North-South Model

[Raul] Prebisch and Singer launched modern Dependency theory. According to this school of thought the terms of trade must continually deteriorate for the LDCs due to differences in the demand for primary and industrial goods. Some of these theorists consider themselves Marxists. Others do not. Some of them attribute the problem to differences in supply as well as demand. It has been pointed out, too, that more rapid technological change in the DCs can cause unequal exchange to occur. They also claim that, because more labor is used in LDC agriculture than DC agriculture, LDCs suffer in the international tradeof the agricultural products of the Northern temperate zone where the DCs are located for the agricultural products of the Southern tropical zone where many LDCs are located.

Some add to this model the operations of multinational corporations based in the DCs; the cheapness of labor in the LDCs arising out of the nature of their labor markets; and the lack of transmission of the best technology to the LDCs. They believe that international agencies like the World Bank and the International Monetary Fund promote the exploitation of the DCs via the LDCs. This type of theory is called a North-South model.

Return to Global Economy