ABSTRACT
This chapter discusses the development of the structuralist interpretation of the balance of payments constraint by Raul Prebisch, Celso Furtado and Juan Noyola at the United Nations Commission for Latin America (CEPAL) in the 1950s. Prebisch’s approach was based on the foreign trade multiplier approach, deployed already in his 1944 lectures delivered in Buenos Aires. The foreign trade multiplier was also part of Jacques Polak’s monetary approach to the balance of payments at the International Monetary Fund (IMF). Prebisch postulated a relation between relative income elasticities of imports and economic rates of growth, which Anthony Thirwall would develop in detail in the 1970s and 1980s. In several CEPAL reports and in essays collected in his 1961 book, Furtado worked out the notion there are two distinct bottlenecks restricting the rate of growth in developing countries – domestic saving and the shortage of foreign exchange. During the 1960s that view would become known as the ‘two-gap’ approach to economic growth after models designed by Hollis Chenery, Ronald McKinnon and others (Chenery and Bruno 1962; Chenery and Strout 1966; McKinnon 1964). Noyola advanced in his 1949 thesis the concept of ‘development disequilibrium’, which would play an important role in the 1957 CEPAL report about Mexico’s balance of payments, produced by him and Furtado.
