Economics(Paper-4) - Shivaji University

for the developing countries has also shown a secular deteriorated. This could be
understood by studying the R. Prebisch Singer thesis as it is given below.
R. Prebisch Hans Singer Thesis :
According Raoul Prebisch the terms of trade between the peripheral
(underdeveloped countries) have shifted in favour of developed countries due to their
monopoly element in their product and factor market.
R. Prebisch assumes that the capacity to import is the determining factor of
economic growth in developing countries. He analysied terms of trade of U.K. with poor
countries during 1870’s and 1930’s, during this period there was a secular downward
trend in the price of primary goods relative to the price of manufactured goods. He
concluded that peripheral countries have not only failed to share in the productivity
gains from the developed countries but also in retaining their own productivity gains
due to population pressures, technological backwardness and domination of industrial
activities of developed countries.
Hans W. Singer argued that opening of gate of developed countries to foreign
trade investment have been inhibited their development. Developing countries have
been specialized in exports of food and raw material to industrialized countries in a big
way due to three reasons.
1) The investing countries were benefited due to cumulative multiplier effect of
foreign investment.
2) Less scope of technical progress, internal and external economies to
developing countries.
3) Deterioration of terms of trade of developing countries.
All these things have taken place due to the operation of Engel’s Law, which is
major factor in accentuating price differentials between the peripheral and the centre.
H.W. Singer writes that “the under developed countries are in danger of falling
between two stools : failing to industrialize in a boom because things are as good as
they are, and failing to industrialize in a slump because things are as bad as they are”
Here, singer suggested remedy for this problem that developing countries should absorb
the flow of international investment into their economic system by reinvesting its profits,
by generating complementary domestic investment and by finding the requisite domestic
resources.
Human Development Report 1997 reports that “Poor countries often lose out
because the rules of the game are biased against them – particularly those realiting to
international trade” No dought some of economist are not agree with views put forth by
prebisch – Singer.
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