Terms of Trade Between France and Latin America, 1826–1856: Causes of Increasing Economic Disparities?

Speaking about theories of economic development, M. Bohnet distinguishes between (a) theories of dualism, (b) theories of strategy, and (c) theories of foreign trade. The latter ones may be divided into Perroux’s theory of the dominant economy, the theory of a secular deterioration (as enunciated by Singer and Prebisch), and Bhagwati’s theory of immiserising growth.1 The commodity terms of trade can be measured fairly exactly; statistically the figure results as the quotient of export price index and import price index.2 The problem lies, of course, in the contents of the ‘baskets’ standing for ‘export goods’ and ‘import goods’ and forming the basis for those indices. The commodity terms of trade will be negative if cheap export goods are given in exchange for expensive importations; in the opposite case, a positive exchange relation results.3 According to Singer and Prebisch export prices for raw materials from the developing countries will fall in the long run, whereas prices for manufactured import goods will rise; the consequence will be a deterioration of (real) terms of trade. For the industrially developed countries technical progress will lead to rising incomes as well as to decreasing import prices for raw materials from the developing countries. Accordingly, being at the same time the producers of manufactured goods exported into the developing countries and buyers of agricultural raw materials therefrom, the former countries will gain in two ways from this intercourse with the latter ones. The result will be an increasingly unjust distribution of welfare between those two parties.4 Prebisch’s investigations were presented to a United Nations Conference on World Trade held at Geneva in 1964; from that time onwards, his ideas have also been discussed by economic historians.5