ABSTRACT
Along with economic growth, fluctuations in economic activity may be transmitted from country to country through the operation of the international economy. Since economic fluctuations appear to be a characteristic feature of industrial economies, and since the nineteenth century saw the emergence of a number of these economies closely linked with each other through trade, labour and capital flows, it is not surprising to find evidence of a tendency for economic expansion and contraction in one industrial country to spill over into other industrial countries. But the spill-over effects of these fluctuations did not stop there. They also spread to primary producing countries, producing excessive fluctuations in the prices and volume of their exports which, through their influence on these countries’ foreign exchange earnings, placed severe constraints on their capacity to generate sustained economic growth. Potentially more damaging to the long-term prospects of growth in these countries, however, is the claim that the spread of modern technology has been associated with a secular tendency for primary product prices to decline relative to the prices of manufactured goods. If true, this movement of the terms of trade against primary producers meant that they were, and are, faced with the possibility of a long-run decline in their export real incomes.
