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staples theory

  A theory which suggests that national economic and social development is based upon the export of unprocessed or semi-processed primary resources (staples). Although the theory has long historical antecedents, and different, frequently truncated, versions of it have been presented (e.g. economic base theory), staples theory is most closely associated with the work of the Canadian economic historian Harold A. Innis (1894-1952).

In Mel Watkins\'s (1963, p. 144) classic exposition of Innis\'s staples model, exports of primary resources function as \'the leading sector of the economy, and set the pace for economic growth\'. In the optimistic version of the theory (particularly associated with neo-classical economics), this sector then stimulates diversification through its various linkages, eventually leading to full industrialization (Baldwin, 1956). In the pessimistic account, and one now associated with the so-called Canadian school of political economy, the economy is ensnared in a staples trap (Williams, 1983). That is, diversification is blocked for reasons such as an export mentality among producers, the domination of the economy by a few, large and often foreign-owned multinational corporations, and a truncated industrial branch-plant structure that minimizes the development of higher order control and research functions (Britton and Gilmour, 1971). The result, to use Innis\'s terminology, is that staples-producing regions become hinterland economies, the fates of which are strongly tied to events in more powerful foreign metropoles (cf. mercantilist model). Of these two different accounts, it is the pessimistic version that is most persuasive (Clement and Williams, 1989).

A principal task of researchers supporting the pessimistic version has been to establish the causal relations between the nature of staples production, on the one hand, and the economic instability and dependency found within staples regions, on the other. Four principal connections have been noted. First, that the market for staple commodities approximates more closely perfect competition than that for manufactured goods. As such, staples regions are price-takers in a market where price volatility is the norm and, in particular, the bulk of crude exports that are the basis of most staples regions tend to be very vulnerable to demand shifts in markets that are both highly competitive and price-elastic. Second, because domestic sales of staples are relatively small, international market volatility has direct and strong impacts, thereby producing the characteristic boom and bust economy of resource-producing regions. Third, for a variety of reasons (technological advances that reduce resource inputs for production, the growth of synthetic substitutes, and low long-run income elasticities of demand), the terms of trade for primary commodities are increasingly less favourable to staples-producing areas. Finally, resource production tends to be undertaken by big, often foreign-owned, multinational corporations. Spry (1981) argues that this is a direct consequence of the large capital expenditures and production indivisibilities associated with staples. However, the presence of foreign multinational firms in staples regions creates a number of potential problems including: the appropriation of economic rents because of the undervaluing of resources by the local state, and done to induce local investment (see regional alliance); the failure to process the resource prior to export because resource extraction is only one stage within a vertically integrated corporation that often prefers for reasons of internal control to process elsewhere (cf. integration); the low levels of technological innovation and development; the lack of local control; and finally, a weakened ability to control trade through explicit policy because of the high degree of intra-corporate transfers.

In sum, there is a very direct relationship between the type of trade in which a staples region engages, and its level of social and economic development. Note that this is not a connection that traditional (neo-classical) economic theory would ever make. It would say that staples nations, such as Canada, most benefit from specializing and trading in those commodities for which they have a comparative advantage, primary resources. But in drawing upon this theory, as Innis (1956, p. 3) wrote in the late 1920s, orthodox economists \'attempt to fit their analysis of new economic facts into … the economic theory of old countries … The handicaps of this process are obvious, and there is evidence to show that [this is] … a new form of exploitation with dangerous consequences\'.

To circumscribe such exploitation, Innis developed his staples theory in such a way that it was peculiarly suited to the \'new economic facts\' (Barnes, 1996, ch. 8). That theory brought together three types of concerns: geographical/ecological, institutional and technological. In turn, this triad became the basis for a theory of staples accumulation, one that begins with the metropole and the dominant technologyfoundthereinproduction,communications and transportation. That technology, in turn, determines the type of resources demanded by the metropole, and those sites within the periphery that are potentially exploitable. In fact, the centrality of technology to Innis\'s scheme has led some commentators to conclude that \'methodologically, [the] staple approach was more technological history writ large than a theory of economic growth in the conventional sense\' (Watkins, 1963, p. 141). This cannot be entirely true because it is also necessary that the right kind of geography be present on which that technology can gain purchase. Unless, say, quantities of a resource are found at a location, or the site is accessible, no resource will be extracted regardless of the technology. As Innis (1946, p. 87) wrote: \'Geography provides the grooves which determine the course and to a large extent the character of economic life.\' This is not geographical determinism, however, because geography and technology work together. Moreover, they can only work together provided that the third leg of the triad is also present, an appropriate institutional structure. Investing in staples production in the periphery requires large amounts of capital expenditure because of the high \'minimum indivisible cost[s] that must be met if production is to be undertaken at all\' (Spry, 1981, pp. 155-6: cf. core-periphery model). Only two institutional forms are capable of raising sufficient funds to cover such costs, the state, which provides basic infrastructure, and large corporations which meet the immediate costs of plant and capital equipment.

When the right technology comes together with the right geography and the right institutional structure, the result is accumulation of \'cyclonic\' frenzy. In this way virgin resource regions are transformed and enveloped within the produced spaces of the capitalist periphery. Such intense accumulation, however, never lasts, and because of the very instabilities of staples production, sooner rather than later investment shifts to yet other staples regions, leaving in its wake abandoned resource sites and communities. Studies of staples economies have been mostly carried out in Canada, and often bring together issues of the physical environment, local community development, and global economics (see local-global dialectic; and essays in Britton, 1996; and Barnes and Hayter, 1997). (TJB)

References Baldwin, R.E. 1956: Patterns of development in newly settled regions. Manchester School of Economics and Social Studies 24: 161-79. Barnes, T.J. 1996: Logics of dislocation: models, metaphors and meanings of economic space. New York: Guilford. Barnes, T.J. and Hayter, R., eds, 1997: Troubles in the rainforest: British Columbia\'s forest economy in transition. Victoria, BC: Western Geographical Press. Britton, J.N.H., ed., 1996: Canada and the global economy: the geography of structural and technological change. Montreal and Kingston: McGill-Queen\'s University Press. Britton, J.N.H. and Gilmour, J.M. 1971: The weakest link: a technological perspective on Canadian industrial underdevelopment. Background study 43. Ottawa: Science Council of Canada. Clement, W. and Williams, G., eds, 1989: The new Canadian political economy. Montreal and Kingston: McGill-Queen\'s University Press. Innis, H.A. 1946: Political economy in the modern state. Toronto: Ryerson. Innis, H.A. 1956: The teaching of economic history in Canada. In M.Q. Innis, ed., Essays in Canadian economic history. Toronto: University of Toronto Press, 3-16 (first published in 1929). Spry, I.M. 1981: Overhead costs, rigidities of productive capacity and the price system. In W.H. Melody, L. Salter and P. Heyer, eds, Culture, communication, and dependency. The tradition of H.A. Innis. Norwood, NJ: Ablex, 155-66. Watkins, M.H. 1963: A staple theory of economic growth. Canadian Journal of Economics and Political Science 29: 141-58. Williams, G. 1983: Not for export: towards a political economy of Canada\'s arrested industrialization. Toronto: McClelland and Stewart.

Suggested Reading Barnes (1996), ch. 8. Drache, D. 1995: Celebrating Innis: the man, the legacy, and our future. In D. Drache, ed., Staples, markets, and cultural change: selected essays of Harold A. Innis. Montreal and Kingston: McGill-Queen\'s University Press, xiii-lix. Watkins (1963).



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