Dependency Theory: An Introduction

Dependency theory is a theory of development that was formed in the 1950s as a response to research conducted by Raul Prebisch, then Director of the United Nations Economic Commission for Latin America (ECLA). Prebisch was concerned about the unchanging underdevelopment of poorer countries compared to the continued economic growth of their counterparts in the advanced industrialized world. His research in fact suggested that economic activity in the richer countries often led to serious economic problems in the poorer countries.

Prebisch‘s explanation for this phenomenon was that poorer states exported their primary commodities to richer states. Richer states would go on to manufacture these commodities into products and then sell them back to the poorer countries from which they originated. Despite being the source of origin for these commodities, poorer countries found themselves at a disadvantage. Richer nations, because of their industrial capacity, gained the value added from manufacturing usable products out of primary commodities. These usable products ultimately cost more than the primary products used to create them, so that poorer countries would never make enough from their export earnings to pay for their imports.

Prebisch’s analysis contradicted the modernization theory, which was the dominant development theory at the time until the 1980s, when it was replaced by neoliberalism as the official approach to development. Grounded in capitalism, the theory viewed economic growth as beneficial to all even where that growth was unequal – as was the case between developed and developing countries. It, and later neoliberalism, ascribed the continued poverty of developing countries to the fact that they were late in adopting solid economic practices and that as soon as they mastered modern economic techniques, poverty would begin to subside. Many, however, disagreed with this view and went on to build upon the tenets of dependency theory and develop it into different categories such as the ECLA school, the moderates and the radicals. Key among these figures were Cardoso and Faletto (moderates), as well as Andre Gunta Frank, Theotonio Dos Santos and Immanuel Wallerstein (radicals). Through the dependency theory they tried to reveal the reality of the relationship between the rich and the poor regions of the world.


Understanding dependency

Two definitions of dependency best capture the commonalities between the ideologies of dependency theorists. The first describes it 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’ is the second, and it places emphasis on the historical aspect of the dependency relationships. He defines dependency as a historical condition that molds a particular structure of the global economy so that it privileges some states to the detriment of others and restricts the development prospects of the poorer countries. He adds that dependency is a situation in which the economies of certain countries are conditioned by and subjected to those of larger economies.

Three features stand out from these definitions, and act as common denominators that pull the different dependency theorists together. The first of these is the logic that the international system is comprised of two sets of states, described as either dominant/dependent, center/periphery or metropolitan/satellite. The dominant states are the richer, more developed countries in the Organisation for Economic Co-operation and Development(OECD), while the dependent states comprise those Asian, Latin American, and African countries that have low per capita Gross National Product (GNP) and which heavily rely on the export of a single commodity for foreign exchange earnings. The second feature is their assumption that economic activities within dependent states are heavily influenced by external forces. These forces include dominant states, foreign assistance, global commodity markets, transnational corporations, communications and any other means through which developed nations “can represent their economic interests abroad”. Thirdly, the definitions indicate relations between dominant and dependent states as reinforcing and intensifying unequal patterns between them.


The Context of Dependency

Most dependency theorists believe that dependency relationships are rooted in a global capitalist system that enforces a rigid international division of labor that has underdeveloped many parts of the world.In accordance with this division of labor, developing countries (the victims of contemporary underdevelopment) supply cheap labor, cheap minerals, and agricultural commodities. They also function as repositories of manufactured goods, surplus capital and outdated technologies. These functions leave the economies of the dependent states at the mercy of external forces. While money, services and goods do flow through them, their allocation is contingent upon the economic interests of the dominant states. Capitalism encourages this division of labour according to the doctrine of comparative advantage, but ultimately, the division of labour is the real culprit of poverty or contemporary underdevelopment in dependent states.

To understand the context of dependency as dependency theorists understand it, one could distinguish dependency theory from the Marxist theory of imperialism. While the theory of imperialism explains dominant state expansion, dependency theory explains underdevelopment. Put differently, the theory of imperialism explains why imperialism takes place, while dependency theory describes the consequences of imperialism. This distinction is significant: for many Marxists the process of imperialism is a necessary step in the path to global emancipation. This is because in their view, imperialism as the highest stage of Capitalism creates the necessary conditions for Socialist revolution and as such, is a channel through which the world is transformed. Dependency theorists however, understand imperialism to be a process which leads to the negative condition of underdevelopment. For them, underdevelopment offers no chance of independent economic activity in dependent nations. They draw this conclusion from several propositions. These are described below.


Propositions of Dependency Theory

Dependency theory is comprised of several key propositions. These include:

  1. Underdevelopment must be distinguished from undevelopment. A state of undevelopment is one which a country has resources but is not using them. Underdevelopment on the other hand, describes a situation in which there is active use of these resources, but that usage is conducted in a manner that benefits dominant states and not the dependent states in which the resources are found. Andre Gunda Frank therefore argues that while developed states may have at one point been undeveloped, they were never underdeveloped.
  2. The distinction between underdevelopment and undevelopment is significant. It suggests that poorer countries are not lagging behind or catching up to developed states. They are not poor because they failed to match the scientific transformations of European states or lagged behind Enlightenment values. Rather, they are poor because they were forcibly integrated into the European economic system in which these transformations took place, only as producers of raw materials or repositories of cheap labor and were deprived of the chance to deploy their resources in a way that would set them up as competent competitors to dominant states.
  3. Dependency theorists suggest that alternative patterns of resource usage should be adopted. The patterns were imposed by dominant states through the principle of comparative advantage, an economic principle that prescribes countries to produce and export only those good and services which they can produce more efficiently and cheaply than other goods and services, which they should instead import. When the theory was developed by British economist David Ricardo, Britain was already an industrialized nation. This necessarily mean that compared to developing countries, it would be better able to manufacture raw commodities while developing and unindustrialized states would be left to specialize in the continuous export of raw materials. Dependency theorists predominantly criticize this pattern of research usage in the context of export agriculture, noting that in their export of primary goods, many dependent states experience high rates of malnutrition despite the great amount of food they produce. They argue therefore that agricultural lands in these countries should be used for domestic food production so as to remedy the high rates of malnutrition.
  4. The diversion of resources over time is maintained not only by the power of dominant states, but also through the power of elites in the dependent states. Dependency theorists argue that these elites maintain a dependent relationship because their own private interests coincide with the interests of the dominant states. These elites are typically trained in the dominant states and share similar values and culture with the elites in dominant states. Thus, in a very real sense, a dependency relationship is a “voluntary” relationship.
  5. Overtime, the diversion of resources is maintained not only by richer states, but also by powerful elites within poorer states. These elites, who are typically educated in the dominant states, share the values and culture of elites in those nations. Dependency theorists assert that because their private interests coincide with those of the dominant states, they maintain the dependent relationship that exists between dominant and dependent states. Frantz Fanon explains this quite clearly in his book The Wretched of the Earth, in which he exposes the role played by post-colonial elites who are semi-Western in their thinking and actions and who will attempt to make European culture their own.



Policy Implications of development theory

If one accepts the analysis of dependency theory, the pursuit of development as it is undertaken now is detrimental to poor economies. From the principles of the theory, poorer countries would be better off abandoning the idea of development as it is prescribed by dominant states. Secondly, dependency theory suggests that poorer countries take into account that modernization theory or currently, neoliberalism does not give enough attention to the question of wealth distribution. It rather presumes that the market will apportion returns from efficient production in a rational and impartial manner, but as has been proven by the experiences of both dependent and dominant states, the market alone is not a sufficient distributive mechanism. From a dependency theory perspective, therefore, poorer countries should refrain from integrating further into the global system. There has been advocacy for the adoption of mechanisms of self-reliance but this instruction should be received with caution. We remember Tanzania’s policy of Ujamaa and its unfortunate failure. Perhaps then what poorer countries should consider is engaging with the global political economy through a system of strategically controlled interactions.

By ‘Manapo ‘Mokose