DEPENDENCY THEORY.

Background
Dependency Theory developed in the late 1950s
under the guidance of the Director of the United
Nations Economic Commission for Latin America,
Raul Prebisch. Prebisch and his colleagues were
troubled by the fact that economic growth in the
advanced industrialized countries did not
necessarily lead to growth in the poorer
countries. Indeed, their studies suggested that
economic activity in the richer countries often
led to serious economic problems in the poorer
countries. Such a possibility was not predicted
by neoclassical theory, which had assumed that
economic growth was beneficial to all (Pareto
optimal) even if the benefits were not always
equally shared.
Prebisch's initial explanation for the phenomenon
was very straightforward: poor countries
exported primary commodities to the rich
countries who then manufactured products out
of those commodities and sold them back to the
poorer countries. The "Value Added" by
manufacturing a usable product always cost
more than the primary products used to create
those products. Therefore, poorer countries
would never be earning enough from their export
earnings to pay for their imports.
Prebisch's solution was similarly straightforward:
poorer countries should embark on programs of
import substitution so that they need not
purchase the manufactured products from the
richer countries. The poorer countries would still
sell their primary products on the world market,
but their foreign exchange reserves would not be
used to purchase their manufactures from
abroad.
Three issues made this policy difficult to follow.
The first is that the internal markets of the
poorer countries were not large enough to
support the economies of scale used by the
richer countries to keep their prices low. The
second issue concerned the political will of the
poorer countries as to whether a transformation
from being primary products producers was
possible or desirable. The final issue revolved
around the extent to which the poorer countries
actually had control of their primary products,
particularly in the area of selling those products
abroad. These obstacles to the import
substitution policy led others to think a little
more creatively and historically at the
relationship between rich and poor countries.
At this point dependency theory was viewed as a
possible way of explaining the persistent poverty
of the poorer countries. The traditional
neoclassical approach said virtually nothing on
this question except to assert that the poorer
countries were late in coming to solid economic
practices and that as soon as they learned the
techniques of modern economics, then the
poverty would begin to subside. However,
Marxists theorists viewed the persistent poverty
as a consequence of capitalist exploitation. And
a new body of thought, called the world systems
approach , argued that the poverty was a direct
consequence of the evolution of the international
political economy into a fairly rigid division of
labor which favored the rich and penalized the
poor.
How Can One Define Dependency Theory?
The debates among the liberal reformers
(Prebisch), the Marxists (Andre Gunder Frank),
and the world systems theorists (Wallerstein)
was vigorous and intellectually quite challenging.
There are still points of serious disagreements
among the various strains of dependency
theorists and it is a mistake to think that there is
only one unified theory of dependency.
Nonetheless, there are some core propositions
which seem to underlie the analyses of most
dependency theorists.
Dependency can be defined as an explanation of
the economic development of a state in terms of
the external influences--political, economic, and
cultural--on national development policies
(Osvaldo Sunkel, "National Development Policy
and External Dependence in Latin America," The
Journal of Development Studies, Vol. 6, no. 1,
October 1969, p. 23). Theotonio Dos Santos
emphasizes the historical dimension of the
dependency relationships in his definition:
[Dependency is]...an historical condition
which shapes a certain structure of the world
economy such that it favors some countries
to the detriment of others and limits the
development possibilities of the subordinate
economics...a situation in which the economy
of a certain group of countries is conditioned
by the development and expansion of another
economy, to which their own is subjected.
(Theotonio Dos Santos, "The Structure of
Dependence," in K.T. Fann and Donald C.
Hodges, eds., Readings in U.S. Imperialism.
Boston: Porter Sargent, 1971, p. 226)
There are three common features to these
definitions which most dependency theorists
share. First, dependency characterizes the
international system as comprised of two sets of
states, variously described as dominant/
dependent, center/periphery or metropolitan/
satellite. The dominant states are the advanced
industiral nations in the Organization of
Economic Co-operation and Development (OECD)
. The dependent states are those states of Latin
America, Asia, and Africa which have low per
capita GNPs and which rely heavily on the export
of a single commodity for foreign exchange
earnings.
Second, both definitions have in common the
assumption that external forces are of singular
importance to the economic activities within the
dependent states. These external forces include
multinational corporations, international
commodity markets, foreign assistance,
communications, and any other means by which
the advanced industrialized countries can
represent their economic interests abroad.
Third, the definitions of dependency all indicate
that the relations between dominant and
dependent states are dynamic because the
interactions between the two sets of states tend
to not only reinforce but also intensify the
unequal patterns. Moreover, dependency is a
very deep-seated historical process, rooted in the
internationalization of capitalism. Dependency is
an ongoing process:
Latin America is today, and has been since
the sixteenth century, part of an international
system dominated by the now-developed
nations.... Latin underdevelopment is the
outcome of a particular series of relationships
to the international system.
Susanne Bodenheimer, "Dependency and
Imperialism: The Roots of Latin American
Underdevelopment," in Fann and Hodges,
Readings, op. cit., p. 157.
In short, dependency theory attempts to explain
the present underdeveloped state of many
nations in the world by examining the patterns of
interactions among nations and by arguing that
inequality among nations is an intrinsic part of
those interactions.
The Structural Context of Dependency: Is it
Capitalism or is it Power?
Most dependency theorists regard international
capitalism as the motive force behind
dependency relationships. Andre Gunder Frank,
one of the earliest dependency theorists, is quite
clear on this point:
...historical research demonstrates that
contemporary underdevelopment is in large
part the historical product of past and
continuing eonomic and other relations
between the satellite underdeveloped and the
now developed metropolitan countries.
Furthermore, these relations are an essential
part of the capitalist system on a world scale
as a whole.
Andre Gunder Frank, "The Development of
Underdevelopment," in James D. Cockcroft,
Andre Gunder Frank, and Dale Johnson, eds.,
Dependence and Underdevelopment. Garden
City, New York: Anchor Books, 1972, p. 3.
According to this view, the capitalist system has
enforced a rigid international division of labor
which is responsible for the underdevelopment of
many areas of the world. The dependent states
supply cheap minerals, agricultural commodities,
and cheap labor, and also serve as the
repositories of surplus capital, obsolescent
technologies, and manufactured goods. These
functions orient the economies of the dependent
states toward the outside: money, goods, and
services do flow into dependent states, but the
allocation of these resources are determined by
the economic interests of the dominant states,
and not by the economic interests of the
dependent state. This division of labor is
ultimately the explanation for poverty and there
is little question but that capitalism regards the
division of labor as a necessary condition for the
efficient allocation of resources. The most
explicit manifestation of this characteristic is in
the doctrine of comparative advantage.
Moreover, to a large extent the dependency
models rest upon the assumption that economic
and political power are heavily concentrated and
centralized in the industrialized countries, an
assumption shared with Marxist theories of
imperialism. If this assumption is valid, then any
distinction between economic and political power
is spurious: governments will take whatever
steps are necessary to protect private economic
interests, such as those held by multinational
corporations.
Not all dependency theorists, however, are
Marxist and one should clearly distinguish
between dependency and a theory of
imperialism. The Marxist theory of imperialism
explains dominant state expansion while the
dependency theory explains underdevelopment.
Stated another way, Marxist theories explain the
reasons why imperialism occurs, while
dependency theories explain the consequences
of imperialism. The difference is significant. In
many respects, imperialism is, for a Marxist, part
of the process by which the world is transformed
and is therefore a process which accelerates the
communist revolution. Marx spoke approvingly of
British colonialism in India:
England has to fulfil a double mission in
India: one destructive, the other
regenerating--the annihilation of old Asiatic
society, and the laying of the material
foundations of Western society in Asia.
Karl Marx, "The Future Results of the British
Rule in India," New York Daily Tribune, No.
3840, August 8, 1853.
For the dependency theorists, underdevelopment
is a wholly negative condition which offers no
possibility of sustained and autonomous
economic activity in a dependent state.
Additionally, the Marxist theory of imperialism is
self-liquidating, while the dependent relationship
is self-perpetuating. The end of imperialism in
the Leninist framework comes about as the
dominant powers go to war over a rapidly
shrinking number of exploitable opportunities.
World War I was, for Lenin, the classic proof of
this proposition. After the war was over, Britain
and France took over the former German
colonies. A dependency theorist rejects this
proposition. A dependent relationship exists
irrespective of the specific identity of the
dominant state. That the dominant states may
fight over the disposition of dependent territories
is not in and of itself a pertinent bit of
information (except that periods of fighting
among dominant states affords opportunities for
the dependent states to break their dependent
relationships). To a dependency theorist, the
central characteristic of the global economy is
the persistence of poverty throughout the entire
modern period in virtually the same areas of the
world, regardless of what state was in control.
Finally, there are some dependency theorists
who do not identify capitalism as the motor
force behind a dependent relationship. The
relationship is maintained by a system of power
first and it does not seem as if power is only
supported by capitalism. For example, the
relationship between the former dependent
states in the socialist bloc (the Eastern European
states and Cuba, for example) closely paralleled
the relationships between poor states and the
advanced capitalist states. The possibility that
dependency is more closely linked to disparities
of power rather than to the particular
characteristics of a given economic system is
intriguing and consistent with the more
traditional analyses of international relations,
such as realism.
The Central Propositions of Dependency Theory
There are a number of propositions, all of which
are contestable, which form the core of
dependency theory. These propositions include:
1. Underdevelopment is a condition
fundamentally different from undevelopment.
The latter term simply refers to a condition in
which resources are not being used. For
example, the European colonists viewed the
North American continent as an undeveloped
area: the land was not actively cultivated on a
scale consistent with its potential.
Underdevelopment refers to a situation in
which resources are being actively used, but
used in a way which benefits dominant states
and not the poorer states in which the
resources are found.
2. The distinction between underdevelopment
and undevelopment places the poorer
countries of the world is a profoundly
different historical context. These countries
are not "behind" or "catching up" to the richer
countries of the world. They are not poor
because they lagged behind the scientific
transformations or the Enlightenment values
of the European states. They are poor
because they were coercively integrated into
the European economic system only as
producers of raw materials or to serve as
repositories of cheap labor, and were denied
the opportunity to market their resources in
any way that competed with dominant states.
3. Dependency theory suggests that
alternative uses of resources are preferable to
the resource usage patterns imposed by
dominant states. There is no clear definition
of what these preferred patterns might be, but
some criteria are invoked. For example, one
of the dominant state practices most often
criticized by dependency theorists is export
agriculture. The criticism is that many poor
economies experience rather high rates of
malnutrition even though they produce great
amounts of food for export. Many dependency
theorists would argue that those agricultural
lands should be used for domestic food
production in order to reduce the rates of
malnutrition.
4. The preceding proposition can be
amplified: dependency theorists rely upon a
belief that there exists a clear "national"
economic interest which can and should be
articulated for each country. In this respect,
dependency theory actually shares a similar
theoretical concern with realism. What
distinguishes the dependency perspective is
that its proponents believe that this national
interest can only be satisfied by addressing
the needs of the poor within a society, rather
than through the satisfaction of corporate or
governmental needs. Trying to determine what
is "best" for the poor is a difficult analytical
problem over the long run. Dependency
theorists have not yet articulated an
operational definition of the national
economic interest.
5. The diversion of resources over time (and
one must remember that dependent
relationships have persisted since the
European expansion beginning in the fifteenth
century) is maintained not only by the power
of dominant states, but also through the
power of elites in the dependent states.
Dependency theorists argue that these elites
maintain a dependent relationship because
their own private interests coincide with the
interests of the dominant states. These elites
are typically trained in the dominant states
and share similar values and culture with the
elites in dominant states. Thus, in a very real
sense, a dependency relationship is a
"voluntary" relationship. One need not argue
that the elites in a dependent state are
consciously betraying the interests of their
poor; the elites sincerely believe that the key
to economic development lies in following the
prescriptions of liberal economic doctrine.
The Policy Implications of Dependency Analysis
If one accepts the analysis of dependency
theory, then the questions of how poor
economies develop become quite different from
the traditional questions concerning comparative
advantage, capital accumulation, and import/
export strategies. Some of the most important
new issues include:
1. The success of the advanced industrial
economies does not serve as a model for the
currently developing economies. When
economic development became a focused
area of study, the analytical strategy (and
ideological preference) was quite clear: all
nations need to emulate the patterns used by
the rich countries. Indeed, in the 1950s and
1960s there was a paradigmatic consensus
that growth strategies were universally
applicable, a consensus best articulated by
Walt Rostow in his book, The Stages of
Economic Growth. Dependency theory
suggests that the success of the richer
countries was a highly contingent and
specific episode in global economic history,
one dominated by the highly exploitative
colonial relationships of the European
powers. A repeat of those relationships is not
now highly likely for the poor countries of the
world.
2. Dependency theory repudiates the central
distributive mechanism of the neoclassical
model, what is usually called "trickle-down"
economics. The neoclassical model of
economic growth pays relatively little attention
to the question of distribution of wealth. Its
primary concern is on efficient production and
assumes that the market will allocate the
rewards of efficient production in a rational
and unbiased manner. This assumption may
be valid for a well-integrated, economically
fluid economy where people can quickly
adjust to economic changes and where
consumption patterns are not distorted by
non-economic forces such as racial, ethnic,
or gender bias. These conditions are not
pervasive in the developing economies, and
dependency theorists argue that economic
activity is not easily disseminated in poor
economies. For these structural reasons,
dependency theorists argue that the market
alone is not a sufficient distributive
mechanism.
3. Since the market only rewards productivity,
dependency theorists discount aggregate
measures of economic growth such as the
GDP or trade indices. Dependency theorists
do not deny that economic activity occurs
within a dependent state. They do make a
very important distinction, however, between
economic growth and economic development.
For example, there is a greater concern within
the dependency framework for whether the
economic activity is actually benefitting the
nation as a whole. Therefore, far greater
attention is paid to indices such as life
expectancy, literacy, infant mortality,
education, and the like. Dependency theorists
clearly emphasize social indicators far more
than economic indicators.
4. Dependent states, therefore, should attempt
to pursue policies of self-reliance. Contrary to
the neo-classical models endorsed by the
International Monetary Fund and the World
Bank, greater integration into the global
economy is not necessarily a good choice for
poor countries. Often this policy perspective
is viewed as an endorsement of a policy of
autarky, and there have been some
experiments with such a policy such as
China's Great Leap Forward or Tanzania's
policy of Ujamaa. The failures of these
policies are clear, and the failures suggest
that autarky is not a good choice. Rather a
policy of self-reliance should be interpreted
as endorsing a policy of controlled
interactions with the world economy: ppor
countries should only endorse interactions on
terms that promise to improve the social and
economic welfare of the larger citizenry.