Key Points
Slum village near the river in the Mandalay city in Myanmar (Burma)
Definition & Example
Dependency theory is an explanation of the continued lack of development throughout the third world compared with the developed capitalist societies of the West.
Andre Gunder Frank posited that the underdeveloped state of the third world was a consequence of first-world policy.
First-world countries had ‘enclaves’ in the third world, usually in capital cities, which they used to exploit resources that would be transferred to the capitalist countries of the West. This de-capitalization was, according to Frank, the main reason for the under-development of the third world.
An example of the dependency theory is that during the years of 1650 to 1900 Britain and other European nations took over or colonialized other nations. They used their superior military technology and naval strength at the time to do this.
Origins of the Theory
In 1916, Vladimir Lenin posited that advanced and capitalist nations would absorb the wealth of underdeveloped nations. However, the official origin of dependency theory is identified as 1949, when the German-born British economist Hans Singer and Argentine economist Raúl Prebisch published two papers (Ferraro, 2008).
In their papers, the two economists observed that underdeveloped nations could buy progressively fewer manufactured products from developed nations in exchange for the exports of their raw materials. This notion earned the appellation ‘the Prebisch-Singer thesis.’
Prebisch, who was also a member of the United Nations Commission for Latin America, noted that underdeveloped countries ought to utilize certain elements of protectionist trade practices in order to develop in a sustainable fashion.
While the differences between the Marxist and Structuralist schools were not insignificant, both these approaches agreed that at the core of the relationship between the periphery and center was the periphery’s inability to develop a dynamic and independent process of innovation (Vernengo, 2004).
Characteristics of Dependency Theory
The following essential premises undergird dependency theory (Ferraro, 2008):
Such usage of resources would benefit the dominant states but not the poorer ones.
The distinction between undevelopment and underdevelopment would place the impoverished countries in a fundamentally different context of historyThis proposition denies that the poorer states’ plight could be related to a dearth of apposite cultural values or scientific transformations.Instead, dependency theory assumes that the poverty of the underdeveloped nations is attributable to their supposedly forced integration into the European system as raw material producers or cheap labor suppliers.
This proposition denies that the poorer states’ plight could be related to a dearth of apposite cultural values or scientific transformations.
Instead, dependency theory assumes that the poverty of the underdeveloped nations is attributable to their supposedly forced integration into the European system as raw material producers or cheap labor suppliers.
Instead of clearly defining what these alternative uses are however, dependency theory invokes nebulous criteria.
For example, dependency theorists have criticized export agriculture, and noted that the poorer nations should utilize agricultural lands for domestic production to decrease their rates of malnutrition.
This is also an argument against seeking the satisfaction of governmental or corporate needs.
Discerning what is best for the poor, nonetheless, is not devoid of analytical issues, and it remains a problem for dependency theorists to grapple with.
The ruling elites of the dependent states (not just the wealthy countries) are responsible for the exploitation of the poorer countries’ resourcesAccording to dependency theorists, theseruling elitesare generally groomed in developed countries, and the personal interests and values of such elites coincide with those of the dominant nations.Hence, dependency theorists hold that the relationship between the predatory nations and the periphery could be a voluntary relationship, wherein those ruling elites inadvertently enact policies supposedly hostile to the poor in pursuing neoliberal agendas.
According to dependency theorists, theseruling elitesare generally groomed in developed countries, and the personal interests and values of such elites coincide with those of the dominant nations.
Hence, dependency theorists hold that the relationship between the predatory nations and the periphery could be a voluntary relationship, wherein those ruling elites inadvertently enact policies supposedly hostile to the poor in pursuing neoliberal agendas.
Dependency Theory’s Policy Implications
The acceptance of dependency theory would generally result in the discarding of the customary concepts pertaining to economic development, such as capital accumulation, comparative advantage, and free trade.
Consequently, government leaders subscribing to dependency theory would be more inclined to adopt approaches such as those below (Ferraro, 2008):
Criticism
Dependency theory’s subjective definitions of dominant states and underdeveloped countries engender binary constructs that ignore the complexity of the real world as well as the dynamism governing the relations among various nations.
It also represents an opportunity cost, i.e., funds that could have been spent on other ventures such as building infrastructure etc. Additionally, tariffs on imports would readily elicit retaliation from foreign nations often in the form of penalties upon one’s own exports.
Further Information
References
Amadi, L. (2012).Africa: Beyond the new dependency: A political economy.African Journal of Political Science and International Relations, 6(8), 191-203.
Bouguignon, F. (2016). Inequality and globalization: How the rich get richer as the poor catch up.Foreign Aff., 95, 11.
Frank, A. G. (1966). The Development of Underdevelopment Monthly Review. 1966 and Reprinted in Latin America:Underdevelopment or Revolution, 18.
Leke, Acha, et al (1 Apr. 2020). “What”s Driving Africa”s Growth.” McKinsey & Company, McKinsey & Company, https://www.mckinsey.com/featured-insights/middle-east-and-africa/whats-driving-africas-growth
Lenin, Vladimir Ilich (2021).Imperialism, the Highest Stage of Capitalism. GENERAL PRESS.
Liyanawatte, Dinuka & Jayasinghe, Uditha (31 Mar. 2022). “Sri Lanka Imposes Curfew after Protests over Economic Crisis Turn Violent.” Reuters, Thomson Reuters, https://www.reuters.com/business/sri-lanka-turn-off-street-lights-economic-crisis-deepens-2022-03-31/.
McMaken, Ryan (2008). “The Failure of Dependency Theory: Ryan McMaken.” Mises Institute, https://mises.org/wire/failure-dependency-theory
Munro, A. (n.d.).Dependency theory. Encyclopedia Britannica. https://www.britannica.com/topic/dependency-theory
Sowell, Thomas (2015). “Basic Economics: A Common Sense Guide to the Economy,” Chapter 2: The Role of Prices. https://riosmauricio.com/wp-content/uploads/2020/07/Basic-Economics-5th-Edition-Thomas-Sowell.pdf
Vernengo, Matias (2004). “Technology, Finance and Dependency: Latin American Radical Political Economy in Retrospect“. University of Utah, Department of Economics.
Williams, Michelle (2014).The End of the Developmental State?. Routledge. p. 44. ISBN 978-0415854825.
Saul McLeod, PhD
BSc (Hons) Psychology, MRes, PhD, University of Manchester
Saul McLeod, PhD., is a qualified psychology teacher with over 18 years of experience in further and higher education. He has been published in peer-reviewed journals, including the Journal of Clinical Psychology.
Olivia Guy-Evans, MSc
BSc (Hons) Psychology, MSc Psychology of Education
Olivia Guy-Evans is a writer and associate editor for Simply Psychology. She has previously worked in healthcare and educational sectors.
Ayesh PereraResearcherB.A, MTS, Harvard UniversityAyesh Perera, a Harvard graduate, has worked as a researcher in psychology and neuroscience under Dr. Kevin Majeres at Harvard Medical School.
Ayesh PereraResearcherB.A, MTS, Harvard University
Ayesh Perera
Researcher
B.A, MTS, Harvard University
Ayesh Perera, a Harvard graduate, has worked as a researcher in psychology and neuroscience under Dr. Kevin Majeres at Harvard Medical School.
