Dependency Theory of Underdevelopment – Geography – UGC NET – Notes

Introduction

• Dependency Theory developed in the late 1950s under the guidance of the Director of the United Nations Economic Commission for Latin America, Raul Prebisch. Prebisch and his colleagues were troubled by the fact that economic growth in the advanced industrialized countries did not necessarily lead to growth in the poorer countries.
• Indeed, their studies suggested that economic activity in the richer countries often led to serious economic problems in the poorer countries. Such a possibility was not predicted by neoclassical theory, which had assumed that economic growth was beneficial to all (Pareto optimal) even if the benefits were not always equally shared.
• Dependency theory became popular in the 1960’s as a response to research by Raul Prebisch. Prebisch found that increases in the wealth of the richer nations appeared to be at the expense of the poorer ones.
• In its extreme form, dependency theory is based on a Marxist view of the world, which sees globalisation in terms of the spread of market capitalism, and the exploitation of cheap labour and resources in return for the obsolete technologies of the developed world.
• The dominant view of dependency theorists is that there is a dominant world capitalist system that relies on a division of labour between the rich ‘core’ countries and poor ‘peripheral’ countries. Over time, the core countries will exploit their dominance over an increasingly marginalised periphery.
• Dependency theory advocated an inward looking approach to development and an increased role for the state in terms of imposing barriers to trade, making inward investment difficult and promoting nationalisation of key industries.
• Although still a popular theory in history and sociology, dependency theory has disappeared from the mainstream of economic theory since the collapse of Communism in the early 1990s. The considerable inefficiencies associated with state involvement in the economy and the growth of corruption, have been dramatically exposed in countries that have followed this view of development, most notably a small number of African economies, including Zimbabwe.
• Dependency theory differs from most Western approaches to studying political development. One difference is that this approach originated in the Third World (primarily Latin America), rather than among Western academics.
• Third World dependency thinkers were concerned with explaining the unequal and unjust situations in which they and their nations found themselves. Third World countries were poor while “developed” countries were rich. Third World countries had bad health conditions, while other countries had good health conditions.
• Third World countries had little military power, while other countries had tremendous military resources. Third World countries faced starvation, while citizens of other countries had to worry about losing weight.
• Third World economies were monoproductive and agriculturally based, while economies in developed countries were diversified and industrialized. By almost any conventional socioeconomic measure, Third World countries were at the bottom of the scale.
• They had less education, less wealth, poorer health, less military power, and were dominated politically and economically by the First World.
• Dependency theorists asked why such inequalities existed. Their central concern was to understand the causes of inequality. They felt that such inequalities were unjust, and sought to explain inequalities in order to change them and achieve their goal of increased equality among nations and peoples.
• Dependency theory has always been quite controversial: it incorporates some Marxist concepts; it addresses the sensitive issue of inequality, blaming inequality on the developed nations; and it originates in the Third World. Some aspects of liberation theology and world systems theory are related to dependency theory.
• Prebisch’s initial explanation for the phenomenon was very straightforward: poor countries exported primary commodities to the rich countries who then manufactured products out of those commodities and sold them back to the poorer countries.
• The “Value Added” by manufacturing a usable product always cost more than the primary products used to create those products. Therefore, poorer countries would never be earning enough from their export earnings to pay for their imports.
• Prebisch’s solution was similarly straightforward: poorer countries should embark on programs of import substitution so that they need not purchase the manufactured products from the richer countries.
• The poorer countries would still sell their primary products on the world market, but their foreign exchange reserves would not be used to purchase their manufactures from abroad.
• Three issues made this policy difficult to follow. The first is that the internal markets of the poorer countries were not large enough to support the economies of scale used by the richer countries to keep their prices low.
• The second issue concerned the political will of the poorer countries as to whether a transformation from being primary products producers was possible or desirable. The final issue revolved around the extent to which the poorer countries actually had control of their primary products, particularly in the area of selling those products abroad.
• These obstacles to the import substitution policy led others to think a little more creatively and historically at the relationship between rich and poor countries.
• At this point dependency theory was viewed as a possible way of explaining the persistent poverty of the poorer countries. The traditional neoclassical approach said virtually nothing on this question except to assert that the poorer countries were late in coming to solid economic practices and that as soon as they learned the techniques of modern economics, then the poverty would begin to subside.
• However, Marxists theorists viewed the persistent poverty as a consequence of capitalist exploitation. And a new body of thought, called the world systems approach, argued that the poverty was a direct consequence of the evolution of the international political economy into a fairly rigid division of labor which favored the rich and penalized the poor.

How Can One Define Dependency Theory?

• The debates among the liberal reformers (Prebisch), the Marxists (Andre Gunder Frank), and the world systems theorists (Wallerstein) was vigorous and intellectually quite challenging.
• There are still points of serious disagreements among the various strains of dependency theorists and it is a mistake to think that there is only one unified theory of dependency. Nonetheless, there are some core propositions which seem to underlie the analyses of most dependency theorists.
• Dependency can be defined as an explanation of the economic development of a state in terms of the external influences–political, economic, and cultural-on national development policies. Theotonio Dos Santos emphasizes the historical dimension of the dependency relationships in his definition:
  • Dependency is an historical condition which shapes a certain structure of the world economy such that it favors some countries to the detriment of others and limits the development possibilities of the subordinate economics…a situation in which the economy of a certain group of countries is conditioned by the development and expansion of another economy, to which their own is subjected.

Theotonio Dos Santos, “The Structure of Dependence,”:

• There are three common features to these definitions which most dependency theorists share. First, dependency characterizes the international system as comprised of two sets of states, variously described as dominant/dependent, center/periphery or metropolitan/satellite.
• The dominant states are the advanced industiral nations in the Organization of Economic Co-operation and Development (OECD). The dependent states are those states of Latin America, Asia, and Africa which have low per capita GNPs and which rely heavily on the export of a single commodity for foreign exchange earnings.
• Second, both definitions have in common the assumption that external forces are of singular importance to the economic activities within the dependent states.
• These external forces include multinational corporations, international commodity markets, foreign assistance, communications, and any other means by which the advanced industrialized countries can represent their economic interests abroad.
• Third, the definitions of dependency all indicate that the relations between dominant and dependent states are dynamic because the interactions between the two sets of states tend to not only reinforce but also intensify the unequal patterns. Moreover, dependency is a very deep-seated historical process, rooted in the internationalization of capitalism. Dependency is an ongoing process:
  • Latin America is today, and has been since the sixteenth century, part of an international system dominated by the now-developed nations Latin underdevelopment is the outcome of a particular series of relationships to the international system.

Susanne Bodenheimer, “Dependency and Imperialism:

In short, dependency theory attempts to explain the present underdeveloped state of many nations in the world by examining the patterns of interactions among nations and by arguing that inequality among nations is an intrinsic part of those interactions.