Dependency Theory

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Conceived in the 1960s by analysts native to developing countries, dependency theory is an alternative to Eurocentric accounts of modernization as universalistic, unilinear evolution (Addo 1996). Instead, contemporary underdevelopment is seen as an outgrowth of asymmetrical contacts with capitalism. The thesis is straightforward: Following the first wave of modernization, less-developed countries are transformed by their interconnectedness with other nations, and the nature of their contacts, economies, and ideologies (Keith 1997). Interaction between social orders is never merely a benign manifestation of economic or cultural diffusion. Rather, both the direction and pace of change leads to internal restructuring designed to bolster the interests of the more powerful exchange partner without altering the worldwide distribution of affluence.

Widely utilized as both a heuristic and empirical template, dependency theory emerged from neo-Marxist critiques of the failure of significant capital infusion, through the United Nations Economic Commission for Latin America, to improve overall quality of life or provide significant returns to countries in the region. Dependency theory quickly became an instrument for political commentary as well as an explanatory framework as it couched its arguments in terms of the consequences of substituting cash crops for subsistence farming and replacing local consumer goods with export commodities destined for developed markets. Frank (1967, 1969), an early proponent, established the premise for dependency theory; contemporary underdevelopment is a result of an international division of labor exploited by capitalist interests.

Frank's innovation was to incorporate the vantagepoint of underdeveloped countries experiencing capital infusion into the discussion of the dynamics of economic, social, and political change. In so doing he discounted Western and European models of modernization as self-serving, ethnocentric, and apolitical. He asserted that explanations of modernization have been disassociated from the colonialism that fueled industrial and economic developments characteristic of the modern era. However, much of the first wave of modernization might have been driven by intrinsic, internal factors; more recent development has taken place in light of change external to individual countries. Central to Frank's contention was a differentiation of undeveloped from underdeveloped countries. In the latter, a state of dependency exists as an outgrowth of a locality's colonial relationship with "advanced" areas. Frank referred to the "development of underdevelopment" and the domination of development efforts by advanced countries, using a "metropolis–satellite" analogy to denote the powerful center out of which innovations emerge and a dependent hinterland is held in its sway. He spoke of a chain of exploitation—or the flow and appropriation of capital through successive metropolis–satellite relationships, each participating in a perpetuation of relative inequalities even while experiencing some enrichment. Galtung (1972) characterized this same relationship in terms of "core and periphery," each with something to offer the other, thereby fostering a symbiotic but lopsided relationship. The effect is a sharp intersocietal precedence wherein the dominant core grows and becomes more complex, while the satellite is subordinated through the transfer of economic surpluses to the core in spite of any absolute economic changes that may occur (Hechter 1975).

Dos Santos (1971) extended Frank's attention to metropolis–satellite relationships. He maintained that whatever economic or social change that does take place occurs primarily for the benefit of the dominant core. This is not to say that the outlying areas are merely plundered or picked clean; to ensure their long-run usefulness, peripheral regions are allowed, indeed encouraged, to develop. Urbanization, industrialization, commercialization of agriculture, and more expedient social, legal, and political structures are induced. In this way the core not only guarantees a stable supply of raw materials, but a market for finished goods. With the bulk of economic surplus exported to the core, the less-developed region is powerless to disseminate change or innovation across multiple realms. Dos Santos distinguished colonial, financial-industrial, and technological-industrial forms of dependencies. Under colonialism there is outright control and expropriation of valued resources by absentee decision makers. The financial-industrial dimension is marked by a locally productive economic sector characterized by widespread specialization and focus ministering primarily to the export sector that coexists alongside an essential subsistence sector. The latter furnishes labor and resources but accrues little from economic gains made in the export sector. In effect, two separate economies exist side by side.

In the third form of dependency, technological-industrial change takes place in developing regions but is customarily channeled and mandated by external interests. As the core extends its catchment area, it maximizes its ascendancy by promoting a dispersed, regionalized division of labor to maximize its returns. International market considerations affect the types of activities local export sectors are permitted to engage in by restricting the infusion of capital for specified purposes only. So, for example, the World Bank makes loans for certain forms of productive activity while eschewing others, and, as a result, highly segmented labor markets occur as internal inequities proliferate. The international division of labor is reflected in local implementation of capital-intensive technology, improvements in the infrastructure—transportation, public facilities, communications—and, ultimately, even social programming occurring principally in central enclaves or along supply corridors that service export trade (Hoogvelt 1977; Jaffee 1985; So 1990). Dos Santos maintained that the balance of payments is manipulated, ex parte, not only to bring about desired forms of change, but to ensure the outflow of capital accumulation to such a degree that decapitalization of the periphery is inescapable. Or, at the very least, that capitalist-based economic development leaves local economies entirely dependent on the vagaries of markets well beyond their control. International interests establish the price of local export products and also set purchase prices of those technological-industrial products essential to maintaining the infrastructure of development. There may be a partial diffusion of technology, since growth in the periphery also enhances profits for the core, but it also creates unequal pockets of surplus labor in secondary labor markets, thereby impeding growth of internal markets as well as deteriorating the quality of life for the general populace (Portes 1976; Jaffee 1985).

Because international capital is able to stipulate the terms of the exchange, external forces shape local political processes if only through disincentives for capitalization of activities not contributing to export trade (Cardoso and Faletto 1979). As Amin (1976) pointed out, nearly all development efforts are geared to enhancing productivity and value in the export sector, even as relative disadvantages accrue in other sectors and result in domestic policies aimed at ensuring stability in the export sector above all else. Internal inequalities are thereby exacerbated as those facets of the economy in contact with international concerns become more capital intensive and increasingly affluent while other sectors languish as they shoulder the transaction costs for the entire process. One consequence of the social relations of the new production arrangements standing side by side with traditional forms is a highly visible appearance of obsolescence as status in conferred by and derived from a "narrow primary production structure" (Hoogvelt 1977, p.96). DeJanvry (1981) spoke of the social disarticulation that results as legitimization and primacy are granted to those deemed necessary to maintain externally valued economic activities. Although overall economic growth may occur as measured by the value of exports relative to Gross Domestic Product (GDP), debt loads remain high and internal disparities bleak as few opportunities for redistribution occur even if local decision makers were so inclined in the face of crushing debt-service. As Ake (1988) put it, even per capita income figures may be insufficient as they represent averages while GDP may be suspect in light of differences between economic growth and distributive development. Finally, although local economies may manifest substantial growth, profits are exported along with products so that capital accumulation is not at the point of production in the periphery but at the core. In its various guises, and despite substantial criticisms, dependency theory provides global-orienting principles for analyses of international capitalism, interlocking monetary policies, and their role in domestic policy in developing countries.

Baran's (1957) analysis of the relationship between India and Great Britain is frequently cited as an early effort to examine the aftermath of colonialism. The imperialism of Great Britain was said to exploit India, fostering a one-sided extraction of raw materials and the imposition of impediments to industrialization, except insofar as they were beneficial to Great Britain. Precolonial India was thought to be a locus of other-worldly philosophies and self-sustaining subsistence production. Postcolonial India came to be little more than a production satellite in which local elites relished their relative advantages as facilitators of British capitalism. In Baran's view, Indian politics, education, finance, and other institutional arrangements were restructured to secure maximal gain to British enterprise. With independence, sweeping changes were undertaken, including many exclusionary practices, as countermeasures to the yoke of colonial rule.

Latin American concerns gave rise to the dependency model, and many of the dependistas, as they were originally known, have concentrated on regional case studies to outline the nature of contact with international capitalism. For the most part they focused less on colonialism per se and more on Dos Santos's (1971) second and third types of dependency. Despite substantial resources, countries in the region found themselves burdened with inordinate trade deficits and international debt loads which had the potential to inundate them (Sweezy and Magdoff 1984). As a consequence, one debt restructuring followed another to ensure the preservation of gains already made, to maintain some modicum of political stability, and to ensure that interest payments continued or, in worst-case scenarios, bad debts could be written down and tax obligations reduced. In many instances the World Bank and the International Monetary Fund (IMF) exercised control and supervision, one consequence of this action being promotion of political regimes unlikely to challenge the principle of the loans (So 1990). Chile proved an exception, but one with disastrous and disruptive consequences. In all cases, to default would be to undermine those emoluments and privileges accorded local elites likely to seek further rather than fewer contacts with external capital.

Dos Santos's third form of dependency has also been widely explored. Landsberg (1979) looked to Asia to find empirical support. Through an analysis of manufacturing relationships in Hong Kong, Singapore, Taiwan, and South Korea with the industrial West, he concluded that despite improvement in local circumstances, relative conditions remained little affected due to the domination of manufacturing and industrial production by multinational corporations. These corporations moved production "off-shore," to Asia or other less-developed regions, in order to limit capitalization and labor costs while selling "on-shore," thereby maximizing profits. Landsberg asserted that because external capital shapes the industrialization of developing nations, the latter becomes so specialized as to have little recourse when international monopolistic practices become unbearable.

Few more eloquent defenders of the broad dependency perspective have emerged than Brazil's Cardoso (1973, 1977). He labeled his rendering a historical-structural model to connote the manner in which local traditions, preexisting social patterns, and the time frame of contact serve to color the way in which generalized patterns of dependency play out. He also coined the phrase associated-dependent development to describe the nurturing of circumscribed internal prosperity in order to enhance profit realization on investments (Cardoso 1973). He recognized that outright exploitation may generate immediate profit but can only lead to stagnation over the long run. Indeed, the fact that many former colonies remain economic losers seems to suggest that global development has not been ubiquitous (Bertocchi and Conova 1996). Instead, foreign capital functions as a means to development, underwriting dynamic progress in those sectors likely to further exports but able, as well, to absorb incoming consumer goods. In the process, internal inequalities are heightened in the face of wide-ranging economic dualities as the physical quality of life for those segments of the population not immediately necessary to export and production suffer as a consequence.

In his analysis of Brazil, Cardoso also broadened the discussion to political consequences of dependency spurred by capital penetration. His intent was not to imply that only a finite range of consequences may occur, but to suggest that local patterns of interaction, entitlements, domination, conflict, and so on have a reciprocal impact on the conditions of dependency. By looking at changes occurring under military rule in Brazil, Cardoso succeeded in demonstrating that foreign capital predominated in essential manufacturing and commercial arenas (foreign ownership of industries in Brazil's state of Rio Grande do Sul were so extensive that Brazilian ownership was notable for being an exception). At the same time, internal disparities were amplified as interests supportive of foreign capital gained advantage at the expense of any opposition. In the process, wages and other labor-related expenses tended not to keep pace with an expanding economy, thereby resulting in ever-larger profit margins. As the military and the bourgeoisie served at the behest of multinational corporations, they defined the interests of Brazil to be consonant with their own.

By the early 1980s the Brazilian economy had stagnated, and as the country entered the new millennium it appeared headed for recursive hard times. Evans (1983) examined how what he termed the "triple alliance"—the state, private, and international capital interests—combined to alter the Brazilian economic picture pretty drastically while managing to preserve their own interests. In an effort to continue an uninterrupted export of profits, international capitalists permitted some accumulation among a carefully circumscribed local elite, so that each shared in the largess of favorable political decisions and state-sponsored ventures. Still, incongruities abounded; per capita wages fell as GDP increased and consumer goods flourished as necessities became unattainable. At the same time, infant and female mortality remained high and few overall gains in life expectancy were experienced. An exacerbation of local inequalities may have contributed to the down-swing but so too did international financial shifts which eventually dictated that the majority of new loans were earmarked for servicing old debts.

In the face of these shifts, foreign capital gained concessions, subsidies, and favored-nation accommodations. The contradictions proliferated. Unable to follow through on promises to local capital, the Brazilian government had little choice but to rescind previous agreements, at the same time incurring the unintended consequence of reducing regional market-absorption capabilities. Without new orders and in the face of loan payments, local capital grew disillusioned and moderated its support for state initiatives despite a coercive bureaucracy that sent Brazil to the verge of economic failure. The value of Evans's work is that it highlights the entanglements imposed on local politics, policies, and capitalists by a dependent-development agenda lacking significant national autonomy. What became apparent was that governments legitimate themselves more in terms of multinational interests than in terms of local capital—and certainly more than in terms of local less-privileged groups seeking to influence government expenditures. In an examination of forty-five less-developed countries, Semyonov and Lewin-Epstein (1996) discovered that though external influences shape the growth of productive services, internal processes frequently remain capable of moderating the effect these changes have on other sectors.

In an analysis of Peru, Becker (1983) contended that internal alignments created close allegiances based on mutual interests and that hegemonic control of alliances in local decision making leads to the devaluing and disenfranchising of those who challenge business as usual or represent old arrangements. Bornschier (1981) asserted that internal inequalities increase and the rate of economic growth decreases in inverse proportion to the degree of dependency and in light of narrow sectoral targeting of foreign capital's development dollars. A recurrent theme running through their findings and those of other researchers is that internal economic disparities grow unchecked as tertiary-sector employment eventually becomes the predominant form (Bornschier 1981; Semyonov and Lewin-Epstein 1986; Delacroix and Ragin 1978; Chase-Dunn 1981; Boyce 1992).

Nearly all advocates of dependency models contend that many facets of less-developed countries, from structure of the labor force to mortality, public health, forms and types of services provided, and the role of the state in public welfare programs, are products of the penetration of external capital and the particulars of activities in the export sector. As capital-intensive production expands, surplus labor is relegated back to agrarian pursuits or to other tertiary and informal labor. It also fosters a personal-services industry in which marginal employees provide service to local elites but whose own well-being is dependent on the economic well-being of the elites. Distributional distortions, as embodied in state-sponsored social policies, are also thought to reflect the presence of external capitalism (Kohli et al. 1984; Clark and Phillipson 1991). Evans is unmistakable: the relationship of dependency and internal inequality ". . . is one of the most robust, quantitative, aggregate findings available" (1979, p.532).

Not everyone is convinced. As investigations of dependency theory proliferated, many investigators failed to find significant effects that could be predicted by the model (Dolan and Tomlin 1980). In fact, Gereffi's (1979) review of quantitative studies of "third world" development led him to maintain that there was little to support the belief that investment of foreign capital had any discernable effect on long-term economic gain. In fact, it is commonly claimed that most investigations rely on gross measures of the value of exports relative to GDP, thus treating all exports as contributing equally to economic growth (Talbot 1998). But when a surplus of primary commodities, "raw" extraction or agricultural products, is exported, prices become unstable, with the consequences being felt most explicitly in producing regions. When manufactured goods are exported, prices remain more stable, and local economies are less affected. Relying on covariant analysis of vertical trade (export of raw materials, import of manufactured goods), commodity concentration, and export processing, Jaffee (1985) maintained that when exports grow so too does overall economic viability. Yet he did note that consideration of economic vulnerabilities and export enclaves does yield "conditional effects" whereby economic growth is significantly reduced or even takes a negative turn.

In their research on what is sometimes termed the "resource curse" in resource-rich countries, Auty (1993) and Khalil and Mansour (1993) suggest that competition between export sectors such as minerals, oil, and agriculture often impedes prosperity of the other two or one another. In countries where that occurs, governments tend to adopt lax economic policies that, for example, increase agricultural dependencies in favor of oil exports. Internal conflicts then become self-perpetuating and play out in the physical and economic well-being of the populace. Some investigators also point out that the internal dynamics of different types of export commodities will have differential impacts on the economy as a whole and on state bureaucracies as differing degrees of infrastructure are implicated (Talbot 1998).

A number of critics have asserted that dependency theory is flawed, fuzzy, and unable to withstand empirical scrutiny (Peckenham 1992; Ake 1988; Becker 1983). Even Marxist theorists find fault with dependency theory for overemphasizing external, exploitative factors at the expense of attention to the role of local elite (Shannon 1996). Other critics have focused on the evidence mustered and suggested that only about one-third of the variance in inequality among nations is accounted for by penetration of multinational corporations or other forms of foreign investment (Kohli et al. 1984; Bornschier, Chase-Dunn, and Rubinson 1978). Interestingly, still others have concluded that economic development of the type being discussed here is a significant facilitator for political democracy (Bollen 1983).

Defenders react by challenging measures of operationalization, the way variables are defined, and whether the complex of concepts embraced by the multidimensionality of the notion of dependency can be assessed in customary ways or in the absence of a comparative framework juxtaposing developing nations with their industrial counterparts (Ragin 1983; Robinson and Holtzman 1982; Boyce 1993). Efforts to isolate commodity concentration and multinational corporate investments have not proven to be reliable indicators and, as noted, even per capita GDP has its detractors. While important questions on heterogeneity, dispersion, or heteroskedasticity can be addressed by slope differences and recognized estimation techniques (Delacroix and Ragin 1978), proponents of the model are adamant that contextualized historical analysis is not only appropriate but mandated by the logic of dependency itself (Bach 1977; Bertocchi and Canova 1996). In their investigation of former colonies in Africa, Bertocchi and Canova (1996) concluded that colonial status is central to explaining relatively poor economic performance in ensuing years.

Proponents have also turned to sophisticated statistical procedures to elucidate their claims. For example, Bertocchi and Canova (1996) ran regression models on forty-six former colonies and dependencies in Africa to test their contention that colonialization makes a difference in subsequent societal and economic well-being. In a separate examination of state size and debt size among African nations, Bradshaw and Tshandu (1990) concluded that international capital penetration in the face of a mounting debt crisis may precipitate antagonism and austerity measures as the IMF and foreign capital debt claims are pitted against local claimants such as governmental subsidies and wages. In discussing capital penetration and the debt crises facing many developing nations, Bradshaw and Huang (1991) attributed incidences of political turmoil to austerity measures imposed on domestic welfare programs by IMF conditions and transnational financial institutions. They went on to assert that dependency theorists must take into consideration international recessions and global monetary crises if they are to understand structural accommodations and shifts in the quality of life in developing nations. In light of inter-locking monetary policies, a single country teetering on the brink of economic adversity portends consequences for not only its trading partners but many other countries as well.

Several dependency analysts have utilized advanced analytic techniques to examine whether income inequality within countries is related to status in the world economy (Rubinson 1976; London and Robinson 1989; Boyce 1993). Both Rubinson (1976) and London and Robinson (1989) looked at interlocking world economies and their affect on governmental bureaucracies and internal structural differentiation. London and Robinson (1989) noted that the extent of multinational corporate penetration, and indirectly, its affect on income inequality, is associated with political malaise. Walton and Ragin (1990) concurred, maintaining that the involvement of international economic interests in domestic political-economic policy combine with "overurbanization" and associated dependency to help pave the way to political protest. Boswell and Dixon (1990) carried the analysis a step further. Using regression and path analysis, they examined both economic and military dependency, concluding that both forms contribute to political instability through their effects on domestic class and state structures. They asserted that corporate penetration impedes real growth while exacerbating inequalities and the type of class polarization that leads to political violence. In his analysis of the economic shambles created in the Philippines under Ferdinand Marcos, Boyce (1993) concluded that the development strategies adopted during the Marcos era were economically disastrous for the bulk of the populace as "imperfections" in world markets precluded even modest capital accumulation for all but a privileged few. Though not speaking strictly in terms of dependency theory, Milner and Keohane (1996) point out that domestic policies are inevitably affected by global economic currents insofar as new policy preferences and coalitions are created as a result, by triggering domestic political and economic crises or by the undermining of governmental autonomy and thereby control over local economic policy. Dependency theorists customarily incorporate attention to all three in addressing the role international markets play in local economic policy.

Alternative interpretations of underdevelopment began to gain strength in the early 1970s. The next step was a world systems perspective, which saw global unity accompanied by an international division of labor with corresponding political alignments. Wallerstein (1974), Chirot and Hall (1982), and others shifted the focus from spatial definitions of nation-states as the unit of analysis to corporate actors as the most significant players able to shape activities—including the export of capital—according to their own interests. Wallerstein suggested that the most powerful countries of the world constitute a de facto collective core that disperses productive activities so that dependent industrialization is an extension of what had previously been geographically localized divisions of labor. World systems analysts see multinational corporations rather than nation-states as the means by which articulation of global economic arrangements is maintained. So powerful have multinationals become that even the costs of corporate organization are borne by those countries in which the corporations do business, with costs calculated according to terms dictated by the multinational corporations themselves. Yet state participation is undoubtedly necessary as a kind of subsidization of multinational corporate interests and as a means for providing local management that, in addition to facilitating political compliance and other functions, promotes capital concentration for more efficient marketing and the maintenance of demand for existing goods and services. Thus production, consumption, and political ideologies are transplanted globally, legitimated, and yield a thoroughgoing stratification that, while it cuts across national boundaries, always creates precedence at the local level.

Dependency theory and collateral notions have become dispositional concepts utilized by numerous investigations of the effect of dependent development on diverse dimensions of inequality. Using a liberal interpretation of the model, many investigators have sought to understand how political economy affects values, types of rationality, definitions of efficiency and so on, as well as evaluations of those who do not share those values, views, or competencies. The social organization of the marketplace is thus thought to exert suzerainty over many types of social relationships and will continue to drive analysis of internal disparities in underdeveloped regions (Zeitlin 1972; Hechter 1975; Ward 1990; Shen and Williamson 1997). It remains to be seen how the absence of Soviet influence, often underemphasized during the formative period of dependency theory, will play out in analyses of international economic development in the twenty-first century (Pai 1991).

Substituting a figurative, symbolic relationship for spatial criteria, a generalized dependency model alloyed ideas of internal colonialism and has been widely employed as an explanatory framework wherein social and psychological distance from the center of power is seen as a factor in shaping well-being and other aspects of quality of life such as school enrollment, labor force participation, social insurance programs, longevity and so on. Likely as not, the political economics of development will continue to inform analysis of ancillary spheres for some time to come.

Gamson's (1968) concept of "stable unrepresentation" helped emphasize how the politics of inequality are perpetuated by real or emblematic core complexes. Internal colonialism and political economic variants have been widely adopted in examinations of many types of social problems. Blauner's (1970) analysis of American racial problems is illustrative of one such application. So too is Marshall's (1985) investigation of patterns of industrialization, investment debt, and export dependency on the status of women in sixty less-developed countries. While she was unable to draw firm conclusions relative to dependency per se, Marshall did assert that with thoughtful specification, gender patterns in employment and education may be found to be associated with dependency-based economic change. In a manner similar to Blauner, Townsend (1981) spoke of "the structured dependency of the elderly" as a consequence of economic utility in advanced industrial societies. Many analysts have advocated the use of dependency-driven approaches to examine various consequences of dependency and development such as fertility, mortality, differential life expectancy, health patterns, and education (Hendricks 1982, 1995; Neysmith and Edwardth 1984; London 1988; Ward 1990; Lena and London 1993; Shen and Williamson 1997). Such a perspective casts the situation of the elderly as a consequence of shifts in economic relationships and state policies designed to provide for their needs. For example, Neysmith (1991) maintained that as debts are refinanced to retain foreign capital, domestic policies are rewritten in such a way as to disenfranchise vulnerable populations within those countries in favor of debt service. To support her point, Neysmith cites a United Nations finding that human development programs tend to benefit males, households in urban areas, and middle- or higher-income people, while relatively fewer are targeted at women, rural residents, or low-income persons (United Nations Department of International Economic and Social Affairs 1988). Interestingly, according to a United Nations report issued two decades ago, women account for approximately half the world's adult population, one-third of the formal labor force, and two-thirds of all the recorded work hours, yet receive one-tenth of the earned income (cited in Tiano 1988; Ward 1990). In an examination of capital penetration in eighty-six countries, Shen and Williamson (1997) suggest that as penetration increases and sectorial inequalities are exacerbated between tertiary and informal labor markets vis-à-vis other sectors, there is a degradation of women's status in all economic activities. At the same time, fertility rates remain high partly because child labor provides an integral component of household income.

Variation in the life experiences of subpopulations is one of the enduring themes of sociology. Despite wide disparities, a central focus has been the interconnections of societal arrangements and political, economic, and individual circumstances. It is through them that norms of reciprocity and distributive justice are fostered and shared. As contexts change, so too will norms of what is appropriate. The linkage between political and moral economies is nowhere more apparent than in dependency theory as it facilitates our understanding of the dynamic relationship between individuals and structural arrangements.


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Jon Hendricks

Dependency Theory

views updated May 23 2018

Dependency Theory





In the early 1950s, a group of economists stationed at the United Nations Economic Commission for Latin America (ECLA) in Santiago, Chile, launched a rigorous research program around one pressing question: What accounts for the growing divergence in living standards and gross domestic product (GDP) between the wealthy countries of the industrialized North and the poorer developing countries of the South? In 1850, for example, Argentina was among the richest nations of the world and GDP per capita in Latin America was $245, compared to $239 in North America. A century later, Argentina was mired in debt and poverty, and GDP per capita in Canada and the United States had quickly outpaced that of Latin America as both had firmly joined the ranks of the developed-country bloc.

According to neoclassical economic theory, strong trade and investment linkages between North and South should lead to a positive-sum outcome for all participants. However, by the 1950s it was difficult to ignore the widening global cleavages between North and South, as well as the growing gap between rich and poor within the developing countries. This latter trend, characterized by an uneasy coexistence between a modern urbanized sector of the economy with strong global ties and a largely rural traditional sector where production modes sorely lagged, was increasingly referred to as dualism. Both dualism and the North-South divide became the focus of conceptual debates and practical policy prescriptions for a new generation of dependency school theorists that emerged during the 1960s and 1970s.

At heart, most dependency theorists saw the problem of underdevelopment as the inherently exploitive and contradictory nature of the capitalist system, which pitted capitalists and workers against each other as both sought to maximize their respective economic well-being. The North, with its capital abundance and accumulation of wealth, was the oppressor, while the South, with its ready supply of cheap labor and vastly rich land and natural resources, was the oppressed. It was the external sector that perpetuated underdevelopment, as well as the various private (multinational corporations) and public entities (the World Bank, the International Monetary Fund, and industrial-bloc governments) that represented it.

Whereas the earlier diagnoses of ECLA had generated proposals for restructuring the developing worlds economic relationship with the northern industrial bloc, the dependency school advocated assertive state intervention to promote the economic and political independence of the developing world vis-à-vis the North. Along with endorsing ambitious programs of import-substitution industrialization, the dependency school expanded the ECLA critique to include the urgent need for the underdeveloped South to overcome its dependence on the developed North through any variety of means, state intervention being one of these.


An initial wave of dependency thinking was triggered by the work of the Argentine economist Raúl Prebisch (19011986), director of his countrys first central bank from 1935 to 1943 and subsequently the executive secretary of ECLA between 1949 and 1963. In Prebischs classic 1949 treatise, The Economic Development of Latin America and Its Principal Problems, he introduced the idea of an industrial, hegemonic center and an agrarian, dependent periphery as a framework for understanding the emerging international division of labor between North and South. Prebisch argued that the wealth of poor nations tended to decrease when that of rich nations increased due to an unequal exchange of industrial versus agricultural goods in the North-South trading relationship. For the early structuralists, industrialization was considered a necessary step toward rectifying this pattern of unequal exchange and thus the most important objective in a development program.

From here, dependency theory quickly divided into diverse strands. Most notably, André Gunder Frank (19292005) adapted it to Marxism, as did Paul Baran (19101964), arguing that imperialism and the colonial legacy had left Asia, Africa, and Latin America in a highly disadvantageous position. Like Karl Marx (18181883), these theorists argued that economics was the main determinant of politics, and that social class should be the prime unit of analysis. Frank identified a comprador class of local southern elites whose interests and profits from this system of exploitation had become closely intertwined with their counterparts in the developed or metropolitan countries. For both Baran and Frank, this third world bourgeoisie was parasitic in nature, leaving it to workers and peasants to break with imperialism and move a given nation toward progress. While acknowledging the debilitating nature of these dual economies, others such as Ernesto Laclau criticized the Marxists for overlooking important distinctions between capitalist and precapitalist modes of production in the South. Given the tenacity of the latter, Laclau argued, it made no sense for dependency analysts to focus solely on capitalist modes of production as the linchpin for change.

Another key debate within the dependency school concerned the weight that should be given to domestic or international factors. In contrast to the hard-line Marxian viewpoint, which held that southern development could only be grasped by placing this process within its proper global historical context, Fernando Henrique Cardoso and Enzo Faletto (19352003) argued that it is the internal dynamics of the nation-state and not its structural location in the international division of labor that determines a countrys fate. Cardoso and Faletto emphasized that external factors had different impacts across the developing world due to the diverse internal conditions (history, factors of endowment, social structures) inherent in each country. In contrast to Frank or Baran, they regarded the national bourgeoisie within dependent peripheral societies as a potentially powerful force for social change and economic progress.

There were other points of consensus among dependency theorists. First, most saw the problem of underdevelopment as deeply rooted in the colonial experience and subsequently perpetuated by a sophisticated set of transnational class linkages composed of political and military elites, powerful economic interests, multinational corporations, and multilateral institutions like the International Monetary Fund. Second, and in light of this cumulative historical legacy, dependency theorists saw the world economy as a functionally integrated whole in which a huge underdeveloped periphery of poor states, and a semiperipheral group of partially industrialized developing countries, are dominated by the industrial-bloc countries that form the core. Third, the nature of economic interaction between these segmented markets is such that the peripheral and semiperipheral countries are stuck in a zero-sum game characterized by diminishing returns from trade and investment with the North.

Dependency theorists were most likely to part ways when it came to the practical political and economic policy prescriptions that flowed from this worldview. One main difference arose between those advocating that the development of the periphery could still be achieved by working within the confines of the capitalist system and those who saw the need for a complete rupture with the advanced capitalist powers and the pursuit of a state-planned socialist model. The former stance embraced a more dynamic and evolutionary view of economic development and the possibilities to achieve upward mobility within the capitalist framework; the latter saw the future of the underdeveloped periphery as locked into a static world economic system that had determined its fate since the sixteenth century and could only be rectified via outright revolution and the installation of a socialist economy.


Even as dependency theory flourished in Africa, Asia, and Latin America, the empirical validity for many of its presumptions was shaky at best. The more revolutionary brand of dependency thinking had been fueled by evidence of the regions robust growth during the first and second world wars, as demand boomed for the regions commodities. Although a unique set of historical circumstances, this wartime boom prompted some to call for a complete de-linking of North and South, the nationalization of major industries, and levels of protectionism akin to autarky. Chile and Peru proceeded along such lines in the early 1970s, but with fairly dismal results.

State planners and economic policymakers in Argentina, Brazil, and Mexico also subscribed to dependency thinking, but chose to work within the capitalist system. It was the track record in such countries that informed some of the main empirical hypotheses that underpinned the dependency model, for example the Prebisch-Singer hypothesis about the secular deterioration of the terms of trade and the Lewis-Nurkse hypothesis. These hypotheses refer to an international pattern of specialization that has the northern countries exporting manufactures among themselves while the southern countries send their primary products to the North, and thus suggest that a balanced growth strategy would be the ideal strategy for less-developed countries.

The dependency era was replete with ambitious stateled policies geared toward industrial modernization and the full exploitation of those endogenous endowment factors (land, labor, and rich natural resources) with which the developing countries had been blessed. Yet, by the end of this period, the international division of labor between North and South remained basically the same, as did the pattern of unequal exchange that that ECLA and dependency theorists alike had originally decried. That is, the South was still largely dependent on the import of increasingly expensive manufactured and technologyintensive goods from the North and the export of primary commodities plagued by volatile price trends in return.

Perhaps the biggest empirical challenge to dependency theory was the takeoff of the newly industrializing countries of East Asia in the 1970s. While Latin America seemed to be running in place with rising inflation, poverty, and debt, countries like Japan, Taiwan, and South Korea were proving that the seemingly hierarchical structure of the world economy was not structurally determined. Under a more pragmatic set of economic policies that combined state and market approaches, this smaller and much less-endowed group of Asian countries showed that it was possible to produce high growth with better income distribution and to do so by integrating more strategically into international markets for trade and investment. Strong leadership and sound economic institutions could, in fact, mitigate the external challenges inherent in the North-South divide.


While few of the dependency schools theoretical assertions have stood the test of time, this perspective continues to offer a powerful description of the political and economic plight of the majority of countries that remain on the periphery of the world economy. A full understanding of the causal mechanisms and policy solutions for remedying underdevelopment may still be a long way off; however, the dependency schools specification of concrete problems like dualism, inequality, diminishing returns to trade, and the North-South divide have enriched debates about development and helped them to move forward.

SEE ALSO Dual Economy; Harris-Todaro Model; North-South Models; Underdevelopment; Unequal Exchange


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Cardoso, Fernando Henrique, and Enzo Faletto. 1979. Dependency and Development in Latin America. Trans. Marjory Mattingly Urquidi. Berkeley: University of California Press.

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Wallerstein, Immanuel. 1979. The Capitalist World Economy: Essays. New York: Cambridge University Press.

Carol Wise

Dependency Theory

views updated Jun 27 2018

Dependency Theory

Dependency theory, a concept that emerged from Latin American intellectual centers in the early 1960s as a critique of the development programs then advocated by policymakers in national and international institutions. While popularly accepted as a new development theory or paradigm, many scholars, such as Fernando Henrique Cardoso, Peter Evans, Theotonio Dos Santos, and Andre Gunder Frank, maintain that dependency theory offers an approach to the study of political development that is related to the Marxian tradition of dialectical analyses of historical structures and social processes within a dynamic global economy.

The central premise of the dependency conception of Latin American economic history is that underdevelopment was created by the expansion of European capitalism. The same process by which the developed world, the "core" countries of western Europe and North America, became developed and wealthy, is the same one by which Latin American countries on the "periphery" became dependent and impoverished. Since the conquest and colonization of the Americas, the Latin American economic system has provided imperial powers with the raw materials required for an expanding industrial base and with captive markets for their surplus products. Colonial policies fashioned a monocultural export orientation on Latin America that political independence in the early nineteenth century did not change. With the assistance of a domestic elite, commercial capital, followed by financial and manufacturing capital, penetrated the area, perpetuating the dependency of Latin American economies on the export of one or two primary commodities and the import of manufactured goods.

The inequitable terms of trade stifled industrial growth, for capital accumulation in a dependent country requires the continued acceptance of its primary materials in the developed world. A dependent country can grow and expand only as a reflection of the growth and development of the developed countries to which it is subordinated. While the developed countries can achieve self-sustaining growth, the economy of the dependent country, being oriented toward external markets that it cannot control, is exceptionally vulnerable to the periodic fluctuations in the international market.

Dependency analysts concluded that the solution to Latin American underdevelopment, contrary to the opinions of policymakers in Europe and North America, did not lie in increased penetration of Latin America by foreign capital. Whereas economic policymakers from the core countries advocated increased levels of foreign investment in Latin American industry as one of the solutions to underdevelopment and poverty, the dependency theorists argued that multinational industries would only strengthen the structure of international dependency, enrich the core, and impoverish the periphery. The immediate political implication of the dependency critique is that Latin America can only develop by severing its ties to the core and promoting self-sustaining economic growth through an industrialization program based on the expansion of the domestic market by agrarian reform and income redistribution.

Dependency theory provoked heated theoretical debates and inspired a wide range of empirical investigations. Charging that it was simply old Marxian wine in new Latin American bottles, critics (and some theorists) reduced it to simplistic hypotheses of external determination and domination by malicious foreign capitalists. Under continuous attack, dependency theory fell into disfavor to a substantial degree in the 1980s, even though it had established itself as one of the primary lenses through which scholars view Latin American political economy. It compelled scholars to analyze the dynamic international forces that condition Latin American development and distinguish it from the processes by which western Europe and North America have developed. While dependency theory undermined the assumptions on which previous development studies were based, its implicit political agenda has frequently been superseded by other models and approaches, such as post-imperialism, post-colonialism, imperial industrialization, and to some extent, postmodernism.

See alsoEconomic Development; Foreign Trade; Industrialization.


Andre Gunder Frank, Latin America: Underdevelopment or Revolution (1969).

Theotonio Dos Santos, "The Structure of Dependency," in American Economic Review 60, no. 2 (May 1970): 231-236.

Ronald Chilcote and Joel Edelstein, Latin America: The Struggle with Dependency and Beyond (1974).

Fernando Henrique Cardoso, "The Consumption of Dependency Theory in the United States," in Latin American Research Review 12, no. 3 (1977): 7-24.

Fernando Henrique Cardoso and Enzo Faletto, Dependency and Development in Latin America (1979).

Tulio Halperin-Donghi, "'Dependency Theory' and Latin American Historiography," in Latin American Research Review 17, no. 1 (1982): 115-130.

Peter Evans, "After Dependency: Recent Studies of Class, State, and Industrialization," Latin American Research Review 20, no. 2 (1985): 149-160.

Additional Bibliography

Chilcote, Ronald H., ed. Development in Theory and Practice: Latin American Perspectives. Lanham: Rowman & Littlefield, 2003.

Roberts, J. Timmons, and Amy Hite, eds. The Globalization and Development Reader: Perspectives on Development and Global Change. Malden: Blackwell Pub., 2007.

Santiago, Silviano. The Space in Between: Essays on Latin American Culture. Ed. Ana Lúcia Gazzola. Trans. Tom Burns, Ana Lúcia Gazzola and Gareth Williams. Durham, NC: Duke University Press, 2001.

Seligson, Mitchell A., and John T Passé-Smith, eds. Development and Underdevelopment: The Political Economy of Global Inequality. 3rd ed. Boulder: Lynne Rienner Publishers, 2003.

                                           Paul J. Dosal

dependency theory

views updated May 29 2018

dependency theory A set of theories which maintained that the failure of Third World states to achieve adequate and sustainable levels of development resulted from their dependence on the advanced capitalist world.

Dependency theories developed in opposition to the optimistic claims of modernization theory which saw the less developed countries being able to catch up with the West. They stressed that Western societies had an interest in maintaining their advantaged position in relation to the LDCs and had the financial and technical wherewithal to do so. A variety of different accounts of the relationship between the advanced and less developed states evolved within the broad framework of dependency theory, ranging from the stagnationism and ‘surplus drain’ theory of Andre Gunder Frank (which predicted erroneously that the Third World would be unable to achieve significant levels of industrialization), to the more cautious pessimism of those who envisaged a measure of growth based on ‘associated dependent’ relations with the West.

The major contribution to dependency theory was undoubtedly that of Frank, a German economist of development who devised and popularized the phrase ‘the development of underdevelopment’, describing what he saw as the deformed and dependent economies of the peripheral states—in his terminology the ‘satellites’ of the more advanced ‘metropolises’. In Capitalism and Underdevelopment in Latin America (1969), he argued that the Third World was doomed to stagnation because the surplus it produced was appropriated by the advanced capitalist countries, through agencies such as transnational corporations. Frank himself insisted that growth could only be achieved by severing ties with capitalism and pursuing autocentric socialist development strategies.

Dependency theory was flawed by an overemphasis on economic factors and in some versions a necessitarian logic based on the idea of a ‘surplus drain’ (extraction and appropriation of profits) from the LDCs to the rich and powerful nations. None the less, it had the merit of drawing attention to the international dimension of development, and brought the power relations between states under scrutiny. The emergence of the newly industrializing countries (NICs) as a group of successful late developers challenged the validity of the core assumptions of dependency theory, demonstrating that successful late industrialization was possible under certain circumstances, and suggesting the need for a more sophisticated and disaggregated approach to Third World development. See also DEVELOPMENT, SOCIOLOGY OF.

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