Environmental Engineering Reference
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development' criticism that dependence on primary product exports is in itself detrimen-
tal to long-term development. The failure of primary product exports to provide the
'engine of growth' for developing economies in the post-World War II era led some
authors to conclude that there is a structural imbalance in the global pattern of trade and
international division of labor that keeps the 'undeveloped periphery' trapped in a per-
petual state of underdevelopment and specialized in the production and export of
primary products. Proponents of the unequal development doctrine in the past have
included Marxist and dependencia writers (e.g. Amin, 1974; Emmanuel, 1972; Frank,
1978; Wallerstein, 1974), and also less radical authors (Dixon and Thirwall, 1975; Myrdal,
1957; Prebisch, 1950; 1959; Seers, 1962; Singer, 1950).
One of the testable hypotheses to emerge from this literature as to why unequal devel-
opment should occur between the industrial core and the primary-producing periphery
in the world economy is the Prebisch-Singer thesis. Examining long-run international
data, Prebisch (1950; 1959) and Singer (1950) noted that the terms of trade of develop-
ing countries' primary product exports relative to imports of manufacturing goods were
falling. The long-run tendency for international prices of primary products to fall in rela-
tion to manufactures may not in itself be a problem; for example, if they are the result of
increased technical progress they allow a country to export more and improve its world
market position. However, Prebisch and Singer argued that falling terms of trade do a
ect
a developing country's growth prospects given that the income elasticity of demand for
manufactured goods is much higher than the income elasticity for primary commodities.
The combination of relatively low income elasticities and falling terms of trade for devel-
oping countries' exports means that their capacity to pay for imported capital goods is
lowered, thus a
ff
ecting development and growth prospects.
Empirical evidence on whether the long-run relative terms of trade of primary prod-
ucts are falling remains fairly mixed, with recent studies suggesting a modest fall in the
region 0 to 0.8 percent annually, with larger 'shocks' occurring as the result of major world
events, such as the Great Depression and the 1980s oil crisis (Bleany and Greenaway, 1993;
Kellard and Wohar, 2006; Zarias, 2005; Ziesemer, 1995). More importantly, the basic
premise of the Prebisch-Singer thesis, the tendency of long-run (non-oil) primary product
prices to fall relative to manufacturing prices, is now generally accepted and is no longer
'such a heretical proposition as in 1950' (Ra
ff
er and Singer, 2001, p. 23). What has
changed is that the thesis is no longer used, as Prebisch (1950; 1959) argued, to justify
import substitution policies in developing countries as a means to reduce dependence on
primary product exports and jump-start industrialization. Most protectionist import sub-
stitution e
ff
orts in the postwar era have produced disappointing, if not disastrous, results
for developing countries, largely 'because protectionism has led to imports of capital
goods higher than the imports substituted by domestic production' (Ziesemer, 1995,
p. 18). Instead, as suggested by Ra
ff
er and Singer (2001, p. 25), the policy recommenda-
tions emerging from the Prebisch-Singer thesis seem to accord with more 'mainstream'
economic advice to developing countries:
ff
It appears that poorer countries with static comparative advantages in (non-oil) primary com-
modities, or in low-tech manufactures, would be well advised to try to create different and
more dynamic comparative advantages in higher-tech manufactures or services. Otherwise, they
may well be caught in the trap of deteriorating terms of trade and may be at the wrong end of
the distribution of gains from trade and investment. Hence our conclusion emphasizes the
