declining sectors (agriculture) and consequently often argue in favour of
government intervention to manipulate relative prices (tariffs, taxes, multiple
exchange rates) and to push the allocation of scarce resources (finance, capital,
foreign exchange) into priority areas (industry).
The case for promoting the industrialization of the periphery rests partly on
a historical analysis of trends in the terms of trade and predictions about their
likely future path. The selection of the starting year in calculating the terms of
trade is important. Prebisch’s late nineteenth-century data showed a long-term
decline in raw-material prices. It is difficult to determine, however, how much
these declines were losses to primary product producers and how much a
reflection of sharply falling international freight costs during the same era. The
fall in international commodity prices after the 1950s was biased by the very
high prices of commodities in 1950 induced by the Korean War (1950–53) and
their subsequent collapse. Changes in quality and product innovation and their
impact on the value of manufactured exports are also difficult to account for (as
noted later by Chang). The income terms of trade can improve (that is, total
export revenue can rise) if productivity and output in export industries
increases faster than the decline in the price of those exports.
Structuralists argue that growth in the periphery countries depends on
demand from the core countries. Akin and Kose (2007) used a dataset of 106
countries for the period 1960–2005 to examine the nature of these global link-
ag es. They found that the North has played a dominant role in explaining
growth dynamics in the rest of the world, but also that the more successful
developing countries (‘the emerging South’) are breaking away decisively
from this dependence. Between 1960 and 1972 the emerging South was heav-
ily dependent on Northern markets and 60 per cent of its exports consisted of
primary commodities. Between 1986 and 2005 the share of primary exports
from the emerging South declined to 17 per cent and the share of manufactur-
ing exports increased to 74 per cent. There has also been an increase in trade
flows among the emerging South countries, with economic interactions
between the North and emerging South evolving from dependence to interde-
pendence (Akin and Kose, 2007:25). A clear indication of this has been in
recent years when despite recession and stagnation in the North many South
developing countries have sustained rapid growth.
The slowdown in manufacturing growth is one of the key explanations for
the end of the ‘golden age of capitalism’ after 1973. For many developed coun-
tries (and even developing countries) the 1980s saw not just a slowdown in
manufacturing growth but a situation of deindustrialization (a fall in the share
of manufacturing employment or an absolute fall in such employment).
Deindustrialization for some represents a pathological state preventing the
economy from being able to achieve its full potential of economic growth and
full employment. This view was developed in relation to weaknesses of British
manufacturing in 1970s and 1980s (Singh, 1977) but later seemed relevant to
similar processes in much of Latin America and Africa over the 1980s and
1990s. Deindustrialization is now occurring in several developing countries at
Economic Growth and Economic Structure since 1750 179