Dependency Theory Made SIMPLE

So you want to learn dependency? Whether you are studying this subject or you are simply just interested in learning more, dependency theory is often centre of the conversation. So lets take a look at what this theory is and how it works…

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What is dependency theory?

Dependency theory is an economic theory that explains how poorer countries are dependent on richer countries for their economic development.

According to this theory, poorer countries are kept in a state of underdevelopment and dependency because they are forced to rely on richer countries for resources and markets.

This dependence is reinforced by global economic systems that favour the interests of richer countries and multinational corporations, often at the expense of poorer countries.

Dependency theory argues that the only way for poorer countries to break free from this cycle of dependence is to develop their own self-sufficient economies that can compete on the global stage.

Types of countries according to dependency theory

According to dependency theory, the global economy can be divided into three types of countries:

Core countries

These are the most developed and powerful countries in the global economy. They have advanced economies, high levels of industrialisation, and dominate in key sectors like finance, technology, and communications. Core countries often exploit peripheral and semi-peripheral countries for raw materials, cheap labor, and markets for their products.

Semi-peripheral countries

These are countries that have some industrialisation and development, but they are not as advanced or powerful as core countries. Semi-peripheral countries are often caught in the middle, as they are exploited by core countries but also exploit peripheral countries. They may also act as intermediaries in global trade, buying raw materials from peripheral countries and selling finished goods to core countries.

Peripheral countries

These are the least developed and most marginalised countries in the global economy. They often have weak economies, limited infrastructure, and rely heavily on exports of raw materials. Peripheral countries are often exploited by core and semi-peripheral countries, who buy their raw materials at low prices and sell them finished goods at high prices. Peripheral countries often struggle to develop their economies and improve the standard of living for their citizens due to this exploitation.

Why was the dependency theory developed?

Dependency theory was developed as a response to the traditional economic theories that focused on the benefits of free market capitalism and globalisation.

The theory emerged in the 1950s and 1960s when many newly independent countries in Africa, Asia, and Latin America were struggling to achieve economic growth and development.

Dependency theorists believed that the traditional economic theories were inadequate in explaining why these countries were not able to achieve the same levels of economic growth and development as Western countries.

Dependency theory was developed as a way to understand the economic relations between richer and poorer countries, and to explain why poorer countries were not able to break out of their underdeveloped state.

It argued that the global economic system was biased towards richer countries and multinational corporations, and that this system was responsible for keeping poorer countries in a state of dependency and underdevelopment.

Dependency theorists believed that the only way for poorer countries to break free from this cycle of dependence was to develop their own self-sufficient economies that could compete on the global stage.

Did Karl Marx influence the dependency theory?

Karl Marx was a German philosopher, economist, and social theorist who lived from 1818 to 1883. He is best known for his theories of capitalism, class struggle, and socialism, which had a profound impact on the development of modern social, economic, and political thought.

Marx developed his ideas about capitalism in response to the social and economic changes of the Industrial Revolution. He argued that capitalism was a system that relied on the exploitation of workers, who were paid less than the value of the goods they produced. He believed that the struggle between capitalists and workers was the driving force behind social and economic change, and that the only way to achieve a just society was to abolish capitalism and create a socialist system.

Dependency theory emerged in the 1950s and 1960s, long after Marx’s death, but it drew on some of his ideas. Dependency theorists argued that the underdevelopment of poorer countries was a result of the exploitation of their resources and labour by richer countries and multinational corporations. They argued that the global economic system was biased towards richer countries, and that this system perpetuated a cycle of dependency and underdevelopment.

While Marx did not develop the dependency theory explicitly, his ideas about imperialism, capitalism, and exploitation were influential in the development of the theory. Dependency theorists drew on Marx’s critiques of capitalism and imperialism to develop their own theories about the relationship between richer and poorer countries.

A brief history of dependence around the globe

The concept of dependency has been present in human societies throughout history, but the modern understanding of dependency theory emerged in the mid-20th century in response to the economic and political changes brought about by decolonization and the rise of globalisation.

In the 1950s and 1960s, many newly independent countries in Asia, Africa, and Latin America struggled to achieve economic development and modernization. Many of these countries turned to the Western industrialised nations for aid and investment, but found that their economic growth was hindered by their dependence on these external sources of capital and technology. This led to the emergence of dependency theory, which argued that the global economic system was structured in a way that perpetuated underdevelopment in poorer countries.

The ideas of dependency theory were influenced by the works of economists such as Raul Prebisch and Andre Gunder Frank, who argued that the unequal exchange of goods and resources between richer and poorer countries perpetuated a cycle of dependency and underdevelopment. They suggested that poorer countries were stuck in a vicious cycle where they had to export raw materials to richer countries in order to generate income, but the terms of trade were heavily biased against them. This meant that they had to import manufactured goods at a high cost, which perpetuated their dependency on external sources of capital and technology.

In the 1970s and 1980s, dependency theory influenced many policies and strategies in developing countries, such as import substitution and nationalization of industries. However, the theory came under criticism for oversimplifying complex economic relationships and failing to account for the role of internal factors, such as poor governance and corruption, in perpetuating underdevelopment.

Today, the legacy of dependency theory continues to be debated in the field of economics, with some arguing that it provides a useful framework for understanding the structural factors that contribute to underdevelopment, while others criticize its focus on external factors and lack of practical solutions.

What are the benefits of dependency theory?

Dependency theory has been used around the world for many years as a starting point for understanding global geopolitics and has several key benefits, which are:

Provides a critical perspective on traditional economic theories and policies, such as free trade and globalization, that may perpetuate economic inequalities between richer and poorer countries.
Highlights the role of external factors, such as the exploitation of resources and labour by richer countries and multinational corporations, in perpetuating underdevelopment in poorer countries.
Emphasises the importance of domestic development and self-sufficiency in achieving economic growth and development.
Raises awareness of global economic inequalities and social disparities between richer and poorer countries.
Provides a theoretical framework for understanding the historical and structural roots of underdevelopment in poorer countries.

What are the criticisms of dependency theory?

Dependency theory also has its critics. Below I have outlined some of the main criticisms of this theory:

Overemphasizes external factors and fails to take into account internal factors, such as corruption and poor governance, that may contribute to underdevelopment.
Ignores the potential benefits of globalization, such as increased access to technology and international cooperation.
May be difficult to implement the policies recommended by dependency theory, and does not offer clear practical solutions to the problems of underdevelopment.
May overlook the agency and power of individuals and communities in shaping economic outcomes, and instead focuses too much on structural factors.
Has been criticized for being overly deterministic and failing to account for the complexities and variations in economic development across different countries and regions.

Dependency theory: Key takeaways

Dependency theory is an economic theory that explains how poorer countries are dependent on richer countries for their economic development.

Dependency theory argues that poorer countries are kept in a state of underdevelopment and dependency because they are forced to rely on richer countries for resources and markets.
This dependency is reinforced by global economic systems that favor the interests of richer countries and multinational corporations, often at the expense of poorer countries.
For example, richer countries may extract natural resources like oil, minerals, and timber from poorer countries at low prices, leaving little for the poorer country to invest in their own development.
Richer countries may also use their economic power to dictate trade terms that are unfavourable to poorer countries, making it difficult for them to compete on the global market.
As a result, poorer countries may become stuck in a cycle of dependence, unable to grow their economies and improve the lives of their citizens.
Dependency theory argues that the only way for poorer countries to break free from this cycle of dependence is to develop their own self-sufficient economies that can compete on the global stage.
This may involve investing in domestic industries, developing their own natural resources, and reducing dependence on foreign aid and trade.
By doing so, poorer countries can become more economically independent and improve the lives of their citizens, without being reliant on richer countries for their economic development.

Dependency theory FAQs

To finish off this article lets take a look at some of the most commonly asked questions about dependency theory…

What is dependency theory?

Dependency theory is a theoretical framework that seeks to explain the structural relationship between richer and poorer countries, and how this relationship perpetuates underdevelopment in poorer countries.

Who developed dependency theory?

Dependency theory was developed by a group of economists and social scientists in the 1950s and 1960s, including Raul Prebisch and Andre Gunder Frank.

What are the key assumptions of dependency theory?

The key assumptions of dependency theory include the idea that the global economic system is biased towards richer countries, and that this system perpetuates a cycle of dependency and underdevelopment in poorer countries.

How does dependency theory explain underdevelopment?

Dependency theory argues that underdevelopment is a structural problem, caused by the unequal distribution of wealth and resources between richer and poorer countries.

What are some policy recommendations of dependency theory?

Policy recommendations of dependency theory include promoting domestic development and self-sufficiency, nationalizing key industries, and reducing reliance on external sources of capital and technology.

How has dependency theory influenced economic development in the Global South?

Dependency theory has influenced many policies and strategies in developing countries, such as import substitution and nationalization of industries, but it has also been criticized for oversimplifying complex economic relationships and failing to account for internal factors.

What are some criticisms of dependency theory?

Criticisms of dependency theory include its focus on external factors and lack of practical solutions, and its failure to account for the role of internal factors, such as poor governance and corruption.

How does dependency theory relate to globalisation?

Dependency theory argues that globalisation has further perpetuated the cycle of dependency and underdevelopment in poorer countries, by increasing their reliance on external sources of capital and technology.

How does dependency theory relate to the North-South divide?

Dependency theory is often used to explain the North-South divide, which refers to the economic and political differences between richer, industrialized countries (the North) and poorer, developing countries (the South).

What is the relevance of dependency theory today?

The relevance of dependency theory continues to be debated in the field of economics, with some arguing that it provides a useful framework for understanding the structural factors that contribute to underdevelopment, while others criticise its focus on external factors and lack of practical solutions.

Dependency theory: To conclude

As you can see, dependency theory is a widely used theory around the world that can be beneficial in many circumstances, but also has a number of limitations. If you enjoyed this article, I am sure you will enjoy these too: