Prebisch thesis of the deterioration of trade terms

Right-wing totalitarian governments that have claimed to strive for autarky have often pursued a very different policy in fact, similar to how some claimed to be in favor of socialism while killing socialists. In 1921 Italian Fascists attacked existing left-wing autarkic projects at the behest of large landowners, destroying roughly 119 labor chambers, 107 cooperatives and 83 peasant offices that year alone [12] . Nazi Germany under economics minister Hjallmar Schacht claimed to strive for self-sufficiency but still pursued major international trade, albeit under a different system to escape the terms of the Treaty of Versailles . The regime would continue to conduct trade, including with countries like the ., including connections with major companies like IBM and Coca-Cola .

However, prices for natural resources are inherently volatile. The reason for this is that both demand  and supply ‘elasticities’ in the short-term are low. For example, the amount of oil the world needs does not rapidly fluctuate but steadily increases, whilst equally, it takes time to adjust oil output. Therefore, when there is a shock to oil supply, the price rapidly increases to meet the same demand. Relying on a volatile natural resource price is perhaps what brings about the ‘resource curse’, rather than an abundance of resources (Cavalcanti, Mohaddes, Raissi, 2011) as it makes government revenue unreliable, and therefore state planning very difficult. However, “since the mid-1960s, studies have consistently found that export instability produces unusually high levels of private investment” meaning that “export instability paradoxically produced higher economic growth” (Ross, 1999, ). Arezki and Gylfason (2011) have also shown that price volatility may not hinder economic growth with evidence that democracies and autocracies respond differently, with the latter having less success in mitigating the effects of volatility (). It is also important to recognise the difference in the degree of volatility of natural resources, with oil and natural gas being by far the most volatile.

To overcome the difficulties of implementing ISI in small-scale economies, proponents of this economic policy, some within UNECLAC , suggested two alternatives to enlarge consumer markets: income redistribution within each country, through agrarian reform and other initiatives aimed at bringing Latin America's enormous marginalized population into the consumer market, and regional integration through initiatives such as the Latin American Free Trade Association (ALALC), which would allow for the products of one country to be sold in another.

Prebisch thesis of the deterioration of trade terms

prebisch thesis of the deterioration of trade terms


prebisch thesis of the deterioration of trade termsprebisch thesis of the deterioration of trade termsprebisch thesis of the deterioration of trade termsprebisch thesis of the deterioration of trade terms