comment on dependency development thesis

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2 Dependency Theory

James Mahoney is Gordon Fulcher Professor in Decision-Making, Professor of Sociology, Department of Sociology, and Professor of Political Science, Department of Political Science, Northwestern University, Evanston, IL, USA.

Department of Sociology, Northwestern University

• Published: 02 November 2016
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This article focuses on dependency theory and its influence on scholarly work in the field of international development. After tracing the roots of dependency theory, the article considers its relationship to the international economy, multinational capital, the local bourgeoisie, and the state. It then discusses dependency theory as a set of general concepts and orientations for formulating theories and explanations, as well as a set of directly testable and falsifiable hypotheses. It also emphasizes the utility of dependency theory for explaining the historical trajectories of development in Latin America, sustained robust economic growth in South Korea and Taiwan, globalization, and recent strong growth in China and some of its raw material suppliers. The article shows that dependency theory has mixed results as a testable theory but has been quite successful when used as a theoretical framework.

Writing in 1985, Peter Evans declared, “Dependency ‘theory,’ if such a thing ever existed, may well have had its day. But the rich tradition of work that has been associated with the concept of dependency continues to thrive and expand its horizons, both substantively and theoretically” (1985: 159). In this chapter, we explore the dependency theory tradition of work as it has evolved over the more than twenty-five years since Evans made this assessment. We consider the extent to which and how this tradition continues to influence scholarly work in the field of international development.

We begin by proposing two ways of viewing the substance of dependency theory: (1) as a set of general concepts and orientations for formulating theories and explanations; and (2) as a set of directly testable and falsifiable hypotheses. We then consider the utility of dependency theory for explaining outcomes across diverse empirical domains: (1) historical trajectories of development in Latin America; (2) sustained high economic growth in South Korea and Taiwan; (3) contemporary processes of globalization; and (4) recent high growth in China and some of its raw material suppliers.

We find that the utility of dependency theory rests partly on how one understands this tradition. As a testable theory, the record for dependency theory is mixed. Many simplistic and predictive hypotheses associated with dependency are clearly false (e.g., the impossibility of capitalist development in the periphery). Other more sophisticated hypotheses have done a better job of withstanding empirical scrutiny, though even here the results are not unambiguously positive. As a theoretical frame, by contrast, dependency theory has been quite successful. Several dependency theory concepts are now built into the way in which mainstream scholars study development, even if they do not call themselves dependencistas. In addition, many recent theoretical innovations at the cutting edge of the field of development can be seen as evolving directly from the dependency theory tradition.

What Is Dependency Theory?

The term “dependency theory” is associated with a heterogeneous set of ideas, ranging from causal propositions about the possibilities for development in general to concepts for analyzing historical processes of development in specific cases. One’s understanding of the meaning of dependency theory shapes one’s evaluation of its past and present contributions.

The Rise of Dependency Theory

Dependency theory has roots in longstanding intellectual traditions, most notably the Marxist tradition and writings on imperialism (e.g., Baran 1957 ; Hobson 1902 ; Lenin 1916 ). But the emergence of dependency theory as a modern approach to development in the 1960s was due mostly to analysts of Latin America who were attempting to make sense of the inability of this region to experience the kind of industrial development that marked the advanced capitalist nations. Early formulations came from economists working at the United Nations’ Economic Commission for Latin America (ECLA), including director Raúl Prebisch (1949) , who rejected the optimism that the neoclassical model assigned to growth via trade and comparative advantage. In the 1960s, social scientists and historians in Latin America looking at the structural roots of underdevelopment reached similar conclusions and elaborated these ideas into what is now known as dependency theory. Important founding scholarly works include Cardoso and Faletto (1969) ; dos Santos ( 1968 , 1970a , 1970b ); Furtado ( 1965 , 1971 ); and Sunkel ( 1967 , 1970 ). Many of the original dependencistas were in close communication with one another, with several working together in Santiago after the military seized power in Brazil in 1964. Variants of dependency theory (perhaps not under this label) were simultaneously being developed and applied in English language works by scholars such as Amin (1972) , Emmanuel (1972) , and Frank ( 1966 , 1967 ). 1 Key dependency theory ideas such as unequal exchange and the notion of a core-periphery structure were also brought into studies designed to explain the evolution of the capitalist world economy and the politics of the state system since 1450 ( Wallerstein 1974 ). The resulting tradition of world systems theory was, in this sense, an extension or offshoot of dependency theory.

Dependency theorists reacted to and rejected core tenets of modernization theory, as it existed in the post–World War II period. Whereas modernization theory seemed to suggest that there was a single path to modernity that most or all underdeveloped states would eventually follow, dependency theorists believed that the countries of the Third World could not follow a pattern of development at all similar to the rich western countries. And whereas modernization theorists often explained underdevelopment in terms of causes internal to the societies of the poor countries, especially traditional cultural orientations and values, dependency theorists stressed the hierarchical and enduring structure of the international economy and its relationship to internal class dynamics. Indeed, an important feature of any version of dependency theory is the idea that the development of poor countries is strongly conditioned by their relationship to wealthy countries and their positioning within the global capitalist economy. From this idea comes the dependency theory’s conceptualization of a world economy divided asymmetrically into a core and a periphery.

Already by the late 1970s, however, tensions existed within the dependency theory tradition about the specific content and purposes of the “theory.” Notably, Cardoso (1977) criticized the way in which dependency was being “consumed” in the United States. He denounced a “vulgar” current that overemphasized external conditioning and failed to attend fully to the interrelationship between domestic processes and external relationships and to the internal evolution of the peripheral countries themselves. Cardoso also expressed skepticism about mechanical tests of dependency hypotheses, arguing that the theory is designed to inform historical inquiries and critical analysis, not to serve as a “corpus of formal and testable propositions” (1977: 15). Around the same time, Palma’s (1978) influential essay titled “Dependency: A Formal Theory of Underdevelopment or a Methodology for the Analysis of Concrete Situations of Underdevelopment?” raised directly the question of whether dependency theory was a set of testable hypotheses or a metatheory for directing historical inquiry. Like Cardoso, Palma argued that it was the latter, but the existence of his essay was a clear acknowledgment that different scholars understood the content and purpose of dependency theory in quite varied ways.

Dependency Theory as a Theory Frame

Most of the original formulators of dependency theory viewed it as an approach to analysis or what Rueschemeyer (2009 : 12–17) calls a “theory frame.” Theory frames suggest orienting concepts, point toward some variables as being important and others not, and raise general questions for analysis. However, they do not offer fully specified and testable hypotheses. Instead, theory frames need to be “filled in” with more specific hypotheses derived in the analysis of concrete historical cases and problems. As such, a given theory frame cannot be evaluated as right or wrong, but rather must be judged in terms of its usefulness for structuring explanatory investigations.

Latin American scholars generally treated the concept of dependencia as referring to a context, or background setting, within which processes of development take place ( Duvall 1978 : 57–59). The core feature of this context is the external conditioning of internal processes. As dos Santos (1970b : 236) put it, a dependent country is one whose economic development is “conditioned by the development and expansion of another economy.” The word “conditioned” of course leaves open the exact nature and extent of influence. But the central question for analysis was not how much dependence exists across times and places. Latin American countries were not understood to be poorer or richer because they had more or less dependence. Instead, dependencistas treated dependence as a common background feature and sought to analyze its different situations, forms, or historical manifestations ( Cardoso and Faletto 1969 ). In turn, starting with the original versions, this kind of specification required looking at the historically evolving relationship between external forces and internal processes.

As a theory frame, the dependency theory approach calls attention to several different variables as potentially important for understanding specific manifestations of dependence. These variables include transnational actors and processes as well as domestic classes and the state ( Evans 1979 ). To elucidate specific situations of dependency, scholars asked questions about the structural interrelationships among economic groups and states.

The International Economy : What is the relationship between a peripheral economy and core economies? How reliant on international trade is the peripheral economy? What kinds of products are being exchanged via trade (e.g., primary goods for manufactured products)? What is the overtime trend in terms of trade? Multinational Capital : What is the relationship between local entrepreneurs and multinational corporations? What is the relationship between the state and multinational corporations? How much and which parts of the productive apparatus of a country are foreign-owned? The Local Bourgeoisie : What is the nature of the local bourgeoisie? How much economic power does it command? What relationship does it have with classes and interest groups in the advanced industrial nations? The State: To what extent and in what ways does the state promote local industrialization and development? How much and what forms of leverage do dominant classes have within the state? What is the relationship between the state and transnational capital?

Dependency theory—as a theory frame—calls on scholars to pay attention to these kinds of questions. The frame is useful insofar as answering these questions helps one to understand and explain concrete development outcomes in specific cases. However, these questions themselves are descriptive and do not contain specific explanatory hypotheses. They provide orienting concepts and point toward issues to be addressed, but they are not directly testable themselves.

Dependency Theory as Testable Hypotheses

While most of the Latin American scholars who helped create dependency theory understood it as a theory frame, the approach was soon also evaluated as a set of directly testable hypotheses about development and underdevelopment. North American scholars were especially eager to assess dependency theory based on the empirical validity of its propositions. The task was never straightforward, however, because the specific testable propositions associated with dependency theory were not readily apparent.

In the most simplistic treatments, dependency theory was understood to embrace the hypothesis that capitalist development within the periphery is simply impossible, given the reliance of these countries on a single primary export, the negative terms of trade, technological dependence, and foreign ownership of the local productive apparatus. The association of dependency theory with this hypothesis is also rooted in some dependency theorists’ exploration of socialism and withdrawal from the international economy as a plausible alternative to capitalist development (see Packenham 1992 ). In addition, certain early works—such as Frank ( 1966 ; 1967 )—suggested that the development of the core requires the underdevelopment of the periphery. From this came the conviction among some that dependency theorists must believe that capitalist development cannot take place in the periphery, a claim that was already obviously not true in the 1960s. Even today, superficial dismissals of dependency theory continue to follow this line of argumentation.

More rigorous efforts to scientifically test dependency theory have explored the effects of external factors on varying development outcomes among peripheral economies. This research essentially tests Frank’s hypothesis proposing that “the satellites experience their greatest economic development . . . if and when their ties to their metropolis are weakest” (1966: 9). In particular, scholars explore statistically whether the level of dependence is nonspuriously associated with outcomes such as economic growth (e.g., Boswell and Dixon 1990 ; Dixon and Boswell 1996 ; Firebaugh 1992 , 1996 ); inequality ( Chase-Dunn 1975 ; Evans and Timberlake 1980 ); and rebellion ( Boswell and Dixon 1990 ). In these works, the extent of dependency is usually measured with data on the level of foreign investment and/or the level of trade with core nations. Cross-national statistical tests are then conducted in which relevant controls are used in the effort to assess the net effect of the level of dependency.

Unfortunately, the findings of this literature are subject to considerable debate. The source of the debate is linked to the fact that the statistical tests used in this literature are sensitive and specific measures, control variables, and regression methods (e.g., Jackman 1982 ). Different and even opposite conclusions can be generated by alternative models and methods. Dependency theory is not unique in facing this kind of methodological challenge. In this case, however, the problem has meant that findings often mirror political divisions: scholars more sympathetic to neo-Marxist approaches find that the level of dependency is negatively related to important development outcomes, whereas scholars not predisposed to neo-Marxism reach opposite conclusions. Since the late 1990s, this stream of statistical research has turned more to issues concerning global inequality. But once again, findings are sensitive to statistical measurement and modeling issues, and scholars with alternative ideological predispositions disagree among themselves (e.g., Firebaugh 2003 ; Korzeniewicz and Moran 2009 ). Thus, while dependency theory has been highly successful at stimulating exercises in empirical hypothesis testing among statistically inclined researchers, the validity of its hypotheses remains quite contested.

This mixed or inclusive record of dependency theory as a set of testable propositions would not trouble most of the formulators of this theory, given that they never intended it to be used or evaluated in this way. They would surely argue that dependency theory as a theory frame has had clear successes in teaching us about the sources of development and underdevelopment in concrete cases in the past and present. The next section considers this line of research across diverse substantive domains.

Dependency Theory and the Study of Development

To explore the validity of Evans’s assertion that dependency theory “continues to thrive and expand its horizons, both substantively and theoretically,” we examine works related to this tradition in four areas: (1) historical trajectories of development in Latin America; (2) sustained high economic growth in South Korea and Taiwan; (3) contemporary processes of globalization; and (4) contemporary high growth in China and some of its raw material suppliers. In doing so, we treat the dependency theory tradition as a theory frame to be used in the analysis of concrete historical processes of development.

Historical Trajectories of Development in Latin America

Many of the original dependency theory studies were aimed at identifying the sources of development problems in Latin America. These studies used dependency theory as a frame to structure explanations of the long-run development trajectories for specific cases. Perhaps the most famous study in this vein is Cardoso and Faletto’s Dependencia y desarrollo en América Latina (1969). 2

Cardoso and Faletto explored how different dependency theory situations shaped the evolution of political and economic development in the region. Above all, they called attention to two kinds of dependence: enclave economies and nationally controlled economies. Enclave economies originated beginning in the late nineteenth century, when foreign capital investment came to dominate the most profitable sectors of the local economy. At the extreme, foreign enclaves stunted industrial development, leaving economies rural and backward, as in many parts of Central America. In less extreme situations, enclaves were established without completely undermining urban growth, as in Chile, Mexico, Peru, and Venezuela. Even here, however, industrial development was distorted and dependent on the core for technology, especially when the middle classes could not wrest control from rural oligarchs ( Cardoso and Faletto 1969 , 101–124).

Cardoso and Faletto’s explanation thus used general theoretical principles while still looking closely at concrete historical cases. These authors emphasized the complex interplay of external and internal factors, calling attention to the distinctive structural situations of individual cases. Their explanation of outcomes took as its starting point the degree and type of linkages between domestic elites and external actors. But they also focused centrally on internal class dynamics, including the historically evolving relationship between class actors and the extent to which these actors controlled the state.

In truth, nearly all of the original empirical studies in the dependency theory tradition gave central attention to domestic structures and dynamics. For instance, while the work of Andre Gunder Frank is now sometimes understood to represent a simplistic version of dependency theory, its empirical analysis paid much attention to local class structure and internal processes of change. In Capitalism and Underdevelopment in Latin America (1967) , which focused on Chile and Brazil, Frank argued that the original sources of underdevelopment were rooted in the colonial period and its aftermath. He especially stressed domestic dynamics linked to land ownership, agrarian production, and class conflict within the rural sector. While various criticisms can be raised about his explanation, Frank’s empirical narrative is not a good example of a simplistic dependency theory that focuses almost exclusively on external relationships.

The early work on Latin America had a substantial influence across various domains, four of which we discuss here. First, the theory strongly influenced many scholars who did not explicitly or fully identify themselves as dependency theorists. For instance, Guillermo O’Donnell’s (1973) work on bureaucratic-authoritarian regimes in South America, Nora Hamilton’s (1982) study on state autonomy in Mexico, and Gary Gereffi’s (1983) analysis of the pharmaceutical industry were all steeped in the dependency theory tradition. As Evans (1985) points out, even some studies that explicitly rejected dependency theory (e.g., Becker 1983 ) could be seen as largely consistent with this approach when it is understood as a theory frame.

Second, dependency theory was closely linked to economic policy within Latin America, specifically the policy of import substitution industrialization (ISI) that began after the Great Depression and took off in the 1950s and 1960s. Advocates of ISI suggested that the position of the Latin American economies in the world economy as food and raw material exporters was disadvantageous, industrialization was necessary for development, and the achievement of industrialization required protecting local industries by replacing imports from the advanced countries with the domestic production of manufactured products. The remedy involved a package of policies that included protective tariffs, preferential import exchange rates for industrial raw materials, public financial support for favored industries, and direct state participation in certain (often “heavier”) industries. Although these ISI policies arose from various sources (e.g., wars, balance-of-payments problems, and growing domestic markets), they grew up along with and were likely influenced by (and also influenced) dependency theory. For instance, Prebisch’s (1949) original ECLA statement urged the adoption of industrialization via the domestic market, as did other key dependency works, such as Furtado’s (1960) influential analysis of development policy in Brazil (see Hirschman 1968 ). 3 In turn, it is probably no accident that the replacement of ISI policies with market-oriented approaches in the 1980s went hand in hand with the decline of dependency theory as an explicit mode of analysis.

Third, scholars drew upon the work of Latin Americanists to make sense of historical development trajectories in other regions. For example, scholars working on sub-Saharan Africa—such as Samir Amin (1972) and Walter Rodney (1972) —were strongly influenced by dependency theory and used this frame to structure their comparative-historical explanations of underdevelopment in the region. Postcolonial African leaders themselves may also have been influenced by versions of dependency theory when pursuing macroeconomic policy ( Ahiakpor 1985 ). As explored in greater depth below, dependency theory was also employed and assessed in light of successful development cases in East Asia.

Finally, it is worth noting the tight connection between the original dependency theory work and the rise of comparative-historical studies of Latin America. When used as a theory frame in substantive analysis, dependency theory studies typically fall within the tradition of comparative-historical analysis associated with scholars such as Moore (1966) , Skocpol (1979) , and Tilly (1992) . The emphases of dependency theory on the role of colonialism, class coalitions, and foreign investment and intervention are all featured in contemporary comparative-historical work on Latin America (e.g., Collier and Collier 1991 ; Mahoney 2010 ; Paige 1997 ; Yashar 1997 ). Leading comparative-historical scholars of Latin America (e.g., Collier and Collier 1991 ) explicitly see themselves as part of a larger effort to explain the different paths of national development in the region—an effort that originated with dependency theory in the 1960s.

The East Asian Newly Industrializing Countries

Sustained high economic growth with equity in the Newly Industrializing Countries (NICs) of East Asia has attracted a great deal of attention among scholars of development over the last three decades. Many analysts suggest that the developmental successes of South Korea and Taiwan (and perhaps also Hong Kong and Singapore) pose serious challenges for dependency theory. Among other things, they point out that, by the 1970s, the East Asian NICs featured a model of export-led industrialization in which foreign investment was often encouraged ( Barrett and Chin 1987 ; Barrett and Whyte 1982 ). In addition, Taiwan and Korea had experienced extensive colonial interference from Japan before World War II, followed by heavy dependence on the United States in the decades after the war ( Amsden 1979 ; Hein 1992 ).

Yet other scholars have argued that the East Asian miracles vindicate more than contradict the dependency theory approach (e.g., Evans 1987 ; Gereffi 1989 ; Gold 1986 ; Koo 1987 ). They insist that the best explanations of the East Asian success stories and even the crisis of 1997 draw on ideas that are firmly rooted in the dependency theory approach. This argument is often developed by contrasting the East Asian NICs with their less successful counterparts in Latin America (e.g., Gereffi and Wyman 1987 ).

One of the most contentious issues in this debate is the role of the state and the contribution of government policy to the high growth. For some scholars who are skeptical of the dependency theory approach, the export-led model of East Asia represents the triumph of neoclassical economics ( Balassa 1981 ; Little 1979 ; Westphal 1978 ). From this perspective, “the first wave of successful industrialization in East Asia emerged with the rapid dismantling of government restrictions in the immediate post-war period, allowing the private sector to operate freely under world market prices” ( Akyüz et al. 1998 : 5). For others, however, the East Asian model of development always had a strong state as its agent of accumulation and thus is quite inconsistent with neoclassical tenets (e.g., Amsden 1979 , 1989 ; Aoki, Kim, and Okuno-Fujiwara 2006 ; Haggard 1990 ; Haggard and Moon 1983 ; Kohli 2004 ; McGuire 1994 ; Wade 2003 ). State-centric scholars nevertheless disagree among themselves about the extent to which East Asia’s state-led development supports dependency theory. At issue is one’s interpretation of dependency theory and whether this theory permits state-led development.

By the 1990s, leading development theorists in political science and sociology—and even international organizations such as the World Bank—tended to agree that the East Asian states were “strong” not only in their ability to actively intervene in economic development but also in the sense that they had considerable autonomy from elite classes, especially when compared to their Latin American counterparts (Evans 1987 , 1995 ; Johnson 1982 ; Koo 1987 ; McGuire 1994 : 229). 4 Vigorous government intervention in specific industries, especially in labor-intensive industries like manufactures for export, lay behind the rapid growth. Likewise, public investment in education, the use of targeted credit programs for promoting exports and research and development, and the implementation of extensive technological policies helped to drive economic development without exacerbating inequality ( Amsden 1989 ; Aoaki, Kim, and Okuno-Fujiwara 2006 ; Koo 1987 ; McGuire 1994 ; Rodrik 1997 ; World Bank 1993 ). In fact, scholars hold that the dismantling of previously effective developmental states during the 1990s as well as financial deregulation were critical causes of the 1997 East Asian financial crisis (e.g., Wade 2003 ).

Some prominent dependency theorists, including notably Evans ( 1987 ; 1995 ), find that the East Asian success also was rooted in the relative autonomy of the state from dominant economic classes. As in Latin America, the East Asian NICs were marked by a triple alliance between the local industrial bourgeoisie, transnational capital, and the state. However, whereas foreign capital was the dominant partner of this alliance in Latin America, the state was the leading actor in the East Asian triple alliance. In East Asia, unlike Latin America, strong states were in place before multinational corporations entered the picture, allowing these states to dictate better the terms on which MNCs would participate in the economy. In fact, while Latin American countries sought to deepen their industrialization in the mid-1950s by welcoming foreign direct investment, the latter was absent in East Asia during the crucial transition to industrialization and remained limited before the 1980s ( Gereffi 1989 : 515). More generally, state autonomy enabled the East Asian NICs to pursue public policies conducive to export-oriented industrialization. Whereas the Latin American states were often “captured” by ISI coalitions, the autonomous states of East Asia were able to more easily move out of ISI policies when external conditions were conducive to export-oriented growth models. The success of these export-oriented models was facilitated by the growing markets available to the East Asian NICs—markets that could not be easily reached by countries in the western hemisphere ( Evans 1987 ; Koo 1987 ).

Moreover, the East Asian states were stronger in relation to a third actor sometimes neglected by scholars working in the dependency theory tradition: local rural elites. In Korea and Taiwan, the state was decoupled from the landlord class during the extended period of Japanese colonization prior to 1945 ( Kohli 1994 ). Once independent, these states engaged in extensive land reform, which not only aided in reducing the gap between rich and poor but also spurred economic growth inasmuch as the resulting small, owner-operated farms were more productive ( Evans 1987 ; Koo 1987 ; McGuire 1994 ). By contrast, in Latin America, the persistence of traditional rural class relations forced the state to negotiate with the powerful landlord class, a process that has hindered and distorted development in that region.

A basic conclusion that some dependency theorists draw from the East Asian NICs is that there are different types and consequences of “dependency.” While the Latin American NICs were highly dependent on investment from transnational corporations and banks, their East Asian counterparts were dependent on American aid and trade for their outward-oriented industrialization. The role of the United States was thus important in both regions, but in quite different ways. In the case of Korea and Japan, the United States sought to protect distant and fledging allies against threats of communism emanating from the outside. It did so by providing massive economic and military aid and promoting capitalist development. But in Latin America, the United States saw the communist threat as emanating from within these nearby countries, and it worked to quash that threat by building up the military and extending high-interest loans to governments willing to support U.S. security interests in the region.

The differential influence of the United States in these two regions is consistent with a second core tenet of dependency theory: the role of external conditioning in shaping internal growth processes. The United States’ aid in South Korea and Taiwan was directed toward the growth of the private sector, infrastructural development (especially education), and laying the foundations of a free-market economy. It was accompanied by pressure for these governments to liberalize their economies and reduce military expenditures. These reorientations set the stage for an export-oriented strategy for industrialization in the 1960s and early 1970s when the world economy was growing. As clearly put by Koo, “It was only after this predominantly political integration into the world system, and after relatively unsuccessful experimentation with import-substitutions industrialization in the 1950s, that South Korea and Taiwan made a dynamic entry into the capitalist world economy in the early 1960s through their adoption of the outward-looking industrialization strategy” (1987: 168).

Overall, one’s view of the utility of dependency theory for explaining the East Asian cases thus depends on one’s understanding of that theory and of the role of the state in East Asian development. Dependency theory fares best if one treats it as a theory frame (rather than a set of directly testable hypotheses) and also if one recognizes the leading role of the state in driving economic growth in East Asia.

Globalization

It is no accident that several leading dependency theorists, such as Peter Evans and Gary Gereffi, are today influential scholars of globalization. The emphasis dependency theory places on the international context and transnational connections makes the analysis of globalization a natural extension. The term “globalization” itself suggests an understanding of international relations consistent with dependency theory: not merely a collection of atomistic states, but an interconnected system in which events occurring at the global level can powerfully shape internal processes of development ( Clayton 2004 : 279). Just as dependency theorists believed that “dependency” was an unavoidable background setting that “conditioned” domestic processes, globalization scholars now emphasize that, “Even if globalization does not ‘determine’ local events, there is no escaping it” ( Lechner and Boli 2000 : 3).

Globalization is a contested concept, much like dependency. Indeed, both dependency and globalization have been conceptualized in so many different ways that their myriad definitions sometimes stand in the way of scholarly communication. Nevertheless, nearly all definitions suggest that globalization encompasses a wider range of interdependencies than the asymmetrical economic relationships that were the focus of dependency theory ( Reyes 2001 ; Sklair 1999 ). 5 For example, scholars often include under the globalization label increased cultural, social, and political connections among states. The economic relationships of interest concern not only traditional dependency emphases, such as trade flows and foreign investment, but also contemporary financial investments, such as currency speculation and hedge funds. In addition, probably to a greater extent than dependency theorists, globalization scholars explore interrelationships among not only states but also localities within states, like cities (e.g., Sassen 2001 ).

When one looks broadly at empirical work on globalization, it is easy to see many imprints of dependency theory beyond the concern with external conditioning. Like dependency theorists, scholars of globalization are centrally concerned with the effects of external connections on the local state. One of the most important recent questions in the field of development is precisely whether globalization implies the withering or retreat of the state as we have traditionally known it ( Evans 1997 ; Guillén 2001 ; O’Riain 2000 ; Rodrik 1997 ; Sassen 1996 , 2008 ; Strange 1996 ). Despite the pressures and impingements of globalization, it is common for scholars in this tradition to argue that the state remains centrally important in the current global economy. This conclusion may well contradict the idea that greater dependence weakens the local state—a hypothesis that some scholars associate with dependency theory. However, the conclusion is quite consistent with dependency theory works that emphasize the developmental state as the late-twentieth century engine of growth in the world system (e.g., Evans 1995 ; Kohli 2004 ).

In addition to the state, multinational corporations (now almost always conceptualized as transnational corporations or TNCs) continue to be analyzed as prime movers in the contemporary global system (Evans 1998 , 2005 ; Sklair 2000 ; Stiglitz 2006 ). To highlight the prominent role of TNCs, Marxist scholars of globalization have referred to the current phase of the global economy as “neoliberal globalization,” “corporate globalization,” and “neoliberal globalization dominated by corporations” ( McMichael 2000 ). Likewise, dependency theory’s concern with understanding the local bourgeoisie has been extended to the global level. Thus, the current literature often focuses on a new transnational capitalist class composed of TNC executives, a global state bureaucracy, and consumer elites (e.g., Carroll and Caron 2003 ; Carroll and Fennema 2002 ; Robinson and Harris 2000 ; Sklair 2001 ). As Robinson (2005 : 5) explains, “world ruling class formation in the age of globalization is seen as the international collusion of these national bourgeoisies and their resultant international coalitions.”

Yet, despite its clear dependency theory lineages, globalization analysis is a distinctive theory frame. Perhaps most basically, globalization theorists broaden the scope of developmental outcomes beyond the traditional concern with economic development. Whereas dependency theorists viewed development mostly in terms of industrialization and the growth of the urban sector, globalization scholars are more apt to be skeptical that these outcomes necessarily generate human “progress.” Indeed, some globalization theorists celebrate and seek to protect the very traditional agrarian societies that dependency theorists associated with underdevelopment. Moreover, it is now a mainstream position to stress the value of preserving the “local” and eschew the imposition of western norms of modernity on nonwestern societies. In this sense, many globalization theorists draw theoretical inspiration from Foucault as well as Marx.

Other dependency theory emphases have been superseded by contemporary developments. For example, dependency theorists understood the international division of labor as fundamentally structured by the core–periphery binary. But globalization scholars envision a less mechanical and more complicated global structure, featuring many transnational actors and institutions that are associated with no specific national state and can occupy multiple and changing positions in the international arena. In addition, whereas dependency theory had relatively little to say about civil society, even within the boundaries of nation-states, the globalization literature is centrally concerned with new expressions of civil society, both nationally and globally. For example, the globalization literature calls attention to new social movements that are grounded in identity politics as well as traditional social movements such as labor organizations. Expressions of civil society that transcend national boundaries are of special interest, such as transnational advocacy networks (e.g., Keck and Sikkink 1998 ; Silver 2003 ) and other progressive movements that represent “counter-hegemonic globalization” or “globalization from below” ( De Sousa Santos and Rodriguez-Garavito 2005 ; Evans 2005 , 2008 ; Klug 2008 ; Silver 2003 ).

In sum, globalization studies depart from some dependency theory orientations even as they grow out of that tradition, adopting many of its major theoretical concerns and applying them to the contemporary global economy. In this way, the literature on globalization, especially its more materialist and neo-Marxist currents, is both an application of and an extension of dependency theory to the current era.

China and the New Global Division of Labor

In this final section, we range broadly and somewhat speculatively to consider the challenges and opportunities that major recent developments in the world economy offer for work in the dependency theory tradition. Let us begin by asking whether dependency as a theory frame can inform explanations of the recent rapid growth, increased openness, and industrialization via manufactured exports in China, which have positioned this country as the second largest economy in the world in terms of gross domestic product (GDP). Given that a definitive work on Chinese economic development has yet to be written, we see at least two possibilities for dependency theory to help make sense of the Chinese experience.

First, just as original works on dependency theory often traced developmental outcomes in Latin America back to a distant colonial period, today’s scholars might explain Chinese growth in terms of its ancient imperial past. In fact, several analysts broadly within the dependency theory tradition have called attention to the ways in which the Chinese economy was the largest and most sophisticated in the world before the nineteenth century ( Anderson 2010 : 91–92; Frank 1998 ; Hobson 2004 ; Pomeranz 2000 ). For centuries, China experienced dynamic progress via intensive agriculture, repeated innovation, long-distance trade, population growth, and vibrant urban commercial centers. One might therefore argue that the last 150 years of poverty and underdevelopment were simply a temporary aberration brought on by Europe’s sudden rise on the back of colonial mineral wealth from the Americas—wealth that China was in many ways originally best positioned to seize. On this path-dependent view, the explanatory task would be to identify the underlying structural continuities that persisted into the current period and that allowed China to revert to its “natural” leading position in the world economy. Such an explanation would likely have a historical-structural form similar to many of the early works of dependency theory.

Second, an alternative mode of explanation rooted in the dependency theory tradition might begin by comparing the Chinese model of growth to Japan, Korea, and Taiwan. A key commonality is readily apparent: a rapidly growing economy built on manufactured exports in which the state plays a leading role in sponsoring locally based private capital accumulation and industrialization. As Rodrik argues, “Much more than comparative advantage and free markets have been at play in shaping China’s export success. Government policies have helped nurture domestic capabilities in consumer electronics and other advanced areas that would most likely not have developed in their absence” (2006: 1). In addition, important elements of “embedded autonomy” are present in China; arguably more autonomy and less embeddedness. Thus, social ties between the Chinese Communist Party (CCP) and overseas Chinese businesses have been a key to recent growth. At the same time, the CCP exhibits substantial autonomy from these business groups, and it has controlled the pace of deregulation and privatization. Moreover, China has benefited from foreign capital investment; yet, parallel to Korea and Taiwan, it has done so “on terms and at conditions that served the Chinese ‘national interest,’ rather than the interests of the US Treasury and Western capital” ( Arrighi 2007 : 355). Furthermore, development in China is consistent with the type of dependent development described by Evans ( 1979 , 1985 ), where the need for repression is big and the need for democracy is small. All of this suggests that work using the frame of dependency theory could help make sense of China’s recent explosion of growth.

Nevertheless, the Chinese model contrasts in significant ways from the prototypical cases of developmental states. When compared to the classic East Asian NICs, China features greater dependence on exports, lower rates of domestic consumption, a larger public sector, higher levels of foreign investment, lower urban wages, and higher levels of urban-rural inequality ( Hung 2009 ). Many of these distinctive features of the Chinese economy are linked together, reinforcing one another. Explaining their operation offers a challenging though exciting possibility for scholars in the dependency theory tradition. Adequate explanation would require understanding how China’s external role in the global economy as the new “workshop of the world” is linked to an unequal internal structure in which an urban elite is privileged by a politically hegemonic party-state at the expense of vast rural grassroots interests. In fact, scholars associated with the dependency theory tradition who have started to examine China invariably have called attention to the relationship between its specific growth model and its rising inequality (e.g., Arrighi 2007 ; Evans and Staveteig 2008 ; Hung 2009 ).

Turning now to Latin America, the recent sustained economic growth in certain countries, notably Chile and Brazil, poses its own intriguing questions from the perspective of dependency theory. The growth in Chile has been built substantially around the export of raw materials (e.g., copper, timber, iron) and food products (e.g., fish, fruit), mainly to China ( Barton 2009 ). In the case of Brazil, the export economy is more diversified and includes heavy manufactures (e.g., automobile and airplane parts). Yet, with the rise of the Chinese economy, Brazil has increasingly depended on primary product exports (e.g., iron ore, crude petroleum, soybeans, and chemical wood pulp) ( Saslavsky and Rozemberg 2009 ). If China is the workshop of the world, Brazil and Chile—along with Argentina, Colombia, and Peru—are now among its key raw-material suppliers ( Arnson and Davidow 2011 : 4–5; Jenkins 2009 : Table 2).

On the one hand, the economic successes of the handful of Latin American countries that have profited from the export boom to China seem problematic when viewed from within the frame of dependency theory. The parallel between their contemporary situation and the situation that originally caught the attention of dependency theory scholars is apparent: these sustained high-growth cases are increasingly dependent on exporting a small number of primary products. Exports are also concentrated in terms of the companies involved ( Jenkins 2009 : 32). Moreover, much as the United States was doing during the 1970s in Latin America, the majority of Chinese foreign direct investment in Latin America is “resource-seeking” in commodity sectors that serve Chinese demand ( Arnson and Davidow 2011 ; Ellis 2009 ). As a result, China has become the most competitive exporter of manufactured goods within Latin America itself, leaving local producers vulnerable to displacement by their Chinese counterparts ( Gallagher and Porzecanski 2010 : 20–39). This situation of economic exposure and vulnerability of the local manufacturing sector closely resembles the one faced by Latin America at the time ISI was implemented.

On the other hand, a dependency theory frame could be used to explain the patterns of economic growth of Chile and Brazil. Dependencistas would be quick to point out that Chile and Brazil remain two of the most unequal countries in all of Latin America ( United Nations Development Program 2010 : 26). Growth via primary-product exporting in these countries has gone hand in hand with extremely high levels of inequality. These scholars might also draw attention to foreign actors for understanding contemporary social struggles in Latin America. Today, many conflicts between the state, landed elites, TNCs, and indigenous peoples are over environmental issues in areas where oil, iron, gold, copper, and coal are extracted as part of the new commodities development model ( Bebbington 2012 ).

In addition, dependency theory scholars might note that, as Latin American countries increasingly link themselves to Europe and China, they are simultaneously becoming decoupled from the United States. Unlike dependence in the past, the new economic connections to China may not entail the same kind of asymmetrical political relationship that existed historically between the United States and Latin America, given that China, as a prospective hegemon, is different from the United States. In fact, some scholars suggest the emergence of a “triangular relationship” among China, the United States, and Latin America, with potential opportunities for alliances and cooperation between China and Latin America ( Arnson and Davidow 2011 ; Ellis 2012 ; Ratliff 2009 ; Stallings 2008 ). In turn, severing the bonds of extreme political dependence on the United States might permit more autonomy in the formulation of national priorities and development policy within the region, eventually constituting a potential threat to U.S. political and economic interests ( Ellis 2012 : 5–8). Yet the larger question remains: Can China be a sustained source of demand for Latin American commodities, and, if so, can this exporting undergird broad-based development? The answer may dictate whether Latin America carves out a new, dynamic role in the world economy or simply follows an older pattern of dependence under a new guise.

Finally, we can consider what China’s rise and the associated reshuffling of roles in the world economy might mean for one of the least industrialized zones, specifically sub-Saharan Africa. Dependency theory work on Africa has focused centrally on the negative consequences of the slave trade and European colonialism for postcolonial development ( Amin 1972 ; Rodney 1972 ). 6 Today, one major issue is whether China’s increasing investment in Africa represents a new form of neocolonialism ( Rotberg 2008 ). Some scholars have raised explicitly the question of whether Africa’s rich natural resources are triggering a “second scramble,” as the wealthier nations seek to carve out new spheres of influence on the continent ( Carmody 2011 ). Minimally, the work of dependency theorists, such as Cardoso and Faletto on enclave economies and Frank on colonialism in Latin America, offers a starting point for assessing the current situation in Africa.

In addition, dependency theory suggests a historical lens for thinking about the form of dependence that exists between Africa and China. From this historical standpoint, important parallels can be seen between contemporary China and Africa, on the one hand, and England and its raw material suppliers during the late nineteenth century, on the other hand. Countries that were key suppliers to England’s manufacturing economy experienced huge influxes of new revenue. That mode of “dependence” proved highly advantageous while the manufacturing boom lasted. Today, those countries in Africa that have been able to export raw materials to China are likewise seeing huge revenue booms. Reliance on markets in a rising manufacturing hegemon is a distinctive mode of dependence that allows for substantial growth, at least in the short run.

Any assessment of the contributions and prospects of work in the tradition of dependency theory will depend heavily on one’s understanding of the content and purposes of that theory. On the one hand, the theory is associated—rightly or wrongly—with a series of simple but readily testable hypotheses, such as the proposition that higher levels of foreign direct investment generate lower rates of economic growth. When viewed in this way, the validity of the theory can be assessed and debated according to the results of empirical tests. Likewise, to the extent that dependency theory is associated with certain policy prescriptions, such as ISI and statist economic models, one can question its practical utility in the real world, either in the past or in the present. The belief among some that dependency theory is a failed approach stems from the conviction that its testable hypotheses are wrong and its policy implications are misguided.

On the other hand, however, most scholars who originally formulated the dependency theory approach viewed it as a frame to help guide the empirical investigation of concrete situations of development and underdevelopment. They suggested that the utility of the approach should be judged according to whether the structural relationships emphasized in the dependency theory tradition—such as trade linkages across countries; connections between foreign investors and local capitalists; forms of dominant class leverage within the state; and types of alliances between multinationals, local capital, and the state—prove useful for explaining particular development outcomes in specific cases. On this view, one can make a strong case that dependency theory has been and continues to be an extremely useful approach. The utility of this approach applies not only to the historical patterns of development in Latin America, for which it was first employed, but also to cases that might seem to challenge the tradition, such as East Asian NICs. In fact, many of the emphases of the dependency theory tradition have been used, consciously or unconsciously, to make sense of contemporary processes of development ranging from globalization to the rise of China.

Already in 1985, Peter Evans projected that the dependency theory label would disappear from scholarly work but that the orientations, concepts, and questions of this theory frame would continue to implicitly influence substantive work. More than twenty-five years later, one cannot help but be impressed by Evans’s prescience. Although virtually no dependency theorists remain, work associated with this theory frame is alive and well in the field of development.

Acknowledgments

For helpful comments, we thank Peter Evans, Kenneth Roberts, and Nicolas van de Walle.

For reviews of early dependency theory works, see Chilcote (1974) , Girvan (1973) , and Valenzuela and Valenzuela (1978) .

The English edition of this book was published in 1979 ( Cardoso and Faletto 1979 ), and it includes an important preface with a theoretical statement about historical-structuralism. Citations in the text are to this 1979 edition.

For an analysis on how Prebisch’s and ECLA’s ideas spread among policy and government circles in Latin American countries, see Sikkink (1991) .

By 1993, the World Bank, which had been known for its free-market policy prescriptions, suggested that a combination of market-oriented and state-led policies were behind rapid growth in East Asia ( World Bank 1993 : 10).

Even leading dependency theorists define globalization more broadly than economic relationships. For example, Boswell and Chase-Dunn (2000 : 33–34) define it as “transnational sourcing and a single interdependent global economy,” facilitated by “foreign investment, information exchange . . . world culture commercialization [and] the integration of trade and production.”

Dependency theory’s impact on the study of Africa was less extensive and shorter-lived than for Latin America. It is possible that the greater importance of ethnic cleavages and more limited utility of traditional economic class categories in Africa explain this puzzle.

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Dependent Development

• First Online: 18 May 2021

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• Ronaldo Munck 4  

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The so-called ‘dependency theory’ that emerged in Latin America during the 1960s and received worldwide attention as the main alternative to the dominant paradigm is undoubtedly the main Southern contribution to development theory. This chapter recounts how the activist intellectuals driving it saw themselves Completing Lenin by adding the view of how imperialism was perceived in the county being dominated, something hitherto missing in the Marxist classics, with the partial exception of Rosa Luxemburg. We explore in this section the various Marxist and neo-Marxist attempts to create a new paradigm of dependent development and establish its own ‘laws of motion’ distinct from those of metropolitan or central capitalism. The following section on the External/Internal Dialectic explores the varying emphasis placed on internal and external causation by various dependency theorists, after an early almost total focus on the external element. This debate continues to rumble on in international political economy and the critique of globalisation as different schools grapple with the dilemmas of a predominantly external lens on capitalist development and the need to incorporate the internal dynamics and class struggle of the dependent condition. Finally, the chapter turns to the Achievements and Limits of the dependent development approach that has in recent years been making something of a comeback. Its undoubted economism and methodological nationalism in many cases needs to be balanced by its creative use as a comparative historical methodology in its best hands. We argue for the continued relevance of dependency today as a methodology and as a lens to apprehend the contradictions of capitalist development on the periphery of the world system.

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Munck, R. (2021). Dependent Development. In: Rethinking Development. Marx, Engels, and Marxisms. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-73811-2_7

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Article contents

Dependency and world-systems perspectives on development.

• Ray Kiely Ray Kiely School of Politics and International Relations, Queen Mary University of London
• https://doi.org/10.1093/acrefore/9780190846626.013.142
• Published in print: 01 March 2010
• Published online: 30 November 2017

This essay focuses on two related “radical theories” of development, dependency and world-systems theory, and shows how they emerged as a critique partly of modernization theory and of the development strategy of import substitution industrialization. The dependency and world-systems perspectives on development were very influential among radical development theorists from the late 1960s onwards, all of whom agreed that capitalism had to be theorized as a world-system. These include Andre Gunder Frank, Fernando Henrique Cardoso, Theotonio Dos Santos, Walter Rodney, Samir Amin, Arghiri Emmanuel, and Immanuel Wallerstein. Some “stronger” versions of dependency, associated with underdevelopment and world-systems theory, have been introduced in recent years. In particular, A. G. Frank proposed the idea that development and underdevelopment are two sides of the same coin. A more nuanced approach to understanding dependency suggested that development and dependence were in some respects compatible. Wallerstein’s world-systems theory has spawned another approach called world-systems analysis. As theories, the ideas associated with both dependency and the world-systems are problematic, failing, for example, to adequately explain the origins of the capitalist world economy. However, both theories remain useful for understanding the current global order. In addition to recognizing that capitalism can in some respects be regarded as a world-system, the two approaches correctly assume that neoliberalism reinforces hierarchies by undermining the capacities of states to shift out of low value production into higher value sectors, as shown by historical patterns of manufacturing.

• development
• world-systems theory
• import substitution industrialization
• underdevelopment
• world-systems analysis
• capitalist world economy
• neoliberalism

Introduction

This essay examines the rise and apparent fall of two related “radical theories” of development, dependency and world-systems theory. It shows how these theories emerged as a critique partly of modernization theory, and (more ambiguously) of the development strategy of import substitution industrialization, but equally shows that these perspectives draw on wider traditions of political economy and social theory. The essay then moves on to look at the main contentions of theories of dependency, and some of the similarities and differences among its main proponents. In discussing these theories, the essay also shows how they were challenged, both theoretically and by important changes in the international economy. In development studies, these challenges have generally been viewed as so great that the theories have effectively ceased to be of any use in the discipline – a view that this essay challenges. The essay then moves on to review and critically examine world-systems analysis, focusing on the rise and fall of hegemonic powers, and specifically the rise (or revival) of East Asia, and the utility of commodity chains analysis. The essay then reflects on the discussion and suggests that, despite some serious weaknesses, both theories remain useful for understanding the current global order. In particular, it will briefly suggested that while theories of both dependency and the world-system were full of problems and deserved a great deal of criticism, the concepts of dependency and the world-system may retain some valuable insights in their attempts to theorize concrete situations of dependency in the context of uneven development in the capitalist world-system. Indeed it will be suggested that this is even more so in the era of neoliberal globalization.

The Origins of Dependency and World-Systems Theory

Both dependency and world-systems theories were very influential among radical development theorists from the late 1960s onwards. Influential writers included Andre Gunder Frank , Fernando Henrique Cardoso , Theotonio Dos Santos , Walter Rodney , Samir Amin , Arghiri Emmanuel , and Immanuel Wallerstein . There were significant differences among these writers, but all agreed on the basic points that capitalism had to be theorized as a world-system, in which there were constituent parts or regions, some of which (cores or metropoles) served to exclude, dominate, or subordinate satellite, peripheral, or dependent regions of the world economy. This was not necessarily a new idea, and a number of third world nationalist leaders had talked about the adverse impact of colonialism and the colonial legacy in subordinating the developing world. Marx had argued in the nineteenth century that there was a close link between wage or “veiled” slavery in the developed capitalist countries and slavery in the new world, a theme developed by a number of nationalist leaders, including in the academy by the Trinidadian premier from 1956 to 1981 , Eric Williams , in his PhD thesis in the 1940s (Williams 1987 ).

In terms of their specific development in the 1960s onwards, dependency and worldsystems theories emerged in part out of a critique of modernization theory. This theory suggested that nation-states pass through similar stages of development on their way to the end point of a mature, industrial society (Rostow 1960 ). Thus, just as developed societies were once backward, so backward societies in the 1960s would follow similar paths of development, and indeed their transition would be hastened through close contact with the already developed societies, who could provide technology, aid, and the diffusion of Western values of entrepreneurship and individual enterprise. Dependency writers rejected this approach, suggesting that developed and backward regions could not be divided in such a fashion, and that instead there was a close, and perhaps even a causal, relationship between development in some eras, and so-called backwardness in others. Thus, Frank argued that supposedly backward societies were not so much undeveloped as under developed.

A related theory suggested one reason why this might be the case, namely that of Raul Prebisch ’s theory of unequal terms of trade. Prebisch ( 1959 ; also Singer 1950 ) argued that trade relations between developed and developing countries were unequal, and this reflected the kinds of goods that were being produced. He suggested that there was a tendency for the terms of trade to decline as against those of manufactured goods, and argued that this was because of the intense competition that existed between many primary goods producers, as opposed to the relatively few manufactured goods producers. This was also reinforced by a low income elasticity of demand for primary goods, so that as average incomes increased, people spent a proportionately lower amount of their income on primary goods. It was also further reinforced by higher wages in the core countries, an argument further (problematically) made by theories of unequal exchange associated with Emmanuel and Amin in the 1970s. For Prebisch and Singer then, there were structured inequalities that pervaded the world economy, and modernization was a far more complex process than any simplistic modernization theory allowed.

Interestingly however, Prebisch argued that his theory provided the rationale for import substitution industrialization (ISI) policies, which ironically was not so far away from the strategic arguments made by modernization theory. ISI policies were regarded as being a means to modernize “backward” countries and reverse the colonial legacy of concentrating on primary products. Prebsich’s relationship to dependency theory is therefore an ambiguous one: on the one hand, he suggested that there are structured inequalities in the global economy which lead to dependent subordination; on the other hand, like modernization theory, he advocated industrialization in order to catch up with the developed countries. For dependency theory proper, the argument concerning structured inequalities was accepted, but the solution to this problem – ISI – was regarded as being part of the problem by later dependency writers.

This was because ISI led to new forms of dependence, be it on foreign capital, investment, technology, or export markets. For some versions of dependency theory, this led to the argument that development could take place, but it was somehow subordinate or dependent, while others suggested that development was impossible so long as the nation-state remained part of the capitalist-dominated world economy. These differences are addressed through a more detailed examination of content in the next section.

Dependency Theory I: Underdevelopment Theory

This section looks in some detail at some of the “stronger” versions of dependency, associated with underdevelopment and world-system theory. The content of these theories is addressed and an initial critical assessment is made, both to show the weaknesses of these theories, but also as a precursor to a partial defense of the idea of dependency, less as a theory and more as a concrete analysis of situations of uneven development. The section thus starts by outlining the broad claims of the theories, challenging them, and then showing potential responses to these problems.

Underdevelopment theory is particularly associated with Paul Baran ’s The Political Economy of Growth , and even more with the 1960s and 1970s work of Andre Gunder Frank ( 1969a ; 1969b ). It was further developed in the 1970s by Walter Rodney ( 1972 ), Samir Amin ( 1976 ) and Arghiri Emmanuel ( 1972b ). The starting point for this analysis was an acceptance that capitalism and imperialism were somehow parasitic, and that this was most clear in the case of the underdeveloped world.

Paul Baran ( 1957 :197) argued that imperialism was based on the dominance of monopoly capital; “now directed not solely towards the rapid extraction of large sporadic gains from the objects of its domination, it is no longer content with merely assuring a more or less steady flow of those gains over a somewhat extended period. Propelled by well organized, rationally conducted monopolistic enterprise, it seeks today to rationalize the flow of these receipts so as to be able to count on it in perpetuity.” This account of underdevelopment was closely linked to what Baran ( 1957 :163–4) described as a stagnant, decaying, monopoly capitalism, which, “far from serving as an engine of economic expansion, of technological progress and of social change” actually represents “a framework for archaic technology, and for social backwardness.” Capital investment in the third world was wasted on luxury consumption by landlords and what Baran ( 1957 : ch.6; also Frank 1969a :168–9) called comprador administrations, tied to and dependent on the imperialist countries.

Frank developed this theory further by particularly emphasizing the links between development and underdevelopment, which were used to explain the history of capitalism since at least the sixteenth century . The basic claim of Frank’s theory was that development and underdevelopment are two sides of the same coin. Liberally borrowing from Baran’s concept of economic surplus, Frank argued that the developed countries were developed because they extracted the economic surplus produced by the poorer countries. Frank argued that this process of surplus extraction occurred within countries too, but it was also clear that his hierarchy of metropoles exploiting satellites could be applied more to the division between rich and poor countries. Thus, “satellites remain underdeveloped for the lack of access to their own surplus” (Frank 1969a :9), as capitalism “has at all times and in all places […] produced both development and underdevelopment” (1969a:240) For Frank, the whole world was capitalist irrespective of the relations of production that existed in a particular locality, whereas Baran argued that non-capitalist relations of production persisted, but were subordinated to the requirements of the wider capitalist-dominated international economy. Both agreed that this resulted in surplus extraction from satellite to metropolis.

Walter Rodney ( 1972 ) argued along similar lines in his How Europe Underdeveloped Africa , though this work focused mainly on the colonial era. Like Rodney, Frank developed a grand theory of underdevelopment, which argued that the international order had been capitalist since the sixteenth century . This order was based on a fundamental inequality between developed and underdeveloped regions, whereby the former developed through extracting the surplus of the latter. This zero-sum game had not fundamentally changed since, except on those rare occasions where underdeveloped countries managed to partially escape from underdevelopment through some form of de-linking from the world economy (Frank 1969a ).

Immanuel Wallerstein ’s world-systems theory was very similar to this approach. Indeed, he explicitly acknowledged his debt to Baran and Frank (Wallerstein 1980 :9) and argued that the world-system had been capitalist since at least the sixteenth century , and the basis for this was a division of the world into core, peripheral, and semi-peripheral areas (Wallerstein 1974 ; 1980 ). He argued that the core areas have, since at least 1640 , specialized in higher value production and appropriated a surplus from the periphery and semiperiphery (Wallerstein 1980 :18–19). In terms of the post- 1945 era, Wallerstein suggests that a new semi-periphery has developed in southern Europe and East Asia, which acts as a buffer between core and periphery. This argument amounts to less an explanation and more a description of the rise of a number of countries out of peripheral status, though we will see below that a number of writers drew on world-systems theory and dependency theory to try to explain the East Asian miracle. What is clear is that, while Wallerstein added another layer to Frank’s conception of metropolis and satellite, he essentially argued that underdevelopment did indeed occur via a process of surplus transfer. Nonetheless, his argument that capitalism is a world-system remains influential and is discussed in depth below.

Perhaps the main weakness of underdevelopment theory was its failure to precisely explain both the origins and mechanisms of development and underdevelopment. It is not clear how countries and localities came to be divided into metropolis and satellite in the first place – more orthodox Marxists suggested that one first had to look at the relations of production within specific localities before moving to an analysis based on trade relations (Brenner 1977 ; Dore and Weeks 1979 ). This argument has been implicitly revived in the context of debates over the origins of the great divergence between West and East within the capitalist world-system, as we will see below.

In terms of the mechanisms that sustain a core–periphery divide, Frank failed to explain changes within the world-system, or how such a divide is maintained over time. His argument rests on the idea that a process of surplus extraction occurs through trade and investment relations between rich and poor world. The mechanisms of how surplus is extracted are not entirely clear, but they could presumably refer to the fact that multinational companies may invest so much in a poor country, but they export more money in terms of profit repatriation. Added to this may be practices such as tax avoidance through transfer pricing, where two or more parts of the same parent multinational company trade across national borders, but declare their profits in the lower tax country (Lall 1978 ; Murray 1981 ). Similarly, a process of surplus extraction may occur through unequal trade, in which the benefits of such transactions accrue to the rich country.

The problem with such arguments, however, is that while such practices may indeed occur, they are not sufficient to establish as stark a dichotomy as that of development in one location, and underdevelopment in another. Foreign investment may lead to some profit repatriation, but this is true in all locations where multinationals invest, not just poor countries. Furthermore, some investment will stay in the home country, and this will have some spinoffs in terms of income generation, employment, foreign exchange in the case of exporters, and so on, even if these may be more limited. Similarly, while trade relations may be unequal, they are not so unequal that the rich location accrues all the benefits and the poor location none at all.

These problems are most clear when we actually examine the nature and direction of capital flows and trade in the postwar international order. The internationalization of capital after 1945 was actually characterized by the increasing concentration of capital within the rich world, and most trade (measured in value terms) was between rich countries. This is not to deny the importance of foreign capital or trade to poorer countries, but it is to deny the starkness of a theory which suggests that the developed world is only developed because it has underdeveloped the poor world. If this was the case, then we would expect the direction of capital to flow from rich to poor world, and most trade to take place between these two regions, in order to facilitate the process of surplus extraction that is said to lead to development and underdevelopment. Indeed, the richer developing countries were the ones that received significant amounts of foreign investment, and traded more with the developed world. This fact – and especially the rise of East Asia – was central to Marxist critiques of Frank which suggest that imperialism is the pioneer of capitalism (Warren 1973 ), but also neoliberal approaches briefly discussed (and challenged) below.

The work of Emmanuel ( 1972a ; 1972b ) and Amin ( 1976 ) was important in that they attempted to explain some of the mechanisms of underdevelopment that were largely absent in the work of Frank. Emmanuel argued that poorer countries lose out in relative, rather than absolute terms (Frank’s argument), due to a process of unequal exchange. For Emmanuel ( 1972b ), wage differentials between rich and poor countries were the main cause of unequal exchange. He made a number of assumptions that challenge orthodox trade theory: capital is internationally mobile while labor is (relatively) immobile, and this led to a tendency for profit rates to equalize across countries. In this context, an unequal exchange occurs because poor countries exchange goods in which more labor time is embodied for goods which are the product of less labor time. A transfer of surplus thus occurs from the poor to the rich countries because profit rates equalize in the context of international capital mobility. The result is that the ratio of advanced country prices to poor country prices is greater than the ratio of advanced country labor time to poorer country labor time, as embodied in specific commodities. Like Frank, the argument is that it is therefore through exchange that a transfer of surplus takes place from poor to rich country.

Amin added to these arguments, and suggested that there was an international division between central and peripheral capitalist formations. This involved two modes of accumulation, autocentric or self-generating accumulation in the centre and extraverted accumulation in the periphery. For the latter, this meant three “distortions” from central capitalism:

a crucial distortion toward export activities, which absorb the major part of capital arriving from the center;

a distortion toward tertiary activities, which arises both from the special contradictions of peripheral capitalism and from the original structures of the peripheral formations; and

a distortion in the choices of branches of industry, toward light branches, together with the utilization of modern techniques in these branches” (Amin 1976 :288).

In the postwar period, with the emergence of the multinational company and foreign investment in manufacturing, extraverted accumulation continues in new forms. These include concentration on the production of luxury goods, profit repatriation, and unequal exchange, which Amin also regarded as being caused by low wages ( 1976 :193).

While both Emmanuel and Amin made a more rigorous attempt to explain processes of surplus extraction, their explanations were still unconvincing. Amin’s concept of autocentric accumulation in the core was inconsistent with a theory that suggests foreign capital investment is important to capital expansion in the core countries (Bernstein 1979 ; Smith 1980 ). Both theories were also problematic in their assumption that unit labor costs are lower in the poorer countries than in the richer ones. Wages are undoubtedly lower, but this can be offset by higher productivity in the richer countries, which itself is a product of earlier rounds of capital accumulation and thus technological investment. In Marxist terminology, the extraction of relative surplus value can more than offset the extraction of absolute surplus value, and so workers in the rich countries can be both better off (in terms of consuming use values) and more exploited, in relative terms (Bettelheim 1972 ; Dore and Weeks 1979 ). If it were the case that rates of surplus value were higher in poor countries, then one would expect capital to move from rich to poor countries, an expectation shared with orthodox theories of trade and investment, but one that does not conform to the realities of the international economy. It may be the case that the rate of extraction of absolute surplus value is greater in poorer, than in richer countries (Dore and Weeks 1979 ), but this is offset by higher rates of relative surplus value in richer countries. What this means is that rates of capital accumulation involve the extraction of surplus value through long hours and low wages in poorer countries, more than it does through increasing productivity and thus lowering the social reproduction requirements of labor, as is more common in richer countries (Bettelheim 1972 ). This critique relates back to the argument that one needs to first focus on the relations of production rather than trade relations, in order to show that the early development of capitalist social relations led to the shift from absolute to relative surplus value extraction, and thus development based on the dynamic accumulation of capital. On the other hand, this then begs the question of whether the expansion of capitalism beyond national borders leads to the progressive diffusion of a dynamic capitalism throughout the world-system. Both dependency and world-systems analysis suggest that this is not the case, and (as well as outlining further the contentions of both approaches), the rest of this essay discusses why they argue this, and why they are right to do so.

Dependency Theory II: Dependent Development?

The logical conclusion of Frankian underdevelopment theory was that so long as a dependent country remains part of the capitalist world-system, it would stagnate as its surplus would be extracted to enrich metropolitan countries. However, a more nuanced approach to understanding dependency suggested that development and dependence were in some respects compatible (Cardoso and Falletto 1979 ; Evans 1979 ). In other words, capital accumulation, economic growth, and even some social development was possible, but it was somehow distorted by relations of dependency.

This could take a number of forms, including dependence on foreign technology, finance, or investment. For example, it was possible for multinational companies to promote development in the third world, but this development remained dependent on the core countries.

This argument was even be applied to the success stories in East Asia, as these were said to be the result of multinational companies relocating from first to third world, in order to “super-exploit” cheap labour in the latter countries. The result was unemployment in the rich world, and distorted or abnormal, and above all dependent development, in the newly industrializing countries (Hart-Landsberg 1979 ; Frobel et al. 1980 ; Hart-Landsberg 1984 ). Third world industrialization was thus still development which ultimately reflected the interests of western (and Japanese) multinational companies, which were said to be the main agents of imperialism. This was reinforced by dependent elites and national capital in the third world, which showed little interest in promoting genuinely independent, national capitalist development, in opposition to imperialism. It was further reinforced by aid practices by the rich countries, which were often tied to strategic (Cold War) and/or commercial interests, so that for instance aid was often tied to the recipient country buying goods from the sending country. In this way, aid too was a postwar manifestation of capitalist imperialism (Hayter 1971 ; 1985 ).

Other Marxists challenged this view. Drawing on Marx’s apologies for colonialism on the grounds that this led to capitalist development in the “backward countries,” Bill Warren ( 1980 ) argued that it was clear that in the post- 1945 period, imperialism was indeed the pioneer of capitalism. For Warren ( 1973 ) and others influenced by his work (Schiffer 1981 ; Sender and Smith 1986 ), all the evidence pointed to rapid capitalist development in the so-called periphery, and this was aided by foreign capital investment. Indeed, third world countries got capital investment on the cheap, as it gave them access to technology which took years of effort and expense to develop in the metropolitan countries (Warren 1973 ). It also led to higher per capita income, employment generation, and new skills, and indeed aided the development of political democracy as capitalism and development were “Siamese twins” (Warren 1980 ). To be sure, such capitalist development took place in the context of massive inequality and uneven development, but these are intrinsic features of all processes of capitalist development. The crucial point is that the fact of capitalist development is indisputable, whatever one thinks of the social consequences of such development. Focusing on the ways in which imperialism allegedly held back capitalist development played into the hands of nationalist mythologies (Kitching 1989 ; 2001 ), which could become self-fulfilling prophecies as states adopted policies which held back further capitalist development in the name of a spurious anti-imperialism.

It was true that capitalist development did take place on quite a rapid scale in the period from 1945 to the early 1970s. This “Golden Age” (Glyn et al. 1991 ) applied not only to the developed countries, but also to many third world countries which experienced high rates of growth. In the 1960s and 1970s, developing countries as a whole had an annual average per capita growth rate of 3 percent, higher than the averages for developed countries in the nineteenth century (Chang 2002 :132). Moreover, while growth rates did diverge considerably among developing countries, with East Asia doing particularly well in this period, they were still quite high throughout the developing world. African countries averaged growth rates of between 1–2 percent per capita per year in the 1960s and 1970s, which again compares favorably with the developed countries in their era of “takeoff” (Chang 2005 : tables 5 and 7). Indeed, the 1960s and 1970s can be described as one where there was an industrial revolution in the third world (Chang 2002 ).

This undermines the claims of underdevelopment theory, but what of the broader idea of dependency, which often accepted the view that capitalist development was possible, and indeed was happening, in the periphery (Kay 1989 )? The main point made by the idea of dependency was that capitalist development was taking place, but that it was somehow different from earlier phases of capitalist development in the developed countries. Sometimes this led to the unconvincing contrast between “normal” and “dependent” capitalist development, which, as we have seen, begged the question of what was “normal” and ironically came close to embracing a Eurocentric view of (“normal European”) capitalism. On the other hand, Warren’s conclusions themselves tended towards a view that there was a normal road to capitalism and, in contrast to dependency theory, suggested that this was what was occurring in the third world. Warren also tended to move from a position of recognition that such a development was occurring, to one that uncritically endorsed such development, without any examination of the social forces and struggles involved in such processes (Seers 1978 ; Lipietz 1982 ). In many ways, Warren’s view was simply an inversion, a mirror image of the crudest version of dependency theory: both constructed a norm, and then argued about whether or not third world countries were conforming to, or deviating from, that norm (Gulalp 1986 ). What both theories lacked was an account of specificity, and the different ways in which capitalism was developing in the third world. This in turn meant that there was a need to concretize uneven development, both internationally and within specific nation-states. In contrast to Warren, this meant recognizing that uneven development was not simply a product of the backwardness of capitalism in some places, but was intrinsic to the way that capitalism functioned throughout the globe. Put this way, the idea of dependency as less a theory, and more a concept designed to understand specific manifestations of uneven development, may retain some utility (Palma 1978 ; Saul and Leys 2007 ; Kiely 2007a ; 2007b ). Much the same point can be made in distinguishing between world-systems theory and world-systems analysis , as shown below.

World-Systems Theory and Analysis

As we saw earlier, world-systems theory was developed by Wallerstein in the 1970s and, initially at least, had quite similar arguments to those of Frank’s underdevelopment theory. However, world-systems analysis retains considerable influence, and it developed in new ways, less as a rigid theory based on three zones in the world economy, and more as a looser frame of analysis. In particular, world-systems analysis takes Wallerstein’s notion of a world-system as a starting point, but then develops this to look at certain specific areas of inquiry. This section cannot do justice to the wide range of subjects that have been examined, and so instead places a particular emphasis on two areas: the rise and fall of hegemonic powers and the resurgence of East Asia; and, global commodity chains analysis. It will also briefly be suggested that the best analysis made by the latter in some ways undermines the claims made by the former, though will do so in a way that does not detract in the least from an analysis of capitalism as a world-system. More specifically, it will be suggested that the former analysis rests on an unconvincing account of the rise of (European and US-dominated) capitalism (the chief weakness of dependency and world-systems theory ), but that the latter usefully points to the unevenness of capitalist development once it is established (the great strength of dependency and world-systems analysis ).

World-systems analysis has developed a broad programme for understanding the rise and fall of hegemonic powers. A recurring theme has been the demise of US hegemony (Wallerstein 2003 ). There is some disagreement as to whether it will be Europe (Wallerstein 2003 ) or (part of) Asia that will replace it, but some of the most interesting work focuses on the rise of Asia. This section will briefly examine two attempts to examine Asia’s rise, through a focus on the later work of Andre Gunder Frank and Giovanni Arrighi .

Although critical of much work of earlier world-systems theory and his own underdevelopment theory, Frank’s later work ( 1998 :26–34, 46) can be located within a newer tradition of “global history” (Bin Wong 1998 ; Pomeranz 2000 ; Gills 2006 ), much of which takes an analysis of the world-system as its point of departure. Frank argues that the world-system has historically been centered on Asia, and that Europe only became the dominant power in the nineteenth century . He is therefore sympathetic to Abu-Lughold’s ( 1989 ) argument that there was an Asia-dominated world economy from 1250 to 1350 , but he challenges her claim that this went into decline after this period. He also challenges the orthodoxy in world-systems theory, which claims that the world economy was one dominated by Europe from the sixteenth century onwards. Frank ( 1998 :75) instead argues that the period from 1400 to 1800 was characterized by an Asia-dominated world economy, and that Europe remained a marginal player in this order. Central to this claim is the fact that Europe had a longstanding trade deficit with Asia, and that Europe financed this by plundering gold from the Americas, which financed the import of goods from Asia. He also claims that as late as 1800 , Asia was a more efficient economic producer than Europe ( 1998 :172–4).

Europe overtook Asia as the latter went into economic crisis from 1750 onwards. Europe benefited from an abundance of certain natural resources (especially coal), cheap food imported from the colonies, and beneficial world prices in the form of higher wages and cheap sources of capital. Frank also repeats his arguments that the extraction of surplus from the periphery was the crucial factor in financing the development of the (new, European) core ( 1998 :294–7). But unlike his earlier underdevelopment theory, Frank more explicitly recognizes that Europe forged ahead through technological innovation while Asia fell behind. For Frank this divergence occurred because higher wages in Europe stimulated innovation, while lower wages in China made it rational for innovation not to take place. Cheaper labor existed in China because a more efficient agrarian system allowed wages to stay low ( 1998 :307), which was further reinforced by a higher demographic/land resource ratio ( 1998 :308).

Frank therefore argues that Europe (and the USA) being the centre of the world is historically unusual. He also suggests that the period of Euro-American dominance is coming to an end. This is also the view of another writer working in a broadly world-systems framework of analysis, Giovanni Arrighi ( 1994 ; 2007 ). Although there are clear differences between the two (Arrighi 1999 ), Giovanni Arrighi ( 2007 ) also argues that the era of European–US dominance is coming to an end. By around 1950 , European and North American dominance was under strain, as the Western capital- and energy-intensive path of industrial development reached its limits, and the East Asian labor-intensive and energy-saving “industrious revolution” began to challenge Western hegemony and restore Asia’s position as the central region in the world economy. In effect, the virtuous circle of capitalism, industrialism, and militarism driven by interstate competition was eroded by a crisis of legitimacy, a new Asian hybrid of industrious and industrial revolutions, nationalism in the third world, and, in the context of increased global integration, the erosion of the synergy between financial and military capabilities which had served to keep West ahead of East. US-led military attempts to overcome these problems backfired “and created unprecedented opportunities for the social and economic empowerment of the peoples of the global South” ( 2007 :95) These opportunities varied across regions, and much of the South was constrained by a new era of indebtedness and neoliberal restructuring, which served to further “integrate” these economies into the world economy, but without promoting sustained development. In Asia, and especially East Asia, things were different, however, and this region is now set to challenge US hegemony, which is in decline, and which has further been eroded by the military adventurism of the Bush II administration.

Drawing on themes developed in his earlier work (Arrighi 1994 ), Arrighi argues that an ongoing sequence of capital accumulation has historically been accompanied by the rise and fall of hegemonic powers. Thus, from the Italian city-states up to the era of US hegemony, via Dutch and then British hegemony, is “the same sequence of declining and emerging capitalist centers that, according to Marx, were linked to one another by a recycling of surplus capital through the international credit system. In both sequences, the states that became identified with capitalism […] were larger and more powerful than their predecessor” ( 2007 :93) Arrighi thus argues that the industrial capitalism of the West came to challenge and surpass East Asia, only then to be challenged by the latter in the second half of the twentieth century .

There are problems with these accounts, however, both historically and as an assessment of current realities. Briefly, a great deal of historical evidence suggests that labor and land productivity had already undergone substantial improvements in parts of Europe (and specifically England or Britain) before 1800 (Allen 2000 ). In England especially, land ownership became increasingly concentrated, and capitalist farms of 100 acres or more increased from 14% of all farms in the 1600s to 52% of all farms by 1800 . These farms made up 66% of all farmland by the latter date (O’Brien 1996 :237). This concentration reflected the increased capitalist nature of English farming, which meant that the context of competition encouraged investment in new, productivity-enhancing methods, which was further facilitated by the concentration of farmland which arose out of the competitive process. The increase in productivity and output allowed for a movement away from the countryside and into the towns, which could be sustained by increased agricultural output. This labor force was also a necessary, but not sufficient, factor in providing supplies of labor for the industrial revolution. Thus, from 1550 to 1800 , Britain’s population tripled while the proportion of the labor force engaged in agriculture declined from 80 percent (1500) to 20 percent in 1850 (Overton 1996 :8). At the same time, land productivity increased in China through an increase in the land under cultivation, but labor productivity did not (Elvin 1973 ; Allen 1992 :73–4). Maddison ( 1998 :25) suggests that per capita income in China remained unchanged from 1280 to 1700 .

Frank’s argument that Asian and, specifically, Chinese production was more efficient than Europe’s is thus problematic. Europe did run a trade deficit with Asia, but as Frank himself at one point suggests, Europe’s share of world trade was 69 percent, while Asia’s share stood at only 11 percent (Frank 1998 :198). In other words, the trade deficit was insignificant from Europe’s point of view. But even more problematic is his view that “inefficient” Europe had to deal with the problem of high wages, while China had low wages and high productivity. If this was the case, then it is not clear why China did not develop and leave Europe (further) behind. As Duchesne ( 2001/2 ) points out, the clear implication is that the peasantry were poorer in Asia than in Europe, where wages were higher, and/or that growth in Asia was achieved through increased exploitation of the peasantry in the context of diminishing returns to agriculture. This hardly paints a picture of efficient China and inefficient Europe, however. Rather it suggests that if one focuses on the social relations of production, then it is clear that the emergence of capitalist social relations in Europe were the main reason for the divergence between Europe and Asia. It is a neglect of these social relations which was one of the main weaknesses of at least some versions of dependency theory, as we have seen.

What then of the current era? Is it the case that the USA is in decline, and a new hegemonic challenge is taking place from Asia, and specifically China? Again there may be grounds for questioning this view, but this time it may be the case that the concept of dependency can be usefully employed to explain why this is the case. Arrighi has himself usefully shown (Arrighi et al. 2003 ) that much of the rise of manufacturing in the developing world is in low value production (see further below). Contra Arrighi, however, it can be argued that China’s rise is not so much a break from this trend, but rather is compatible with it. The shares of transnational manufacturing affiliates in China’s exports increased from 17.4% in 1990 , to 55% in 2003 (Hart-Landsberg and Burkett 2005 :125). China’s growth in manufacturing exports must at least in part be explained through its (subordinate) role in East Asian production networks, and it essentially concentrates on exporting the lower value end of such goods.

This leads us on to an analysis of global commodity chains. Though there are important differences among proponents of this approach (see Bair 2009 ), the basic argument is that production processes are no longer confined to national boundaries, but are instead linked through a chain, “a transnationally linked sequence of functions in which each stage adds value to the process of production of goods or services ” (Dicken 2003 :14; see also Gereffi and Korzeniewicz 1994 ; Dicken et al. 2001 ; Henderson et al. 2002 ). As world-systems analysis has pointed out (Hopkins and Wallerstein 1986 ), these chains are not necessarily new, and production processes have long drawn on the supply of raw materials from overseas producers. What is relatively novel, however, is that now (parts of) manufacturing production can be located in different parts of the world, so that final products can be made up of industrial components from different parts of the globe.

Gereffi ( 1994 ) has argued that there are two types of commodity chain, those that are producer driven and those that are buyer driven. In the former, rents are generated by economies of scale (and associated high startup costs), and control over backward and forward linkages such as supplies and retailing. In the case of buyer-driven chains, barriers to entry are generated at more intangible levels, such as marketing and design (Gereffi 1994 ; Dicken 2003 ; Kaplinsky 2005 ). While much of the business-oriented literature focuses on the possibilities for upgrading in those localities that specialize in low value production, world-systems approaches are more concerned with showing how the globalization of production – and rise of manufacturing in the former “third world” – does not eradicate the distinction between core and periphery in the world economy (Gibbon and Ponte 2005 ). Those production processes that are contracted out and/or relocated to parts of the periphery tend to be concentrated in low cost and lower value production, so that the core recovers most of the value-added at the higher value end of production, distribution, and marketing processes, where rents are generated.

This has clear implications for understanding development in the current era, and this will be discussed below. First, however, the rise of global commodity chains needs to be related to the rise of China. China’s percentage of manufacturing exports to the USA increased from 9.1% in 1992 to 22.9% in 2000 , and to the EU it increased from 9.5% to 16.7% for the same years. Over the same period, Thai export shares to the USA fell from 26.4% to 22.9%, and to the EU from 21.3% to 17.7%, and South Korea’s fell from 25.9% to 23.9% (USA) – although they showed a small increase in shares to the EU, far bigger was the share of exports to the rest of East Asia. With some small variations, there has been a significant increase in shares by East Asian exporters to the rest of the region, while EU and US shares (either taken together or individually) have generally fallen or stagnated (Athukorala 2003 :40–1). Even more significant has been the increase in shares in parts and components rather than finished goods. Indeed, between 1992 and 2000 , these accounted for 55% of the export growth of Indonesia, Thailand, Malaysia, Singapore, the Philippines, and Vietnam ( 2003 :33). There was no clearly identifiable pattern in the share of components and parts in trade to the USA or EU from East Asian countries, with some showing increases and some decreases, but generally the far bigger increases in shares of parts and components were in East Asian countries’ trade with China. By 2000 , the shares were 50.6% for Malaysia, 54% for Thailand, 50.3% for Singapore, 81.8% for the Philippines, 26.7% for South Korea, and 29.8% for Taiwan. At the same time, parts and components in China’s share of exports to the US (4.3% to 9.1%) and to the EU (2.9% to 10.9%) increased from 1992 to 2000 , but from far lower bases and the total shares remained low (Athukorala 2003 :48–9). In the period from 1992 to 2003 , parts and components accounted for 52% (Taiwan), 44% (Malaysia), 70% (Philippines), 59% (Singapore) and 31% (Thailand) of the total manufacturing export growth for particular countries. For China, the figure was 17% (Athukorala and Yamashita 2005 :33). Taken together, these figures suggest that China has increased its role as a manufacturer of final goods produced within the East Asian region, which are exported to the EU and US (and Japanese) markets.

These data do not necessarily undermine the view that China has become a major player in the global economy. But the rise of global production networks does at least qualify notions of China’s rise, and its economic success must in part at least be located in the context of the globalization of manufacturing production. If the concepts of the world-system and of dependency retain any contemporary relevance, they must be situated in this contemporary context. This is the subject of the final section.

Defending the Ideas of Dependency and the World-System in Neoliberal Times

Development studies moved in new directions in the 1980s and 1990s. In an effort to avoid the over-generalizations associated with grand theories of development and underdevelopment, a “post-impasse” development studies became increasingly concerned with more micro-issues such as the “correct fit” between state, market, and civil society and how the three sectors should play a complementary role in the process of development. In the process, though, something was lost, not least a critical analysis of the neoliberal context of the world-system, which development studies was increasingly taking for granted by the 1990s. Ironically, the return of “big picture” analysis such as that associated with the idea of globalization did not reverse this picture, not least because that particular concept continually suffered from a lack of clarity, above all in terms of its status as an explanatory concept (Rosenberg 2005 ; Kiely 2005 ). In the field of development studies, globalization tended to be regarded as something that simply existed, to which particular localities responded in ways which would enhance or hold back development. This shift to more “localized” approaches to development added weight to the view that dependency and the world-systems had ceased to be useful concepts, at least for the study of development. This section takes issue with this view and suggests that, theoretical weaknesses notwithstanding, in a time of neoliberal globalization, the utility of the concepts of dependency and the world-system is potentially greater than ever.

The critical discussion of the theories outlined in this essay suggests that we need to recognize the following. First, capitalist development has occurred in the developing world since 1945 . Second, this does not necessarily mean that such development has replicated earlier processes of capitalist development in the developed countries. Third, there are mechanisms of domination and subordination that arise out of the unevenness of capital accumulation, but these need to be specified rather than read off from a general theory which has pre-conceived expectations about what these may be.

As regards the first two issues, while we need not assume that capitalist development will necessarily lead to convergence with developed countries, some comparison with the latter’s own methods of promoting capitalism is useful. Indeed, such a comparison provides strong grounds for defending the relevance of the idea of dependency, particularly in an era of neoliberal globalization. The advanced capitalist countries developed in the late nineteenth century through import-substitution policies, designed to protect their “national economies” from foreign, or British competition. These policies also occurred in the dominions (Canada, Australia, New Zealand), but were not implemented in colonies as colonial powers did not allow such policies to take place. They also did not occur in independent Latin America, where dominant classes happily imported manufactured goods and derived their wealth from ownership of land (Cardoso and Falletto 1979 ).

In the postwar period (or in Latin America, in the 1930s), this changed as new social and political forces demanded new policies. Both the forces and policies involved varied from country to country, but there was a general pattern of alliances across different classes, committed to national development through industrialization, justified on the grounds that living standards would improve in the long term, and through appeals to nation building. This was the domestic social basis for ISI policies in the third world, although this varied from state to state in terms of ideological justification, social cohesion, degrees of contestation, and economic effectiveness (Sandbrook 1985 ; Evans 1995 ; Chibber 2003 ). At the same time, these policies were further enabled by the compromises made after 1945 , which meant a commitment to a liberal international order on the part of the hegemonic power, but a recognition that some protectionism could take place, including in the developing world. The existence of the Soviet Union, and the capacity of states to play off one superpower against another, gave further impetus to ISI policies. However, the period from the 1970s, and especially the early 1980s, onwards, saw a period of neoliberal restructuring which radically altered the context in which capitalist development took place.

How then can the ideas of dependency and the world-system retain any validity in this context? It has been argued that dependency should be seen as a starting point for understanding concrete situations of uneven development, both within national economies and in the capitalist world-system (Buttel and McMichael 1993 ). The rest of this conclusion will focus on how neoliberalism fosters dependence and subordination, and by implication, actually existing globalization is based on the kind of structured inequalities that the idea of dependency tries to capture, albeit too often rather clumsily. These structured inequalities may be altered, not least by how social and political forces within national social formations respond to these inequalities, but the fact is, contra neoliberalism, they also exist. This will be illustrated by examining the relationship between the globalization of production and neoliberalism.

We can start by returning to the Prebsich–Singer thesis, but updating it to take account of new realities in the global economy. As we saw above, the basic contention of this theory was that the terms of trade tended to decline for primary goods against manufactured goods. With the rise of manufacturing exports from the developing world, this argument could be regarded as out of date, but in fact it can be fruitfully used to look at the terms of trade between different types of manufacturing exports (UNCTAD 2002 :118; Kaplinksy and Santos-Paulinho 2005 ). Based on a study of trade in manufacturing goods from 1970 to 1987 , Sarkar and Singer ( 1991 ) have claimed that the price of manufacturing exports from developing countries fell by an average of 1% a year. Other studies have supported the claim that the price of simple manufacturing exports from developing countries have tended to fall against more complex manufacturing and services from developed countries (Maizels et al. 1998 ). One study of Chinese exports suggests that the net barter terms of trade fell by 10% against developed countries from 1993 to 2000 , but improved as against other developing countries (Zheng 2002 ).

The reason for these movements can be linked to the globalization of production. Essentially, as we have seen, developed countries still tend to dominate in high value sectors, based on high barriers to entry, high startup and running costs, and significant skill levels. In the developing world, where there are large amounts of surplus labor and barriers to entry, skills and wages are low. While this gives such countries considerable competitive advantages, at the same time the fact that those barriers to entry are low means that competition is particularly intense and largely determined by cost price, which also means low wages. Thus, the clothing industry, where developing countries have achieved considerable increases in world export shares in recent years, has a very low degree of market concentration. In contrast, sectors like machinery (such as non-electric engines, motors, steam engines) and transport equipment (aircraft, ships, boats, motor cars and motor bikes) have very high degrees of market concentration, and are mainly located in the developed world (UNCTAD 2002 :120–3).

The neoliberal argument is that production in these labor-intensive sectors is only a starting point, allowing countries to upgrade as more developed countries shift to higher value production. However, this assumes that upgrading is a more or less inevitable process, and one that can be driven by the “natural” workings of the market. But in practice, upgrading has occurred by states deliberately protecting themselves from import competition from established producers, via a process of import substitution industrialization. In the context of a tendency towards free trade, upgrading is far from inevitable and indeed, faced with competition from established overseas producers, is unlikely to occur.

Thus, with the globalization of production, manufacturing in the developing world is overwhelmingly concentrated in lower value production characterized by low barriers to entry, intense competition and diminishing returns. It is in these sectors – clothing, textiles, toys, and so on – that developing countries have a cost advantage, particularly in low wages. But precisely because they are characterized by low barriers to entry, they do not provide the basis for upgrading to sectors with higher barriers to entry, where rents can be accrued to the most dynamic producers (Kaplinksy 2005 ; Kiely 2007b ). Indeed, since 1990 , the growth of China’s exports in absolute amounts has exceeded that of the rest of the top ten leading manufacturing exporters from the developing world, and since 2000 , the latter nine countries’ combined export share has fallen whilst China’s has risen (Eichengreen et al. 2004 ).

In opposition to earlier debates over the links between deindustrialization in the developed world and the rise of manufacturing in the developing world, one interesting development in recent years ( 1995–2002 ) has been a decline in formal sector manufacturing, not only in the developed world, but also, it appears, in China ( 1995–2002 ) and India ( 1996–2002 ). While there are certainly question marks over the reliability of figures, especially for China, the likelihood is that the fall from around 98 million to 83 million is actually an underestimation, as many workers in the state sector and town and village enterprises are effectively unemployed (Kaplinksy 2005 :214–15). As industrialization (and now post-industrialization) has swept the globe, measured in terms of proportion of total employment, the absorption of labor forces by manufacturing has gradually declined. A movement out of agriculture into manufacturing, in which the latter was characterized by increasing returns, linkages, and higher productivity, and was reinforced by the rise of organized labour as production was socialized, was a recipe for some form of progress, albeit with many social costs along the way. Later industrialization, including in contemporary China, has seen far less absorption of labor by manufacturing, and so the dynamic potential for progress has been seriously eroded (Evans and Staveteig 2006 ). The pattern we now see is one of urbanization without high rates of industrialization, and the development of cities of slums (Davis 2004 ; Bernstein 2004 ; Kiely 2008 ). Unless accompanied by radically different social policies, ISI is unlikely to alter this growing trend. This brief discussion demonstrates that later capitalist development does indeed differ from earlier periods of capitalist development, and this was one of the main issues highlighted by the idea of dependency.

The implications for my argument should be clear. Rather than promoting convergence between developed and developing countries, whereby the latter catch up or at least follow similar stages of development through upgrading, we have continued divergence based on a changing but unequal international division of labour. As Arrighi and Moore ( 2001 :75) suggest, “the underlying contradiction of a world capitalist system that promotes the formation of a world proletariat but cannot accommodate a generalized living wage (that is, the most basic of reproduction costs), far from being solved, has become more acute than ever.” In terms of development, upgrading is a far from inevitable process, not only because of the “developmental” lead established by earlier developers, but also because neoliberal policies of trade liberalization undermine the prospects for upgrading to higher value production. Neoliberalism therefore reinforces structured inequalities in the world economy in two ways. First, neoliberal policies exaggerate the ease by which liberalization policies will lead to countries breaking into export markets, and thus ultimately converging with already rich countries. And second, neoliberalism actually undermines the prospects for such convergence because liberalization forces national economies to compete against already established producers in the developed world within their own national markets. Dependency thus arises less from the domination of foreign capital in domestic economies, and more from the subordination of these economies in an unequally structured capitalist world-system.

This account owes something to the theory of the new international division of labour (NIDL), which was developed in the 1970s and which drew heavily from the insights of both dependency theory and world-systems theory. This theory undoubtedly exaggerated the mobility of productive capital, and thus over-generalized the extent to which manufacturing was relocating from the developed to the developing world, and especially to the first-tier East Asian newly industrializing countries (Jenkins 1984 ; Kiely 1994 ). The first-tier East Asian NICs, or at least South Korea and Taiwan, essentially took off through state-directed policies in alliance with national capital, a strategy which broke down in the early 1990s (prior to the financial crash of 1997 ). More generally, in contrast to NIDL theory it could be argued that dependency reflected the concentration of capital in the already developed world, rather than its dispersal to the developing world. But it is perhaps now the case that the theory is more valid as an explanation for later industrialization processes in the developing world, including in China, at least when applied to low value labor-intensive manufacturing.

There is one further area where the concept of dependency retains considerable utility, and this relates to the relationship between class formation and the contemporary global economy. This can be illustrated through a brief discussion of the prospects for a revival of ISI. Insofar as a revival of ISI is likely take place, this would constitute a significant challenge to neoliberal hegemony in the international economic order, as well as established policies that have operated through adjustment policies and World Trade Organization agreements. In this sense then, ISI would constitute a challenge to the neoliberal “imperialism of free trade,” which prevents developing countries “from using the tools of trade and industrial policies that they [developed countries] had themselves so effectively used in the past to promote their own economic development” (Chang 2007 :77; Kiely 2009 ) What, then, of the prospects for a challenge to neoliberalism, based on a revival of development strategies that “guide the market” rather than promote “market friendly intervention”? In the context of the increased global integration that characterizes the current world-system, dominant economic and political actors in the developing world want access to international circuits of capital, and therefore may support neoliberal policies (Albo 2003 ). Crucially, however, these circuits of capital do not necessarily involve the promotion of productive capital investment, such as would be necessary for ISI to be revived. Put simply, then, the question of the potential revival of ISI does not just involve the technical efficiency of such a policy, but whether or not there are social and political agents that are willing to carry it out. This does not mean that ISI has ended – the Chinese Communist Party is clearly committed to some version of it, and current political trends in Latin America suggest some kind of revival there. But it does mean that the globalization of circuits of capital has undermined the prospects of the emergence of a “national bourgeoisie,” committed to nationalist, productive capitalist development. Baran’s idea of the comprador nature of bourgeoisies in developing countries may have been problematic in the context of national–populist alliances around ISI, but it may have more relevance in the context of neoliberal integration. Once again, if dependency is regarded less as a dogmatic theory of underdevelopment, and more as a starting point for understanding concrete situations of uneven development, then the idea appears to retain some relevance. And these concrete situations must be situated in the context of the capitalist world-system.

This essay has suggested that as theories , the ideas associated with both dependency and the world-systems are problematic. They do not adequately explain the origins of the capitalist world economy, and at least some of the mechanisms that sustain inequality and hierarchy within the international order. On the other hand, the assumption that the expansion of capitalism will mean a progressive convergence between countries is also problematic, and here we can locate the strength of dependency and the world-systems as a method of analysis . In particular, both approaches correctly recognize the following: (1) capitalism can in some respects be regarded as a world-system; (2) the capitalist world economy is not a level playing field, and the process of market promotion in recent years has reinforced hierarchies, not undermined them; (3) this is true despite the rise of manufacturing in the developing world associated with the globalization of production; (4) neoliberalism reinforces hierarchies by undermining the capacities of states to shift out of low value production into higher value sectors; (5) this is reinforced by historical patterns of manufacturing, which suggest that the capacity of this sector to promote dynamic spinoffs to the rest of the economy, and to generate substantial improvements in living standards for all, is increasingly being eroded. These conclusions are in marked contrast to upbeat assessments of the links between liberalization policies and poverty reduction (World Bank 2002 ), but these have been the subject of some strong criticisms that are compatible with the claims made in this essay (Milanovic 2003 ; Wade 2004 ; Kiely 2007b ). They are also compatible with the idea that dependency retains some utility as an idea that attempts to think critically about understanding concrete situations of uneven development in the capitalist world-system today (Palma 1978 ; Saul and Leys 2007 ).

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Links to Digital Materials

Resources in this strongly theoretical area are, not surprisingly, quite thin. However, the first and to a lesser extent the second resources listed below are important sources in outlining the main contentions of underdevelopment theory, and current research influenced by world-systems theory. The third and fourth resources are good empirical and theoretical sources, though neither is explicitly influenced by either dependency or world-systems theory, but much of the analysis in both is compatible with the conclusion to this chapter.

Róbinson Rojas’ databank. At www.rrojasdatabank.org , accessed Jul. 2009. This site contains many articles including a link to much of Andre Gunder Frank’s writing. It does, however, promote the crudest aspects of underdevelopment theory.

Journal of World-Systems Research. At http://jwsr.ucr.edu/index.php , accessed Jul. 2009. This site has links to articles that, to varying degrees, are influence by world-systems analysis.

UNCTAD. At www.unctad.org , accessed Jul. 2009. This site contains many data-led publications.

Center for Economic and Policy Research. At www.cepr.net , accessed Jul. 2009. A good US site with critical discussion of globalization, which implicitly suggests some compatibility with the views outlined in this chapter.

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Dependency Theory: An Introduction

Related Papers

Glory Makere

Banselian Books Sevices

Amos Kehinde AJAYI

The dependency school arose as a reaction to methropolian or modernization school tendency to attribute all problems of underdevelopment to the periphery. Basically, there are two school of thought in Latin America and those here been classified structural and dependency theories. The structural focuses on the neo-clasical analysis of development which do not favour them. This school was pre-dominant around the United Nation Economic Commission for Latin America (UNECLA). However, another group came up and focus on the criticisms of the modernization school, apart of their intellectual heritage, apart of their intellectual heritage, were strands of the Marxist thought even though they were not classified as Marxist, they used his methodology and analysis. Another factors that contributed to the Marxist school were Marxism and Russia revolutionaries, as well as continued intervention of USA into the socio-political activities of Latin America nations. The dependency school was pioneered by Raul Presbixh on agentive economist and the director of ECLA in the 1950s. The theory rejected the ideological postulations of the modernization school and argued that world economic is divided into developed, metropolitan cover and underdeveloped or Periphery.

UJAH: Unizik Journal of Arts and Humanities

Chuka Enuka

The present world economic order is based on domination and inequality. The world is bifurcated into two asymmetrical groups of countries: the North and the South. While the economies of the North are generally strong, industrialized, and self-reliant, those of the South are predominantly weak, disarticulated, unindustrialized, appendage and dependent on the North. Explanations for this reality of inequality and disparity in the levels of development in the world have precipitated scholarly debates, postulations and theoretical formulations. Among such theories is the dependency theory. As a theory of development and underdevelopment studies and an analytical framework within the discipline of international economic relations, the dependency theory discusses the reality of underdevelopment and global economic imbalance in the international system. It rejects underdevelopment as a natural condition of the poor societies of the South, and links underdevelopment to dependence, a situat...

Alfredo Saad Filho

International Business Research

Andrés F. Rodríguez

Soon after the end of World War II, the economic development of newly independent states rose to the top of the international agenda, sharpened by the ideological context of the Cold War. To blunt the attraction of the Soviet Union&#39;s rapid industrialization, Walt Whitman Rostow (1960) and other economists attempted to trace patterns of economic growth based on the English experience and offer that as a model to states in the Third World. However, Raúl Prebisch and his colleagues at the Economic Commission for Latin America (ECLA) compiled extensive historical evidence to show that European economic growth was predicated on a massive transfer of surplus from its colonies in the Caribbean and Latin America. Building on this work, André Gunder Frank (1967), Samir Amin (1974), Walter Rodney (1974), and others argued that the economic trajectories of non-European states were not simply deformed and travestied forms of patterns experienced by more prosperous West European and North Am...

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Gives a history of development of the Latin American countries from colonial time to the modern capitalist era.

Henry E Ushie

This work on economic dependency is an attempt to elucidate the intricacies embedded in the concept. Its conceptualization is hung on the theory of dependency which portrays the reliance of the third world states on the buoyant north. The indices for economic dependency would be broadly spelt out through a historical-colonial and economic ideological lines particularly capitalism. The premise for this concept would not be left out as the implication and consequences of economic dependency would be analyzed, the recommendations would be intended to correct these negative consequences.

In Development Studies, Dependency theory has been used to explain why underdeveloped countries are poor, while advanced countries are rich, and how the existing world economic system establishes economic exploitation and dominance of the rich and wealthy countries to grab the benefits and interests for their own and leaves underdeveloped countries behind. This paper attempts to explain how Dependency theory is used to emphasize why some countries are staying in poverty while some countries are rich. It will include supportive ideas from previous existing studies followed by critical analysis to provide a certain level of counterargument and show the limitation of the theory.

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Dependency Theory of Development

Ayesh Perera

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.

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Dependency Theory argues that the underdevelopment of certain nations is a direct result of their exploitation by wealthy, developed nations. Resources flow from poor “periphery” countries to rich “core” countries, enriching the latter at the expense of the former.

• Dependency theory is an approach that seeks to explain the underdevelopment of certain nations by emphasizing the supposed putative restraints imposed upon them by the global economic and political order.
• This theory which gained popularity especially in the 1960s and the 1970s, is a reaction to modernization theory (Ahiakpor, 1985). It holds that a core of rich nations benefits from the resources that flow into them from a periphery of underdeveloped and impoverished nations.
• The central tenet of dependency theory is that these poor states’ integration into the world system is primarily responsible for their plight as well as the enrichment of the wealthy states.

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.

This meant that trade-and-export orientation should be replaced by import-substitution industrialization. Paul A. Baran later built upon the preceding propositions from a Marxian viewpoint with The Political Economy of Growth (Vernengo, 2004).

Indeed, dependency theory shares manifold points in common with Marxist notions of imperialism propagated by Vladimir Lenin and Rosa Luxemburg.

However, upon closer analysis one can pinpoint two notable and distinct streams in this theory: the Marxian approach developed by Paul Sweezy, Andre Gunder Frank and Paul A. Baran, and the Latin American Structuralist approach generally associated with Anibal Pinto, Celso Furtado and Raúl Prebisch.

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):

Undevelopment is distinct from underdevelopment

The former refers to the non-use of resources (e.g., uncultivated lands), whereas the latter denotes the purported exploitation of poorer nations’ resources by dominant states.

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 history

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.

Alternative uses of resources should be preferred to the patterns of use imposed by the predatory states

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.

There is an evident national economic interest to be articulated for every country

Dependency theorists hold that each nation’s national interest could be gratified only by attending to the needs of its poor people.

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’ resources

According to dependency theorists, these ruling elites   are 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):

• Successful and advanced economies would not be viewed as models to emulate. Instead, their progress would be written off as the fruit of their past exploitative relationships with poorer states.
• Efficient production and the reliance upon the market to allocate its rewards, which characterize the neoclassical model for economic growth, would be replaced by centralized planning and coercive distributive mechanisms. This would be further supported by the assumption that poorer economies suffer from a lack of economic fluidity and integration.
• Dependency theorists would also discount numerical measures of aggregate economic growth, such as trade indices and GDP rates, in favor of indicators such as literacy, education, life expectancy, infant mortality, etc.
• Invitations of the World Bank and the International Monetary Fund to integrate into the global economy would be treated at best with extreme caution. Moreover, the primary focus would be on self-reliance, and autarky would be pursued with little external trade. Tanzania’s Ujamaa, and China’s Great Leap Forward, both of which ended up in phenomenal failures, are striking examples of dependency theory in action.

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.

Moreover, economic policies inspired by dependency theory are not without serious problems. For instance, preventing imports and subsidizing domestic industries may provide local companies with perverse incentives to remain inefficient, manufacture low-quality products and disregard consumer needs (Williams, 2014).

Because the domestic populace is deprived of imported alternatives, local producers may readily earn sufficient income from local consumers without any impetus to engage in innovation. Furthermore, the government support of domestic industries, financed by taxation, is an added burden upon the people.

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.

In conclusion, abounding are the examples of poorer countries, further impoverished by heeding dependency theorists’ prescriptions, as well as countries that have grown out of poverty by abandoning such schemes.

Mexico’s inefficient, outdated and ailing oil industry controlled by Pemex, which even lacks funds to purchase better extraction equipment, is one example (McMaken, 2008). The Mexican government’s barring of any significant foreign involvement in Mexican oil reserves, inspired much by leftwing political rhetoric against privatizations, is responsible for this situation.

Moreover, Sri Lanka’s present economic crisis, characterized by daily 13-hour power cuts, fuel, food and medicine shortages, and violent upheavals, exemplifies the consequences of pursuing autarky combined with centralized planning (Liyanawatte, & Jayasinghe, 2022)

Conversely, India’s transition from a close socialist economy to an open capitalist economy in the early 1990s was accompanied by an unprecedented annual economic growth rate of 6% [during the preceding 4 decades of economic isolation and centralized planning, India’s annual economic growth rate had been a meager 2%] (Sowell, 2015). As a result, millions of Indians have been able to escape poverty.

Likewise in Africa, while countries which had adopted import-substitution, like Zimbabwe, have lagged behind, economies pursuing pro-capitalist trade policies, such as Tunisia, South Africa and Egypt have experienced significant growth accompanied by relative prosperity (Leke, Acha, et al, 2020).

Further Information

• Santos, T. D. (1970). The structure of dependence. The american economic review, 60(2), 231-236.
• Matunhu, J. (2011). A critique of modernization and dependency theories in Africa: Critical assessment. African journal of History and Culture, 3(5), 65-72.
• Tausch, A. (2010). Globalisation and development: the relevance of classical “dependency” theory for the world today. International Social Science Journal, 61(202), 467-488.
• Herath, D. (2008). Development discourse of the globalists and dependency theorists: do the globalisation theorists rephrase and reword the central concepts of the dependency school?. Third World Quarterly, 29(4), 819-834.
• Kay, C. (2011). Andre Gunder Frank:‘Unity in diversity’ from the development of underdevelopment to the world system. New political economy, 16(4), 523-538.

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

Perera, Ayesh (28 Sept. 2021). “ Common Sense Solutions to Sri Lanka”s Crisis .” Medium-Centenary Movement, Medium-Centenary Movement Sri Lanka, https://centenarysl.medium.com/common-sense-solutions-to-sri-lankas-crisis-cad4a1348b6b

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.

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