The new export growth model. A revision from the perspective of Prebisch

ESTEBAN SERRANI; OSCAR UGARTECHE

Hensinki

Conferencia; Transparencys Tipping Point: The 7th Financial Transparency Conference; 2017

Financial Transparency Coalition

The general hypothesis this work aims to prove is that from Prebisch?s perspective, the contemporary crisis is not just a financial crisis but a crisis of the second-generation export growth model, the so-called New Development Theory (Banerjee, et al, 2005), which over time has been considered as empirics rather than theory (Mookherjee, 2005; Banerjee, A., Bardhan, P., Basu, P., Kanbur, R. and Mookherjee, D., 2005). By way of first specific hypothesis, it is maintained that the new export growth model is based on the principle that economies shall grow as a result of their exports and the most developed nations that have over-consumption might absorb their import demand in an indefinite manner. That is, the purchasing capacity of the economies that show over-consumption would be endless. We would like to show that the level of over-consumption is finite and that, by way of a proxy variable, this is expressed in the restructuring of the main destination of the foreign trade of emerging powers which increase their intra-regional ties, while also having high levels of internal credit for consumption, partly financed by the more developed economies, with the international reserves accumulated in the export economies of emerging countries. Thus, in mature economies imports grow at greater pace than the increase of productivity and salaries resulting from the increased financialization of their economies. Within this general framework, we can trace the social impacts of the social changes brought by this export-based growth model. By way of second specific hypothesis, in order to export dynamically the model undertakes the following as a condition: an increased concentration of income in the top deciles and, at the same time, a deterioration of salaries vis-à-vis income. That is, salaries should increase less than the growth of productivity, thus reducing the cost of the final product, strengthening the concentration of income and increasing the financialization of the economy. Nevertheless, already in the 21st century, the problem of this dragging crisis has mostly shifted to the central countries, apparently because the most dynamic economies are those of emerging countries and because commodity prices are defined by operations in the derivatives and futures markets rather than by market fundamentals (UNCTAD, 2008: 19-48; UNCTAD, 2011).