Dependency Theory

This post is a brief summary of the Dependency Theory view of Development and Underdevelopment. It is, broadly speaking, a Marxist theory of development.

According to Dependency theory, the underdevelopment of many countries was the fault of the West. Dependency theory points out that the last 500 years of history has seen Western European Nations and companies exploit people and resources in Latin America, Asia and Africa and left them poor, helpless, and dependent on aid.

Dependency theory hence criticises modernisation theory. Dependency theory blames the Western Capitalist Nations rather than the ‘backward’ cultures of developing countries.

The World Capitalist System

Frank argued that since the 16th century, there has been a global capitalist system that operates in a similar way to class based societies.

The system consists of metropolis or core nations (the developed, industrialised world) who have taken the resources of the satellite or peripheral countries (the developing world) and made themselves rich at the expense of these countries.

The Core nations have traditionally worked with Elites in satellite nations, who are always a small minority of the population and who benefit from this system of inequality.

The origins of dependency: Or how did we reach this situation?

The unequal relationship between the developed west and the underdeveloped South has it origins in Slavery and then Colonialism.

Slavery – helped to kick start Britain’s economic growth in the 18th and 19th centuries. For a 200 year period, between 1600 and 1850 approximately nine million Africans were shipped from West Africa to the Americas. Britain and British merchants at this time were at the centre of the slave triangle.

Colonialism – Locked much of Africa, Asia and Latin America into exploitative relationships with Western European Nations from about 1650 – 1900. During this period, superior naval and military resources allowed these nations to colonise most of the rest of the world. Colonialism had a number of effects that benefited those at the top of the global capitalist system.

  • Colonies were exploited for their cheap food, labour and raw materials

  • The most fertile land was appropriated for growing profitable cash crops – such as tea

  • New markets were created for the manufactured goods created by the West

  • Local industries that attempted to compete with the west were destroyed or undermined by cheaper textiles from the west

  • Divisions and conflicts between ethnic groups were created or enforced as those tribes loyal to the colonising powers were given economic and political power rewards

  • Arbitrary boarders were imposed especially in Africa which form the basis of ethnic conflicts even today! (Rwanda etc.)

Neocolonialism

Most African countries gained their independence in the 1960s. However, despite former colonies having achieved independence, Frank argues that they are still exploited by more developed countries, a situation which Frank describes as Neo-Colonialism. These new forms of exploitation are more subtle than slavery and colonialism, but the effect is still to keep the developing world in a state of dependency on the West.

Following World War 2, Dependency theory argued that the economies of developing countries were prevented from developing because of the following:

  1. The economies of many ex colonies remained dependent for their export earnings on a small umber of commodities such as agricultural cash crops or raw materials. This over reliance on one or two commodities was the result of the colonial powers organising the economies of their colonies to produce a handful of goods that they desired, such as coffee, tobacco, and cotton.

If there is any fall in demand from western countries for these products, this can have a severe negative impact on the economies of these countries. This is especially the case where only a few metropolis countries purchase these products. It is estimated that roughly 2.5 billion people are engaged in agriculture in developing countries; 1 billion of them receive most of their income from exports for at least 50% of their export earnings at least two thirds of African countries derive over 80% of their export earnings from one or two commodities.

  1. Raw materials in themselves have little value. It is the processing of these materials that adds value. The processing mainly occurs in the West, meaning it is western companies that benefit most from raw materials For example, if a chocolate bar sells for one pound, only 8 pence per goes to the cocoa farmer while 77 pence goes to the manufacturer. Manufactured goods have increased in price over the past 30 years whereas the prices of many raw materials have either stayed the same or even gone down. This means that developing countries have to produce more and more goods to earn the same relative amount of money.

  1. Western Nations can limit the amount of goods they receive through tariffs on imported goods and subsidies for home produced goods. This makes goods from the developing world more expensive and home produced goods cheaper.

  1. In a few cases in Africa, mainly involving the ex colonies of France, the French maintained a political and economic presence in order to ensure that French companies benefited from any development initiatives undertaken.

Strategies for Development 

  1. Breaking away from dependency

  2. Associate or dependent development

  1. Breaking away from dependency

This view argues that dependency is not just a phase, but rather a permanent position. The only way developing countries can escape dependency is to escape from the whole capitalist system. Under this category, there are different paths to development:

  • Isolation, as in the example of China from about 1960 to 2000, which is now successfully emerging as a global economic superpower having isolated itself from the West for the past 4 decades.

  • A second solution is to break away at a time when the metropolis country is weak, as India did in Britain in the 1950s, following world war 2. India is now a rising economic power.

  • Thirdly, there is socialist revolution as in the case of Cuba. This, however, resulted in sanctions being applies by America which limited trade with the country, holding its development back.

  • Many leaders in African countries adopted dependency theory, arguing that and developing political movements that aimed to liberate Africa from western exploitation, stressing nationalism rather than neo-colonialism.

  1. Associate or dependent development.

Here, one can be part of the system, and adopt national economic policies to being about economic growth such as

Import substitution industrialisation where industrialisation produces consumer goods that would normally be imported from abroad, as successfully adopted by many South American countries. The biggest failure of this, however, was that it did not address inequalities within the countries. ISI was controlled by elites, and these policies lead to economic growth while increasing inequality.

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