Picture: THINKSTOCK
Picture: THINKSTOCK

AS AFRICA struggles with the challenges of region-building, it is worth considering the legacy of Raul Prebisch, a visionary Argentinian economist who contributed tremendously to the building of Latin America 60 years ago. Prebisch was born in 1901. He studied and taught economics at the University of Buenos Aires before serving as undersecretary of finance and agriculture. At 34, he became the first director of Argentina’s central bank, serving a military-backed oligarchy, which later became discredited. His world view was heavily influenced by orthodox western economic thinking.

After a military coup in 1943, he was dismissed and ostracised by the regime. Almost like an intellectual Che Guevara whose motorcycle travels across Latin America transformed him into the world’s most famous guerrilla leader, Prebisch spent six years in the wilderness travelling more comfortably than his famous compatriot across the region as a banking consultant.

He eventually found succour in the Chilean capital of Santiago, where he served as the United Nations (UN) Economic Commission for Latin America’s (ECLA’s) executive secretary from 1950 to 1963. The US had been determined to shut down the ECLA, which it regarded as an unwelcome rival to the Washington-based Organisation of American States’ Economic and Social Council. Prebisch mobilised political support across Latin America for its governments to take ownership of the body and to stare down the US juggernaut. His ECLA produced country studies of such high quality that he convinced regional governments to embarrass Washington into keeping the organisation alive.

Before joining the ECLA, Prebisch had achieved prominence when he presented his seminal report, The Economic Development of Latin America and its Principal Problems, to the newly established organisation in 1949. He rejected neoclassical international trade theories that argued that such commerce benefited all countries due to the comparative advantage each enjoyed. The ruinous effects of the Great Depression of the 1930s on Latin American economies were a formative experience for Prebisch. He was unconvinced international trade would reduce the income gap between rich and poor countries. He urged Latin American countries to overturn the international division of labour in which the northern "centre" exported manufactured goods to developing countries, the prices of which continued to increase, while the southern "periphery" exported agricultural goods and minerals to the north, the prices of which continued to decline.

Led by Prebisch, ECLA "structuralists" proposed a strategy based on import-substitution and employing protectionist high tariffs on manufacturing imports and a tax on primary exports to encourage the creation of a larger industrial sector. The organisation’s two-yearly economic surveys sought to push Latin American governments to break the vicious cycle of low productivity, low income and low savings by increasing industrialisation through restructuring domestic imports and production. Prebisch’s approach was to find "historical moments" to use new ideas to transform institutions into movements for structural change. He believed fervently in the role of the state in social engineering and economic planning.

Working 18-hour days at the ECLA with a team of some of the continent’s finest economists, Prebisch’s disciples spread the heretical gospel of "structuralism". They questioned whether growth would necessarily result in improved income distribution, and called for greater external savings to support regional development.

Prebisch also focused on trying to create a Latin American Common Market, often complaining that Latin America’s 20 states operated in "watertight compartments". He urged co-operation in areas such as iron and steel at a time when agriculture-dominated regional trade was a derisory 7%. He preached specialisation based on regional planning as a way of industrialising through the economies of scale of a larger market.

Though critics often dismissed Prebisch’s ideas as "impractical" and "socialist", he consistently promoted the role of the private sector, international trade and foreign capital. His success at the ECLA, though, may have contained the seeds of its own failure. Having sold structuralism as a theory for economic development, these ideas did not translate into success in the real world of practice, leading to regional governments losing faith in the new religion. Prebisch later blamed the failures on ineffective implementation by incompetent Latin American governments, in contrast to the success of countries such as South Korea.

Today, the increasing economic success of China and Brazil has rendered Prebisch’s binary north-south divide somewhat anachronistic. He died in 1986 at the age of 85, with The Economist dubbing him "Latin America’s Keynes". In the end, Prebisch was a tragic prophet whose vision for regional integration and development in Latin America went largely unfulfilled. It was, however, a heroic failure borne not out of a lack of ambition, but of power.

Adebajo is executive director of the Centre for Conflict Resolution and co-editor of The EU and Africa.