisch, 8 April 1949, Prebisch Papers.

456 History of Political Economy 35:3 (2003)

Anonymity of Authorship in the UN

As has been seen, it is not possible to sustain the claim that Prebisch

was the ﬁrst to discover the phenomenon of the secular decline in the

terms of trade of primary producers. On the ground that Prebisch’s con-

tribution was complete by May 1949, while Singer’s paper was not pre-

sented to the American Economic Association meeting until December

1949, Love (1980, 58–59) concluded that “Prebisch clearly seems to

have reached his position earlier than Singer.” This was faulty reason-

ing, given Singer’s authorship of the UN study, something of which Love

does not seem to have been aware. John Spraos has commented on the

general lack of awareness of Singer’s authorship, and he correctly attrib-

uted it to the UN’s rule that authors of its publications remain anony-

mous.41

Anonymity is indeed the general fate of the authors of UN publica-

tions.42 Since the UN has employed many distinguished economists, it

has become a standard task for their biographers to try to disentangle

those sections of UN publications that they authored.43 What is odd in

the present case is not that Singer’s authorship should have been invis-

ible, but that Prebisch’s should have been visible. What was originally

intended to be the introduction to the ECLA survey for 1948 eventually

appeared under Prebisch’s name as The Economic Development of Latin

America and Its Principal Problems. Had the piece been retained as the

introduction to the survey, its author would, like Singer, have remained

anonymous. In the event, however, it appeared as a separate UN publica-

tion, but with the author personally identiﬁed. The UN rule of anonymity

was applied to Singer and Prebisch asymmetrically. This came about in

the following way.

The Sub-Commission on Economic Development held its third ses-

sion, from 21 March to 11 April 1949. It discussed Singer’s study, Post-

war Price Relations. It accepted, somewhat grudgingly, the statistical

41. “It is an interesting fact, perhaps not widely known because of the anonymity of UN

staff publications, that the principal author [of Post-war Price Relations and Relative Prices]

was Hans Singer who became the second twin in the ‘Prebisch-Singer thesis’through a subse-

quent signed article” (Spraos 1980, 107 n. 3).

42. Alexander Loveday, who directed the economic research of the League of Nations,

wrote critically of “the rigidity of their [the UN’s] anonymity rule,” which he thought ham-

pered the employment of temporary experts. See Loveday 1956, 296.

43. See, for example, the efforts of Jerzy Osiatynski to identify the UN writings of Michal

Kalecki, in Osiatynski 1990–97, 7:552–75.

Toye and Toye / The Prebisch-Singer Thesis 457

evidence, but rejected the lessons that had been drawn from it. Its report

said the following:

The Sub-Commission is constrained to point out that the study under

review contains certain conclusions in regard to the price relationship

between developed and under-developed countries which, in its opin-

ion, do not represent a correct picture of the actual position.As a result

of the discussion, the Sub-Commission agreed that while the docu-

ment contained an adequate study of relative price trends of primary

commodities and manufactured goods, it was necessary to broaden

the scope of the study into that of the terms of trade between under-

developed and industrialized countries, including prices and quanti-

ties traded, and in extending it, to cover the most recent movements in

these ﬁelds. (United Nations 1949d, 12)

The most controversial of the suggestions that Singer had made in inter-

preting his ﬁndings, was, of course, that underdeveloped countries were

helping to maintain a rising standard of living in industrialized countries

without receiving any equivalent compensation. This was potentially po-

litically explosive. While it appealed to the underdeveloped countries, it

appealed not at all to the developed. It seems plausible to suggest that the

subcommission used the (acknowledged) fact that the picture presented

by the study was in some ways incomplete as an excuse for disclaiming

its radical conclusions.

It is probable, given the slow rate of circulation of UN documents, that

Prebisch was not aware of the subcommission’s report when he wrote.

Be that as it may, in the ﬁnal version of his introduction, he repeated

the implication to which it seems the subcommission had objected by

quoting the relevant passage from Singer’s study (Prebisch 1950, 10 n.

3). Worse, by using his terminology of center and periphery, he further

dramatized it:

The enormous beneﬁts that derive from increased productivity have

not reached the periphery in a measure comparable to that obtained

by the peoples of the great industrial countries. Hence, the outstanding

differences between the standards of living of the masses of the former

and the latter and the manifest discrepancies between their respective

abilities to accumulate capital. (1)

When he presented this version in Havana, it received the acclaim of

the delegates of the Latin American countries (Magariños 1991, 130).

458 History of Political Economy 35:3 (2003)

However, what was music to the ears of the delegates of Latin Ameri-

can countries would have displeased the industrial countries, especially

the United States. This fact appears to have caused some consternation

among UN high ofﬁcials in NewYork, who were anxious to distance the

UN from Prebisch’s introduction. Accordingly, after the Havana confer-

ence was over, it was submitted to the secretary-general as an “essay”

commissioned in the process of “fostering research.”44 It was then pro-

posed to the UN publications committee to break the rule that authors of

UN publications should not be identiﬁed by name. This course of action

was designed to ensure that Prebisch took “credit (and responsibility) for

the report...in order to emphasize that the views expressed...were

those of the author and not those of any UN organ.” The proposal was

presented “as an exceptional one, unlikely to recur but in the present cir-

cumstances very desirable.”45 Prebisch’s suspicion that no international

organization would feel comfortable with the viewpoint of the underde-

veloped countries was thus conﬁrmed.

The UN’s tactic backﬁred. The Spanish original had been issued in

May 1949, but, as Furtado has noted, it was some time before both this,

and the English translation, were eventually published in NewYork by

the United Nations, being circulated, as he put it, “with the slowness

characteristic of ofﬁcial documents” (Furtado 1987, 80). Meanwhile,

however, a Portuguese translation of the Spanish original, undertaken

at Furtado’s own urging, was published in Brazil in September 1949. It

is at this point that the history of Prebisch’s enormous inﬂuence began,

spreading out from Brazil eventually to become worldwide.46 The pub-

lication of the English version of The Economic Development of Latin

America and Its Principal Problems merely strengthened that effect in

North America and Europe. In fact, this was how Singer now discov-

ered the existence of Prebisch. “I believe it was between presenting my

paper to the AEA in December 1949 and its publication in the summer

44. Gustavo Martínez Cabañas to Trygve Lie, 9 October 1949, letter of transmittal printed

in Prebisch 1950.

45. H. E. Caustin to A. D. K. Owen, 12 October 1949, UN Archive, DAG-17 box 33; see

also Magariños 1991, 129.

46. Its ﬁrst incarnation was in Spanish, as UN document E/CN.12/89, dated 14 May 1949.

It appeared in the July–September 1949 issue of El trimestre economico. At the instance of

Furtado, it was published in Portuguese in the Revista Brasileira de economia in October 1949.

It was republished in Spanish in Santiago in April 1950, and again in English later in 1950 in

Lake Success, New York, as UN document no. E/CN.12/89/Rev.1. Its subsequent publication

history until 1986 is to be found in United Nations 1987, 52.

Toye and Toye / The Prebisch-Singer Thesis 459

of 1950 that I discovered that Raúl Prebisch, my colleague at the UN,

had developed very similar opinions and had also put the problem of

poor terms of trade for primary products into the centre of thinking of

the Economic Commission for Latin America” (Singer 1997, 141). The

main result of identifying the author was that the polished and polemical

Prebisch rapidly gained greater recognition in Europe and North Amer-

ica as a “UN economist” than did the more understated Singer, who had

published under his own name only in academic journals.

Prebisch’s Contribution: The Economic

Mechanics of Secular Decline

Given the evidence outlined above, it seems clear that, if the Prebisch-

Singer thesis is deﬁned as the statement of the phenomenon of secular

decline in the terms of trade of primary products, if anyone can be said to

have anticipated Singer, it would be Kindleberger or Samuelson, rather

than Prebisch. After all, both of them, unlike Prebisch, made explicit

published remarks on the issue. Prebisch, however, made a contribution

distinct from that made by Singer. This was to advance a cyclical-cum-

structural mechanism to explain the decline, one more complicated than

the purely structural interpretation of Singer.

Unlike the 1948 lectures, which singled out restrictions on labor im-

migration from countries not experiencing technical progress (type B),

the new mechanism was based on institutional factors that permitted the

retention of productivity gains by labor in countries where there was

technical progress (type A). Prebisch (1950, 12) further argued, char-

acteristically, that “the existence of this phenomenon cannot be under-

stood, except in relation to trade cycles and the way in which they occur

in the centres and at the periphery, since the cycle is the characteris-

tic form of growth of the capitalist economy, and increased productiv-

ity is one of the main factors of that growth.” He suggested that, even

though in the boom primary product prices typically rise faster than in-

dustrial prices, deterioration in the commodity terms of trade of the pe-

riphery is nevertheless possible, if, in the slump, primary commodity

prices decline steeply enough, compared with industrial prices. The ex-

planation offered of why primary product prices declined severely in the

slump compared with industrial prices was “the well-known resistance

to a lowering of wages” at the center. By contrast, “the characteristic

lack of organization among the workers employed in primary production

460 History of Political Economy 35:3 (2003)

prevents them from obtaining wage increases comparable to those of the

industrial countries, and from maintaining the increases to the same ex-

tent” (13).47

However, instead of leaving matters there, Prebisch also made an-

other argument that seemed to undermine his ﬁrst explanation. He iden-

tiﬁed industrial production and primary production with groups of coun-

tries, described as “center” and “periphery.” He then argued that the

differing strength of organized labor at the center and the periphery was

not the crux of the matter, because even if workers at the periphery were

able to resist wage decreases as strongly as industrial workers were, ad-

justment would take place by another process. The high prices of pri-

mary products would force a contraction of industrial production, which

in turn would cut the demand for primary products. Recalling the experi-

ence of the Great Depression of the 1930s, Prebisch commented that “the

forced readjustment of costs of primary production during the world cri-

sis illustrates the intensity that this movement can attain” (13–14). This

was the germ of the idea, later taken up by dependency and world sys-

tem theorists, that the “center” was able to drain resources away from

countries on the “periphery,” regardless of their respective states of la-

bor organization.

As has been seen, Prebisch had arrived at his explanation in April and

May 1949. Prebisch and Singer probably arrived at their respective ex-

planations of primary commodity terms of trade decline independently,

although again Singer was ﬁrst. Singer had presented his explanation, in

embryonic form, in a paper originally presented in December 1948 and

published in March 1949, then more fully in another paper to the Ameri-

can Economic Association conference in December 1949.48 This further

paper explored factors that had “reduced the beneﬁts to under-developed

countries of foreign trade-cum-investment based on export specializa-

tion in food and raw materials.” The ﬁrst of these was that the secondary

and cumulative effects of foreign export enclave investment were felt in

the investing country, not the country where the investment was made.

The second was that countries were “diverted” into types of economic

47. The dislocation to relative prices caused by monopolistic tendencies in the labor and

manufactures markets of Europe had been the theme of Gustav Cassels’s 1927 League of Na-

tions study Recent Monopolistic Tendencies in Industry and Trade (Love 1991, 2).

48. The basic idea of a structural difference between countries where increased efﬁciency

of production leads to higher incomes and those where it leads to falling product prices was

already in Singer 1949, 2–3.

Toye and Toye / The Prebisch-Singer Thesis 461

activity that offered less scope for technical progress and internal and

external economies. The third factor, “perhaps of even greater impor-

tance,” was the movement of the terms of trade. Singer, while conceding

that the statistics in Relative Prices (United Nations 1949c) were open

to doubt and objection in detail, regarded the general story that they told

as “unmistakable” (Singer [1950] 1975, 48).

Singer’s proposed mechanism of secular decline was less complicated

and based less on business cycles than Prebisch’s. It was an asymmetric

process whereby (1) the gains from technical progress in manufacturing

are distributed to the producers in the form of higher incomes, while (2)

the smaller gains from technical progress in primary commodity produc-

tion are distributed to the consumers in the form of lower prices. On this

basis, the industrialized countries have the best of both worlds, as pro-

ducers of manufactures and as consumers of primary products. The un-

derdeveloped countries have the worst of both worlds, as consumers of

manufactures and as producers of primary products. Thus the beneﬁts of

foreign trade are shared unequally, and traditional foreign investment in

plantations and mines did, after all, “form part of a system of ‘economic

imperialism’ and of ‘exploitation,’” albeit not in the classical Marxist or

Leninist sense (49–51).

Prebisch’s interpretation of the secular decline, although possessed

of its own ambiguities, gave an illusion of greater concreteness than

Singer’s. Instead of two sets of countries deﬁned by the types of prod-

ucts that they exported and imported, Prebisch’s concept of center and

periphery seemed to have a spatial, even geographical, reality to it. His

introduction of economic cycles into the mechanism allowed the short

and medium term to be integrated with the long term, and countered

the static quality of the purely structural approach. In general, this more

complex schema opened the door to broader analyses of the economic

conjuncture and policy recommendations on the issues of immediate

concern to Latin American economists. Although fertile in these ways,

Prebisch’s interpretation itself was still very succinct, perhaps reﬂect-

ing the novelty of the secular decline thesis even to him, and it there-

fore remained obscure on a number of crucial questions (Cardoso [1980]

1984, 27, 29–30; Furtado 1987, 66–67). It was also quite different from

the theoretical model that Prebisch published in 1959, which resembled

the standard neoclassical model of a small open economy, but with the

exception of a small number of special assumptions (Prebisch 1959).49

49. See the commentary in Flanders 1964 and FitzGerald 2000, 61–69. As FitzGerald in-

dicates, there are two stages in Prebisch’s explanation of terms of trade decline, the ﬁrst based

462 History of Political Economy 35:3 (2003)

The ambiguities notwithstanding, Prebisch’s “heresies,” boldly laid out

“a la Bernard Shaw” (as he put it), proved as appealing to the underde-

veloped countries of LatinAmerica as they were anathema to UN head-

quarters in NewYork (Magariños 1991, 129).

Summary and Concluding Reﬂections

The United Nations ECLA had been born against the wishes of the Unit-

ed States. In preparing for its ﬁrst major conference it lacked the statis-

tical infrastructure to discharge one of its primary tasks, to survey the

common economic and technical problems of the region. This provided

the cue for statistical help from UN headquarters in New York. During

the preparations for the conference, Singer’s work was transmitted to

ECLA by three different channels between December 1948 and April

1949. An early version arrived in December 1948, but does not seem

to have been followed up by Eugenio Castillo. The second transfer was

via Martínez Cabañas and Coire to Prebisch before the latter arrived in

Santiago, and this was the critical route.At Martínez Cabañas’s prompt-

ing, Prebisch “latched onto the terms of trade idea,” in the words of

Victor Urquidi,50 and meshed it with his own framework of thought in

April/May 1949. The additional data he requested from New York (the

third route) arrived too late to be useful. The document that became The

Economic Development of Latin America and Its Principal Problems

thus contained—as far as the terms of trade was concerned—merely a

small part of the original UN study data, minimally reformulated.

Thus the conventional view, that Prebisch achieved priority over Sing-

er in stating the thesis of secularly declining terms of trade for primary

producers, is not based on an accurate chronology of ideas. The near si-

multaneity of the dates of the ﬁrst English publications of the thesis by

Prebisch and Singer cannot be relied upon as a means of dating the two

men’s contributions. The key events did not take place in 1950 at all,

but in 1948 and 1949 in the run-up to and the aftermath of the ECLA

conference at Havana. Prebisch’s presentation to the Havana conference

was a resounding success, turning him into a champion of the inter-

ests of the underdeveloped countries. Senior UN ofﬁcials attempted to

on a neo-Ricardian model of price formation at the center and technical progress, and the 1959

version, in which there is no functional distribution or technical progress, just certain nonstan-

dard characteristics of exogenous demand.

50. In an interview conducted by Tom Weiss for the UN Intellectual History Project.

Toye and Toye / The Prebisch-Singer Thesis 463

distance themselves from Prebisch by identifying him as the author of

the views to which the developed countries took exception. In so doing,

they unwittingly heightened his prestige.

The common belief that the thesis of the deterioration of the terms

of trade was ﬁrst picked up from Latin America by North American and

European scholars during the 1950s is therefore inaccurate (Kay 1989,

8). What happened in the 1950s was in fact the transmission of the the-

sis back again. The more detailed chronology of events given here has

also indicated a further unsatisfactory aspect of the conventional wis-

dom, namely, the general lack of precision about what constitutes the

Prebisch-Singer thesis. Is it to be understood simply as a claim about

a long-run downward trend in the terms of trade of primary producers,

that is to say, the statistical phenomenon of secular decline? Or, is it the

delineation of an economic mechanism that could account for a long-run

secular decline? Or is it both? If the thesis is the empirical fact of a sec-

ular decline, it is clear that Singer had priority, and Prebisch’s work was

wholly derivative. If it is the speciﬁcation of a theoretical mechanism

to account for a secular decline, Singer also had priority, but Prebisch’s

contribution was independent—and also more elaborate, if convoluted.

In terms of the dissemination of these ideas, however, it is clear that

Singer beneﬁted from the existence of Prebisch as much as Prebisch had

previously beneﬁted from the existence of Singer. Let us ask what would

have happened to the ideas of each, had the other been absent. If Singer

had not overcome his personal reluctance to join the UN, Prebisch may

well not have integrated declining terms of trade into his text. However,

if Prebisch had gone to work for the IMF and not ECLA, the impact of

Singer’s study in Latin America might have amounted to no more than

the very faint mark that it left on the 1948 Economic Survey. From the

viewpoint of publicity and political repercussions, therefore, it was in-

deed the “Prebisch-Singer thesis.”

The thesis promptly entered the Cold War battleﬁeld. The initial U.S.

response was an attempt to close down ECLA in 1951.51 Having failed,

successive administrations slowly learned that Prebisch was in fact more

pragmatic than he was polemical. By 1961, President Kennedy proposed

51. At the 1951 ECLA meeting in Mexico, a U.S. proposal to close the commission down

was narrowly averted after Prebisch offered a stout defense of its work (and after a timely

intervention from President Vargas of Brazil). See Magariños 1991, 138–141; Furtado 1987, 94;

and “Progress Report Made by the Executive Secretary to the Fourth Session,” UN document

no. EC/CN.12/220, 29 May 1951.

464 History of Political Economy 35:3 (2003)

to the UN a “development decade” and launched the Alliance for Prog-

ress in the hope of a more constructive U.S. relationship with LatinAmer-

ica. Mr. M.V. Lavrichenko, deputy head of the Department of the USSR

Ministry of Foreign Affairs, argued in the Second Committee of the Gen-

eral Assembly, that ECOSOC “should devote more of its attention to

such urgent economic problems as the prevention of the economic plun-

dering by the imperialist Powers of the countries of Asia, Africa and

Latin America.” In support of this claim, he reminded his listeners that “a

United Nations survey published in 1949 concluded that, in the course

of almost half a century, there had been a steady drop in the prices of

raw materials in comparison with those of industrial goods.”52 Thus he

demonstrated the long-lasting controversial power of the thesis that Pre-

bisch and Singer had between them articulated, and that the United

Nations had attempted to bury, yet inadvertently had ended up making

world-famous.

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