Carlos F. Díaz-Alejandro
This essay presents a framework for viewing North-South economic relations which, it is hoped, will facilitate positive analysis and will contribute toward normative prescriptions regarding the desirable trend of North-South economic relations in the future. The primary point of departure is the viewpoint of the South as it faces the whole range of its relationships with the North.
Possible social and economic typologies of Southern nations, or less developed countries (LDCs), are explored first, as international economic links differ in importance among groups of states. Key features of the political economy of the Northern nations, or developed countries (DCs), are also examined. The arena of interaction between North and South is then discussed, focusing on fundamental asymmetries in the working of the international economic system. This is followed by more detailed analysis of international commodity and factor markets. The implications of such analysis for international aid and monetary reform are discussed toward the end of this essay.
The economist will quickly recognize the basic approach of this essay: the analysis of different types of international markets, viewed as more or less desirable mechanisms for handling economic interdependence among nations. The desirability of such mechanisms will be judged not only on the basis of their purely economic efficiency but also on whether they help or hinder the achievement of other national goals as developed in the first essay in this volume. The point is to search for mechanisms to handle international interdependence that are compatible with the pursuit of a variety of purely national goals. The search is motivated by the assumption that two apparently contradictory forces will continue to dominate
Carlos Díaz-Alejandro is a professor of economics at Yale University in New Haven, Connecticut An earlier draft of this essay benefited greatly from criticisms received during a conference held at the Brookings Institution on 10-12 January 1974. Detailed comments from C. Fred Bergsten, Benjamin I. Cohen, Richard N. Cooper, William Diebold, Jr., Gerald K. Helleiner, Albert O. Hirschman, Lawrence B. Krause, Charles P. Kindleberger, Vahid Nowshirvani, and Gustav Ranis are also gratefully acknowledged. Many of the ideas in this essay were either picked up from the work of Stephen Hymer or were developed as a reaction to his stimulating thought. This essay is dedicated to his memory.