In the late 1950s, dependency theory was proposed by Raul Prebisch, the director of the United Nations Economic Commission for Latin America (Cardoso & Faletto, 1979). Dependency theory mainly focuses on the interaction between the developing and developed countries and was considered as a big challenge to the free market economic policies at that time (Davis & Cobb, 2009). The theory was incredibly popular as many developing countries were close to the verge of economic collapse caused by the free market policies of development theory during 1950s to 1970s; meanwhile, the dependency theory was also considered as a major criticism directly questioning modernization theory (Caporaso, 1980).
During that period, various scholars presented further analyses of Prebisch’s dependency theory, for example, the Germany economist Frank developed dependency theory to become a part of Marxism-based “new dependency theory” considering the domestic and foreign relations of developing countries and Wallerstein developed further the Marxist thoughts in this theory to make it one of the world system theories (Caporaso, 1980). However, the incapability of dependency theory to explain the rising success of countries such as India and China in recent decades have made its persuasiveness questionable, and many critics today no longer perceive dependency theory as the up-to-date stream of thoughts.(Ferraro, 2008). In this essay I attempt to explain the declining persuasiveness of dependency theory under the context of contemporary global economy through three stages; by presenting a brief history of the development of dependency theory first, I would then assess the definitive and methodical deficiencies of the theory, and explain how such incoherence has eventually made the dependency analysis no longer a persuasive tool to understand IPE today.
As mentioned at the beginning, in the 1950s, many developing countries were closing to the verge of economic collapse and the gap between the developed countries and developing countries expanded significantly (Ferraro, 2008). As the free market economic policies of the post-war era could no longer justify this phenomenon, scholars began seeking for alternative explanations and the Argentinian economist Raul Prebisch proposed the dependency theory under such circumstance (Caporaso, 1980). According to Prebish, “the economic activity in the developed countries may cause the serious economic problem in the poorer countries (Ferraro, 2008). Prebish’s explanation of the mechanism is that by restricting poor countries to only export primary commodities at an unreasonably low price, the rich countries were able to manufacture the cheaply imported raw materials into products and export them out again to the poor countries with a higher price (Ferraro, 2008). Under this circumstance, dependency theorists view the core-periphery division and the unfairness of world trade as the ultimate explanations of the persistent poverty of the less developed world. In essence, dependency theory holds that the relative impoverishment of the developing world is as a result of the western or developed world enriching itself at the expense of the former. Simply put, the developing world drained the natural resources of its newly-conquered territories and reduced the economies of those territories to stunted abominations that merely served the needs of the colonial (western) powers.
The dependency theory itself has definitive and methodical deficiencies. Firstly, the dependency theory is more like an “approach” rather than a “theory”, which can be concluded from its background and the content. The main reason for the scientists and economists to propose dependency theory is to explain why the gap at the aspect of economy became larger and according to Ferraro...