Dependency Theory

Dependency theory is a socio-economic concept suggesting that underdevelopment in many countries is a result of their economic dependence on and exploitation by more developed nations. It posits that this dependency perpetuates unequal power dynamics and hinders progress in the less developed countries.

Dependency Theory

Introduction

In the realm of international politics, Dependency Theory and the Theory of Underdevelopment stand as influential paradigms. These theories shed light on the unequal relationship between Developed Countries (Center/Core) and Underdeveloped Countries (Periphery) and their impact on global dynamics. This article delves into the origins, central arguments, and key proponents of Dependency Theory to provide a comprehensive understanding of these critical concepts.

Table of Contents

The Origin of Dependency Theory

Dependency Theory first emerged in Latin America as a response to the predominant theories of modernization and development in the 1950s and 1960s, which were largely championed by Western and Marxist scholars. It commenced with an examination of the colonial legacy’s impact on the socio-economic and political structures of indigenous populations. It then sought to analyze the characteristics of the newly established socio-economic framework and its evolution in the context of both internal changes and the developments in the global capitalist system.

There exist numerous theories aimed at explaining the process of underdevelopment, with three of them being particularly prominent. These three commonly accepted theories that elucidate the underdevelopment process include classical Marxism theory, the new Marxism theories, and the dependency theory.

Marx’s perspective traces the development of the capitalist mode of production from the era of feudalism. Capitalism initially emerged in Europe and was forcefully imposed on other regions across the world. Mercantilists adopted various methods of exploitation and introduced the concept of primitive accumulation. In his earlier writings, Marx delves into colonialism and British colonial policy in India, highlighting how the British East India Company transformed into a capitalist enterprise and established the foundations of capitalist activities in India. Marx considered the introduction of capitalism in India a necessary evil, which he explained in the context of the Asiatic mode of production. Another significant source was V.I. Lenin‘s theory of imperialism and underdevelopment, notably presented in his famous pamphlet, “Imperialism: the Highest Stage of Capitalism.”

The failure of capitalism to stimulate economic development in the former colonies, as Marx had predicted, gave rise to the neo-Marxian theory of underdevelopment. New Marxists increasingly recognize that the modern capitalist system can be divided into an advanced center and an underdeveloped periphery. This concept originally began with Lenin and Bukharin and was further developed by scholars like Rosa Luxemburg in her book “The Accumulation of Capital” and Paul Baran in “The Political Economy of Growth.” Paul Baran attributed the primary cause of underdevelopment is imperialism, and this line of thought eventually led to the development of dependency theory through a balanced analysis. Paul Baran and Paul Sweezy explain dependency theory through “monopoly capitalism” i.e. advanced industrial nations dominate and exploit less developed countries economically, perpetuating global inequalities..

Two pivotal papers by Hans Singer and Raúl Prebisch played a crucial role in shaping Dependency Theory. In 1950, Raúl Prebisch published “The Economic Development of Latin America and its Principal Problems,” while Hans Singer contributed with “Post-war Price Relations between Under-developed and Industrialized Countries” in 1949. Both of these authors observed a decline in the terms of trade for underdeveloped nations in comparison to developed countries. This phenomenon, known as the Prebisch–Singer thesis, pointed to the fact that underdeveloped countries were purchasing fewer manufactured goods from developed nations in exchange for their raw material exports. Gunnar Mydral explains the circular nature of capital movements increases regional inequalities by concentrating wealth more in developed regions making the rest underdeveloped. Also Samir Amin presented a “Theory of Unequal Exchange” in 1970. He explained that unequal exchange allows capitalist countries to acquire profits whereas Peripheral countries gets into heavy debts and become dependent on them represents the linked nature of the World Capitalist system. 

Central Arguments of Dependency Theory

Dependency Theory’s primary focus is on the internal dynamics of underdeveloped countries and how these dynamics are intertwined with their position in the global economic system. It explores the relationship between a nation’s internal and external structures, attributing the underdevelopment of Third World countries to socio-economic, politico-cultural processes connecting them to the developed nations. In this perspective, underdeveloped nations are seen as peripheries, and developed nations are the centers. Dependency Theory asserts that social phenomena in the periphery can only be comprehended by reference to the world capitalist system, which is dominated by the developed centers.

The Dependency Theory emphasizes that social phenomena in Third World countries are shaped by the process of underdevelopment, a consequence of the expansion of World Capitalism. Argentine economist Raúl Prebisch at the United Nations Economic Commission for Latin America and Caribbean (UNECLA) argued that underdeveloped nations should adopt protectionism in trade, favoring import-substitution industrialization (ISI) over a trade-and-export-oriented strategy.

Key Proponents and Divisions

Dependency theorists can be broadly categorized into two groups: liberal reformists and neo-Marxists. Prominent figures in Dependency Theory include Andre Gunder Frank, Raul Prebisch, Wallerstein, Dos Santos, Osvaldo Sunkel, Celso Furtado, Rodolfo Stavenhagen, Euzo Falleto, and Frantz Fanon. They share a common belief that the underdevelopment of Third World countries is directly linked to their neo-colonial existence, characterized by external dependence on developed nations.

Some scholars identify two main streams within Dependency Theory: the Latin American Structuralist, represented by the work of Prebisch, Celso Furtado, and Aníbal Pinto, and the American Marxist, developed by Paul A. Baran, Paul Sweezy, and Andre Gunder Frank. These perspectives offer a macro-historical and structural view, rejecting Continuum and Marxist explanations of development and underdevelopment.

According to Theotonio Dos Santos, the basis of dependency in underdeveloped nations is derived from colonial dependence and industrial technological production, rather than from financial ties to monopolies from the core nations. In addition to Dos Santos, other classical authors in the dependency school are: Paul Baran, who has studied conditions in India in the late 1950s; and Landsberg, who has studied the processes of industrial production in the core countries in 1987. The pioneer contribution in the emergence of development theory is of Andre Gunder Frank and Wallerstein who have advocated that the underdevelopment of Third World Countries was due to the development of developed country to whom the former is dependent

Dependency theories, rooted in the study of global political economy, play a vital role in understanding the disparities between developed and underdeveloped nations. Chilcote provided the classification of Dependency theories, breaking them down into four main categories. 

Classification of Dependency Theories by Chilcote

Chilcote categorizes Dependency theories into four distinct conceptions, each contributing unique perspectives to the understanding of global economic disparities:

Development of Underdevelopment (A. G. Frank and Rodney): This perspective argues that underdeveloped nations haven’t failed to develop due to internal barriers, as modernization theorists suggest. Instead, they remain underdeveloped because the developed West systematically keeps them in a state of dependency, favoring their own development.

New Dependency (Dos Santos): New Dependency theory, advocated by Dos Santos, emphasizes the evolving nature of dependency relationships in the modern world. It recognizes the changing dynamics of economic interdependence between developed and underdeveloped nations.

Dependency and Development (Cardoso): Cardoso’s perspective seeks to find a balance between dependency and development. It acknowledges the existence of dependency while exploring ways in which underdeveloped nations can achieve economic growth without succumbing to dependency.

Dependency and Imperialism (Baran, Sweezy, and Quijano): This perspective highlights the role of imperialism in perpetuating dependency. It draws attention to the ways in which dominant powers exploit underdeveloped nations to maintain their economic and political supremacy.

Theory of Underdevelopment by A. G. Frank

A. G. Frank’s Theory of Underdevelopment, presented in 1971, challenges the notion that underdeveloped nations fail to progress due to internal factors. Instead, Frank argues that the developed West intentionally underdeveloped these nations, subjecting them to a state of perpetual dependency.

Key points of Frank’s theory include:

Systematic Underdevelopment: Frank contends that the development of Third World countries is impossible within the world capitalist system, which inherently favors the development of the Core, i.e., developed countries. This systemic bias makes it unfavorable for developing nations.

Stagnant Economies: Underdeveloped economies have become stagnant and increasingly reliant on the economies of developed nations, exacerbating their dependency.

Overthrowing the System: To break free from this dependency, Frank and other dependence theorists suggest several options, including socialist revolution, command-centered economies, liberal reforms, and enhancing bargaining power through regional cooperation and adopting new techniques through macroeconomic adjustments.

Criticisms of Dependency Theory of Frank

Lack of Empirical Evidence: Critics argue that Frank’s theory lacks comprehensive empirical evidence to support its conclusions, making it less convincing.

Advocacy of Radicalism and Socialism: Some view the theory’s advocacy of radical solutions like socialist revolutions as overly idealistic and impractical.

Failure of Socialist Solutions: The actual implementation of socialist solutions has faced significant challenges and has not always led to the expected outcomes.

Neglecting Relative Autonomy: Frank’s theory does not adequately address the relative autonomy of governments from powerful elites, a concept explored in detail by new dependency theorists such as Enrique Cardozo and Faletto. These scholars examine how relationships within a country, both external and internal, can be transformed into positive elements for the development of peripheral nations. O’Donell studied the case of relative autonomy between economic and political elements within conditions of Third World countries, especially those in South East Asia.

Nation-State Assumptions: A current critique of dependency theories, including Frank’s, is their reliance on the nation-state as the primary unit of analysis. This approach overlooks the complexities of global interdependence and the roles of non-state actors in shaping economic and political dynamics.

World System theory

World System Theory, developed by Immanuel Wallerstein in 1979, offers a comprehensive framework for examining the global economic capitalist system’s establishment and its influence on the relationships between countries within it. This theory emerged as a response to criticisms of Dependency Theory, which primarily focused on the exploitation of nations by others. However, World System Theory takes a broader approach, emphasizing the importance of looking at the global economic institutions and corporations rather than individual countries.

World System Theory

Key Characteristics of World System Theory

Global Economic Institutions: According to Wallerstein, these institutions form what he terms a Modern World System, where all countries, regardless of their wealth, are interconnected. He asserts that corporations and global capital transcend national boundaries, making nation states relatively powerless to control them. To understand why countries are rich or poor, we should examine global economic institutions and corporations.

International Division of Labor: Wallerstein identifies three types of capitalist zones in the Modern World System – core, semi-peripheral, and peripheral. Core countries control world wages and monopolize the production of manufactured goods, while semi-peripheral countries resemble core countries in urban areas but also have pockets of rural poverty. Peripheral countries provide raw materials to the core and semi-periphery.

Upward and Downward Mobility: Wallerstein’s theory recognizes that countries can move up or down within the world system, depending on various factors, including economic growth and development.

Dynamic Nature: The Modern World System is dynamic, with core countries constantly evolving new strategies to extract profits from poorer countries and regions, such as unfair trade rules and domination by Western corporations.

Criticisms of World System Theory

Critics argue that the theory, like Dependency Theory, oversimplifies the causes of underdevelopment, ignoring cultural factors, corruption, and ethnic conflict. Additionally, some find the concept vague and challenging to apply in practice.

Globalization Perspective

Globalization, often described as the process of interaction and integration among people, companies, and governments worldwide, has become a dominant force in contemporary international relations. This theory is rooted in the idea that globalization involves greater integration, with a particular emphasis on economic transactions and cultural links among nations.

Key Characteristics of Globalization Theory

Cultural Emphasis: Unlike earlier theories that primarily focused on economic aspects, globalization theory highlights the importance of cultural links between nations. It recognizes the role of technology in enhancing cultural communication.

Technological Advancements: Globalization has been propelled by advances in transportation and communication technology, leading to increased global interactions, international trade, and the exchange of ideas and culture.

Redundancy of Nation-State: This theory challenges the traditional notion of the nation-state as the primary unit of analysis, emphasizing the significance of non-state actors such as multinational corporations and terrorist organizations in shaping the global landscape.

Four Aspects of Globalization: The International Monetary Fund (IMF) identifies four key aspects of globalization: trade and transactions, capital and investment movements, migration, and the dissemination of knowledge. Furthermore, globalization is intertwined with global challenges like environmental issues and climate change.

Subdivided Globalization: Academic literature divides globalization into three major areas: economic globalization, cultural globalization, and political globalization, each influencing various aspects of the world.

Conclusion

Dependency theories, as categorized by Chilcote, provide a multifaceted perspective on the relationship between developed and underdeveloped nations. A. G. Frank’s Theory of Underdevelopment challenges the conventional wisdom about the causes of underdevelopment, highlighting the role of systemic dependency. While these theories have faced criticism, they remain valuable tools for understanding the intricate dynamics of global political economy and development.

Read More:

Latest articles

Leave a Comment

You cannot copy content of this page