Dependency Theory

Definition of dependency theory

First, let's clarify what we mean by this concept.

Fig. 1 - Developed nations have left the developing countries poverty-stricken by exploiting and extracting resources from them.

Dependency theory is broadly based on a Marxist theory of development. According to the theory, the ex-colonies are being economically exploited by former colonial powers and need to isolate themselves from capitalism and the ‘free market’ in order to develop.

Andre Gunder Frank (1971) argues that the developed West has 'underdeveloped' developing nations effectively by relegating them to a state of dependency. It is important to study dependency theory to understand how this has come about.

The origins and importance of dependency theory

According to Frank, the global capitalist system we know today developed in the sixteenth century. Through its processes, nations in Latin America, Asia, and Africa became involved in a relationship of exploitation and dependency with the more powerful European nations.

Dependency theory: global capitalism

This global capitalist structure is organised so that the rich ‘core nations’ like the USA and the UK are at one end, and the undeveloped or ‘peripheral nations’ are at the other end. The core exploits the periphery through its economic and military dominance.

Based on Frank’s theory of dependency, world history from the 1500s to the 1960s can be understood as a systematic process. The core developed nations accumulated wealth by extracting resources from the peripheral developing countries for their own economic and social development. This then left the peripheral countries poverty-stricken in the process.

Frank further argued that the developed nations kept the developing countries in a state of underdevelopment to profit off their economic weakness.

According to Frank, developed nations actively fear losing their dominance and prosperity to the development of poorer countries.

Dependency theory: historical exploitation

Under colonialism, powerful nations took control of other territories for their own benefit. The countries under colonial rule essentially became part of the 'mother country' and were not seen as independent entities. Colonialism is fundamentally linked to the idea of 'empire building’ or imperialism.

Frank argued that the prime period of colonial expansion took place between 1650 and 1900, when Britain and other European nations used their naval and military powers to colonise the rest of the world.

During this time, the powerful nations saw the rest of the world as sources to extract from and exploit.

European colonies in the other parts of the world established plantations for agricultural production in their colonies. The products were to be exported back to the mother country. As the process evolved, colonies started engaging in specialised production - the production became climate dependent.

Consequently, many changes occurred in the colonial regions as colonial powers established local systems of government to continue plantation and extract resources.

According to dependency theorists, these measures created a rift between ethnic groups and sowed the seeds of conflict for future years of independence from colonial rule.

Dependency theory: unequal and dependent relationship

There were several effective political and economic systems across borders in the pre-colonial period, and economies were mostly based on subsistence farming. This was all jeopardised through the unequal and dependent relationships formed with colonising nations.

Dependency theory, colonialism and local economies

Colonialism knocked down independent local economies and replaced them with mono-culture economies which geared themselves to export specific products to the mother country.

Fig. 2 - Due to unequal distribution of wealth, the poor are forced to seek help from the rich and powerful.

European countries further used this wealth to drive the industrial revolution by increasing the value of production and manufacturing goods for export. This accelerated their capacity to generate wealth but increased economic inequality between Europe and the rest of the world.

The goods manufactured and produced through industrialisation entered the markets of developing countries, weakening local economies and their ability to develop internally on their own terms.

Dependency theory and Neo-colonialism

The majority of the colonies achieved independence from colonising powers by the 1960s. However, European countries continued to view developing countries as sources of cheap labour and resources.

Dependency theorists believe that the colonising nations had no intention of helping the colonies to develop, as they wanted to continue reaping benefits from their poverty.

Thus, exploitation persisted through neo-colonialism. Although European powers no longer exercise political control over developing countries in Latin America, Asia, and Africa, they still exploit them through subtle economic ways.

Principles of dependency theory and neo-colonialism

Andre Gunder Frank points out three main principles of dependency theory that underpin the dependent relationship in neo-colonialism.

Terms of trade benefit Western interests

The terms of the trade keep benefiting Western interests and development. After colonialism, many ex-colonies remained dependent on their export revenue for basic products, e.g., tea and coffee crops. These products have low value in raw material form, so they are bought cheaply but are then processed profitably in the West.

The increasing dominance of transnational corporations

Frank brings attention to the increased dominance of Transnational Corporations in exploiting labour and resources in developing countries. As they are globally mobile, these corporations offer lower wages to take advantage of poor countries and their workforces. Developing countries often have no choice but to compete in a ‘race to the bottom’, which harms their development.

Rich countries exploit developing countries

Frank further argues that wealthy countries send financial support to developing nations in terms of loans with conditions attached, e.g. opening up their markets to Western companies to continue exploiting them and making them dependent.

Dependency theory: examples of strategies for development

Sociologists argue that dependency is not a process but a permanent situation from which developing countries can only escape by breaking free from the capitalist structure.

There are different ways to develop:

Isolation of economy for development

One method of breaking the cycle of dependency is for the developing country to isolate its economy and affairs from more powerful, developed economies, essentially becoming self-sufficient.

Socialist revolution for development

Frank suggests a socialist revolution may help overcome elite Western rule, as in the instance of Cuba. Although in Frank’s view, the West would reassert its dominance sooner or later.

Associate or dependent development

In these circumstances, a country remains part of the system of dependency and takes up national policies for economic growth, such as import substitution industrialisation. This refers to the production of consumer goods that would otherwise be imported from overseas. Quite a few South American countries have successfully adopted this.

The biggest flaw here is that the process leads to economic growth while fostering inequalities.

Criticisms of dependency theory

• Goldethorpe (1975) suggests that some nations have benefitted from colonialism. Countries that were colonised, such as India, have developed in terms of transportation systems and communication networks, compared to a country like Ethiopia, which was never colonised and is much less developed.

• Modernisation theorists might argue against the opinion that isolation and socialist/communist revolution are effective means to foster development, referring to the failure of the Communist movements in Russia and in Eastern Europe.

• They would further add that many developing nations have benefitted by receiving help from Western governments through Aid-for-Development programs. Countries that have adapted to a capitalist structure have witnessed a faster development rate than those that pursued communism.

• Neoliberals would mainly consider the internal factors responsible for underdevelopment and not exploitation. In their opinion, poor governance and corruption are to blame for the shortfalls in development. For example, neoliberals argue that Africa needs to adapt to more of a capitalist structure and pursue less isolationist policies.