Dependency Theory Essay – Claims, Concepts & Global Development Analysis

The dependency theory of underdevelopment gained popularity in the 1960s and 1970s, particularly in third-world states. It was developed by scholars such as Samir Amin and Andre Gunder-Frank to critique the modernization theory that stated that development takes place in stages and that the third world states were in their early stages of development. According to Walter Rostow (1959), one of the key proponents of the modernization theory, growth took place in five stages: “The traditional society, the preconditions for take-off, the take-off, the drive to maturity, and the age of high mass consumption.”

The scholars who were proponents of the dependency theory argued that the modernization theory did not sufficiently address underdevelopment in third-world countries. They stated that these countries would not grow as long as they were enslaved by the rich countries (Velasco, 2002). Unlike the modernization theory, which focused on internal factors, the dependency theory focused on external relationships and how they affected the developmental process of a nation. It emphasized, “individual nations, their role as suppliers of raw materials, cheap labour, and markets for expensive manufactured goods from industrialized countries” (Shrum, 2001).

Writing a strong dependency theory essay requires deep analysis of concepts like unequal exchange, modernization critiques, and underdevelopment in third-world nations. At My Homework Helpline’s management homework assistance, our experts help you structure assignments with clarity, academic rigor, and originality. Whether you need research guidance or complete essay support, we provide tailored solutions to strengthen your understanding and improve your grades.

Dependency theory came in two versions the extreme version developed by economists and scholars such as Andre Gunder-Frank and Amir Samin, and the milder version proposed by scholars such as Fernando Henrique Cardoso, Osvaldo Sunkel, and Enzo Faletto. The radical version of the theory stated that western nations grew at the expense of third-world states (Velasco, 2002). For example, in his thesis on the development of underdevelopment, Andre Gunder-Frank stated that Western countries’ continued success and growth were directly linked to the exploitation of nations in the periphery, that is, third-world countries. Therefore, in his view, the development of western countries and the underdevelopment of third-world states were not two separate processes but rather two sides of the same process. According to Gunder-Frank, third-world states could only achieve full economic independence if they attained full political and economic independence from western countries. As a result, third-world countries, particularly Latin America, faced two choices in the post-World War II era: continue being underdeveloped while dependent on the western imperial states or undergo a wholesale revolution.

The extreme version of dependency had its shortcoming. For example, scholars could not find a positive correlation between expansion in the North and recession in the South (Velasco, 2002). Additionally, they could not establish a causal relationship between the wealth of the Western nations in the North and the poverty of the third-world nations in the South. Their studies often established that a boom in the Western Nation resulted in growth in third world nations. In the milder version, scholars such as Cardoso, Sunkel, and Faletto argued that in a capitalist economy, both western and third-world countries could grow; however, they would not benefit from the growth equally.

Apart from Gunder-Frank’s thesis of the development of underdevelopment, another theory that further developed the dependency theory is the theory of unequal international exchange proposed by scholars such as Raul Prebisch and Immanuel Wallerstein. Prebisch introduced this thesis in 1944 when he established “the notion of centre and periphery” (Birkan, 2015). The centre represents Western nations’ capitalist economies, while the periphery refers to the other underdeveloped nations worldwide. According to Prebisch, the Western nations that make up the centre have the following characteristics, “greater rate of technological innovation, well organized powerful labour unions and oligopolistic markets, and experience smaller amounts of decline in export prices in a cyclical downturn than the periphery” (Birkan, 2015). On the other hand, third-world countries in the periphery lack all these characteristics.

Around the same time as Prebisch, another scholar H. Singer, came up with the thesis that goods in their different states have different income elasticities of demand (Kvangraven, 2020). Nations at the centre largely trade in high-value goods, while nations in the periphery largely trade primary goods. As a result, Western nations have an advantage in the international economy compared to third-world nations.

In his theory of unequal exchange, Walden Bello takes a more radical view. He believes it is a “theory of bloodless but inexorable exploitation” (Bello, 2008). He states that the income gained from international trade systematically favours developed nations while at the same time impoverishing third-world countries. That manifests itself in the theory of diminishing terms of trade. According to the theory, high-value goods include manufactured products with higher and stable prices compared to primary goods that tend to be unstable and low (Ricci, 2019). Since third-world states largely produce primary goods, the unequal exchange means these countries do not have enough funds to finance investments and develop their domestic economies. They also do not have sufficient funds to import high-value goods from Western nations.

Apart from critiquing the modernization theory, the dependency theory also critiques the Bretton Woods system. The system was implemented following the Bretton Woods conference held in 1944 (Igwe, 2018). Three international organizations were set up due to the meeting, the International Monetary Fund, the World Bank, and the International Trade Organization. The conference also set the US dollar as the medium of international exchange, replacing gold. Third-world states had an easy relationship with Brentwood institutions as they felt they played a key role in the structural inequalities between them and western countries. As a result, they fought hard to have it reformed. They were able to achieve this through the United Nations General Assembly. The result was the New International Economic Order, officially established in 1974. The dependency theory heavily influenced this new system.

Just like all other theories, the dependency theory has shortcomings. One of its major weaknesses is that it does not sufficiently explain the origin of underdevelopment. As a result, critics of the theory have been able to come up with a multitude of positions. For example, according to Sarjaya Lall, a liberal critic, the dependency theory does not fully address underdevelopment as “the concept of dependency is impossible to define and cannot be shown to be causally related to continuance of underdevelopment” (Namkoong, 1999). Some Marxist scholars also argue that while unequal exchange may help perpetuate underdevelopment, it is not a key factor that leads to increased dependency and underdevelopment. According to them, the capitalist nature of production leads to underdevelopment.

In conclusion, despite its shortcomings, dependency theory established a way to view international economies and underdevelopment. In particular, it helped focus on the problem of underdevelopment in third-world states and the factors that lead to it. As a result, it can be regarded as a significant contribution to the global political economy analysis, particularly in the post-World War II and post-colonial eras.

References

Bello, W. (2008). Deglobalization: Ideas for a new world economy. Zed Books Ltd.

Birkan, A. (2015). A brief overview of the theory of unequal exchange and its critiques. International Journal of Humanities and Social Science, 5(4), 1.

Igwe, I. O. (2018). History of the international economy: The Bretton Woods system and its impact on the economic development of developing countries. Athens JL, pp. 4, 105. DOI:10.30958/ajl.4.2.1

Kvangraven, I. H. (2021). Beyond the stereotype: Restating the relevance of the dependency research program. Development and Change, 52(1), 76-112. https://doi.org/10.1111/dech.12593

Namkoong, Y. (1999). Dependency theory: concepts, classifications, and criticisms. International Area Review, 2(1), 121–150. https://doi.org/10.1177/22338659990020010

Ricci, A. (2019). Unequal exchange in the age of globalization. Review of Radical Political Economics, 51(2), 225–245. https://doi.org/10.1177/0486613418773753

Rostow, W. W. (1959). The stages of economic growth. The economic history review, 12(1), 1-16.

Shrum, W. (2001). Science and Development.Editor(s): Neil J. Smelser, Paul B. Baltes, International Encyclopedia of the Social & Behavioral Sciences, Pergamon, 2001, 13607–13610. https://doi.org/10.1016/B0-08-043076-7/03165-X

Velasco, A. (2002). Dependency theory. Foreign Policy, (133), p. 44.