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# A Southern Perspective on Development Studies

Mallorquín, Carlos

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Distributed under a Creative Commons Attribution 4.0 International License
ISBN: 978-956-6095-09-5

DOI: 10.5281/zenodo.4338468

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# A Southern Perspective on Development Studies

Carlos Mallorquin

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A Southern Perspective on Development Studies

Carlos Mallorquin

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## Contents

Introduction 5

Chapter 1 A Southern Perspective on Development Studies: Contributions from Latin America 21

Chapter 2 The Unfamiliar Raúl Prebisch (1943-1949) 53

Chapter 3 Celso Furtado and Development: A Brief Outline (1950-2004) 99

Chapter 4 Theoretical Misrecognitions as the Source of Development Theory Déjà Vu 123

Chapter 5 How Economics Forgot Power 149

Chapter 6 All That Is Solid Does Not Necessarily Melt Into Air 181

References 235

## A Southern Perspective on Development Studies

Carlos Mallorquin

Research Professor, Autonomous University of Zacatecas (Zacatecas, Mexico)

2021

ISBN 978-956-6095-09-5

DOI 10.5281/zenodo.4338468

Francisco Osorio (Editor)

Published by Ariadna Ediciones (Santiago of Chile) using a Creative Commons license CC BY 4.0. Also available to download from www.ariadnaediciones.cl

Book Cover is Martin Waldseemüller's 1507 world map where America appears for the first time to Europeans as a separate continent.
Introduction

Question everything and everyone. Be subversive,
constantly questioning reality and
the status quo.

Be a poet, not a huckster. Don't cater, don't
pander, especially not to possible audiences,
readers, editors, or publishers.

Come out of your closet. It's dark in there.

Raise the blinds, throw open your shuttered
windows, raise the roof, unscrew the locks
from the doors, but don't throw away the
screws.

Be committed to something outside yourself.
Be militant about it. Or ecstatic.

*Challenges to Young Poets* by Lawrence Ferlinghetti

Episodes in the history of Latin American social sciences and the various discursive formations communicated by means of a Western-centric<fnref n="1" /> language might be especially uncomfortable or intractable to the reader, if the narrative that follows aims to reveal a whole set of misapprehensions by the Western-centric tradition. Starting with the misrecognition of the existence of an autochthonous regional discourse on economics, which requires re-examination. Hopefully, the narrative will become “uncomfortable”, which means that the account has a tale to tell!

The following narrative points towards several historical circumstances, which enabled the theories developed within Latin America vis-à-vis the then dominant orthodox economics tradition, both regionally and worldwide in the 1940s. Chapter 1 *A Southern Perspective on Development Studies: Contributions from Latin America* offers a sketch of the “Southern” theoretical problematic and historical context that can be examined with more detail in the following chapters of the book. Hence, Chapter 2 *The Unfamiliar Raúl Prebisch (1943-1949)* aims to exhibit a relatively unknown phase of the theoretical transition in the vast work of Prebisch (1901-1986), which in part got curtailed in 1949 given the responsibilities he was to undertake when he was the Executive Secretary of the Economic Commission for Latin America (ECLAC).<fnref n="2" /> Next, in Chapter 3, there is a summary of the work and

<footnote n="1">¹ Anglo-Saxon and/or Eurocentric discourses.</footnote>

<footnote n="2">² Since its first day, the creation of ECLAC sought after Prebisch as the ideal candidate to be Executive Secretary, a post he rejected in July 1948, which was then occupied by the Mexican Gustavo Martínez Cabañas. After much “pleading”, Prebisch accepted a three month consultancy post in 1949, which after the appearance of the famous text (Latin American “Manifesto”), generated a further negotiation and discussion culminating in his acceptance of the Executive Secretary in question; it is worthwhile to examine the wording of the emissary sent from the UN to talk to Prebisch on the issue. Adolfo Dorfman, in a letter to Victor Urquidi (who had equally rejected the post), conveys to him the sad news of Prebisch’s negative answer, “various reasons were wielded, but anyway, important is… that he offered advice and sporadic collaboration, *which is something*” (Dorfman 1948, my emphasis).</footnote>
struggles of Celso Furtado (1918-2004) *Celso Furtado and Development: A Brief Outline (1950-2004)*. Chapter 4 *Theoretical Misrecognitions as the Source of Development Theory Déjà Vu* assesses the figure and work of Albert O. Hirschman (1915-2012), during the 1950s and early 1960s. He was Furtado's contemporary in most theoretical details of the period.

The book then changes its “geographical” direction. Two chapters examine and evaluate *How Economics Forgot Power and All That Is Solid Does Not Necessarily Melt Into Air* in the scope of two brave and recent critiques of mainstream economics as portrayed in the Western-centric academic circles. However, examined from a “Southern” or Latin American Structuralism perspective, our story emphasizes mainly the theoretical aspects of those books that stopped short of the “full nine yards”.<fnref n="3" />

The resolution to focus on certain Latin American theorists as the main contenders of the story about “development” is related, paradoxically, to their recent upsurge *within* Western-centric discourses, in which the names of Raúl Prebisch and Celso Furtado appear prominently. I believe it is time to recover the central themes and terminology of their ideas, which have been “domesticated” as it were, or read through a vocabulary that was precisely their objective to question.

There are two central themes implicit or explicit in the argument of the book, namely: (a) the process of a theoretical reconstruction; and (b) the status of the notion of power:

(1) it assumes, on the one hand, that the Latin American critique of the ethnocentric characteristics of the discourse implied the construction of a set of new objects and categories, but which, on the other, meant simultaneously problematizing the adequacy of those categories to explain those economies from which they were apparently their “image”;

(2) the theoretical reconfiguration pivots on a long well-established tradition, from Marx onward, in which the power asymmetry among and between agents and the social relations in question are paramount, but Latin American Structuralism critique of Western-centric discourse embraces the idea that it has surpassed (“superseding” in Hegelian terms), in a very important sense, certain of Marx’s notions.

## After the Bombing of Hiroshima

After World War II, the diffusion of Western-centric governmentality discourse (government and governed), was transmuted into a three-layer governmentality: “households and firms,” “self-governing units” (“people-goods”), and national governments, in charge of the latter’s surveillance, which are in turn “gazed” upon by top layer “international organizations” (Danby 2017: 78). Governments “gained” “new powers” by means of national accounting statistics: surveillance and surveying make “government” instantaneously more visible (ibid.) and vulnerable.

International organizations after WWII and governments amplified their field of action and the “nation” became an object of the multilateral organizations and international purview: the hitherto race civilization divide took on a distinct new form, superseded by a new “scale-making project.” (Danby 2017: 79). The “developed/underdeveloped” economy or society couple implied:

> A rhetoric of discipline and punishment (for disordered people, families, and nations) structured: the merging world and international institutions (...) [the] difference worked differently: on the one hand rigorously standardized categories of nation, government, household, business, and citizen promised formal equality. On the other hand, the world could be divided into those who lived up to and enacted these categories, and those who fell short and therefore required tutelage and discipline. (Danby 2017: 78-79)

In fact, the Keynesian national income accounting was to “conquer the world.” The “choice” meant highlighting the household/business split, a product of “modernist ideology” (Danby 2017: 63). The productive process was divided into “two categories” distinguished by “the state of mind of the people doing that activity” (ibid.), monetary spending, households and businessmen/government, which alternatively can be differentiated by regrouping into one single flow “of disparate ‘real’ goods and services” (ibid.), with money as the underlying “unit”, or neglecting the “real” products and services, and “treat money as important *in itself*, as a financial asset with its own properties” (ibid.).

The Keynesian theoretical victory of national income accounting displaced questions that Kuznets addressed, regarding “measuring” well-being and “flow of life-improving benefits to households” (Danby 2017: 64). The potentially warring historical characteristics of WWII and the changing process of *economic representation*, with the rise of the new international institutions: the Organization for European Economic Cooperation (OEEC), and the United Nations; the IMF and the World Bank, all of which display the data gathering momentum, dwarfing the conundrum of the “welfarist” “national income” debate:

<footnote n="3">³ Originally, the book was composed with the aim to include the work of Enrique Leff on the “environment” and the sustainable development in the Periphery, which also represents a regional autochthonous perspective, but I was not given permission to incorporate the text: “The Sustainable Development Labyrinth” (Mallorquin 2017a), which was originally published in the *International Journal of Pluralism and Economics Education, 8*(1). Its publisher, “Inderscience,” seems to own the copyright on behalf of *IJPEE*, which should be a warning to all future authors whose purpose is to publish under this corporation’s name.</footnote>
After the war, [M] Gilbert consolidated the victory of Keynesian national income accounting in the United States, ensuring that there would be no peacetime reversion to Kuznets's system. This was a moment of some drama. In 1947, the National Income Division of the Commerce Department, now directed by Gilbert, published *National Income and Product Statistics of the United States, 1929-1946*, which pointedly redid all the estimates Kuznets had produced in the 1930's, using Keynesian concepts and signaled that the Keynesian framework would be used later. Kuznets attacked the new figures in a 1948 article. (...) He charged that the new system may allow the investigator to rest too comfortably on the monetary surface of economic circulation, without forcing him to examine closely the real flow of commodities and services beneath the surface -a danger that, as the discussion below suggests, the report does not avoid. (Kuznets in Danby 2017: 70-71)

The “shape of the world,” as coined by Danby, had been reconstituted, and with new “nations,” and the force of the decolonization movements, signals the inevitable decline of tutelage by “empires” and its organization. Nationhood, literally “parachuted” so to speak, in many cases, despite the communities’ wishes in question, “imposing watchful disciplines” (Danby 2017: 68): Keynesian monetary economics and bounded national entities revolve around the concepts imported from accounting procedures.

The rise of a specific set of both national and international accounting procedures is a story of a specific power struggle, which Keynes's disciples ultimately hegemonized, in which the chief theoretical heroes were M. Gilbert and R. Stone: Keynes “persuaded” (Danby 2017: 68) the British government in the 1940s for Stone's incorporation into the process of assembling data, who in turn occupied and dominated the Organization for European Economic Cooperation, and United Nations (UN) alongside Milton Gilbert, U.S.A.'s conqueror of Kuznets in the “national accounting” standardization dispute:

> In a nutshell, a set of international organizations emerged after WWII that needed standardized nation-level concepts. Richard Stone and Milton Gilbert had forged a common Anglo-American position during the war on national income accounting: There was no serious competitor. No alternative system of national accounting had such well-placed advocates or was as well poised to claim global applicability. (Danby 2017: 68-69)

The national accounting theoretical “framework”<fnref n="4" /> $Y = C + I + G$ in Keynes’s 1940 text *How to Pay for War*, had previously undergone a sustained theoretical dispute, to say the least, vis-à-vis the then denominated “Treasury View”.<fnref n="5" /> The epoch exhibits a singular “will to power” on the move, all of which is incomprehensible without naming the force of the persona in question.

By “the summer of 1940, [Keynes] was an insider at the Treasury” having “accepted” an invitation to become a “member of a new Consultative Council” to “advise the Chancellor” (Peden 2000: 311), while simultaneously Hawtrey’s influence “underwent a complete eclipse” (ibid.). By September of 1941, Keynes was a “director of the Bank of England” (Peden 2004: 12) and a “peer by June of 1942” (Ibid). Although both [Hubert] Henderson and [Dennis] Robertson had left the Treasury by the end of 1945, “Neither (...) could match Keynes’s personality. Moreover, as Henderson had grudgingly to admit, ‘the currents of abstract economic thought’ had been ‘flowing in recent years in the direction of sympathy with the doctrines to which Lord Keynes is attached” (Peden 2000: 312).

Keynes, to put it as quaintly as possible, did not hide his loathsome attitude toward those he considered “intellectually” inferior,<fnref n="6" /> but to be fair to him his conduct was unmistakably consistent as can be examined from his famous depiction of the Bretton Woods participants in 1944 as “the most monstrous monkey-house assembled for years” (quoted in Thornton 2017: 150).

Cosio Villegas’s (the Mexican representative) appreciation at the Bretton Woods venue, recollects the war in process and the USA-Great Britain power struggle as the source of the “authoritarian” spirit of the Conference. It was a well-organized “consensus” charade among those countries invited with the aim to bring to light the newly created financial institutions of the IMF and the World Bank of Reconstruction and Development. Cosio Villegas describes a “clash with the great master” (Cosio 1976: 220), in two interventions which he made to the Committee discussing the project of the World Bank for Reconstruction and Development, and in which Keynes, as the Director of the Debates, simply “discourteously” put aside: Cosio Villegas wanted to change the title’s order of appearance, “development” before “reconstruction,” since the latter was to be a task for a limited and temporary period in the Bank’s tasks, while development had to be thought of “eternally”, especially for Latin American countries. For the sake of unanimity, in this occasion Cosio Villegas did not contradict Keynes’s “dismissal” remark that the Bank’s name was not under discussion, but when an acute article relating to loan applications was being prepared, Cosio Villegas questioned the concentrated nature of the decisions in the hands of a small group, e.g. USA/England, and perhaps, France, which to top it all, the reception of the loan in a specific denomination could elevate the costs substantially if the credit had to be used in a country of a different monetary unit (say Franc loan for a dollar acquisition). Without fail, Keynes dismissed the submission, but on this occasion, Cosio Villegas (Cosio 1976: 221) announced that Mexico would vote against the article, and simultaneously demanded that a note be taken unveiling both the negative posture and the reasons of the Mexican government. Finally, the matter

<footnote n="4">⁴ $Y$=National Income, $C$=Private Consumption, $I$=Private Investment, $G$=Government Spending.</footnote>

<footnote n="5">⁵ See also Chapters 5 and 7 in Peden (2000, 2004).</footnote>

<footnote n="6">⁶ For example, in 1945, Keynes hailed a long-standing Treasury representative, in charge of the “Home Finance Division,” Hebert Brittain, as being “intellectually contemptible” (Peden 2000: 356).</footnote>
was solved by stipulating that Latin American countries would have two
permanent representatives in the governing committee of both the World
Bank and the IMF, regardless of the volume of capital contributions by which
the voting rights were accorded, although it did not change the dominance
of USA, Great Britain, and France as major "shareholders" in those financial
institutions (Helleiner 2014).

The theoretical differences between (Gilbert) “monetary” and (Kuznets) “real” were initially the source of the antagonism during the process of constructing national accounts:

flows of spending for *their own sake*, not as proxies for something
else, and integrates them into a *monetary* macroeconomic theory. By
contrast for Kuznets, the central purpose of national income, moral as
well as analytical was to measure the flow of real benefits to households:
good meals, warm houses, decent clothes. (Danby 2017: 71)

In Kuznets's perspective, government (military expenditure), could not
be seen as “benefiting” households, nor could the government be perceived
as some kind of “ultimate consumer” as a “corporeal entity” (ibid.) in the
same sense by which men and women attain satisfaction, if only because it
invites a dangerous “fetishism” (ibid.).

Gilbert's reply was that Kuznets excluded from "total production" certain goods and services. These theoretical disputes accentuate Danby's central thesis, whereby a "moralistic flavor" creeps in disfiguring "national income measurements". Thus, romantics such as Ruskin can be reinstated into the narrative: "it is noteworthy that Gilbert and associates reached for John Ruskin, the 19th Century romantic thinker, in order to name the despised opposite of quantitative Economics" (Danby 2017: 72).

On his part, M. Gilbert moved in 1951 to the OEEC, created in 1948,
as Head of its Department of Economics and Statistics. The OEEC's most
important tasks were to coordinate the Marshall Plan's aid among the
respective national development plans, requiring "multilateral surveillance,"
and common concepts: despite Gilbert's vocation, generally forgotten
given Richard Stone's own ubiquity on a number of duties and publishing
magnitude, hence Danby's claims of his "essential" role in worldwide national
account standardization.

Stone and Gilbert pioneered within the OEEC organization the “first
generation” (Danby 2017: 73) of standardized statistics and national accounts
frameworks, globalizing them (ibid.). On the other hand, Stone’s Cambridge
post at the Department of Applied Economics, OEEC, and UN, formed
the basis by which a technocrat managed to sponsor and shape careers and
research on British colonial accounts.

Hence, this narrative assumes the existence of flows between different
borders, although in certain economic formations, the absence of a formal

set of assets framework is contradicted by IMF's *International Financial Statistics*:

Two assumptions are not only built into globally-applied national income accounting, but actively advertised and promoted by the published data: that every country is in the same way integral and complete with similar institutions, and that the relations between national economies are relatively thin and inconsequential. (Danby 2017: 74-75)

Therefore, national accounting data misses the “dependent” character
between and among different economic formations. No “data concept” (Danby
2017: 75) can symbolize this “relation.” As Danby emphasized, the *appearance*
of national units as discrete entities was relinquished through the concept of an
“abstract global space of goods and financial flows without power or politics,
without alliances, antagonisms, or spheres of influence. And it appears as
though it had the same internal institutional structure” (ibid.).

The mathematical example is drawn from the theoretician Jacques Polak, who starts from a simple single-country, *self-contained* “autonomous factors” (Danby 2017: 77), through which the national income and imports are determined, and then proceeding to a “world” model in “less than a page” (Danby 2017: 77). The “illegibility” of power and absence of institutional specificities generated by the “world model” posed by Polak and the Keynesian categories and national income accounting were profound. See further ahead.<fnref n="7" />

The worldwide data (standardized) has a particular effect: it can gauge
individual “policy” successes or “failures” and, therefore, those national
governments. According to Danby, hitherto the world’s cartography
was defined by a series of “discontinuous empires” in which “power,” or
international power was in plain sight:

> This fit the panoptic quality of official post-WWII international
> organizations, dividing the world's population into national cells and
> spotlighting their condition by means of statistics-gathering. The
> brightly lit UN General Assembly is a visual metaphor for this observed
> world, each formally identical nation named and fixed space. (Danby
> 2017: 78)

The Tropics of Discontent

Even before initiating his role as ECLAC's second Executive Secretary
in 1949, Raúl Prebisch's report (*The Economic Development of Latin*

<footnote n="7">⁷ Danby writes: “close relations between any particular export sector and particular foreign buyers are illegible. There is no category -no conceptual category, no measurable thing- in which the structure of the international financial system might appear. (...) the *International* market is conceptualized as a space of pure flows, a space without people or institutions, who are all tucked away inside national economies. This effect is strengthened by the way *orthodox economists* like to model markets, as efficient anonymous smoothly adjusting mechanisms to facilitate flows of goods and services and exchanges of assets” (Danby 2017: 77, my emphasis).</footnote>
*America and its Principal Problems)*,<fnref n="8" /> was promoting the importance of “systematic research” to understand the region’s economic problematic, and simultaneously reminding us of his own theoretical evolution during the second half of the 1940s. Dispatching economists from the Periphery to “study at the great universities in the United States or Europe, was important, but *insufficient*,” since one of the:

most conspicuous faults which general economic theory suffers from, seen from the Periphery, is its false sense of universality. In truth, it could hardly be expected that economists of the great countries, embroiled by serious problems of their own, would preferentially dedicate their attention to other countries rather than the study their own. [...] However, do not misinterpret that this purpose is encouraged by an exclusive particularism. On the contrary, it can only be seen to be accomplished through a solid knowledge of those theories elaborated in the great countries, with their great wealth of common truths. We must not confuse a reflexive knowledge of the other with a mental subjection to extraneous ideas, from which we are slowly learning to be free. (Prebisch 1949b: 106, my translation)

It is through a similar guise that one should interpret Dudley Seers's condensed prose on the "special case" (Seers 1963) to describe the economics developed in the Anglo-Saxon or European universities. Simply put, it was the flip side of Prebisch's rejection of their presumption of "universality."

A "Southern perspective" on economic matters also suggests the existence of a "Northern" or Western-centric perspective, subsumed within an ever-constant power asymmetry confrontation, a political and academic struggle both within and without the "Center-Periphery" complex. Foucault's notion of discursive formations and specific enunciative modalities as product and source of the empowered social relations are implicit, if not explicit, in our argumentative logic. The premises of the argument insists that the concept of the agency, whether when it refers to the entity as an "enunciative modality," and/or "productive agent," does not suggest necessarily the category of a "human subject" as the materialization of its "acts," which also explains our efforts to use as little as possible the term "actor." In other words: agents are not always "human beings." What falls within the category of agency will depend on the context and power asymmetries: corporations, individuals, "sectors," "countries," production units, "firms," etc.

Clothed in Prebisch's words, there is no presumption that a ubiquitous "geographical" or "language" characteristic is the obligatory source, nor a guarantee of a privileged "epistemic" discursive perspective, or its putative "consistency," but it just so happened that Nietzsche's so-called "will to power" can also be an attribute of certain agents in the Periphery or

regions beyond the Western-centric areas of the world. Taking up Ludwig Wittgenstein's idea about the absence of meta-discourse to guide us in reaching and understanding a precise juncture corroborates the notion that Latin American Structuralism could well have been constructed through the allocution of Shakespearean "noises."

Hence, my theoretical “bridge” building process between contrasting discursive formations, proceeds simultaneously by critique and running commentary of the work of P. Pilkington and C. Danby, Chapters 5 and 6, respectively: the former unwittingly a “Latin American Structuralist,” and the latter a conscious performer not withstanding my critique.

These theoretical episodes may well have been written, as already pointed out, by means of the “clatter” of the “Shakespearean” noises, an aspect which is not eluded in our argument. Therefore, it might be useful reminding readers within the Western-centric tradition of a possible line of reasoning.

The previous discursive struggles on notions of national accounting, for instance, are perhaps one of the best illustrations of the problematic nature of those aspects necessitating replacement which the evolution of “developmentalism” in economics hoped to achieve. One possible route was to elaborate new categories *in situ*: the Prebisch-Furtado-Seers’s conundrum. In the Center countries, as seen above, even before the dust of the theoretical debates on the accounting categories was cleared, Keynes was sponsoring their “transference” to colonial territories, with which to generate reliable data despite the presence of peculiar social relations where “production” and “distribution” are apparently associated by “non-market” mechanisms.

Simultaneously to “technical” accounting conundrums, potential theoretical disputes were at hand, since the story required a description and generation of alternative vocabularies to explain the specificities of those peripheral “nations.” It was precisely the U.S. and Soviet Union, post-WWII antagonism, which generated certain of those theoretical opportunities. For example, it is currently unimaginable that a United Nations report would dare recommend to governments of an “under-developed country” to undertake a “land reform” (*UN Department of Economic and Social Affairs* 1951: 93).

It is worthwhile to highlight, for those whose theoretical gaze springs from the “Periphery,” the theoretical problems to be discussed represent the decisive moments of the reconstruction of the “economics” vocabulary in the region (Latin America, for example), prominent among them the perspective C. Furtado, and R. Prebisch between the 1950s and the 1960s.

On the other hand, early on in his professional life, Dudley Seers perceived the existence or the potentiality of discourses questioning Western-centric thought during the 1950s:

> Similar doubts were also being expressed elsewhere, notably by Gunnar Myrdal then working on his *Asian Drama*, though it was

<footnote n="8">⁸ Prebisch (1949b), *United Nations Department of Economic Affairs* (1950), original text in Spanish, April 1949.</footnote>
not published (by Allen Lane) until 1968. What Paul Streeten called "mumbles of discontent with established categories of thought" had also been audible, in particular from Raul Prebisch and Latin American economists associated with him, but these were not taken very seriously by the profession, especially in that period. (Seers 1979: 718).

Seers also reflected on the limiting theoretical and practical aspects of "general theories like those of Keynes and Harrod-Domar model," and hoped Anglo-Saxon writers, "acquire some relativity" and "comparative attitude" (Seers in Martin and Knapp 1967: 158). At the same time, he did not jettison the construction of a more "'general theory' of development" (Seers in Martin and Knapp 1967: 223), and on this occasion the call was the need for a "Hume" or "Moore rather than a Hegel" (Seers in Martin and Knapp 1967: 158), to understand the process through which an analogous theoretical transition is constructed. He also more than flirted with the idea of understanding the undergoing evolution of economics, to comprehend its reconstruction:

> We are not even in a position to judge what has to be demolished of the old doctrine, or what can be saved and adapted for further uses. This is still somewhere late in the 'Hobson phase', or early in the 'Kahn phase', of development economics. (Seers in Martin and Knapp 1967: 3)

Seers’s “exploitation” (pun intended) of Keynes’s own reflections in the last chapters of his *General theory*... to underscore Hobson’s standing to comprehend the importance of the struggles through which theoretical transitions are produced (“rebellious” authors), and/or the use of Kahn’s “multiplier model”, are a good example when examining the evolution of the discursive formations. The analogy implies that:

> The ‘Kahn article’ may not yet have been published. A characteristic of this article is, of course, that nobody recognizes it as much, at the time; only in the ‘Keynes phase’ can its historical significance be appreciated. All one can safely say is that attempts to solve practical problems of development are going to teach us a great deal about processes of economic change, and the time is almost ripe for the appearance of a Keynes (though this task may be beyond the capacity of any single person). (Seers in Martin and Knapp 1967: 3)

Seers declares this having previously pointed the reader to a footnote where he says:

> the transformation now is bigger and there are a number of candidates for being considered the 'Hobson' of this generation -e.g. Myrdal, Prebisch, Singer and Nurkse. I would be inclined to nominate Prebisch, because it is a characteristic of a 'Hobson' that he does not quite realize what he is doing to the subject. Besides, Prebisch lives closer to the seismic fault from which the tremors are emanating. (Seers in Martin and Knapp 1967: 3).

It is in the context of a theoretical reunion in Manchester in 1967, centered on discussing Seers’s famous text published in 1963, *The Limitations of the Special Case*, that P. Streeten’s indications must be understood. Prolonging the procedure of these rhetorical analogies, he actually adds a name “Hobson-Gessell phase,” and further on adds a third: “Mayor Douglas” (Seers in Martin and Knapp 1967: 66).<fnref n="9" /> Streeten’s remark about the “mumbles of discontent,” commented by Seers, *seems* to imply their mutual accord and understanding that the “concepts and categories” (Seers in Martin and Knapp 1967: 158) then dominant required transformation: “We are unable to carry out the sort of reconstruction of working categories which are necessary, partly for lack of time and partly because we are ourselves held in the vice of conventional concepts” (Seers in Martin and Knapp 1967: 157-58).

Seers aimed to differentiate patterns and institutional settings, to think dynamics in distinct economies whose characteristics seem at odds with conventional economics. Kurt Martin invoking Seers’s ideas indicates:

> He had suffered himself when first working in Africa from being too ‘Latin American’, e.g. from putting too much weight on the foreign trade bottleneck and not enough on education, though this had been a less incurable fault than being too ‘Anglo-Saxon’. (Seers in Martin and Knapp 1967: 224)

> But put in those terms the central theoretical conundrum is inadvertently hidden: “why particular countries of particular types of countries are exceptions” (ibid.).

> It is my contention that Seers’s Anglo-Saxon contemporaries did not fully grasp the “specter” which haunted his work, or as I call it “‘the white man’s burden’ curse,”<fnref n="10" /> the “added” term to the classic Rudyard Kipling’s racist expression intends to radicalize the conundrum in question: Seers consciously bore the burden as a “curse”: the task of advising governments under specific power complex asymmetries. Strictly speaking, Kipling’s expression represents a technological-knowledge power regime *a la Foucault*. I believe Streeten and Richard Jolly and other colleagues misapprehended the origin of Seers’s wit and conduct:

> Dudley’s second phase was expressed most sharply in the negative -as a strong critique of the Brandt, Commission’s report. *North-South: a Programme for Survival* stirred Dudley’s ire and irony as few documents did. In his review ‘Muddling morality and mutuality’ [Seers 1980], Dudley tore into the Commissioners -many were his friends- for what he argued was a long list of confusions over ‘mutual interests’, which the Brandt report had made a central point underlying its proposals. (...) this was one of Dudley’s least credible efforts, itself limited and illogical, at times bitter and sour, with little of that sense of humour

<footnote n="9">⁹ In fact, Gessell forms part of Prebisch’s early reads.</footnote>

<footnote n="10">¹⁰ See Guha (1997), Hindess (2001).</footnote>
and ironic touch which enlivens most of Dudley's writing. Instead we
have a sledgehammer being used to smash a whole report, rather than
to drive home some important points of criticism. (Jolly 1989: 39)

On his part, Streeten says:

His wit could be quite mordant. (...) on a visit to the IDS [Institute of Development Studies], discussing with him aid criteria and whether human rights should be included. I said, naively, that I was against torture. Dudley replied devastatingly: 'You've come along way, Paul'. (Streeten 1989: 27)<fnref n="11" />

On the other hand, this book mentions only in passing the so-called Latin American “dependency school,” whether in its Marxist or alternative versions, both claiming Raúl Prebisch as its theoretical instigator; whether for better or for worse, since I don’t dedicate much space to the perspective, interested English readers can easily gather the quality of the theoretical diversity by reading one of the best introductions written in English by Cristobal Kay (1989), and yet to be translated to Spanish!!! The author in question had Seers as his Ph.D. supervisor, during which Dudley Seers, religiously never once uttered a word to him in “broken” Spanish.

Let us now go back a little. Prebisch, telling accounts of having to deal with the Western-centric advisers are known to many by word of mouth, but some have in fact been published. Here describing his reunion with Jacob Viner:

After the appearance of our first reports, one of the most illustrious
professors on matters of international trade called in on over here
(Jakob Viner, C. M.). Formed in the purest classic tradition, submitted
to long decades of Ricardian logic, few brief weeks in Brazil were not
enough to seduce him by the spectacle of industrialization which had
barely initiated, if you take as the point of view the cosmic potentialities
of this country. Dragging the economists of ECLAC [English acronym
of CEPAL], in his execration, he condemned the Latin American
industrialization, which we were advocating. He challenged also
all forms of deliberate control of economic growth and guidance of
international commerce. Well at least he left us a unique and positive
formula of economic development: engage into agriculture and birth
control! (Prebisch 1953b: 47, my translation).

To those suspicious of the suggestion, on the other side of the Atlantic,
around 1963, in Seers’s famous 1963 article “The Limitations of the Special
Case,” we encounter his usual attitude of “impatience” as he states that:

previous generation of economists failed to cope realistically with
economic fluctuations until after the depression had brought politically
catastrophic results. The life cycle of each period in the development
of an economic doctrine is now familiar. Some great issue of public

economic policy appears. At first, economists at high places refuse to
admit that this is any concern of the profession. (Seers 1963: 77)

At the end of the sentence, Seers interrupts the reader by adding a
footnote:

The story is told in Latin America of a Chilean graduate student who stated, in answer to a question by a very eminent London professor, that he wanted to specialize in economics of development, ‘Oh!’ said the professor. ‘What economics is that?’ This was in the 1950’s! (Seers 1963: 77)

The anecdote must have been told to Seers while he was working in ECLAC, during the 1960s in Santiago de Chile by the student in question. But the reader is left none the wiser as to the tempestuous nature of the so-called “conversation” or as to the identity of the professor and student in 1954. Today we know who those parties were Osvaldo Sunkel and Lionel Robbins. In fact, Sunkel was not allowed to sit during the whole exchange with the English professor. The retort by Robbins, who recently had polished the Mont Pelerin Society manifesto (Mirowski 2009), stunned Sunkel, never to be forgotten, when the professor, “red faced,” “answered me ‘angrily.’ He said, what you have to do is to study demography; development is just merely a problem of population growth!” (Franco 2013: 70).

It's noteworthy, if only in passing, that Osvaldo Sunkel and Anibal Pinto, both functionaries at ECLAC in 1966, interviewed Arnold C. Harberger (Sunkel 1966), who by then was already a Mont Pelerin Society affiliate and professor both in the United States and Chile. The content of the talk seems to be one of the themes that ensues in my book: the obstacles of studying "Latin American Structuralism" in Anglo-Saxon Universities. Then the "Chicago Boys" had not yet taken hold of economics in Chile, which occurred when Pinochet's military dictatorship ruled the country. It is the extraordinarily restrained vocabulary of Harberger in the 1966 interview which I want to emphasize, which suddenly, during Pinochet's regime, transformed itself into a totally disheveled, slapdash discourse, to say the least:

When ‘good economics’ was just coming to Latin American (sic) in the late 1950s, the path was far from easy. In the way stood a bulwark of doctrinaire isolationism and protectionism: the ‘old’ ECLA (...) which actively sponsored and fostered the interventionist, statist, illiberal policies of the era. That was an era of fierce debate between the so-called structuralist and monetarist schools, with the former counting ECLAC as one of its principal bastions. I find it hard, even from today’s vantage point, to define precisely what structuralism was. It did not proceed via rigorous analysis from the ground up, as it were. Rather, it referred vaguely to ‘inelasticities’ of various types-of foreign demand for raw materials, of domestic supply of agricultural products, and so on-that somehow stood in the way of progress, made inflation

<footnote n="11">¹¹ Please see volume dedicated to his work: "Dudley Seers: His Work and Influence" (Toye 1989), *IDS Bulletin* 20(3).</footnote>
almost inevitable (even, to some, desirable), and made widespread
state intervention a sensible ‘solution’ to Latin American problems.
(Harberger 1995: 306-307)

Indeed, in a posthumously published interview, which was recorded
in 1985 in English, Prebisch reiterates the convoluted form of the power
asymmetry and attitude in question, facing David Pollock, the interviewer,
his collaborator and assistant during the 1960s, while heading the UNCTAD:

Because of second and third-hand reading. And because there is a
prejudice that probably you have seen, [as] a member of a northern
university. Really, David, there is a certain arrogance and disparagement.
They don't take us seriously. I'm sure that in Harvard they don't take us
seriously. We are second-class economists, or even third class. We are
underdeveloped economists. (Pollock 2001)

Today one of the greatest stats cited in Google, enfolds the terms (in any
language), “Prebisch-Singer,” or “Singer-Prebisch” thesis. The notion is
related to the so-called “deterioration terms of trade” of developing countries
vis-à-vis “industrial” countries, or “Center-Periphery” in Prebisch terms;
further ahead we will return to this theme. At this moment, what I want
to underline is the insistence to establish a monopoly by Western-centric
scholars on the origin and source of its theoretical elaboration.

For example, R. Jolly (2008), claims Prebisch should come “second”
to Singer given his 1949 publication (Post-War Price Relations Between
Underdeveloped and Industrialized Countries), despite the fact that Prebisch
was writing theoretically on the subject since the early 1930s!:

More properly called the Singer-Prebisch thesis after the careful
detective work of John Toye and Richard Toye showed that, strictly
speaking, Hans Singer's work preceded that of Prebisch, strictly
speaking, Hans Singer's work preceded that of Prebisch. (Jolly 2008:
65, footnote number 50)

Disputing who was first to the post is not crucial in our argument, since
Prebisch's examination focuses on its style of theoretical development and the
importance of the notion of *power asymmetries* to explain the “deterioration
of the terms of trade” in question, which in countless accounts, in Spanish or
English alike, seem to be misrecognized, becoming problematical if Centered
around the notion of the so-called price demand “elasticities disparities”
between Center and Periphery countries.

Recovering the notion of a heterogenous complex (consequence of
the power asymmetries) among and between diverse agents, Center and
Periphery alike, opens up the possibility to propound social arrangements
that can be made more amenable with a perspective that considers the aspects
of the environment and the sustainability process through the “integrated”
management of the natural resources. In turn, that means that there can be no

“general” strategy, given the presumption of the antagonisms of the diverse
and heterogenous agents (countries, regions, productive units). Hence, the
notion of “possessing in separation” certain of the conditions of production
becomes central to explain the heterogeneous character of agents and the
limits of the political strategies to transform the social relations. Unlike
Marxism, Latin American Structuralism’s idea of antagonism and notion of
the heterogenous characteristics of the agents implies examining the specific
forms that social relations take: there is no general “mode of production” and,
therefore, no necessary “productive forces” that may or may not “correspond”
to specific social relations: in more philosophical terms, there is no general
form of being given its diverse set of social and historical conditions.<fnref n="12" />

<footnote n="12">¹² Except Chapter 6 *All That Is Solid Does Not Necessarily Melt Into Air*, contents of the chapters have been published previously in part or totally. Chapter 1 *A Southern Perspective on Development Studies: Contributions from Latin America* in *Cinta de Moebio* 58: 26-46. Chapter 2 *Lord Keynes después de su muerte según Raúl Prebisch* in *Estudios Críticos del Desarrollo* 6(9). Chapter 3 *Celso Furtado and Development: A Brief Outline* (1950-2004) in *Celso Furtado: un retrato intelectual*, Universidad Autónoma de la Ciudad de México. Chapter 4 *Theoretical Misrecognitions as the Source of Development Theory Déjà Vu* in H. Márquez, R. Soto, E. Roberto an Záyago (coords.), *El Desarrollo Perdido. Avatares del Capitalismo Neoliberal en Tiempos de Crisis*. Editorial Miguel Angel Porrúa. Chapter 5 *How Economics Forgot Power* in *Estudios Regionales en Economía, Población y Desarrollo* 53. I am indebted to Michael O’Brien whose help and suggestions to improve the manuscript stretched well beyond the call of duty of family friendship.</footnote>
Chapter 1

A Southern Perspective on Development Studies:
Contributions from Latin America

Economic science is universal, like mathematics. Economic science is not Pampa, Guaraní or Tehuelche. If its applicable in Europe, in America too (quoted in Jimena Caravaca 2011: 35).

As the epigraph goes, in the last decade of the 19th Century, the national congress in Argentina witnessed the then Minister of the Economy defending the idea that the government applied policies sustained by principles of universal validity. The political confrontation brought to light the notion that perhaps those “knowledges” coming from afar are not as consistent as they make out to be, and that local theorizations were necessary to “discipline” the “science” in question. The following chapter stresses the idea that a relatively autochthonous discourse on development was constructed in the Latin American region, which can be defined as the “Center-Periphery” perspective initially developed by Raúl Prebisch (1944b, 1944c, 1948, 1949, 1949a). Ultimately, it is a perspective that examines the power asymmetries that constitute social relations, within and between regions and countries, therefore the Center-Periphery couple is not necessarily a “geographical” peculiarity; it denotes some mechanism of exclusion and/or exploitation, within and between communities. At the (exchange) knowledge continuum the conception of power asymmetries can be made to look similar to Connell’s idea of a “Southern theory” (Connell 2007, Lander 2000).<fnref n="1" /> The rise of the “discursive formation” (Foucault 1972) in question first entailed a deconstruction-reconstruction of what was accepted as social science (economics, sociology, political theory, anthropology) in the Western-centric<fnref n="2" /> universities and vision of the world. In other words, it required a decolonizing conceptual strategy, creating a vocabulary not only consistent with the new “objects” that it should explain, but also, in its aftermath, showing that the theoretical inadequacies of the Western-centric discourses were unsustainable even within their own perspective and universe, which it was supposedly to investigate.

This aspect has to be mentioned because initially, after World War II,
there was the belief that economics, for example, could play, as it were, two
different “scientific” games; one in which its categories were congruent

<footnote n="1">¹ We generalize Connell's notion of the "colonial" asymmetries: "Knowledge about a colonized society is acquired by an author from the metropole and deployed in a metropolitan debate. Debates among the colonized are ignored, the intellectuals of colonized societies are unreferenced, and social process is analyzed in an ethnographic time-warp" (Connell 2007: 44).</footnote>

<footnote n="2">² Origin of the Anglo-Saxon or Eurocentric discourses.</footnote>
and “coherent” for “developed economies,” and, simultaneously, another in
which, certain concepts of the dominant literature in economics were “offside”
given certain institutional and organizing qualities of those countries pointed
as “underdeveloped,” and hence requiring and admitting the elaboration of
differing and distinct categories. In economics, this divergent evolution in
their respective objects and vocabulary came abruptly to an end by the early
1980s, in institutions and countries, “Center” and “Periphery” alike, which
signaled the return of the hegemony of neoclassical thought.<fnref n="3" />

But two decades previously, by the mid-1960s, the “Center-Periphery”
perspective itself would evolve into an intertwined stream of two ideas, in
which some of its proponents would change theoretical camps, in more
than one occasion during the following years. One was denominated “Latin
American Structuralism” and the other the “Dependency Approach”. This
distinction is important because the rise of neoliberalism hegemony early in
the 1980s was the product of its criticism of certain development strategies in
the region, conforming a strange alliance with the “dependency” approach
vis-à-vis Latin American Structuralism.

Before describing the evolution of the Latin American Structuralism
theoretical perspective and some of the personalities involved, it is important
to mention certain political and institutional transformations in the aftermath
of World War II (following section “It’s a Hard Chilliness A-Gonna Fall”),
which made possible the posing of certain questions hitherto blocked and
also the appearance of the Latin American discourse or the “will to power”
in question.<fnref n="4" /> In the final segment of the chapter (Under the Sweltering Heat
of the “Washington Consensus”), we attempt to elaborate a brief synthesis of
the consequences and limitations of those policies and contest its hegemonic
presence, with some descriptions of the economic and social tendencies in
the region that should help focus on alternative political strategies.

It's a Hard Chilliness A-Gonna Fall

The political and intellectual undercurrents that drove the power Centers
of the world after World War II are not recognizable today, given the relatively
"multi-polar" prearrangements of domination, despite the United States
virtual hegemony. But at that juncture it seemed imminent the face-to-face
confrontation between the United States and the Soviet Union.

The context of the Cold War post-WWII, and the decolonization
movements of liberation led to the emergence of a host of voices from "Third
World" countries looking to make themselves heard on the international
stage, especially in the United Nations.

The new power Center and guardian of the capitalist ensemble, the United
States of America, which had arisen from the demise of Great Britain, sought

new forms with which to organize the world economy. First came the founding
of new rules for the flow of trade in general. Retrospectively, the Bretton
Woods (Helleiner 2014) arrangements on the one hand, and the Marshall Plan
for Europe on the other, intended then as the basis for the reconstruction of a
war-devastated Europe, formed part of the same process. If great efforts could
be undertaken to "promote higher living standards," as the UN declared,
why not develop specific means to undertake its implementation? This view
led to the setting up of the Economic Commission for Europe and for Asia;
and it was only a matter of time before other regions started creating similar
demands and projects (Toye J., Toye R. 2004).

Within this scenario, a well-organized group of men in Latin America,
talented and confident in their specific fields and backed by their respective
governments, managed to present a project for the creation of an Economic
Commission for Latin America, or ECLAC (Comisión Económica para
América Latina, CEPAL acronym in Spanish)<fnref n="5" />. Their diplomatic lobbying,
with the help of some of their Western European counterparts was very
successful, given the clear opposition to it by the United States government
that had other plans: an organization, headed by it within the Organization of
American States (OAS). Thus, by 1947, ECLAC had come to life for a three-
year trial period, starting in 1948. Equally, it must be remembered that before
ECLAC's confirmation in 1951 as part of the United Nations Organization
family, the United States government hounded its existence until it was finally
defeated by the alliance of the Latin American governments. One should bear
in mind that it was Getulio Vargas's ultimate push that finally made it possible
to set up ECLAC, contrary to the wishes of the United States (Santa Cruz
1984, Magariños 1991, Furtado 1985, Mallorquin 2010a).

By January 20th, 1949, the countries of the region had been consigned
among those “underdeveloped areas” by the inaugurating speech of the newly
elected President of the United States of America, Harry S. Truman (Truman
1949). He went on to promise help to develop those “underdeveloped”
nations which advocated “freedom” and “liberty.” A couple of months later
that year appeared Prebisch’s (1949b) report to (ECLAC): *The Economic
Development of Latin America and its Principal Problems*, hence forward
becoming a classic in the Latin American social sciences literature on the
prognosis of the “Periphery’s”<fnref n="6" /> “development” and “growth”<fnref n="7" /> vis-à-vis the
“Center.” The text, branded by Hirschman (1981) since its inception as the
Latin American “manifesto” for development, flourished worldwide in most
languages.

<footnote n="5">⁵ Later, it will include “the Caribbean” as Economic Commission for Latin America and the Caribbean.</footnote>

<footnote n="6">⁶ See, for example E. Iglesias’s (Executive Director of ECLAC in the 1990’s) recollections of the event during his university days in Uruguay (Dosman 2006).</footnote>

<footnote n="7">⁷ Symptomatically, Prebisch rarely uttered the term “underdevelopment” (“subdesarrollo”) until the 1970s; he used “developing” economies, in process of “development.”</footnote>

<footnote n="3">³ For the Anglo-Saxon story, see A. O. Hirschman’s classic article (1981).</footnote>

<footnote n="4">⁴ Escobar (1995), Esteva (1992), Mallorquin (1998).</footnote>
Therefore, “development” is a theoretical construct post-WWII. Before World War I, Western-centrism economic and sociological discourse reigned supreme: it was unashamedly teleological when it referred to those “backwards areas.” Furthermore, Arndt (1981) shows that the notion of “economic development” in those areas was seen in terms of opening and “exploiting natural resources.” Those notions cannot be made easily harmonious with “well-being of the population” and “growth per capita” generated in the 1930s and 1940s with the construction of the national incomes accounts and “Keynesian” macroeconomic models (Danby 2017). As Heilbronner (1963), Love (1996), and Arndt (1987) insisted, before World War II little was written on the “backwards areas” that was not thought in terms of a “stage” that had been superseded by the “industrial” economies.

Although Prebisch was not ECLAC's Secretary General until 1949, his important role in its recognition and creation, a product of his work style and passion, which he instilled at the ECLAC, can never be exaggerated (Hodara 1987, Dosman 2008). In terms of his ideas on economic development, speaking in theoretical terms, he can truly be considered a pioneer and progenitor of a long-lasting tradition in this field in Latin America, if not in most "Third World" countries. Part of his legacy relates to his belief and struggle for the creation of an institution representing those countries that had come to specialize in the production of primary or raw materials in general, worldwide and/or particularly in Latin America, which would promote and monitor their development. His share of élan in the fulfilment of the ECLAC project could be seen once again during the 1960s, when he left the organization to become Secretary General of the UNCTAD and subsequently head of *The Latin American Institute of Social and Economic Planification* (ILPES), a project and proposal of his own making in 1962 whilst still at ECLAC. During the 1940s and 1950s in many Latin American countries, universities created new Economic and Sociology Departments driven by the political movements and governments purporting to sponsor growth and “development” processes. The rise and decline of the perspective to be described below can also be seen in transformations of the Economic and Sociology Departments in the universities in the region between the 1950s and 1990s (Montecinos 2009). The description of the development of the region and political milieu of the Latin American of post-WWII requires we trace some of the ideas, posing them as “ideal types” (Weber), given the ample fertile tradition in Spanish and Portuguese of the discourses in question mentioning certain personalities within the Latin American structuralist tradition (Prebisch, Furtado) and “dependency approach” (Cardoso, Marini).<fnref n="8" />

## Latin American Structuralism

By the second half of the 1940s, the pre-eminence of Keynes's work on the possibility of resolving the “cyclical” nature of capitalism through planning or demand management cannot be put into doubt. Both his name and his ideas were synonymous with a “revolution” in economic science at academic institutions all over the world. The fruitful results of his ideas over time and space, and in practical terms, especially in Latin America during the early 1930s, were soon to be recovered to argue that Western-centric economic discourse has limitations, and that the Keynesian categories had to be transformed. This task was soon undertaken by R. Prebisch, J. F. Noyola, V. Urquidi, R. Boti, A. Pinto, O. Sunkel, D. Seers, C. Furtado, to name but a few.

On the other hand, “economic science” could not go further than reiterate its new-fangled categories when thinking of the Periphery or the “backward countries.” There was a brutal silence and the absence of a specific theoretical discourse about countries that were plainly not “industrialized.” The emergence of the notion of “underdeveloped economies,” following World War II, which singled out late-comers to the growing industrialization process or raw material producer countries, was the product of a crucial theoretical and political battle fought by institutions like the ECLAC. The posing of a process of industrialization and transformations of the Periphery (fiscal and land reform, modernization of its state apparatuses) became the Center piece of the concerns by Prebisch and ECLAC.

During the mid-1940s, Prebisch himself was very reticent to adopt the so-called “Keynesian revolution” vocabulary (examined in the next chapter), and was very critical of its work as well as much of economic science (Prebisch 1946, 1947, 1948, 1949a).<fnref n="9" />

The asymmetric mechanism of distribution of the productivity gains or the “fruits of technical progress,” between the Center and the Periphery in Prebisch’s argument has nothing to do with “imperialism” whatsoever.<fnref n="10" /> It just so happened that during “the upward phase” of the cycle, prices of raw materials of the Periphery rose at a much faster pace than the correlative products of the Center, while in the down swing phase prices of raw materials declined at a much faster rate than industrial products and therefore the new market “clearing” price of primary products found itself requiring a superior quantum of sales of its products to buy a similar proportion of manufactured goods during the next cycle. Whether it was a question of differing demand-price “elasticity” for their respective products and/or because the Center’s better organized homogeneous labor associations managed to defend

<footnote n="8">⁸ See also Kay's note number 5 and 8 of Chapter 6 of his book (Kay 1989: 246). Ironically, up to date, the best account is a book written in English by Cristobal Kay. Kay's PhD dissertation director was D. Seers; Kay was also alumni to O. Sunkel's university classes. Unfortunately, given the language “barrier” and the power asymmetries among and within the so-called “knowledge communities”, the “dependency approach” in Western-centric universities is taught through the vocabulary of Gunder Frank's books (1966, 1967). See also Palma (1978), Love (1990).</footnote>

<footnote n="9">⁹ See next chapter for a detailed analysis of Prebisch's ideas for the period 1943-1949.</footnote>

<footnote n="10">¹⁰ The notion does not exclude its presence. Many contemporary commentators, without acknowledgement are really conflating the Rumanian Mihail Manoilescu's (Love 1996, 2011) notion of “unequal exchange,” with Prebisch's concept of the deterioration of the “terms of trade.” Notice that the notion of “fruits of technical progress” is an appropriation by Prebisch of a category found in the work of J. A. Schumpeter, transformed into a different meaning.</footnote>
its income level better than the respective organizations of Periphery, a deterioration of the terms of exchange ensued, which in Prebisch's eyes did not lead necessarily to categorize the overall mechanism as “unequal” (for a more detailed explanation see chapters 2 and 5):<fnref n="11" />

1) Since 1946, Prebisch had been arguing that the notion of “equilibrium” was a mystical notion.

2) Therefore, the price mechanism and thus money did not “represent” anything external to itself other than being a unit of account, which explains his condemnation as “metaphysical” all those discussions about “value” in the early days of Marginalism or Classical Economy as labor content (“use value” and “exchange value” and so on).

Prebisch argued that there was an intrinsic constitutive reason which describes the life existence of the cycle: *Time* is the culprit in question, and more specifically “time disparities,” between the Center and the Periphery. Differing time “phases” between the productive and circulatory circuits; as will be argued further ahead, it also applies within and between distinct capitals (heterogeneity).

Classical and neoclassical economics eluded this issue by introducing money as a “vicarious”<fnref n="12" /> entity to restore a balance between the real and financial levels of the economy. But for Prebisch, there is a systematic asynchrony between the diverse productive cycles and the financial-money cycle (a time disparity), although “money” is reintroduced post factum in the orthodox traditional accounts of the economy and history of thought. The bank rates managed by the Bank of England in the first “cyclical Center” (Great Britain) would attract and/or expel gold during the fluctuating periods of the cycle, leaving to the Periphery the task of adjusting its overall internal and external accounts to this “untimely” movement. It is the time disparities that cause the systematic wave like (“undulatory”) motions of capitalism. At the *First Meeting of Technicians on Central Banking Problems of the American Continent*, Prebisch stated:

> I find myself disturbed by the thesis that free competition leads to general equilibrium and to the most adequate distribution of

the resources and income within the community. I do not see any correspondence between these abstract propositions and the reality of the economic world. (1946: 227)

“Capitalism” was essentially unstable, thus the importance of money and fiscal policies. As Prebisch observed:

> I have found only but wave motions, a succession of ascendant and descendant wave motions. (...) The cycle (...), in the Center as much as in the Periphery, is the characteristic form by which the economy grows –the capitalist economy has not had another form of growing than the cyclical form.<fnref n="13" /> (1946: 226-227)

We could also see how Prebisch appropriated *some* of Pareto’s work. As Pareto explained:

> In reality, equilibrium is never reached, since, as one approaches it, it alters continually because the technical and economic conditions of production modify themselves. The real state is, therefore, that of continued oscillation around a central equilibrium point, which itself moves. (Pareto cited in Mclure 2001: 76)

It must be said, however, that Prebisch did not make explicit these theoretical considerations at ECLAC.<fnref n="14" /> He was adamant that his purpose there was to produce practical and well-organized policies and technical advice to development projects:

> We have presented at different sessions of the Commission a flow, at times abundant of documents in which the economic phenomena of Latin American countries are analyzed, interpreted, ordered; studies that could be judged as eminently theoretical. Gentlemen, it’s true that reality persuades us more so that practical action should have a theoretical base, be it in economic matters as in any other field of knowledge, but to conclude from this that the permanent organization of ECLAC is an instrument of theoretical analysis would be a serious, a very *serious* error because it would mean distancing oneself by the path traced by this Commission in successive meetings. The ECLAC organization is not a theoretical instrument, not a body of scientific investigation, but rather it is inspired by eminently practical purposes,

<footnote n="11">¹¹ Simultaneously, Prebisch mentions notions such as “disparate demand elasticities” and power asymmetries as the source of the deterioration in question. It is my contention throughout this book that the notion of “elasticities” in fact only clouds the real political and theoretical issue: power asymmetries within and between agents: countries, regions, distinct productive sectors, and labor segments. Hopefully as the reader prolongs their journey through the book, it will be made clearer why I leave for later the explanation of the use the term “class,” since it pertains to a distinct theoretical construction which supersedes certain aspects of Marxism itself, related to the notion of “heterogeneity,” a theoretical consequence of Latin American Structuralist thought. See further ahead Chapter “All That Is Solid Does Not Necessarily Melt Into Air.”</footnote>

<footnote n="12">¹² On the notion of “vicariousness,” see Maffeo Pantaleoni Pure Economics (1957, English version, originally 1889), third part; Prebisch’s teacher, Roque Gondra, translated the 1889 Italian version of the text during 1916, although presumably Prebisch read the text in Italian.</footnote>

<footnote n="13">¹³ That is “a continuous succession of disequilibriums”” (Prebisch 1948a, in Prebisch 1991c: 499, my emphasis).</footnote>

<footnote n="14">¹⁴ And yet Prebisch could not help himself. In 1953, after many recognized economists of the “North” from Western-centric universities visited Brazil (G. Harbeler, J. Viner, L. Robbins) with the aim to combat and counter ECLAC’s ascendancy, E. Gudin (1953) wrote a series of articles in O Correio Da Manha with the title: “The Mystical Planification,” to which Prebisch responded with: “The Spontaneous Mystical Equilibrium of the Economy” (Prebisch 1953a): “its proof that Dr. Gudin continues to believe in the tendency towards equilibrium, inherent in the economic system, when perturbing elements are not introduced in the economy. I don’t believe in all of that. The cycle is the typical form of growth of the capitalist economy, that is to say, an uninterrupted succession of disequilibriums.”</footnote>
objectives that have been defined and reached, perhaps, more clearly
at the Conference in Mexico (...) ECLAC as an organization of
international action (...) can examine those forces that act deep in the
womb of the economy of the Latin American countries (...) (and) find
a solution to our immediate problems (...) determining the technical
necessities of the countries (...) the necessities of investment of capital;
studies of the techniques of investment programs (...) contribute to the
formulation of policies of development; and (...) training economists in
problems of development. (Prebisch 1952: 24-25, my emphasis)

Prebisch's reminder of ECLAC's mission and reprimand represent just one
of several difficult episodes at the organization, for Celso Furtado in particular
(see chapter on Celso Furtado), as a consequence of his first book *The Brazilian
Economy: A Contribution to the Analysis of its Development* (1954) dedicated
to Prebisch.<fnref n="15" /> The role of the “multiplier” and the “accelerator” were crucial
to many of the calculations that would be undertaken to postulate specific
rates of growth. The recommendations towards a “full employment” policy
admitted that the economy could not be seen as a self-regulatory entity. Fiscal
policies and management of interest rates as well as budgetary deficits were
part of a process aimed at maintaining a certain level of employment and
income. What came to be known as demand-managed economies gave clear
indications of the results that could be accomplished through the promotion
of economic “growth,” well above the expectations of “market forces,” in spite
of the downward undulations and “cyclical” nature of capitalism.

Prebisch's ideas, and later those of Furtado, opened up a vast uncharted
theoretical landscape, which henceforth would be mapped by means of
new categories which would incorporate planning as one of the methods to
induce a programmed process of development. Since the 1930s, Prebisch had
been experimenting with great difficulty and not much success with various
explanations to account for Argentina's topsy-turvy economic development,
including those that took their starting point from conventional economic
categories: the cyclical notions of capitalism and the “Gold Standard” were
parameters that left much to be desired, and could only be fitted to Argentina's
experience through an unquenchable violation of the facts (Prebisch 1944).

By 1947, Prebisch had initiated a theoretical perspective that would
culminate in a specific discourse in reference to the so-called “primary
goods producer” countries or the Periphery of capitalism. In other words, he
thought that what was needed to address the “Periphery’s” problems, could
not be deduced from Keynesian and/or neoclassical models of development.
It was therefore paramount to differentiate the raw material producing
countries (the Periphery) *vis-à-vis* the “Center” or industrialized nations. He
was arguing against the plainly “false” claims of “universality” of the economic
discourse hegemonic at that time, which in the last instance assumed that the

countries of the Periphery should undergo similar structural transformations
during their development process as those that the industrialized countries
had undertaken in the past, adjusting themselves to world economic forces;
a concept of history which L. Althusser (1969), in a polite and paradoxical
manner has termed as “future anterior.”<fnref n="16" />

Under this scheme of things, the “backward economies” had to adapt
themselves to an international trading organization that blessed its relative
abundance of factors of production. There arose a version of an international
structure of trade, which reinforced the hitherto international division
of labor: the Periphery had to specialize in the production of raw and
primary products, and the Center had to concentrate on the production of
manufactured products.

These countries were supposed to use those “factors of production” in
relative abundance, and thus cheaper, to produce specific goods. Accordingly,
there was a “comparative advantage” (no doubt in static terms) that favored
some countries to concentrate on the production of certain products that
required diverse intensities of capital and/or labor. The surplus production
would form part of the trade pattern that would maximize the overall growth
and earnings of respective economies.

Today's literature has been evaluating the “robustness” of what has become known as the Prebisch-Singer thesis (Prebisch 1949b, Singer 1949),<fnref n="17" /> although Prebisch had been showing statistically the “worsening terms of trade” or “worsening price relations” since the 1930s for Argentina. It seems that those countries that had actually followed the specialization path in their trade relations, and had accordingly adjusted their economies to the cyclical growth process of capitalism, found themselves, in the long run, in a worsening spiral situation. If, as he argued, the diffusion of the fruits of technological progress should have favored the Periphery, given its lower productive or technological capacity/intensity, so it should have manifested itself in lower price levels for manufactured goods imported. But the international price index revealed otherwise; this by itself did not prove, nor explained, what came to be known as the Prebisch/Singer thesis of the “deterioration<fnref n="18" /> in terms of trade” of the Periphery *vis-à-vis* the industrialized

<footnote n="15">¹⁵ For more details see the chapter “Celso Furtado and Development: A Brief Outline (1950-2004).”</footnote>

<footnote n="16">¹⁶ Althusser (1969) insisted that the past should not be read in terms of the present, a “future anterior”; Marx’s Capital is a theoretical product that repudiated his “Hegelian” days.</footnote>

<footnote n="17">¹⁷ According to Jolly, it should be more “properly called the Singer-Prebisch thesis after the careful detective work of John Toye and Richard Toye showed that, strictly speaking, Hans Singer’s work preceded that of Prebisch” (Jolly 2008: 65).</footnote>

<footnote n="18">¹⁸ The presentation of Prebisch's ideas can be followed in chapters 1 and 2, which take into account his theoretical evolution in much more detail on various aspects, making the reading of them once again an important task in the Periphery and Center alike. For the best unsurpassed up to date interpretation, see Rodriguez (1980). For example, the narrative offers two versions of the thesis on the deterioration of the terms of trade, the “cyclical” and the “accountable” one. But my own contention is that those versions are not separable, only at the cost of making indefensible Prebisch’s theory of prices-value.</footnote>
Centers. What was claimed was that after the continuum repetitive cycle, the Periphery, besides not being able to hold on to its own “fruits of technological progress,” also lost them through the downward pressure that was exerted on the prices of its goods.

The Periphery's deterioration, in terms of trade vis-à-vis the industrial nations, was due to the existence of a structural asymmetric “elasticity” price demand for their respective products. Given the power asymmetries in question, the Center managed to preserve its price and cost levels, even, and despite the downswing in the cyclical process. It is true, as Prebisch argued, that the gains (prices) in primary products during the upswing rose at a much faster pace than their counterparts at the Center, but it is also historically correct that during the downswing, they declined and lost much more than what they had attained previously. The so-called debate on the “strange persistence of the terms of trade,” and the proofs of its “deterioration” or otherwise, ever since its inception (Powelson 1977, Torres González 2010; 2006, Ocampo and Parra 2007, Vernengo and Caldentey 2010, Ellsworth 1956), despite many of its authors contentions, disregards the main contention of Latin American Structuralism, which was to question the idea that the “international division of labor” is a “natural” phenomenon. In other words, the conundrum epitomizes one among other geographical divisions, which represents the presence of power asymmetries, within and between different economic formations, countries, regions, and periods, and, therefore, not an insurmountable iron law. The absence of a “worsening” tendency of the terms of trade was not an oversight by the perspective in question: quite the contrary, it helped to underline that contingent power asymmetries should and could be changed, explaining the importance of the political strategies for the structural transformations.

On the other hand, the name Prebisch/Singer or in the inverse order, has become a worldwide academic and google phenomenon, when the so-called “deterioration terms of trade” is written in any research engine, and yet Prebisch had already started writing on the subject well before Singer's 1949 text *Postwar Price Relations Between Underdeveloped and Industrialized Countries*. In 1934, Prebisch was using a different vocabulary: Argentina presented a *worsening* of its international exchange terms* (Prebisch 1934; 189, my emphasis).<fnref n="19" />

After the appearance of various texts (Prebisch 1949b, 1949c, 1951), where Prebisch presents these aspects in detailed fashion, during lectures on October 1951 to the *Training Center of Latin American in Programs and Agricultural Projects and Related Subjects*, he explicitly denounces the then misinterpretation of his posture:

> I was made responsible of having formulated an immanent law of the process of economic development by which the prices of primary

products tend to depreciate in relative terms with respect to those of industrial products. I have not formulated any sort of such immanent law, but I simply called attention to the phenomenon that has occurred in a determinate period of time under the pressure of certain forces. We don't know what will occur in the future, it depends on a series of factors. (Prebisch 1951b: 6-7).<fnref n="20" />

Another aspect that formed part of the explanation of Argentina's *“worsening” of its international exchange terms,* had to do with the differing import and export coefficients, between the trading entities; previous to the great crisis, the then hegemonic cyclical Center, the British Empire, had what can be called a relatively high import coefficient with respect to what was going to happen to the “world economy” once the USA took the hegemonic role during the interregnum of the peace before World War II.

To preserve the hitherto level of export earnings, the Periphery had to increase the quantum of its exports, intensifying its productive capacity, which in turn increased its demand for imported goods (semi-manufactured and manufactured), constraining the diversification of its economy. Thus, every cycle saw the imposition of a tendency that presented itself as the deterioration of the Periphery's terms of trade with all the subsequent negative consequences to its external balance ("disequilibrium"). The search for an elusive "equilibrium" meant a lower rate of investment, higher levels of savings, and a reduced capacity to receive foreign credits and therefore overseas capital. This had to be resolved by attracting foreign capital through an internal deflationary process, all of which stalled the growth of the economy.

The growth of income in the Center was not reflected in an equally proportionate increase in its demand for products or goods from the Periphery. On the contrary, a whole series of substitutes and “demand” schedules appeared for other, and more elaborated types of goods, which for the Periphery meant a reduction in “demand” for its goods. The Periphery’s growth was therefore inhibited by internal and external disequilibrium given its lower capacity for imports, which in turn explained its stop-go characteristics. Modern literature presumes to have resuscitated this aspect of the power asymmetries phenomenon under the Thirwall thesis of “balance

<footnote n="19">¹⁹ “empeoramiento en los términos del intercambio comercial”.</footnote>

<footnote n="20">²⁰ “Problemas del Desarrollo Económico en América Latina,” Third Conference, October 25th, 1951. Spanish readers should have known better, English readers on the other hand, had to deal with a relatively shabby translation of 1949c and 1951. As a rule, the United Nations documents translate them into English and French. (“Crecimiento, Desequilibrio y Disparidades: Interpretación del Proceso de Desarrollo Económico” in: Estudio Económico de América Latina, 1949 - E/CN.12/164/Rev.1 – 1949c and the 1951 Problemas Teóricos y Prácticos del Crecimiento Económico, CEPAL, México, 28 mayo E/CN.12/221. On the other hand, the classic text of 1949b El Desarrollo Económico de la América Latina y Sus Principales Problemas E/CN.12/89 (May), under a very close scrutiny by the U.S. government fared relatively better in English. Perhaps Prebisch, given the load of work and strain under which he was working did not check the translations.</footnote>
of payments” (Boianosvky and Solis 2014) constraints in a growing economy, converting it into a problem of price-income demand elasticities disparities between different economic formations. For Prebisch, the problem was not the “absolute export earnings” decline, but rather to what extent they generated internally the appearance of sectors whose “productivity” was higher than those concentrating on exports. And given the historically relatively low “import coefficient” of the United States economy, an “inward drive” development seemed the only practical option for the Periphery.

Thus, all manifestations of the Periphery’s erratic growth process throughout the first half of the 20th century, largely based on the external demand for its goods, pointed towards a policy that required a sponsored process of internal productive diversification, which in the last instance meant the industrialization and the structural transformations and social reforms of these peripheral countries: a change in the social and technical division of labor. Simply put, the interpretation of Prebisch that concentrates its reading of the 1949 text as only a debate about “industrialization” loses a crucial piece of Prebisch’s vision; he clearly states that the “industrialization has a *social purpose*” (Prebisch 1949b: 139) and requires an “adequate social legislation” (Prebisch 1949b: 101).

In Prebisch’s proposal, a “programmed” process of industrialization would in turn allow for the absorption of underemployed labor or those displaced from less productive sectors. The employment of labor in the secondary and tertiary sectors would secure a higher level of employment, which would in turn destroy the social and political forces which kept wages down that reinforced the life of old quasi “feudalistic” relations in agriculture, with low costs and extensive methods of land use for production of raw or primary products in many countries of the region. The industrialization process would substitute some imports, changing its *composition*, and creating a mechanism to hold on to some of the fruits of the technological progress. A more diversified economy presumes higher factor “prices,” which in the long run could be the basis for the export of industrial manufactured goods.

Prebisch also sponsored a broader common market arrangement (Briceño 2010), with some important early accomplishments of the strategy during the early 1960s in Central Latin America, similar to today’s regional agreements in Latin America, which would facilitate the lowering of costs and the use of ample economies of scale for new industrial sectors. Initially, some industries would produce some goods at higher prices than those in international markets, but as the industrialization argument runs, in the long run those “Ricardian losses” (Prebisch’s expression) were a positive element in the tradeoff between having labor employed in industrial activities or importing cheaper products, which through the multiplier effects would generate incomes and demand internally. Besides creating a more “homogeneous” economic base, the substitution of imports with local production

-industrialization-, would also enable a better control of the economy during cyclical downturns. In this sense, programming the rate of growth and industrialization was seen as a way to help “market forces,” not stifle them, as most neoclassical or neo-liberal misinterpretations of Prebisch claimed. The same process of reforms to transform land possession meant the creation of smaller capitalized productive units generating economic and political forces to contest the hegemonic conservative “haciendas” sector, economically and politically, giving life to “markets.” Later on, we will return to this aspect of Latin American Structuralism, but it’s worthwhile to underline that the “dependency approach” perceived from its inception these political features which obeyed great part of its criticisms of Latin American Structuralism.

To counteract these policies during the early years of the 1950s we can observe a series of “academic visits” to Latin America by members of the orthodoxy from the “North,” among them Jacob Viner, by then already a member of the *Mont-Pelerin Society*<fnref n="21" /> who in the words of Prebisch had the “sagacity,” as mentioned previously, to recommend demographic studies instead of economic development policies.

Simultaneously, during the 1940s and 1950s, Brazil, under the sway of strong nationalist social forces, became everything that the so-called “ideology of developmentalism” represented. The political forces headed by Vargas and a large number of institutions like the Superior Institute of Brazilian Studies (ISEB) pushed the industrialization process into most of the plans they had a chance to come up with, culminating with Juscelino Kubitschek’s (“Targets Plan”) economic plans.

After the war, the National Bank of Economic Development (BNDE) was founded and soon made agreements with the ECLAC, and Furtado’s involvement, to undertake many development projects. The Joint American and Brazilian Commission, which was formed to enhance the industrialization process, had Furtado as its Director. Brazil became, in the first half of the 1950s, a theoretical paradise for discussing and experimenting on the theme of “development.”<fnref n="22" /> Most of the leading exponents, G. Myrdal, R. Nurkse (1953), of a full-speed-ahead-towards-industrialization policy and critics, J. Viner (University of Chicago) and L. Robbins (London School of Economics), the structuralist’s terror, visited the country during that time and discussed the topic.

Furtado (1952) was to establish a specific debate with Nurkse (1953) on the issue of the size or otherwise of the market as a limit to the capitalization and development process. More on Furtado’s involvement in this process can be seen in the third chapter, here it is enough a summary. Furtado’s

<footnote n="21">²¹ See Mirowski and Plehwe (2009). Hurwicz, as early as 1940, found the economists at Chicago “very reactionary and orthodox. I met Viner, Knight and the other local celebrities... and didn’t think very much of them”” (quoted in Mirowski and Nik-Khah 2017: 75).</footnote>

<footnote n="22">²² The work by Bielschowsky (1988) shows the richness of the “economic thought” in Brazil, although originally it is a product of a doctoral dissertation in English.</footnote>
theoretical and practical interests during the early 1950s examined the history
of the evolution and transformation of the Brazilian “economy” Periphery
and “economic theory” then dominant in the western world.<fnref n="23" /> Hence,
Furtado’s first published book *The Brazilian Economy* (1954)<fnref n="24" /> had two quite
distinct characteristics. On the one hand, it was comprised of a historical
description of Brazil’s “economic formation” from its colonization up until
the decade of the 1950s, and on the other, we had one of the first documented
histories of economic thought. It focused on the problems of “backward”
economies,<fnref n="25" /> demonstrating that orthodox economic categories’ references
towards “underdeveloped economies,” had only the function of signaling
“differences,” with respect to “developed” economies, and worthless to think
the specificities of an “underdeveloped economy.”

The concept of an underdeveloped economy as a distinct entity with
its own logic and structure was already being processed conceptually,
culminating in fully fledged discourse during the years of 1958-1962,
displacing the teleological and evolutionary notions implicit and explicit
in conventional economic discourse, Keynesian included. To start with,
the notion of an “underdeveloped economy” starts dislodging the hitherto
category of a “colonial economy” dominant in much of the text. By 1958,
Furtado was convinced, although not yet completely theoretically armed,
that the Latin American economies were specific historical entities that could
not be explained with the traditional vocabulary of mainstream economics.

Paradoxically, Prebisch was very critical of Furtado's ideas,<fnref n="26" /> and
reprimanded, *The Brazilian Economy*... (1954), which in turn made Furtado
ponder leaving ECLAC. We could even speculate that to keep him away
from the Center of attention he was regularly invited to participate in various
economic reports and commissions, starting in the Brazilian and United
States Commission and later, through his sudden trips to prepare reports in
Venezuela and México.

After 1954, Furtado’s cyclical notions of capitalism as a means to
jettison inefficient productive sectors started disappearing (Furtado 1950);
theoretically, Furtado started thinking more in “structural” terms, “obstacles”
or “structural transformations”; concepts that could think productive agents
embedded in specific social relations and historical contexts, displacing the
“rational” maximizing entities espoused in the official economic discourse.

It followed that a theoretical reconstruction was in order, and accordingly,
“underdevelopment” could not and should not be thought of as a historical
phase to be overcome, but rather as the outcome of the hegemony of a specific
set of asymmetric social relations whose articulation generated many of the
disparities and “heterogenous” phenomena once thought of in “cyclical”
terms.

Thus, a specific body of conceptual tools had to be constructed and that
was precisely what occupied Furtado between 1958 and 1962. As mentioned
before, the evolution of Western-centric economic thought (Furtado 1954),
inapplicable for the analysis of the Periphery’s development, and in part
resembling his own research, appeared in the results of a conference held
in 1951 at Chicago University (Hoselitz 1953),<fnref n="27" /> which Furtado read in the
following manner:

The theory of economic development does not fit, in general terms, within
the categories of economic analysis. This point of view is quite generally
accepted today, and it suffices to quote the seminar on development organized
by the University of Chicago in 1951, in which sociologists, anthropologists
and historians were gathered alongside economists. (Furtado 1952: 264)

The process and evolution of Latin American Structuralism did not appear
in “one fell swoop,” as it were. In fact, it was painfully achieved during a period
when Furtado, having left ECLAC in 1957, fought many crucial political
battles to transform, first the Northeast, in Brazil, as its first Superintendent
(1959b),<fnref n="28" /> and secondly, as the Minister for Planning (1962a).<fnref n="29" />

After spending a short period at Cambridge University by Kaldor's
invitation, he returned to Brazil where he took up the post of Director for the
Northeast section at the National Bank of Economic Development (BNDE).
It was during this period that Furtado was to publish *The Economic Formation
of Brazil* (1959),<fnref n="30" /> perhaps the most renowned text in Brazil if not in Latin
America. It incorporated most of the historical sections of the previously

<footnote n="23">²³ For more details see third chapter “Celso Furtado and Development: A Brief Outline (1950-2004).”</footnote>

<footnote n="24">²⁴ *A economia brasileira*. It is ironical that a book that was dedicated to Prebisch was to cause him so many problems at ECLAC; his views were used to put pressure on Prebisch and the International Organization, but it must be remarked that it is in great part at odds with the economic categories then dominant, including Prebisch's.</footnote>

<footnote n="25">²⁵ In the English language the closest examination of this type was done by Meier and Baldwin (1957).</footnote>

<footnote n="26">²⁶ See chapter ahead dedicated to his work: “Celso Furtado and Development: A Brief Outline (1950-2004).”</footnote>

<footnote n="27">²⁷ For the account of those involved within the perspective of development in the Western-centric tradition, see Gunder Frank (1966).</footnote>

<footnote n="28">²⁸ There he elaborated *An Economic Development Policy for the Northeast* (1959b), perhaps one of the first *books* to have used the thesis of the deterioration terms of trade within different regions (Northeast and Center-South) of a single country's economic formation. See details in Mallorquin (1996) and Love (1996). Prebisch's notion, always a power asymmetry phenomenon, forms part of the evolution of regions and economies: "if agriculture progresses technically by its own impulse independently of the demand in the city (...) lower prices of the primary products in relation to the industrial prices," will generate "an internal deterioration of the terms of trade" ... "similar...to the deterioration of the international terms of trade"... "the fruits of technical progress applied to agriculture will be transferred to the industrial sector, receiving primary raw material and foodstuff at lower prices." (Prebisch 1951a: 12)</footnote>

<footnote n="29">²⁹ The three-year plan of the government *Plano Trienal de Desenvolvimento Econômico e Social* (1963-1965), elaborated by Furtado, was attacked by all social forces.</footnote>

<footnote n="30">³⁰ In Mallorquin (2005b) I offer a detailed follow up of the conceptual changes in the theoretical vocabulary of this book in relation to its original version: *The Brazilian Economy*... (1954). See also chapter on Furtado ahead.</footnote>
mentioned book *The Brazilian Economy*... (1954). But this latter version came
with all the appropriate reformulations to give it a distinctly “structural”
flavor.

Between the appearance of this book and the period of 1964, when he
was exiled and forced to leave Brazil by the Military regime, Furtado fought
on many battlefields. He produced books and articles with distinct political
and/or academic texts, and some of a controversial nature. The latter can
be exemplified by the text entitled *The Brazilian Pre-Revolution* (1962),<fnref n="31" />
grouping a series of articles, including one which was used for its title and
the most politically explosive; a good example of the former can be seen in
*Development and Underdevelopment* (1961), also a reordering of some of the
material found in *The Brazilian Economy*... (1954), appropriately reformulated,
and also containing new material from Furtado (1958 and 1959b).

In his first stop of exile in Chile, at the ILPES in ECLAC, Furtado
offered a series of conferences. On June 3rd, 1964, he was to present the
origins of his theoretical recent position that was to last until around 1972.
He represented an economic tendency for Brazil and Latin America, which
showed a declining process of growth and industrialization. Here we can
observe the notion of the “structural obstacles” and “stagnationist” thesis for
the economy as a whole. The conferences initiated the argument which was
to become subsequently the book *Underdevelopment and Stagnation in Latin
America* (Furtado 1964).<fnref n="32" /> The text exhibits all the genealogical conceptual
elements that were to appear in F. Cardoso and E. Faletto’s classical text of
1969 *Dependency and Development in Latin America*. In turn, Cardoso’s book
circulated in manuscript form since its inception in 1967, two years before
its publication, as an internal document of ILPES - ECLAC (Kahl 1976).
The Furtado lectures were attended by various of the names that are later
to conform the “dependency approach”: Fernando H. Cardoso, R. Cibotti,
N. Gonzalez, José M. Echavarría, O. Sunkel, P. Vuscovic, and F. Weffort,
amongst others.

The Dependency Approach<fnref n="33" />

The vision and perspective of the “dependency approach” cannot be
reduced to the issue as to when was the category first mentioned. For example,
Kahl remarks (1986: 227), that Cardoso first uses the term “dependency”<fnref n="34" /> in
1965. In Latin America there is an extensive discussion as to whether it’s an
“autonomous theory” or the theoretical product (Beigel 2006) of addressing
a critique to the economism and “pessimism” of the future of economic
development of the region, of which Furtado’s “stagnationist” thesis was an
exemplar for that period of his life.

Also, the *Economic Bulletin of ECLAC’s* 1964³⁵ prognosis of certain
difficulties on the future process of “industrialization,” could and was turned
into a “pessimistic” perspective on the future prospects of the development
process as a whole, underlining relatively higher costs in comparative
terms and a difficult process ahead when the capital-intensive sectors
were considered. The first “stages” in the industrialization transformation/
expansion, of consumer’s goods, substituting imports by local elaboration,
apparently seems to have reached a *cul-de-sac*. Also, it gave rise to abundant
uncertainties on the capacity to pay for imports and/or rates of “exploitation”
required to pay for them as “dependentists” had pointed out; these aspects of
the problematical nature of a “development” process articulated to the world
market, overwhelmed the discussions in the dependency approach and Latin
American Structuralism, alike.

In the “stagnationist” book, Furtado presented explicitly the first Latin
American “structuralist” model, its content presented all of the conceptual
characteristics that would later appear in the writings of those that were to
adopt or follow the above-mentioned denomination. It clearly highlighted
the social-political forces that are the basis of “internal” or “external”
dislocations of an economy and which tended to reproduce the conditions
that constituted the “underdevelopment” condition, or so Furtado argued
then, notwithstanding the industrial progression in some of the economies
in question.

The text was the culmination of what was to be Furtado’s specific
“structuralism.” Although this book exhibited a very pessimistic view of
Latin American economies’ future rate of growth and industrialization,
today we know that what he was actually criticizing and disapproving of,

<footnote n="31">³¹ The English version of *The Dialectics of Development* (1964) appeared as *Diagnosis of the Brazilian Crisis* (1965), which can also be put in this tradition, but it is a better and very well-developed case for explaining the unification of the regressive political and social forces of the right against the government, which he foresaw with a military takeover, which unfortunately turned out to be true. Willard Barber (1966), reviewed the English version of the *Dialéctica de Desarrollo* (Furtado 1964), alleging Furtado’s “deep Leninist ruts.” (Barber 1966: 196). A positive review in English can be seen in Donald J. Harris’s text “Diagnosis of the Brazilian Crisis” (1966). It is interesting to mention that the author was the father of Kamala Harris, who is the 2020 vice president of the U.S.A. (see Meireles 2020).</footnote>

<footnote n="32">³² *Subdesenvolvimento e estagnação na América Latina* (1966).</footnote>

<footnote n="33">³³ With apologies to the many Latin Americans not mentioned, but see note in Kay (1989: 241) for just a few of the names that formed part of the vast and fertile discussions in the region, the majority of which were exiles, first moving and escaping from the repressive Brazilian military regime in 1964, and then repeating the process from Argentina’s, and Chile’s counterparts in the early 1970’s. In their great majority the exodus culminated in their reunification in Mexico.</footnote>

<footnote n="34">³⁴ In 1956 Furtado published a manuscript entitled *A Dependent Economy* (1956) [*Uma Economia Dependente*]. Its contents are part of chapters 2, 3, 4, and 5 in Furtado 1954 *The Brazilian Economy*.</footnote>

<footnote n="35">³⁵ See Tavares (1964) and Macario (1964).</footnote>
and confusing with an inherent “stagnation” tendency, was the structural and intrinsic mechanism of exclusion by certain capitalist economic formations which marginalize the majority of the population from the fruits of their technical progress. For the first time, Furtado’s overwhelming nationalistic tone questioned the role of foreign capital in the conformation of the debt pattern and its productive role in Latin America. This was a theme that would never again become peripheral to his intellectual and political activities.

ECLAC always viewed foreign capital as merely a transitional phenomenon in Latin American economies, required only to undertake the initial process of capitalization, given the low level of “savings.” Furtado felt betrayed by the United States’ promises and policies for the *Alliance of Progress* during his time at the forefront of development of the Northeast, which in part also explains his pessimistic tone following the Brazilian Military Coup.

Furtado started with an examination of the “external” factors that he believed crippled Latin American economies (U.S. policy), and then moved on to describe the “internal” limits of the industrialization process within Latin America. In this aspect, he argued that once the easy period of the industrialization process was over (consumption goods), substituting certain imports through local production, the next phase (capital goods) posed inherent limitations to incorporate a broader number of the population within the growth of the economy. Furtado considered that the substitution of capital goods imports with local production required an overly intensive capital function, which in turn stimulated higher level of imports. The other side of the equation showed that it absorbed a relatively low level of the labor force from the “backward” sectors of the economy. Aside from the fact that a higher capital-intensive function required a much higher level of savings, which the upper classes did not and would not supply, given their traditional historical behavior, the market size for its goods hindered the benefits of fully fledged economies of scale. As a result, everything seemed to work towards lowering the productivity level of the economy as a whole -not just the capital-intensive sectors- thus ensuring the stagnation process of the Latin American economies.

Cardoso and Faletto questioned the inherent stagnation tendency arguing that development is “dependent-associated” on the power alliances of the social classes involved, but capitalism will certainly continue to advance in the region, therefore the actual historical period did not necessarily mean the end of the continuation of the process and the transformation of the societies. The book by Cardoso and Faletto devoted plenty of space to describe the differing historical situations in Latin America, within and between countries and the economic formations, to present the case for the possibility of a “dependent-associated development,” showing therefore the fertile use of some of the elements of the Latin American Structuralism perspective. The theoretical consummation of this flank of the “dependency approach” meant

displacing the classical Marxist notions of classes to explain the political agents and process in question, which is a theoretical aspect that would be contested by Mauro Marini in the best part of his work and debates with Cardoso and others.

Furthermore, Cardoso’s perspective also interrogates and disputes the Gunder Frank’s thesis of the “development of underdevelopment” (1966) as can be seen by Theotonio Dos Santos’s own definition of a situation of dependence:

> dependency is a conditioning situation in which the economies of one group of countries are conditioned by the development and expansion of others. A relationship of interdependence between two or more economies or between such economies and the world trading system becomes a dependent relationship when some countries can expand through self-impulsion while others, being in a dependent position, can only expand as a reflection of the expansion of the dominant countries, which may have positive or negative effects on their immediate development. In either case, the basic situation of dependence causes these countries to be both backward and exploited. (Dos Santos 1978: 305).

But the above synthesis represents the undergoing theoretical transformation by the dependency approach dominated by its “Marxist” vocabulary. Marini’s work (1969, 1972) depicts clearly this aspect vis-à-vis, those who followed Gunder Frank’s vocabulary, and those within the Cardoso and Faletto camp. The political and intellectual period, marked by the Cuban revolution, especially once it was declared “socialist” in 1961, was under the presumed alternative that in the last instance countries in the Periphery had to leave the “capitalist” and “imperialist” trading complex if they were to develop their economies.

Retrospectively, in reference to the 1964 military takeover, Marini signaled that the “conflict would soon explode” (Marini 1969: 150) “between differing processes of surplus-value extraction -relative and absolute- between those highly concentrated capital sectors” and the small capital “technologically” backward ones.

Cardoso and Faletto’s interpretation of the period in political terms is similar although the tone and vocabulary differ radically:

> Therefore, development, from the moment that it is undertaken intensifies social exclusion and not just of the masses, but also of the economically significant social strata of the previous stage, whose principal alternative was to achieve some form of subsidiary vinculation to the modern monopolist sector and the political domination it installed. (Cardoso and Faletto 1975: 151-152)
Marini's thesis brought to light a specific reading of Marx's labor theory of value to explain the commercial ties with the international market and the peculiarity of the labor process and the "extraction"/exploitation mechanism dominant in the region. The reading in question forms the basis of his attempt to save an explanation for the use of the category of "underdevelopment" for the Periphery of the capitalist world economy.<fnref n="36" />

On the other hand, in its first versions, the theme and vocabulary of Gunder Frank on the mechanism of “appropriation of the surplus” generated by the “satellites” by the “metropolis” seems to be the product of today’s classic works of Paul Baran *Monopoly Capital: An Essay on the American Economic and Social Order* (1966) and *The Political Economy of Growth* (1957). The notion of “surplus” was not given much explanation or elaboration on the part of Gunder Frank, simply assumed as what could be siphoned off from the “satellites” in distinct historical periods by the “metropolis” given the power asymmetries and the imperialist strategy. The asymmetric contradiction: “metropolis” / “satellite” could also be an internal occurrence and differentiation within the same region or country. It was this mechanism that explained the oscillating manner by which a specific expansion or development of a certain region “underdeveloped” its “trading” or commercial counterparts.

There is sufficient literature in the Western-centric world that discussed, since its inception, Gunder Frank's thesis, empirically and conceptually. In the mid-1960s, part of those arguments seems to echo in Latin America, when the “Latin America's structuralist” stagnationist thesis was discussed. Among the proponents of the dependency approach a profound theoretical discussion arose as to the pertinence of the “heterogeneity” notion developed by Latin America structuralists and the power asymmetries in the countries and regions.

The regional articulation to the world market became the center of the analysis via the reconstruction of Marx's theory of value, therefore establishing a conceptual mechanism that could explain different and distinctive processes of “extraction” / “appropriation” of the surplus among and between diverse social formations, some capitalists or proto-capitalists and so-called “pre-capitalist” ones (the notion of “heterogeneity” underscored by Latin American Structuralism). Simultaneously, this would provide the conceptual vocabulary to explain the internal difficulties of the Periphery to continue its development path notwithstanding the “underdevelopment” condition.

When talking about the “central economies” Marini argued that the:

general rule has been the intensification of the exploitation and therefore, accumulation through the real cheapening of the labor force, achieved principally through the reduction of the value of the goods that are required for its subsistence (...) the constant devaluing of the labor force has constituted the decisive element in the production and

capitalist accumulation of the central economies (...) it is *not rigorously the case in the capitalist economies of the Periphery* (...) these economies have undertaken its process of accumulation fundamentally based in the production of absolute surplus value (...). In other words, the increase of the surplus labor time tends to be realized in fact without altering the necessary labor, that is by not reconstituting the value to the worker which he creates during this setting; therefore, what would seem relative surplus value, frequently is an anomalous case of absolute surplus value. (...) Lets make clear the point: the augmentation of the surplus time-work always signifies a greater exploitation of the labor force (Marini 1974: 114-115, my emphasis) [...] Still, it is possible to identify a mode of increasing surplus value, by which the reduction of the wage is not in correspondence with a real decrease of the necessary labor time. This case tends to be exceptional in the advanced countries, but embraces a generalized characteristic in backward countries, like Brazil, where it configures the super-exploitation of labor. Exclusively for the purpose of simplification, in the text, we use the expression of absolute surplus value also to denote this last modality. (Marini 1974: 148).

Kay's reading of Marini seems to uphold this interpretation that “super exploitation is not identical to absolute surplus-value” (Kay 1989: 145). Sotelo has recently underlined once again the political importance of the Marini/Cardoso-Serra debate at the end of 1970:<fnref n="37" />

> In contrast to Marini, Cardoso and Serra conceived of labor super exploitation as a conjunctural phenomenon and not as a process endogenous to capital accumulation in dependent economies. In the same manner as Ricardo (whose work Marx criticized thoroughly), moreover, they calculated the increase in the rate of profit in a way that conflated the rate of surplus value with the rate of profit. (Sotelo 2014: 544)

In Marini's interpretation, the Brazilian “military dictatorship” could be seen as the “inevitable consequence of the Brazilian capitalist development” in its “desperate attempt to open up new perspectives for its development” (Marini 1974: 97), with its repressive and exploitative labor laws.

Another way to read Marini's concepts of surplus-value and super-exploitation is not to question its “consistency” with respect to a supposedly Marxist tradition, as if the notion of the labor theory of value is something unproblematic.<fnref n="38" /> It is precisely this line of thought that the Latin American structuralist perspective developed, problematizing Marxist and neoclassical notions of value and price alike. It argued that the idea of power asymmetries and exploitation between and within production units and the labor force

<footnote n="36">³⁶ See accounts by Ourique (1994), Barreda (1994), Sotelo (2005, 2014), and Osorio (1995).</footnote>

<footnote n="37">³⁷ Marini (1978), Cardoso and Serra (1978), Serra and Cardoso (1978).</footnote>

<footnote n="38">³⁸ Dostaler (1980), Mañán (2012).</footnote>
did not require a general conception of value to explain certain specific inequalities and indefensible distributional patterns, and in that sense Marini's argument can be defended as a consistent manner to examine the labor process and power asymmetries in certain sectors and regions of the world (Sotelo 2014). In other words, this means that it is the whole classical political economy tradition which has to be overhauled and questioned. A reading of the period and its authors in a structuralist fashion converts the notion of power as its center of analyses and examines the differing mechanism by which social relations delineate and determine the possession in separation of certain of the conditions of existence of the productive units, mechanism by which a "market" and a commodity circulation emerges. In turn, this mechanism explains how the exchange process determines the distributional context-pattern between different agents. In this sense, there is no market in general and no necessary articulation of certain social relations to specific forces of production. These are transitional and contingent upon certain historical cultural traditions and specific processes. The heterogeneous nature of much of the "economy," both "developed" and "underdeveloped," belies the idea that there is a unique way to organize the productive process and achieve efficiency and equality.<fnref n="39" /> That is one of the central ideas that Latin American Structuralism developed theoretically through its historical analyses. Structuralism has always sustained that its perspective theoretically supersedes (in Hegelian fashion) the "classical" and post-Keynesian school of thought. It is worthwhile, then, to observe some of its vocabulary through the work of Furtado. By the mid-1960s Furtado said:

> Economic structuralism (a school of thought that arose in the first half of the 1960's amongst Latin American economists) has as its principal objective to take into consideration the importance of the 'non-economic parameters' contained in macroeconomic models. Given that the behavior of these economic variables depends mostly on these parameters they have to be the object of meticulous study. (Furtado 1967: 81)

Thus, the emergence of economic plans, for example, implied “land reforms” (Furtado 1969, Chapter XXIII), so that the “structural picture” could be modified and the social agents in question be freed to take up better remunerated positions within the social division of labor, which in turn would presumably favor a more equal distribution of incomes and resources. It assumed an advancement in the “knowledge of real structures,” so that on many occasions it demanded the supersession of “conventional economic analysis” (1969: 297). Furtado insisted that his perspective had “no direct relationship with the French structuralist school, whose main orientation was to give importance to the synchronic axis of social analysis and establish the ‘syntaxes’ of the disparities in social organizations.” (Furtado 1967: 80-81)

Traditional conventional economics cannot take account for, nor explain the existence of “structural obstacles” or “heterogeneous agents.” Therefore, the perspective rejects the notion of the existence of “homogeneous factors with the same technological time horizon” (Furtado 1969: 102). The problems of “underdevelopment” needed to incorporate ideas of a non-unified labor market and the simultaneous existence of diverse productive functions (heterogenous), depending on the “surface of the economic structure in which the productive agent is inserted” (Furtado 1969: 102). The theoretical emphasis, therefore, tries to destroy systematically the traditional appearance of these problems within separate compartments, be “economics” or “history.”

In a sense, Furtado rebuilt into a theoretical concept a notion that for Perroux appeared to be an *obstacle* or ephemeral phenomena that needed to be reformed:

> Structural inflation has adulterated the very notions of our science; that is to say, it has warped or broken the modern instruments which are necessary not only for the diagnosis, but also for the treatment or operations that are indispensable for its cure.” (Perroux 1957: 263)

Furtado’s theoretical deductions had already appeared in his description of the evolution of the development of Brazil during the early 1950’s in which he distinguished between “dynamic” and “static” notions of inflation, a consequence of power asymmetries between agents and sectors, which later with the work of Noyola (1956)⁴⁰, were to be coined as the “structuralist” conception of inflation, underlining power asymmetries between different agents-sectors in the economic formation, in other words *not a monetary phenomenon*.

In this sense, the 1954 book *The Brazilian Economy* shows the initial steps of a theoretical transformation that can also be found in Perroux’s idea that specific and distinct economic units have differing “arenas,” necessarily antagonistic towards each other. The so-called “equilibrium” or “relative peace” is the consequence of the hegemony of a definite productive unit or sector, which manages to establish a hegemonic role over a specific economic space and thus over other economic sectors (Perroux 1950). In other words, it is a question of the differing power asymmetries.

Retrospectively, developmentalists and their critics have to reckon with a post-WWII period of growth, which before the “lost decade” (1980) showed rates of “growth” that have not been attained since. But the real absentee, during this period, are the structural reforms required to promote the “development” of the region, which can be said are the main dark aspects of the history during the epoch.

<footnote n="39">³⁹ From a different perspective, notions of the “Pareto Optimum”, efficiency and self-adjustment equilibriums are difficult to sustain (Nadal and Ackerman 2004).</footnote>

<footnote>The historical transformations of land and fiscal reforms were never in the
⁴⁰ There seems to be a familiar resemblance of sorts in the Western-centric literature, Aujac Henri (1954). Noyola reviewed Furtado’s *A Economia Brasileira* (Noyola 1955).</footnote>
political agenda, distributional aspects that would have provided the much
need “demand” to defeat the so-called limitations of the “market.”

Ever since the mid-1960s, structuralism policies on development have
been evaluated in terms of its policy ideas towards the industrial sector, and
yet that aspect forms part of a much wider perspective of the role of the
state in transforming the social and political horizon. The differentiation
and apparent conflict between an “easy” phase of the import substitution
“industrialization” devoted to the elaboration of the consumer or non-
durable goods vis-à-vis the “difficult” stage that entailed the substitution
of the “machinery” or capital sectors forgets that the issue was related to a
change in the “composition” of the goods imported:

the substitution process does not propose the diminution of the global
quantum of the importation; the diminution, when it is achieved,
comes imposed by the restrictions of the external sector and not
by design. From these restrictions (absolute or relative) arises the
necessity of producing internally some of the goods that before were
exported. (Tavares 1964: 5)

The Periphery, tied to the limitations of its inherent external disequilibrium,
given the tendency of the deterioration of the terms of trade and incomes,
had to concentrate in developing certain sectors and geographical areas
that could be sustained by a series of closely articulated policies, what later
(Hirschman 1963) would coin in terms of “backward and forward linkages”
and the positive feedback all along the productive and sectorial chain.

These aspects also tend to cloud an issue, which is generally appraised
in terms of the respective levels that can be deduced from capital-output
and/or capital/labor ratios that present the heterogeneous horizon of
those economies. And yet the structuralist perspective emphasized that
“productivity” and investment had to be examined in the context of the power
asymmetries of the production units and regions involved, that required
specific analysis in every case, by which it practically sidestepped the so-
called Cambridge capital controversies and “re-switching” (Harcourt 1974)
of the 1960s in the Anglo-Saxon universities (Boinavosky 2013). The whole
notion of development implied a distinct version of thinking the “increase” of
“productivity” levels which meant organizing the labor process in a different
manner, as well as promoting changes in land tenure or “structural reforms”
in general: the dynamic view implied that even if some nations produced
at a higher cost some of its products instead of importing them, it would
generate in turn new production units and other necessities, changing the
patterns of production and the “demand” in question. This way of posing
the problems in ECLAC demonstrates once again that they had no need of
mainstream economics, nor proto-Keynesian visions: prices and incomes
were a contingent product of the power asymmetries between and within
certain sectors and regions. Structuralists assumed the undecidable dilemma

trade-off between a relatively higher level of incorporation of the population
towards the more productive of modern zones, or specific sectorial higher
wages; it was a dilemma that had no easy answer, whether in the “Paretian
optimum,” or “second best choice” (Little 1982) of the capital intensity
required, it simply could not be deduced in advance.

This vision for amplifying the radius and scope of modern “exchange”
and commodity relations was to be criticized by Marxist theorists (Bernal
Sahagun et. al. 1980),<fnref n="41" /> and the “dependency approach” alike. Simultaneously,
neoclassical criticisms during those years highlighted the investment
strategies but for different reasons.

The historical confrontation between, on the one hand, the “Dependentistas”
who claimed that structuralists aspired to develop “capitalism” aiding
a “comprador bourgeoisie” (a backward and corrupted capitalist class)
with profound state interventions, and on the other hand, neoliberal ideas
underlining high level of protection and certain costly experiments and “state
interventions” proclivities. This in turn limited the efficiency of the market
through the “crowding out” effect of private capital investment, which
obscured structuralists’ policies and views on the role of the “market” for
transforming Latin American governments strategies. It was argued that the
states’ intervention turned the whole process of investment and growth into
a vicious negative circle, which lead to high levels of external debts.

By the end of the 1970s, it was clear that “development” was not
synonymous with “growth,” implying among other things a series of reforms
or structural transformations, reducing income inequalities between
sectors, differences between various areas and regions, which could not be
conceived independently of recovering and institutionalizing some form of a
“democratic” regime. Thus, the 1980 lost decade of growth in Latin America
withstood all the political struggles and various transitional processes which
the region had to undergo to reach a form government based on a more open
and competitive “democratic” process (Foxley 1988).

Under the Sweltering Heat of the “Washington Consensus”

In the 1980s, with an increasing external debt (Bulmer-Thomas 2011,
Sunkel 1991), the Periphery would show declining rates of growth and
development. The international environment had changed drastically after
the U.S. left the dollar free of its gold counterpart, turning to relatively flexible
exchange rates. In turn, the higher petrol prices during those years created a
massive liquidity that was to be “lent” at very low interest rates to any country
willing to undertake the borrowing. An inflationary process surged that
was to leave the Periphery in a very weak situation to negotiate its external
debts. The Brady plans to exchange bonds for external debt (Bulmer-Thomas
2011) did not really solve the insurmountable payments with the level of

<footnote n="41">⁴¹ A book composed of a series of meetings in 1973-74 at the Autonomous University of Méxi-
co. See also Guillen (1975, 1976).</footnote>
interest rates then in process, which with the declining rates of growth of the industrial Centers generated a reduced level of imports from the Periphery. That explains the negative rates of growth during the so-called “lost decade” of the 1980’s, although it can be taken to mean until the end of the 1990s in some countries (Perez and Vernengo 2010).

The decline of state support for capital investment/construction (Ramos 1991) can certainly explain the lower rates of growth and development in the Periphery since the inception of the “Washington Consensus” drive and the appearance of the so-called “good economics” (Harberger 1995) and the “Chicago Boys” in our intellectual horizons; foreign direct capital did not occupy the vacuum left by the public and states’ subsidies to local industry; the childish argument about the “crowding effect” by state interventions and subsidies took many decades before it was questioned (Sunkel 1991, Ros 2014, Sosa et. al. 2013) given the disastrous consequences for local industrial sectors and the economy in general.

The process stimulating research and development in local industries has become one of the main aspects on which the state in the Periphery is beginning to concentrate. The so-called market forces have not been forthcoming with their benevolent fruits as the globalization and “Washington Consensus” initially promised. The great part of the investment and research is generally undertaken and “placed” strategically in “developed” economies (Thompson and Hirst 1996), leaving for the Periphery other less important tasks of the productive process in the best of cases when the direct foreign investment is undertaken by the big corporations.

The surplus of foreign currency to pay for the debt and interest in the current account, allowed the foreign exchange to be sent home by the great migration drive towards the industrial countries, given the absence of local alternatives: the Periphery was converted into a vast camp of labor export sanctuary for certain economic sectors in the “Center countries.” In contrast to capital flight and unregulated freedom by the “globalization” drive, the migratory forces were under the constant persecution and racist invectives of the local Center states, which was to be intensified once a downward growth tendency was perceived, lessening their capacity to increment the “price” of its labor.

Invariably in ECLAC a discussion arose as to the *mode* of sustaining and generating higher “productivity rates” and the industrialization process. It included a much-reconsidered reflection on the “openness” or otherwise of the recent decades of the “industrialization” drive, which as mentioned before was not just a “neoliberal” criticism. The trends and direction of the generation of endogenous local technological rationalities was the starting point with the work of Fernando Fajnzylberg (1983) *La Industrialización Trunca de América Latina*, underlining the importance of developing an

“endogenous nucleus” and “creative environment”<fnref n="42" /> with the corresponding social and political alliances to attract some form of foreign capital to intensify the accumulation drive, which really meant concentrating on sectors with high capital density, in tandem with a much more “open” and “free” environment heretofore in the region. Although the discussions linger on whether the “structure” of the final demand and incorporation of the labor force could be better intensified if industrial innovation strategies concentrate on the medium or smaller production units, the work of Sunkel in the early 1990s (*Development from Within: Toward a Neostructuralist Approach for Latin America*) offered an interesting alternative theoretical twist. The work is presented as a supersession of Prebisch’s and ECLAC’s postures on its vision of the articulation of the Periphery to the world markets and the corresponding industrialization process involved.

By then the region had to attune itself to what was called the “Washington Consensus”<fnref n="43" /> if it was going to receive some foreign lending or respite on the drain of its capital towards the industrial Centers. The hegemonic neoliberal regime came hand in hand with the imposition of the “Washington Consensus” and the myth of the globalization process. The “reforms” imposed, implied it had to open up its economies lowering all rates of levies on imports, sell and privatize most of its public utilities sectors, and generate a surplus in foreign exchange. This meant advocating an export drive that in the short run could only be undertaken by the primary sector which generated the commodity boom export, whose role in the last instance became the Center piece of a strategy reinstating the long run sustainable uncertainties on the nature of the transformation of the economies in question.

The opening up of the economies of the region to the world market with the promise to receive foreign investment soon showed a declining tendency, after an early surge by big international corporations to buy the heretofore state public utilities (“un-manageable”, “deficit”, and “unproductive” as the tedious neoliberal jargon sung), followed by the cyclical arrival of foreign capital searching for higher bond rates earnings in the Periphery.

Most of the adjustments and reforms consequent on the opening up of vast economic sectors to the international competition had also to do with the absence of macroeconomic “equilibriums” that were thought to be generated by the state’s uncontrolled expenditure, requiring important fiscal reforms that had also been a basic postulate of the structuralist modernizing strategy.

In certain arguments it was a question of the distance or “non-convergence” between Latin America’s growth patterns, specially of its industrial sectors vis-à-vis the benchmarks or model of the industrial Center growth rates; others argued that transmission of knowledge and research alternatives had

<footnote n="42">⁴² Rodriguez says, “enriched with the advances and understanding of the ‘endogenous’ technical progress and innovation” (2006: 367).</footnote>

<footnote n="43">⁴³ Cypher (1998), Marangos (2012), Kregel (2008).</footnote>
to be examined given that differing productivity rates could not be explained solely on factor productivity in question.

Sunkel (1991) was recuperating the structuralist vocabulary with the prefix “neo-structuralism,” emphasizing and questioning the critique by neoliberal ideas that its strategies were inefficient because it opposed an open market<fnref n="44" /> and the freedom to interact and compete among different countries. If Prebisch’s classic formula (Prebisch 1949b) stated that post-WWII process of development should take an “inward” direction for the Periphery after a century of an “outward” drive, Sunkel (1991: 23-59) generated an interesting twist to the issue. He argued that Prebisch’s dictum of an “inward looking development,” did not put sufficient weight on the particularities of accumulation, emphasizing the impulses that were generated by the expansion of the home market, and the replacement of local production by imports of goods previously imported.

This last formulation leads to a strategy, which rests in the amplification of the internal consumption and the local reproduction of the consuming patterns, industrial production and technology of the Centers, via the import substitution industrialization, fundamentally oriented by a narrow and skewed internal demand, configured by an internal unequal distribution of income. The industrial strategy *from within has very different implications* (...) in the words of Fajnzylber (1983), of an ‘internal creative effort to configure a productive structure that is functional to the needs and potential national specificities’ (...) internal creativity requires (...) a greater and contiguous participation and interrelation between different agents and incentives: big industrial plants linked to medium and small enterprises, scientific and technological infrastructure (...) Once the communication, interaction and fluidity of these actors, instances and levels of decision get consolidated as a national practice, it would have conformed integrally what is known as the ‘dynamic technological endogenous nucleus’. (Sunkel 1991: 64).

Therefore, Sunkel’s *Inward-Looking Development to Development from Within*, exhibit a search for a political and theoretical option to counter the so-called “globalization” and “Washington Consensus” policies.

It seems to displace the question of the home market's limitations to absorb technological progress, culminating in the idea of generating an endogenous technology change emphasizing reforms and structural transformations now viewed in terms of the new forms of articulating the local productive units and the potentially conceivable associations with the world market corporations.<fnref n="45" />

First of all, the “structuralist perspective” and its policies were never the evil green monster anti-market or state Centered that neoliberalism narrative claimed; the post-WWII economic environment of the period imposed on

some countries exchanged control and state subsidies for industrial and other concerns, which were not very different to what had occurred during the evolution and growth of the industrial Centers and inter-war years.<fnref n="46" /> On the other hand, the social and infrastructure development conform to the patterns observed in the industrial Centers own evolution as Chang’s (2002) book reminds Western-centric academia.

In that context (Fajnzylber 1983) proposed concentrating on developing the uppermost technological phases of industry, which generated an important debate with those whom argued instead for the support of the small and medium size production units, given its higher rate of labor incorporation to the productive circuit, which had a more positive effect on the economy as a whole and to the productivity level generated by each unit of capital or labor during the growth process.

*Development from within* recovered some of the various alternatives to think and propose the new ways to incorporate and defend for the Periphery the fruits of its own technological progress, transforming the once apparently closed circuits between local capital and their foreign counterparts, into a more hospitable and competitive environment were the “state” would use other types of leverage to sponsor the industrialization and transformation of the Periphery. What neoliberalism policies forgot in its “state Centered” invective in the region were the authoritarian and undemocratic regimes that existed during the 1970s and 1980s, which created many of the obstacles to the “developmental process” required for a higher “growth” drive to be undertaken. Neoliberalism’s policies were complicit with the Pinochets of the region that protected and sponsored so-called “individual enterprise” at whatever cost in terms of civil liberties.

Simultaneously by the end of the 1970s in Latin America, perceptions on the undemocratic regimes started to differentiate between “styles” or “approaches” of development (Gutierrez Garza 1994),<fnref n="47" /> as well as O’Donnell’s (1982) notion of “state bureaucratic-authoritarism.” They initiated challenging the then quite dominant conceptual horizon of the left in Latin American of the function of the state as simply an apparatus representative of the bourgeoisie “interests.”

Under the dictates of the period “Washington Consensus” we find a peculiar historical phenomenon occurrence in the Latin American region, especially if gauged by its intensity: the much vaunted process of inclusion and development, represents a period were the region intensifies the political and economic asymmetries, sponsoring the expulsion and exportation of labor: the much needed surplus of foreign exchange to pay for the region’s external debt had been resolved through the mechanism of the “exportation of labor force” to the Center countries.

<footnote n="44">⁴⁴ For the typical criticism, see Lal (1983).</footnote>

<footnote n="45">⁴⁵ See Leiva’s critique (2008).</footnote>

<footnote n="46">⁴⁶ Booth (1987, 1989), Peden (1989), Cerretano (2009).</footnote>

<footnote n="47">⁴⁷ Graciarena (1976), Wolfe (1976).</footnote>
Subsequently the social and political struggles in the region confronted the persistence of the neoliberal strategies, under a few political regimes which contest some of its main tenets: Venezuela, Brazil Argentina, Bolivia, and Ecuador, which more recently have presented an off course with vengeance with the return of Bolsonaro and the Macri regimes in Brazil and Argentina respectively. At least rhetorically if not in real terms, Bolivia, Ecuador, and Venezuela strove for new policies with a more "distributive" perspective until the recent changes, sponsoring an intensification of certain rates of growth and incorporating the inclusion of the local populations in their development objectives. But we must evaluate these alternatives in the context of what has happened with the rise of a whirlwind of neoliberalism and its consequences. The level of inequality in the region has not changed practically in the last twenty years. Sectorial and geographically debates hinge on its amplitude (ECLAC 2010, 2015).

Weak rates of growth globally again seems to be a basic limitation but also the structural reforms in the region have been delinking the productive processes internally by sale to foreign enterprises of certain productive units, which sponsored “commodities boom” primary exports displacing backward and forward linkages, by prioritizing the agricultural-export boom- without its “industrial” partner side.<fnref n="48" /> Also the land tenure and family agriculture have not received the subsidies or collateral for its sustainability; in some countries, agriculture has had to withstand the most retrograde of policies attempting to appropriate and concentrate the land in fewer units; its forms of possession in separation of some of its conditions of existence do not present any “modernizing” tone in any sense. On the side of its external account, the region presents a much more stable and consistent behavior, having tackled with success the 2008 financial meltdown in the U.S.

ECLAC's much professed “hour of equality” (ECLAC 2010) corroborates much of the prognoses of a weak growth rate and yet relatively stable macroeconomic parameters. Reforms are needed to enhance the development in the region. But the elements which new policies should incorporate have to do with transforming the actual forms of possession in separation of the production units, looking for alternatives in community projects and other forms of state and cooperatives participation. Macro demand management policies are not enough to change the actual logic of neoliberal “deregulations” which brought about a surge of economic, and much more dangerous, social polarization forces, marginalizing extensive sectors of the population, which previously had been slowly incorporated into the life of the nations.

## Concluding remarks

The long trajectory of Latin American theoretical discussions presented have not concluded. I tried to describe a certain peculiarity, emphasizing its distinctness with respect to Western-centric discourse, and given the absence of a privileged or sacred perspective, construction of theoretical bridges can be undertaken. Recently, under the authorship of Pérez (2015) “neostructuralism” and “heterodox” economics are placed as discussants of each other as to their viability of their articulation. Whatever the resulting synthesis which we might reconstruct, Latin American “structuralism” finds itself placed in the difficult situation of having to choose between a discourse that understands the “economy” as simply portraying diverse and contrasting “elasticities,” or an antagonistic power asymmetric space between agents. Much (time!!!) was lost by Prebisch himself, who did not close the dilemma until one of his last books (Prebisch 1981) *Capitalismo Periférico: Crisis y Transformación*, underlining the heterogeneous nature of the agents in question, and the power asymmetry, which engendered them. But there is still some hope: Western-centric post-Keynesianism has offered something in that direction: “Contrary to neoclassical theory, and contrary in fact to what many Marxist and classical economists claim, there is no necessary inverse relationship between real wages and profits rates” (Lavoie 2009: 122), a basic tenet of the deterioration terms of trade which surrounds the work of Prebisch, which equally can be bolstered by the “explorations” on “disequilibrium”, found in the Backhouse and Boianovsky book (2013), as well as the reappearance of the “heterogeneous agents” (Hoover 2012).

But the political reforms required in the region require reconstructing a much disarticulated “playing” field, which means that we must transform the way by which agents, regions, and countries “possess in separation” the conditions of their livelihood; it’s not just the question of resuscitating the role of the “state,” it also has to do with finding ways of incorporating the local populations into their own reconstruction: which brings us back full circle to the initial question of what we mean by “development.”

<footnote n="48">⁴⁸ CEPAL-Cimoli (2007), Cimoli (2005), Cimoli y Dosi (1995), Cimoli, Primi y Vergara (2005), Cimoli y Stiglitz (2008), Cimoli, Nelson y Stiglitz (2006), Cimoli, Dosi y Stiglitz (2008a), Dosi, Fagiolo y Roventini (2008), Dosi, Orsenigo y Labini (2002).</footnote>
Time precedes existence

Prigogine (1990: 183)

Time is the substance of which I am made

Jorge Luis Borges (1996: 148)

Introduction

This *Introduction* is followed by three sections, *A Crucifixion on a 'Cross of Gold'?*, which examines Prebisch's first steps to explain the role of the "gold standard" aiming to generate alternative policies for the Periphery while the "White-Keynes" project for a new financial organization at Bretton Woods is in process, which is continued with the description of the theoretical strategy to jettison "classical political economy", *A Theology for Liberation*, and finally, *The Eternal Return: Time and Asynchrony*, that underlines the culmination of Prebisch's ideas on the cycle and time, or to use a pompous term, the "ontology" in question.

The chapter hopes to display an episode in the intellectual life of Raúl Prebisch, namely, the years following his dismissal in 1943 as head of Argentina's Central Bank until a few days after his departure in 1949 from Mexico City to Santiago de Chile, without having concluded the schedule of lectures promised. In Chile he was to draw up a report as a consultant for the ECLAC, a period just prior to the *Manifesto* (Prebisch 1949b).<fnref n="1" />

On October 18th, 1943, Prebisch received news that he had been fired from the Central Bank. This, as Dosman points out, was "the single most painful experience of his life" (Dosman 2001: 89), and one that Prebisch himself mentions repeatedly in interviews throughout the 1980s (Magariños 1991, Pollock et al. 2001, González del Solar 1983). By December 1943, Prebisch had already made an important decision to seek financial backing to research and write a book entitled *La Moneda y el Ritmo de la Actividad Económica* (Prebisch 1943).<fnref n="2" /> Argentina's publishers rejected his proposal, but Prebisch went ahead with his plan "while he was teaching at the faculty" (Dosman 2001: 94).

<footnote n="1">¹ The title of the original text, *El desarrollo económico de América Latina y sus principales problemas (The Economic Development of Latin America and its Principal Problems)* is not qualified by the term *some* (“algunos”) when cited by many specialists. Did Prebisch himself change the title, or was it due to an error that could not be altered, given the lightning speed with which it was published everywhere? I am in debt to Dr. Víctor Urquidi for giving me a copy of the original manuscript.</footnote>

<footnote n="2">² I would like to thank Edgar Dosman for a copy of this 10-page manuscript.</footnote>
But today's access to the content of much of Raúl Prebisch work and "published" texts during the following year's requires an explanation. Writings such as *Conversaciones en el Banco de México S.A.* (1944b), were dismembered in two volumes, hence the reference "Prebisch 1944b in Prebisch 1991c and 1993", and *La Moneda y los Ciclos Económicos en la Argentina*<fnref n="3" /> from 1944c, another dismembered text of the period, is referenced as appearing in Prebisch 1991c and 1993. The manuscript *Conversaciones* can be found separated in Prebisch 1991c and 1993. *Conversaciones* are talks he gave to a series of public officials of the Mexican government with whom he agreed they were not to be made "public." On the other hand, *La Moneda* (1944c) incorporates substantial parts of *Conversaciones* (1944b). Editors mention that Prebisch allowed for this incorporation. The publication of *La Moneda* (1944c) is presented in turn dispersed as mentioned into specific fascicles representing specific lectures by Prebisch (1991c and 1993), but includes only 17, excluding fascicle no. 1 ("Introduction," 11 pages) which can be read in Mallorquin (2006). In fact, *La Moneda y los Ciclos Económicos en la Argentina* is actually a full contained text of 342 pages. Editors were Julio Gonzalez del Solar, Pascual M. Martínez, and Juan Carlos Menescaldi. The volume contains the shorthand notes taken from Prebisch's lectures which were revised under his supervision. In accordance with Argentina law 12,371 of June 1944, editors expressing no profit motive hoped to recover costs. However, notwithstanding the 1944 year as date of "publication" by *Rotaprint Argentina* fascicles 14 to 18 were published during the first weeks of January and February 1945. But the latter fascicles can also be found in Prebisch's 1944b. In today's terms, there was an incredible amount of "copy paste" work.

It is my aim here to present the development of Prebisch's critiques and reflections on economic thought. I will touch only obliquely on his ideas about economic policy and industrialization, a subject that merits consideration but which can be observed discussed throughout most of the book. One of the assumptions of my argument is precisely that Prebisch's thinking displays a certain historical unity in this period. This can be analyzed independently of the intellectual periods immediately preceding and those that follow our analysis. The period between his demise in 1943 as the General Manager of Argentina Central Bank and his decision to take up initially a post of consultancy at ECLAC in 1949, should be seen in a context fraught with very important political transformations in Argentina with the rise of Perón to power. The Faculty of Economics of the University of Buenos Aires also bears the brunt of changes in process and Prebisch was not an absentee in the discussion for the reform of the curricula of the discipline by offering an alternative, although "losing" out to the proposals of the then governing body of the Faculty in 1948 (Arana 2016). Simultaneously, as his theoretical evolution would show, he consciously rejected any necessary "oligarchical"

ties in thought and action with the landowning class: in September in 1945 he published in Spanish the 1924 conference he offered in Australia to the Henry George Club de Melbourne (*The land issue*, Prebisch 1945d) showing his lifelong disgust for the landowning class and parasitical practices in Argentina and Latin America. But the inner conflicts in the Faculty of economics, with the "Peronist" movement in process, convinced him to leave the Faculty in 1948 despite his favorable avowed posture for a "responsible" intervention in the economy (Prebisch 1945 in Prebisch 1991c: 447).

I will not go into a comparison between the theoretical vocabulary of the period 1943-49 and *subsequent vocabulary*. However, the existential and political events that prompt the Prebisch of the *Manifesto* familiar to many is a period I take as "read."

In a nutshell, the Prebisch of the *Manifesto* (1949) and the theoretical reflection about the peripheral economy (and therefore the very notion of the cycle) that gradually took shape thereafter, was not predetermined by his earlier thinking. In other words, the ideas that Prebisch had been developing, and was carrying around in "his luggage" when he decided to accept the post of consultant to the ECLAC in Chile suggested a *different* theoretical path. We shall see that Prebisch had other theoretical options and may well have gone on developing them.

Joseph Love has mentioned that Prebisch read an article by Charles Kindleberger discussing the decline of the terms of trade suffered by the primary producing countries *vis-à-vis* the industrial ones and suggesting that "production factors for agriculture and raw materials [be] transferred to industry" (Kindleberger in Harris 1943). Indeed, Prebisch avoids these issues in *Conversaciones* (1944b) and criticizes Kindleberger (Prebisch 1944b in 1991: 197), for assuming that the rest of the world was predestined to buy much more from the United States than what it sells, rather than the other way around. Using Argentina as corroboration, even called into question his own statements about Kindleberger.<fnref n="4" /> However, we have to remember that the discussion at the time was focused on the international stabilization plans (the White and the Keynes Plans were already circulating) and the "scarcity of the dollar" (Mikesell 1994). Even more important, for Prebisch, the theoretical explanation for the different "income elasticities" was not relevant as a subject for reflection. During those days, he was examining economic theory in general, and although the subject of the "worsening" primary product prices had been "reported" and "assessed" by his own pen since his student days, he had as yet no theoretical explanation other than the classical one of the cyclical rise and downfall of prices.<fnref n="5" />

<footnote n="3">³ I am grateful to Dr. Washington Ashwell, who kindly sent me a copy of the manuscript.</footnote>

<footnote n="4">⁴ "Which does not mean he might not be right" (Prebisch 1944b in 1991c: 198).</footnote>

<footnote n="5">⁵ An example should it be needed: here the topic discussed is the tendency to disequilibrium in the "balance of payments" in 1936: "I am referring to the fall in international prices. If international prices go on falling year after year, the balance of payments, which tends to balance out after the first fall, is again unbalanced with successive falls (...) The case I am considering</footnote>
Indeed, it is rather “odd”, as Love puts it (1996: 118), that no paternity of
any kind is granted to Kindleberger as one of the precursors of the Prebisch-
Singer thesis about the worsening terms of trade suffered by primary exporting
countries *vis-à-vis* the industrial countries. Moreover, if we assume that these
issues were foremost in Prebisch’s reflections on economic thought, then we
can rightly talk, as John Toye and Richard Toye (2003: 445) do, of a certain
“confusion” in his ideas about the mechanism of the “worsening in the terms
of trade.”

My own interpretation differs in that, rather than talking of “confusion,” I
aim to show that Prebisch found himself in a process of theoretical transition,
or at one of the several theoretical crossroads throughout his life, and which
would in fact be frozen. But Toye’s approach fudges analysis of his reflections
before the *Manifesto* with the latter. In other words, at ECLAC emerges once
again a strategic shift in theoretical vocabulary, quite possibly the result of
a crucial event, as well as the atmosphere of the “Cold War” and prudence
and calculation produced by international organizations, especially ECLAC,
hounded by the United States.<fnref n="6" />

This would seem to have been the case because Celso Furtado, a colleague
of Prebisch’s in the early days of ECLAC, has said that prior to the famous
manuscript, Prebisch circulated a “first text” and that, before discussion began,
“it was abruptly taken out of circulation with no explanation,” aspects of which
can be observed in our account further ahead. However, the text known
worldwide today was presented without further preliminaries and reached
“my hands in mimeograph in its finished form” (Furtado 1988: 53). In fact,
we do not know what happened to the “first text,” but the new manuscript
was, in Furtado’s words, no longer on the “defensive”; it was an open call
for industrialization, in spite of pointing out the “limitations.” According to
Furtado,<fnref n="7" /> it is the appearance of Singer’s classic article (1949)<fnref n="8" /> which explains
the turnabout and the beginning of the transformation of Prebisch’s theoretical
vocabulary between the two texts, as Toye (2003) tends to validate.

In Dag Hammarskjold’s celebrated phrase<fnref n="9" />, was this the period when
is different. It involves the hypothesis that price levels fall continually over a number of years”
(Prebisch 1991c: 566), “setting off a new wave of gold exports. That is the characteristic feature
of this phenomenon” (Prebisch 1991c: 569).

Prebisch started “skating on thin ice?” Notwithstanding it did not prevent
him supporting the presentation of the report commissioned from him for
the Quintadinha Meeting in Brazil in 1954 by the OAS’s Inter-American
Economic and Social Council. It is no secret that, aside from calling for his
“head,” the United States government attempted unsuccessfully to prevent
ECLAC being set up after the three-year trial period. There can be no better
corroboration of this attitude and policy than when Eugene Black, then
President of the International Reconstruction and Development Bank,
shouted from the rooftops “Who does this man think he is coming here and
giving us advice?” (Santa Cruz 1984: 467).<fnref n="10" />

A Crucifixion on a “Cross of Gold”?

Several years after leaving the Central Bank, Prebisch claimed it had been a
“true theoretical liberation” (Prebisch 1993: 411).<fnref n="11" /> It is symptomatic that right
from the beginning of the *Conversaciones* (1944b) he draws the limit and extent
to what he was willing to criticize of the “monetary doctrine”: “Why not seek
our own principles when the traditional principles themselves are undergoing
a severe process of critical revision?” (Prebisch 1944b in 1972a: 255).

Although *La Moneda* (1944c) composed and written some months *after Conversaciones* incorporates much of the content of the latter, critical positions much more fundamental to economic theory can already be perceived. These positions Prebisch may already have held, but not yet conceptually elaborated, and they therefore did not form part of what he expounded previously in Mexico.<fnref n="12" /> The theoretical strategy of *La Moneda* still spoke of “adaptation” and the “modification of theories,” as well as “formulating new ones” about the “reality” of his “country” (Prebisch in Mallorquin 2006: 54-55). Indeed, a year later he was still trying in some way to defend the limitations of the traditional doctrine regarding the Periphery, referring to it in the image of “geographical charts” or “old maps” that should be put right contrasting them to specific realities (Prebisch 1945 in 1991c: 443).<fnref n="13" /> Then, in *La Moneda*, he does not suggest breaking with the traditional explanation of “monetary phenomena of big countries” (Prebisch 1944c in 1972a: 256), since they “coincide” (albeit only “partially”) with the phenomena of peripheral countries.

I should stress that the discrepancy (not to say theoretical “ambiguity”)
about the usefulness or otherwise of traditional theories, is also present in

<footnote n="6">⁶ There is no better account of these years than Celso Furtado (1988) and Burger (1998).</footnote>

<footnote n="7">⁷ “It was the appearance of H. Singer’s work on the terms of trade that enabled people to think globally about the problems of underdeveloped countries, or about the global terms of worldwide exchange between primary and industrialized products, which is translated into global terms of trade. Singer took the relationship between the developed and undeveloped countries as a central hypothesis. It was a description of imperialism under another name, in a manner of speaking. (...) Prebisch read Singer’s text and it must have had a great effect on him because, after tidying up the first version, he worked intensely on a second, introducing a quote by Singer, and the system of exchange data” (Furtado 1998: 85-86).</footnote>

<footnote n="8">⁸ On the vicissitudes of Singer’s article, see Toye (2003).</footnote>

<footnote n="9">⁹ Dag Hammarskjold had said: “Indeed, Prebisch is skating on thin ice, but I fully support him”
(Magariños 1991: 144).</footnote>

<footnote n="10">¹⁰ At the meeting in Quintadinha in Brazil in 1954; Black did not notice that he had the head-phones on and was therefore “audible to his neighbors but not to himself” (Santa Cruz, *ibid*.).</footnote>

<footnote n="11">¹¹ During the period under analysis, Prebisch mentioned his departure from the Central Bank several times (Prebisch 1993: 242-243).</footnote>

<footnote n="12">¹² “our ideas and adapting to them the development of a national monetary policy” (Prebisch 1944b in 1991c: 228).</footnote>

<footnote n="13">¹³ A “task of revision” accentuating “its major successes” and amending “its many errors” (Prebisch 1945 in 1991c: 444), Introducción al curso de economía política (Prebisch 1945) and Concepto preliminar de la circulación de ingresos (Prebisch 1945a). It is necessary to note that the first of these texts appears in Prebisch (1991c), and the second chapter in Prebisch (1993).</footnote>
his appraisal of the gold standard. If, on the one hand, this was not “about ditching the gold standard as a monetary regime in our country, but about finding a way to adapt its workings to our needs, to our economic and monetary reality” (Prebisch 1944c in Mallorquin 2006: 54),<fnref n="14" /> on the other, Prebisch also stated that the classical theory of the gold standard “is not universal.” Such a regime represented the “experience of the Center,” of “industrial and creditor” countries, and not “the experience of the countries in the Periphery” (Prebisch 1944c in 1993: 19).<fnref n="15" />

These discrepancies reflect an ongoing theoretical transition. It is in *La Moneda* (Prebisch 1991c: 286)<fnref n="16" /> where Prebisch expounds for the “first time” the theoretical explanation about the cycle while simultaneously trying to displace previous elaborations. This also explains why his arguments against Kindleberger in *Conversaciones* (1944b) are absent in *La Moneda* (Prebisch 1944c). Both narratives were elaborated in 1944: *Conversaciones* preceded *La Moneda*. The new theoretical issues also excluded any kind of rapprochement with Kindleberger’s thesis, apart from the fact that Prebisch already had a new

appreciation of the international ensemble,<fnref n="17" /> despite being aware of one of the factors pointed out by Kindleberger to explain the “worsening” primary produce prices, for example *a la Duesenberry* on the low price elasticity of demand for consumer goods which he now begins to consider.<fnref n="18" />

Prebisch then was claiming he was closer to the “classics,” since classical economists aimed to observe “reality,” “scientifically” (Prebisch 1944c in 1991c: 286) in contrast to those who just merely replicate it.

There is a theory then (an explanation) of the workings of the realm of capitalism under the influence of a conceptual element that would survive throughout the period: the economic phenomenon should give priority to the examination of money, which is the “technical yardstick for measuring values,” and has an importance that is “absolutely fundamental in the life of society” (Prebisch in Mallorquin 2006: 55). By the same token, the *descriptions* of the evolution of the cycle that had for some time been devised under the assumption of a “system of communicating vessels” are clearly inadequate:

> For this reason, the theory is incomplete, and incorrect on fundamental points, for one part of the system could not have been theorized about while disregarding the other fundamental part. Which is why I believe that the international theory of the gold standard has to be revised to give it a general character covering the Center, the countries close to the Center, and the countries of the Periphery. (Prebisch 1944c in 1993: 19).<fnref n="19" />

The first part of *La Moneda* (1944c) sets out under various hypothetical scenarios (rising or falling imports, domestic expansion of income, or lack of it, and so on) a series of examples illustrating the development of the economy and the consequences of the circulatory process of income and its reproduction. It points out the sectors’ interdependence, assuming different rates of income generation and reproduction in each case. Depending on the phase of the cyclical process observed (contracting or expanding), Prebisch insists that “external or internal influences cause expansion and contraction phenomena greater in scope than the numerical significance of the initial impulse that causes them in the first place” (Prebisch 1944c in 1991c: 250). In every hypothetical model he points out the shortcomings of classical monetary theory (Prebisch 1944c in 1991c: 274). But what he really wants

<footnote n="14">¹⁴ The stance of *Conversaciones* (Prebisch 1972a) and *El patrón oro...* are similar: “to perfect,” “to correct,” “not to destroy” the gold standard in “our countries” (Prebisch 1991c: 233).</footnote>

<footnote n="15">¹⁵ Elsewhere Prebisch says: “As a system the gold standard has been automatic only for certain countries. It was not so for England, who managed it until the First World War. The concept of the gold standard’s automatism is a dogmatic aberration of the kind so frequent in economic matters. (...) the gold standard has been a highly directed system, not by a single authority, by one government, but by a group of bankers led by the Bank of England (...) directed (...) from the standpoint of British interests, and even more so from the standpoint of a social class with great economic and political influence in Great Britain, and extremely concerned to maintain domestic monetary stability, despite the consequences that might result from it for international economic activity” (Prebisch 1944c in 1991c: 317). At around the same time, Nurkse was saying something similar, but from a different theoretical perspective: “The policy of offsetting is intended not to raise total spending but to prevent it from falling. (...) Yet the amount of imports, and hence the gap in the balance of payments, will necessarily be greater than if the country allowed depression to spread to its whole domestic economy. (...) Under the gold standard, not only were things expected to take their natural course, but a country in the situation described was even expected to accelerate the spread of depression by pushing up its discount rates and contracting credit as gold flowed out. No doubt the gold standard’s ‘rules of the game’ tended to reduce the loss of gold to a minimum; but they did so only by speeding up the propagation of depressions. The offsetting procedure described is precisely the opposite of that which would be called for under the gold-standard’s rules of the game. (...) Even in the best days of the gold standard, of course, the rules of the game were not always strictly observed. There is some statistical evidence of “neutralization,” on the part of the Bank of France and the Bank of England in the nineteenth century. In the inter-war period neutralization of gold movements by central banks became, in fact, the rule rather than the exception. (...) Though neutralization by central banks was very common in the inter-war period it was nearly always frowned upon; it was widely regarded as wicked and disreputable behavior. (...) it is time to accept it as a normal and respectable procedure” (Nurkse 1945: 11-13).</footnote>

<footnote n="16">¹⁶ We should stress that Prebisch states that this is “a hypothesis that should be checked” in other words, “the nature of the income circulatory process at the monetary Center to and from the countries of the Periphery [which] would explain by it [self] the generation of the cyclical global process, with no need for any other reasons, which is not to say no other extremely important reasons exist” (Prebisch 1944c in 1993: 30).</footnote>

<footnote n="17">¹⁷ And the fact that the Bretton Woods Meeting and Agreements had already taken place. See Mikesell (1994).</footnote>

<footnote n="18">¹⁸ “When the personal incomes of the employed population rise -especially those in the relatively high-income bracket- they do not consume more food, but greater quantities of manufactured products” (Prebisch 1944c in 1991c: 271).</footnote>

<footnote n="19">¹⁹ A year later Prebisch said it was not necessary to look for “two orders of theories”, a cycle in the Periphery, and another in the industrial Center, “as two phases are involved, two different aspects of the same international phenomenon. But it is inadmissible to apply the interpretation of one phase to the events of the other, to the obverse, (...) domestic and international economic activity manifested in a continuous process of circulation of income” (Prebisch 1945 in 1991c: 446).</footnote>
to introduce into his models is the factor of *time*. The time it takes the various different productive sectors to generate new income implies thinking about the time they require to expand or extend productive activity.<fnref n="20" /> The notion will mutate into a much more complex phenomenon in the following years, which in my reading subsumes Keynes’s concept of “uncertainty.”

To the time issue, or that of the rate of income circulation and reproduction, Prebisch adds the thesis that “income growth” in various countries is a function of profits. In other words, this phenomenon would explain the concentration and holding of gold crossing their borders.

One of the first phenomena to consider in explaining the serious flaws in the gold standard scheme is the different import coefficients among countries. In other words, gold holdings do not depend on a country's opening-up or interaction with the international market. They depend instead on the distribution of “total profits” (“réditos totales”) between “domestic activity” and “foreign trade” (Prebisch 1944c in 1991c: 290).<fnref n="21" /> This is displayed by Prebisch with numerical models for countries with similar, then dissimilar, productive structures, but different import coefficients.<fnref n="22" />

The sterilization of foreign currencies or gold in the upward phase, may diminish the effects of continuous drainage of gold reserves, but do not totally prevent it, particularly if the “gold standard regime” is followed to the letter.<fnref n="23" /> This arrangement, which in the long term concentrates gold within certain borders, contradicted the idea that gold was merely a vehicle for carrying out transfers and supporting foreign trade. Prebisch indorses theoretically the existing asymmetry through the idea of the “expansion coefficient,” which, according to him, is not the same as the concept of the Keynesian “multiplier” (Keynes/Kahn), as they are each “based on substantially different theories” (Prebisch 1944c in 1991c: 350). Whereas for Keynes the “multiplier” is a constant indicating the amount by which investments or original income have been reproduced, Prebisch holds that his idea of the “expansion coefficient” has “limits.” These “limits” have nothing to do with the amount of “saving” assumed by Keynes’s theory (Prebisch 1944c in 1991c: 364), but

with the “time” elapsing between the beginning of a productive cycle and the generation of fresh income. This period is determined by two elements: “the number of times the money changes hands to produce the income” (i.e., its rate of circulation), and the “amount of money lost at each exchange in imports payment” (Prebisch 1944c in 1991c: 358).<fnref n="24" /> What this attempts to explain is, on the one hand, the loss of income leaving the circulatory process via imports in economies like Argentina’s, and on the other, the rate at which different economies generate their own income. It is precisely the time factor that explains a certain asymmetry, or “disparity” in Prebisch’s terms, in the concentration of gold: economies with low import coefficients that “take a long time” to put back a proportion of their income into the international market, which generated “gold holdings” within their borders, progressively amplified over various cycles. Thus, Prebisch suggests that it is the relationship between “total profit” (the rate at which they are generated) and foreign trade, that explains the process. If we accept that, in “the upward phase” of the cycle “exports grew faster than imports, and the balance of payments was positive, whereas in the downward phase exports fell more rapidly than imports” (Prebisch 1944c in 1991c: 320), then the different rates of circulation of the income and amounts leaving some borders would explain the circular accumulative process.<fnref n="25" />

Given his theory “the greater the profits, the greater the gold holdings,” it is understandable that Prebisch would be suspicious of industrialization policies per se in shoring up growth and dealing with oscillations caused by the gold standard (Prebisch 1993: 210). Hence his reference to Alejandro Bunge and his group, and difficulties of adapting to the regime despite a clearly defined monetary policy in traditional terms: “It is often believed amongst us that Argentina’s industrial growth would make us less vulnerable to the effects of these international disturbance factors. The belief is totally without basis. I will demonstrate (...) that industrial growth could make us less vulnerable” (Prebisch 1991c: 279), only if Argentina takes into account political and monetary aspects to counteract the “negative aspects” operating under the classical “gold standard.”

Prebisch is clearly not interested in the different demand/income elasticities or demand/price elasticities (nor even the terms of trade). Countries, it would seem, are differentiated based on their relationship of global rather than sectoral exchange with reference to a financial Center and

<footnote n="20">²⁰ “The *time* in which the process is completed -its *duration*- is of fundamental importance, and the explanation of this point is of interest in gaining a better grasp of the international mechanism and its flaws” (Prebisch 1944c in 1991c: 280).</footnote>

<footnote n="21">²¹ “The incremented income which stays in each country is proportional to its profits [réditos] (...) "it can be proven that the increment of income which stays in each country at the equilibrium point, have between them the same relation (...) That is, the incremented original income is distributed proportionally to the profit of distinct countries considered" (Prebisch 1944c in 1991c: 294).</footnote>

<footnote n="22">²² “Therefore, as gold is distributed worldwide according to countries’ incomes and not according to their foreign trade, countries with lower returns and higher import coefficients are put in a much more vulnerable position in terms of fluctuations in foreign trade and balance of payments.” (Prebisch 1944c in 1991c: 296).</footnote>

<footnote n="23">²³ “There exists therefore incompatibility between an expanding domestic policy or maintenance of domestic economic activity in a downward phase caused by falling exports, and the monetary stability inherent in the gold standard regime” (Prebisch 1944c in 1991c: 315).</footnote>

<footnote n="24">²⁴ “The economic cycle is thus manifested in an alternate movement of income, contracting and expanding in the circulatory process. (...) Whatever the origin of domestic income, it gradually evaporates and is transformed into income of other countries. (...) The extent of which this substitution takes place has great influence on the evolution of domestic economic activity” (Prebisch 1945a in 1993: 217).</footnote>

<footnote n="25">²⁵ “I can thus prove numerically what I have so often said, namely, that in the downward phase, imports fall less steeply than exports. In this way, the remainder of money is consumed, or the gold and foreign currencies from the positive balances of the preceding phase -which amounts to the same thing in this case” (Prebisch 1944c in 1991c: 354).</footnote>
its effects. Although *La Moneda* and the later *Concepto...* (Prebisch 1945a in 1993) both conceive of the rate and circulation of money and income in terms of the payment “habits” of the “public” (companies, individuals, the State), and/or of the varying number of “transactions required by each economy to obtain a given amount of income” (Prebisch 1945a in 1993: 223), Prebisch’s text (*Concepto...*) avoids any reference to the “quantitative theory of money” mentioned in *La Moneda* (Prebisch 1944c in 1991c: 400). Perhaps even more significant than the continuous process of theoretical elaboration is the fact that he does not mention his concept of the “expansion coefficient” in contradistinction to Keynes’s “multiplier.” As we shall see further on, this notion would mutate into the concept of the “exit coefficient” (Prebisch 1949a in 1993: 464)<fnref n="26" />. Prebisch is clearly still not totally comfortable because he does not stop there. More radically, a year later in 1946, at the *First Meeting of Technicians on Problems of Central Banking of the American Continent*, he stated:

> I am disturbed by the arguments that free competition leads to general
equilibrium and to the most appropriate distribution of resources and
income within society. I see no correspondence between these abstract
propositions and the reality of the economic world. (Prebisch 1946 in
1993: 227)

But by this stage he already perceives that the ontological feature of
capitalism is essentially stochastic:

> I have reached the conclusion that all movements in the economy
taken as a whole are cyclical in character (...) in the broadest sense, (...)
a succession of undulatory movements rising and falling (...) The cycle
(...), both in the Center and the Periphery, is the characteristic way
the economy grows -the capitalist economy has grown in no way but
cyclically. (Prebisch 1946 in 1993: 226)

## A Theology for Liberation

The *theoretical* work undertaken in the coming years will be devoted to a “dynamic examination of the economy,” because then it was still “in its beginnings” (Prebisch 1945a in 1993: 228). Between August 1946 and early 1947, Prebisch devoted himself to analyzing Keynes’s classic work, *The General Theory of Employment, Interest and Money*. It was during this analysis that he made his final theoretical transition of the period.

Though the “practical solutions” proposed by Keynes are indisputable,
this does not necessarily mean agreeing with his critique of political economy
or its doctrinaire construction,<fnref n="27" /> less still with the “dogma” his followers

have made of his work, on the basis of which they devise “new theoretical
constructions ever further removed from reality as, in my opinion, is Keynes’s
own construction” (Prebisch 1948 in 1991c: 504).<fnref n="28" /> Prebisch insisted that
anticyclical economic policy should be defended from a different theoretical
perspective. Wherever he could, Prebisch emphasized the divergence
between himself and Keynes. During 1947 Prebisch wrote a series of articles
analyzing the elementary concepts to Keynes that would later become
his *Introducción a Keynes*<fnref n="29" /> (almost a glossary of sorts). Prebisch did not
interrupt the flow of Keynes’s ideas with his own or others’ criticisms. He
also excluded from the book the more scathing of two negative comments
about Keynes made in the original articles;<fnref n="30" /> only the following was left in:
“What correspondence do these theoretical reasonings have with reality?
Keynes’s book cannot be said to present a systematic analysis of facts to verify
his theories” (Prebisch 1993: 258).

He leaves for another occasion the matter of whether or not “Lord
Keynes” carried off “the rational explanation of economic movement, and
elucidated the principles it obeys” (Prebisch 1991c: 454).<fnref n="31" /> Yet the strategy
he was later to embark upon is already very clear here: looking when he
could on analogies or “coincidences” between Keynes’s ideas and “classical”
thought, missing no opportunity to point out that the “multiplier decreases”
(Prebisch 1991c: 454) in an open interrelated economic complex due to the
fact that some income filters abroad to pay for imports. Prebisch is in fact
here reminding us of the asymmetric mechanism he developed concerning
the trading relations under the gold standard.

<footnote n="26">²⁶ I translate “coeficiente de salida” as “exit coefficient,” and its contrary movement (“coeficiente de afluencia”) as “influx coefficient.”</footnote>

<footnote n="27">²⁷ “Keynes has also left behind practical solutions that are independent of his theory and that can be admitted or rejected, while wholly abstaining from it. These practical solutions are of great importance and have not yet been superseded. (...) You will say that there is contradic-</footnote>

<footnote>tion in my theoretical position in judging Keynes, and my respect for some of his practical propositions. There is no such contradiction, since accepting an interpretation of reality to- tally distinct from Keynes's own does not imply seeing the positive side which in the absence of a better one, certain of his practical propositions could have, within certain limitations" (Prebisch 1948a in 1991c: 505).</footnote>

<footnote n="28">²⁸ Much of Prebisch's disparagement with Keynes has also to do with the then ongoing process of the construction of the famous IS-LM "workhorse" that was to dominate economics in the Center countries. Hicks's original diagram posed the vertical axis signaling interest rates and the horizontal one as total income with a downward-sloping curve (IS) representing investment in terms of changing levels of interest rates, and savings in terms of income, which is intersected by an upward-sloping curve (LL) for the money mass demanded which is presumed fixed, subsequently redefined as LM; see De Vroey and Hoover (2004), for more details see chapter "How Economics Forgot Power".</footnote>

<footnote n="29">²⁹ *Introduction to Keynes.*</footnote>

<footnote n="30">³⁰ "Thus, our author states it categorically, though offering no arguments to prove it other than the ones he has just succinctly mentioned" (Prebisch 1947 in 1991c: 476). See the end of the first paragraph of the *Introducción a Keynes* (Prebisch 1947: 57). It is no coincidence that this jab appears at this juncture of the argument, since it relates to the theme discussing the multi- plier. But as we will see, Prebisch's critique of Keynes takes another spin in subsequent years: "his general theory of employment seems to unfold upon a plane independent of the cyclical movement" (Prebisch 1993: 260).</footnote>

<footnote n="31">³¹ "[Which] I intend to consider briefly in a more encouraging work on the Keynesian system and the economic cycle" (Prebisch 1991c: 454).</footnote>
As his account of Keynes develops, Prebisch emphasizes the undulatory wave pattern and cyclical form of capitalism, highlighting its fluctuations, a phenomenon that seems not to have been central to the analysis, says Prebisch, for it is left until the end of the book. However, basing himself on Keynes's idea of "oscillation around an intermediate position," so as to avoid consideration of major serious fluctuations, he advances his own ideas that the cycle and its undulatory form should be seen in a historical, institutional sense, not as a "natural law" (Prebisch 1991c: 482). However, Prebisch's critique of classical political economy in general and Keynes's in particular, had already been set up:

> To explain the phenomenon of continuous disequilibrium in reality, Keynes devotes a couple of pages at the end of his work, -the so-called notes on the cycle- in which he makes no use of the results reached in his theoretical discussion at all. He seeks the explanation of the cycle in another vague form. He said that the ascendant phase suddenly collapses with the falling of capital returns, without explaining his reasons nor the relation it has with the phenomena studied in the general theory; that is, as with classical economists, we find that his fundamental theories are unsuited to explaining cyclical reality. (Prebisch 1991c: 506)<fnref n="32" />

By mid-1948, in *Apuntes de Economía Política*<fnref n="33" />, shortly after finishing his book on Keynes, Prebisch was shifting the conceptual vocabulary that might almost be described as a “quantum leap.” He proposes no less a task than rebuilding “classical” or “traditional economics.” The initially timid vocabulary of the course - “to see things with one’s own mind” and “to detach oneself from certain foreign theories” (Prebisch 1991c: 495)- is succeeded by a full-frontal assault on the whole apparatus of economics as a discipline. He stresses that only by:

> undertaking a profound revision of classical theory and devising a new theory, rather than attaching a theory on to it (...), might we find the theoretical elements to guide us effectively and wisely in practical action. (Prebisch 1993: 325)

in other words, to reach through “economic policy” that which is nonexistent in reality: “economic equilibrium” (Prebisch 1993: 326). As a discipline (and even morally) economics was in “serious crisis” due to its excessive “exaltation of personal interest as the supreme regulator of economic activity” (Prebisch 1991c: 496). As a “scientific discipline” it was “incipient” and “indecisive.” As in earlier days, its critical situation had to be surmounted through reformulation: an “out-and-out effort to renovate it from its very foundations,” as it cannot “rationally explain” the way:

economic movement occurs, the how’s, why’s and wherefores of economic phenomena. And if political economy has not been able to teach us that, wrongly we could find in her the indispensable resources to act on a reality we don’t know (...) therefore the economy is insufficient to encompass, describe and explain the problems of reality to give us the means to act upon her with effectiveness. (Prebisch 1991c: 496).

If we are to understand how he arrived at his theory of the cycle, we should deal with the brief excursion Prebisch made into the history of economic thought. First and foremost, Prebisch needed to deconstruct the discipline in order to synthesize and conclude the theory he had been devising, and to stress the importance of certain notions that “classical” thinking deemed marginal: time, money, and profit.

Therefore, there is an explanation and a history of the distinct ruptures which the economic discipline has undergone: the first was “provoked by Marx” (Prebisch 1991c: 497), which is essentially a critique on the embarrassing nonexistence of the “inequalities” and “instability of the economic system” but which through the use of an “inconsistent” “theory of labor,” became an easy target of classical economics, despite the latter’s own limitations to explain these. With Walras and Pareto comes the reconstruction and a “superior phase,” whose precision and elegance through mathematics shoved the “body of the doctrine,” away from the real world, which was supposedly its task to explain, giving us the “means to act over her” (Prebisch 1991c: 497).<fnref n="34" />

Although Prebisch perceived with pristine clarity differences within the “compact body of doctrines,” he keeps the term because according to him there is a series of underlining principles which authorizes its use: (1) the profit incentive under the free forces of competition drives to an “equilibrium” situation and an “optimum of production”; (2) the social distribution compatible with this “optimum” should not be interfered with by ethical or political questions, despite its importance; (3) the absentee state.

Despite the “logical brilliance,” the “classical” doctrine has not been “able to explain what happens in (...) the imminent cyclical reality” (Prebisch 1991c: 499): “Historically the cycle is the typical form of growth of capitalism (...) There is no resting point: it ascends to descend, and it descends to ascend once again. (...) In the movement, there is no equilibrium point; the movement is a succession of continuous disequilibrium (Prebisch 1991c: 499).

The search for profit generates the logic of growth described, and which does not achieve “equilibrium.” Classical economics cannot be “reconciled” with a reality which is “cyclical.” An “optimum of production” is impossible given the upturns and downturn phases and the structure never reaches “full employment” properly speaking, rather “productive forces” are squandered.

<footnote n="32">³² Introducción al curso de dinámica económica (1948a in Prebisch 1991c) was the first chapter of *Apuntes de Economía política...* (Prebisch 1948d). All the following chapters appear in Prebisch (1993).</footnote>

<footnote n="33">³³ As mentioned in the previous note, *Apuntes de Economía Política* (1948d) has been published in parts in Prebisch 1991c and 1993.</footnote>

<footnote n="34">³⁴ “Building on thin air” (Prebisch 1991c: 497).</footnote>
The instability cannot be reconciled with the doctrine of classical economics and least of all with the way it postulates the “distribution of income” hence the “crisis of political economy”:

it's ineptitude to explain the manner of being and production of the economic phenomenon. In other words, if the disequilibrium of the cycle constitute an inherent evil of the capitalist process, wrongly could we explain the cyclical reality with the classical doctrines which sustain that the process is conducive towards equilibrium. (Prebisch 1991c: 500)

This does not mean that those doctrines have ignored the phenomena described, but rather that their crisis derives from not confronting the conundrum “scientifically” which meant “jettisoned” the theories “which do not achieve a satisfactory explanation of the reality” (Prebisch 1991c: 500). Adopting instead certain “attitudes” when facing phenomena like unemployment, indicating “rigidities” or “resistances” on the part of the reality like the downturn of salaries, thus eluding confronting the logical faults of the “premises.” Even Keynes, despite his efforts to liberate himself of those doctrines, presents a “type of explanation imminently classical” but here the rigidity lies in the notion of “the rate of interest,” which does not decrease sufficiently to counter the “decline in the marginal efficiency of capital” (Prebisch 1991c: 501).

Another theoretical attitude assumed by the classics relates to blaming the consequences of the “excesses” and depressions of the cyclical process on the “abus[e] [of] the monetary system” (Prebisch 1991c: 501), or state intervention, and/or customs duties.

The third attitude which Prebisch underlines among economists with respect to the undulatory reality is the “admission of the existence of the cycle” but “attributing” to it explanations sustained on the notion that it is a product of “alien elements,” “cosmic elements”; “psychological” alterations which produce optimism or pessimism: that is “alien factors to the economic system” (Prebisch 1991c: 502). The latter liberates the economists of an explanation because apparently it is a phenomenon external to the discipline.

Therefore, Prebisch's first step was to devise a historical explanation for the various ruptures in economic thinking, and in the process pointing the theoretical incongruities of “classical economics,” while simultaneously sharing with Keynes's term when referring to neoclassical economists. As a second step, Prebisch would summarize this in his theory of the capitalist cycle, as indeed his own evaluation of the discipline demanded: an “absolutely endogenous theory of the cycle where it is repeated systematically through the very factors inherent in the system” (Prebisch 1949a in 1993: 458).

As we will see later, Prebisch would suggest that the “general cycle” theory should be devised without:

the false sense of universality from which the major cycle theories have so far suffered, concerning themselves exclusively with the phenomena of Centers, blithely ignoring what is happening on the Periphery, and thus closing off one of the most fertile paths of research. (Prebisch 1949a in 1993: 414)

But the theory must have a “general” character because the capitalist economy grows in a cyclical manner:

> The capitalist economy has grown but in an undulatory form, has moved but in this form and any perturbation to the whole gives an undulatory form to the movement. Therefore, if the cycle is the form of growing and moving of the economy and if the economy moves incessantly in this form, it would seem that all the phenomena of the whole economy, not only those of occupation and production but also those of distribution, should be integrated within a general dynamic theory. (Prebisch 1949a in 1993: 414).

Therefore, it presumes economics should not enclose itself in a “partial field” nor an “specialty”; the explanation of the “overall” economic movement requires including the variations and transformations of the “distribution of the income of the collectivity” (Prebisch 1949a in 1993: 415) during the cycle. Hence the distribution cannot be seen outside the context of the cycle, “outside the undulatory movement” (ibid.).

Prebisch then hoped that the:

> cyclical theory becomes the *only* dynamic theory of the economy, or rather, is the *only* theory of the overall movements of the economy. I do not believe that the overall movements can be the object of a static theory which pursues positions of equilibrium. I believe that the analysis of equilibrium points has no other fruitful field than the study of partial phenomena of the economy. But when it's about the general phenomenon, the equilibrium analysis can only be useful in the initial phases of work as an instrument of work, which serves us to compare reality with that which could be the image of a state of things completely distinct than the one that rules in the world of capitalism. (Prebisch 1949a in 1993: 415, my emphasis)

In spite of its “veneer of logic,” “classical” doctrine was not “able to explain to us what happens in an eminently cyclical (...) reality” (Prebisch 1948a in 1991c: 499), the result of the engine of capitalist growth through profit-seeking businessmen, and irreconcilable with classical economics, which describes the process in terms of “equilibria.” An “optimum of production” cannot exist when the expanding and contracting phases are systematic. The system approaches, but never reaches “full employment,” there being a waste of “productive forces” instead. Instability cannot be reconciled with the body of doctrines of classical economics, still less so with the manner whereby it