Dependency theory became popular in the 1960’s as a response to research by Raul Prebisch. Prebisch found that increases in the wealth of the richer nations appeared to be at the expense of the poorer ones.
In its extreme form, dependency theory is based on a Marxist view of the world, which sees globalisation in terms of the spread of market capitalism, and the exploitation of cheap labour and resources in return for the obsolete technologies of the West.
The dominant view of dependency theorists is that there is a dominant world capitalist system that relies on a division of labour between the rich 'core' countries and poor 'peripheral' countries. Over time, the core countries will exploit their dominance over an increasingly marginalised periphery.
Although still a popular theory in history and sociology, dependency theory has disappeared from the mainstream of economic theory since the collapse of Communism in the early 1990s.
The considerable inefficiencies associated with state involvement in the economy and the growth of corruption, have been dramatically exposed in countries that have followed this view of development, most notably a small number of African economies, including Zimbabwe.
Raul Prebisch believed that the economic growth in the advanced industrialized countries (the First world) did not necessarily lead to growth in the poorer countries (the Third World).
Indeed, economic activity in the richer countries often led to severe economic problems in the poorer countries. As a field, development economics looks not only at traditional economic rubrics, such as GDP or per-capital income, but also looks at things like standard of living, health care, education, and equal rights opportunities.
The relations between dominant and dependent states are dynamic. Dependency is an ongoing process. For example, Latin America is today, and has been since the sixteenth century, part of an international system dominated by the now-developed nations. The first explanation for the Dependency Theory would be that poor countries exported primary resources to the rich countries like USA.
Less developed nations provided raw materials, cheap labour and markets for developed countries. Rich countries then manufactured products or objects out of the resources given by the poor countries. Later on, rich countries (like USA or the UK) would sell it back to a poor country.
As a matter of fact, the rich countries would sell their manufactured products to the poor countries for more money than the poor countries would sell their primary resources to the rich countries. Therefore, poor countries would never be earning enough money from their exports to pay their imports.
For this reason, supporters of the Dependency Theory have been trying to work out a way to prevent the poor countries to buy from the rich ones. The solution was to produce the manufactured products on their own soil.
This was known as import substitution programs. These poor countries would still be able to sell their primary products out on the world market, but on the other hand, they would not spend their money on manufactured goods coming from rich countries. A lot of countries, for example, in Latin America tried to manufacture goods on their own soil.
By – Ashna Dhaliwal Haberdashers Crayford Academy
