Dependency Theory

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What Is Dependency Theory And How Does It Apply To Development?

Dependency Theory developed in the late 1950s under the guidance of the Director of the United Nations Economic Commission for Latin America, Raul Prebisch. He 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.

Dependency theory shares many points with Marxist theories of imperialism. But the difference between two schools is quite significant because Marxist theories explain the “reasons” of the capitalism, while dependency theories explain the “consequences” of capitalism. (1) This dependency theory represented a new way in explaining the persistent poverty of the poor countries. Traditionally, previous economic theories assumed that all countries have similar stages of development, that today's underdeveloped nations are in a similar stage than the developed countries a few years ago. Dependency theory rejects this view. We can identify two main streams in dependency theory: the Latin American Structuralist, developed by the work of Prebisch and the American Marxist, developed by Andre Gunder Frank. Both schools agree on the basic points but Latin American Structuralist School emphasizes the fact that underdeveloped countries are not old versions of developed countries, but they have their own structures that aren’t necessarily the same as the wealthy countries. Because of their own structures, these underdeveloped countries will be the weaker members in a world market economy. Dependency theory says that the poverty of the poor countries is not because they are not integrated into the world system, but because of how they are integrated into the system. Actually, there isn’t only one unified Dependency Theory. Nevertheless, there are some main propositions, which form the core of dependency theory. These propositions include: Underdevelopment is very different from undevelopment. “Development and Underdevelopment are opposite sides of the coin: the development of the industrialized world was and is made possible only by the corresponding underdevelopment of the Third World”, said Randall and Theobald in1985. Undevelopment means that resources are not used on the scale of its potential; for example, North America was an undeveloped area for European colonists. However, underdevelopment refers to a country in which resources are being used, but used in a way in which benefits the dominant states and not the states in which the resources are found. For example, many countries in Latin America started their development in the 80’s but instead of using resources internally, they had to produce in order to pay his loans to the US.

Dependency theory includes not only an economic but also an historical dimension because this theory says that the undeveloped countries are poor and undeveloped because they were pushed to integrate the economic system too late, so they weren’t allowed to compete with wealthy states. (2) In Josue de Castro’s opinion, “Third World countries are underdeveloped not because of natural reasons but mostly because of historical facts. Unfavorable historic circumstances, especially colonialism, kept these regions aside from the rapidly growing world economy.” (3) Another aspect of the historical dimension is the fact that 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. Dependency theory suggests that LEDC’s countries should make an alternative use of internal resources in order to prevent internal problems. Internal resources should be used internally and not in the global market. For example, poor states...
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