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5. The Early Terms-of-Trade Controversy
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110 The UN and Global Political Economy 110 5 The Early Terms-of-Trade Controversy • Introduction • Prebisch’s Intellectual Formation • Singer Starts Work on the Terms of Trade • How Prebisch Made Use of the Singer Study • Anonymity of Authorship in the UN • Prebisch’s Contribution: The Economic Mechanics of Secular Decline • Channels of Dissemination • The North American Critical Onslaught of the 1950s • The End of the Early Controversy Introduction By the late 1940s,one of the main political results of the Second World War had become apparent: an increasing differentiation of the power relations of thecountriesof theworld.Europewasnowdivided,andWesternEuropeneeded massive foreign aid for reconstruction. The Marshall Plan, followed by the establishment of NATO,“began in earnest an era of American military, political and economic dominance over Europe.”1 The revelation in September that the Soviets had succeeded in exploding an atomic bomb confirmed the USSR as the second “superpower.” Japan, defeated, was only just beginning to switch its energies from military to economic efforts.The other countries of the world, in the rest of Asia, in Latin America, and in what was still colonial Africa2 were for the most part wretchedly poor and at best were regional powers. The new UN forum had allowed them to find their voice in international economic affairsandtobegintoarticulateaviewof theirownsituation.Thismodestprogress was, however, far outdistanced by the great leap in the exercise of worldwide power made by the United States.In this broader context of growing imbalance in the power of nations, it is possible to discern in the controversy over the The Early Terms-of-Trade Controversy 111 trend in the terms of trade not only a lively academic debate but also the emergence of a contest around the ideology of economic nationalism in poorer countries in response to these changing political realities. Despite the increasing global differentiation in the political power of nations , the UN still represented the idealism of its wartime origins and was indeed the most advanced institutional embodiment of mankind’s aspiration to unity. As Hans Singer later recalled, “the UN was the home of mankind . . . . [I]t was then at the center of the international organisations, [while] the Bank and the Fund were very much on the periphery in those days.”3 In the years before the advent of McCarthyism in early , the UN Secretariat still had the self-confidence to raise issues and concerns about forces that might undermine the path toward unity. Moreover, the faster-flowing currents of nationalism outside North America and Europe affected the choice of topic of the economic research undertaken by the UN, while the UN network then provided the means for wide dissemination of the results.4 These were powerful ways of spreading unorthodox economic ideas that suited well the new nationalist mood of nonindustrial countries. This was not always what the highest ranks in the UN intended, however, as we shall see later in this chapter. The self-appointed defenders of economic orthodoxy were, for their part, not slow to respond, producing a vigorous, multifaceted but inconclusive controversy around the trend in the terms of trade of primary producers. It revived some years after its early efflorescence in the s. It is continuing still, though now in a new and much more sophisticated form. The “Prebisch-Singer thesis” is generally taken to be the proposition that the net barter terms of trade between primary products 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 , the English version of The Economic Development of Latin America and Its Principal Problems, by Raúl Prebisch,appeared under the UN’s imprint. In the same month, Hans Singer published an article on the consequences of foreign direct investment, “The Distribution of Gains between 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 primary products and those exporting mainly manufactures.Further,inequality of per capita income between these two types of countries will 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. [3.235.251.99] Project MUSE (2024-03-28 18:55 GMT...