The Distribution of the Gains from Trade and Technical Progress

Abstract

It is now more than twenty years since Prebisch, Singer and Myrdal announced the thesis that the poverty of the poor countries is largely the result of bad and worsening terms of trade between their primary exports and their manufactured imports. The remedy recommended by these authors was liberation from dependence on primary exports through import-substituting industrialisation behind protective barriers. Whether it was the power of this idea that created the vested interests, or whether it was the vested interests of the budding industrialists that seized the idea as a convenient ideology, many countries have in fact adopted the recommended policies and now find it difficult to change course, in the direction of a strategy of encouraging agriculture and exports. The trade pessimism that underlay the import-substituting industrialisation policy has turned out to be a self-fulfilling prophecy: neglect of exports has led to poor export performance.