4.4 Dependency theory

Dependency theory emerged as a critique of modernization theory, challenging the idea that all societies progress linearly. It argues that the global economy is divided into a dominant center and subordinate periphery, with unequal exchange perpetuating underdevelopment.

This theory connects to Marxism and critical theories by emphasizing structural inequalities and power imbalances in the global economy. It highlights how historical factors like colonialism shape international relations, offering a critical perspective on capitalist development and global inequality.

Origins of dependency theory

• Emerged in the 1950s and 1960s as a critique of modernization theory and neoclassical economics
• Developed by Latin American scholars who sought to explain the persistent underdevelopment and inequality in their region
• Drew inspiration from Marxist and structuralist economic theories, emphasizing the historical and structural factors that shape international relations

Core ideas of dependency theory

Center vs periphery

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• The global economy is divided into a dominant "center" (developed countries) and a subordinate "periphery" (developing countries)
• The center exploits the periphery through unequal trade, investment, and political control, perpetuating a state of dependency
• Examples: United States and Western Europe as the center, Latin America and Africa as the periphery

Unequal exchange

• Trade between the center and periphery is inherently unequal, with the periphery exporting raw materials and low-value goods while importing high-value manufactured goods
• This unequal exchange leads to a transfer of wealth from the periphery to the center, reinforcing the center's economic dominance
• Examples: Latin American countries exporting coffee and bananas to the United States and Europe

Surplus extraction

• The center extracts economic surplus from the periphery through various mechanisms, such as foreign investment, debt, and intellectual property rights
• This surplus is then used to fuel the center's economic growth and maintain its global hegemony
• Examples: Multinational corporations repatriating profits from their operations in developing countries

Dependency theory vs modernization theory

• Modernization theory argues that all societies progress through similar stages of development, with underdevelopment being a temporary phase
• Dependency theory rejects this linear view, emphasizing the structural barriers that prevent developing countries from catching up to the developed world
• Dependency theorists argue that modernization theory ignores the historical legacy of colonialism and the ongoing power imbalances in the global economy

Dependency theory vs world-systems theory

• World-systems theory, developed by Immanuel Wallerstein, builds upon dependency theory but offers a more comprehensive analysis of the global capitalist system
• It divides the world into core, semi-periphery, and periphery countries, each with distinct roles in the global division of labor
• World-systems theory places greater emphasis on the cyclical nature of the capitalist world-economy and the possibility of countries moving between categories over time

Key thinkers in dependency theory

Raúl Prebisch

• Argentine economist who served as the first secretary-general of the United Nations Economic Commission for Latin America (ECLA)
• Developed the concept of the "center-periphery" model and advocated for import substitution industrialization (ISI) as a strategy for reducing dependency
• Argued that the global economic system was inherently biased against the periphery, leading to a deterioration in the terms of trade over time

André Gunder Frank

• German-American sociologist and economic historian who was a leading proponent of dependency theory
• Argued that underdevelopment in the periphery was not a natural stage but a direct consequence of the development of the center
• Introduced the concept of the "development of underdevelopment," suggesting that the center actively underdeveloped the periphery to maintain its dominance

Immanuel Wallerstein

• American sociologist and historical social scientist who developed world-systems theory
• Expanded upon dependency theory by analyzing the global capitalist system as a whole, rather than focusing solely on the center-periphery relationship
• Emphasized the importance of the semi-periphery as a buffer zone between the core and periphery and a potential site of upward mobility

Influence on Latin American politics

• Dependency theory had a significant impact on political and economic thinking in Latin America during the 1960s and 1970s
• It provided a theoretical foundation for leftist and nationalist movements that sought to challenge U.S. hegemony and promote alternative development strategies
• Examples: The rise of socialist governments in Chile (Salvador Allende) and Nicaragua (Sandinistas), and the popularity of ISI policies in countries like Brazil and Argentina

Criticisms of dependency theory

Oversimplification of global economy

• Critics argue that dependency theory presents an overly simplistic and deterministic view of the global economy
• It fails to account for the diversity of experiences among developing countries and the potential for agency and resistance
• Examples: The successful industrialization of East Asian countries (South Korea, Taiwan) challenges the notion of a fixed center-periphery divide

Lack of empirical evidence

• Some scholars contend that dependency theory lacks robust empirical support and relies heavily on anecdotal evidence
• They argue that the theory's predictions about the inevitability of underdevelopment and the impossibility of catching up have not been borne out in practice
• Examples: The rapid economic growth of China and India in recent decades suggests that developing countries can achieve significant progress within the global capitalist system

Neglect of domestic factors

• Dependency theory has been criticized for overemphasizing external factors (e.g., imperialism, unequal exchange) at the expense of internal factors (e.g., political institutions, social structures)
• Critics argue that the theory downplays the role of domestic elites and class relations in perpetuating underdevelopment
• Examples: The persistence of poverty and inequality in many Latin American countries despite attempts at ISI and other dependency-inspired policies

Legacy and contemporary relevance

• Despite its limitations, dependency theory remains an influential perspective in the study of international relations and development
• It has contributed to a greater awareness of the structural inequalities in the global economy and the need for alternative development strategies
• Dependency theory has inspired more recent approaches, such as post-colonial theory and alter-globalization movements, which continue to challenge the dominant neoliberal paradigm
• In an increasingly interconnected world, the core ideas of dependency theory remain relevant for understanding the ongoing power imbalances and challenges facing developing countries