Dependency Theory

Dependency theory tended to see the ‘root cause’ of underdevelopment as rich world
governments (or nation states) – they believed poor countries remained poor following a history
of colonialism where powerful countries such as Britain colonised other areas of the globe, for
example India and many African countries and took control of these regions politically and
economically, running them for their own benefit.
Dependency theory believed the unequal relationship between the coloniser and colonised (or
core and satellite) disadvantaged poor countries to such an extent that they were still in a state of
dependency when the colonial powers left in the 1950s and 1960s. The ex colonies were
effectively turned into the exporters of low value primary products such as Tea, which kept them
poor.
HOWEVER, WST points out that today nation states have lost their power to control poor
countries, and that there are ex colonies which have developed by becoming semi-periphery
countries, or manufacturing – India and Mexico are good examples.
Another criticism WST makes of DT is that rich ex coloniser countries can go down the
development hierarchy because Nation States are no longer the most powerful actors in the
modern global system controlled more by TNCs and the WTO.
A second criticism of Dependency Theory comes from People Centred Development.
DT still saw industrialisation as the root to development for poor countries, except that it should
be controlled by nation states (socialism).
PCD criticises this as horrific things still happened through socialist development – as in Russia
and China, and also point out that the nation state may be too large to take into account the
diverse wishes of many local communities.
PCD would rather see much more diverse, localised forms of development, decided on by the
people, rather than development imposed by nation states
Dependency Theory – Revision Notes
Dependency Theory claims that Colonialism had a negative impact on the satellite territories in
Africa, Asia and Latin America; that neocolonialism keeps the ex colonial master rich and the ex
colonies poor, and that in order to develop the ex colonies need to isolate themselves from the
capitalist system, protect themselves from the ‘free market’ and develop internally, through
socialism for example.

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Colonialism made rich countries rich and poor countries poor
1. Stealing land and resources which decimated local populations through slavery, disease
and displacement of local populations.
2. Increasing ethnic conflict by selecting one ‘pro-European group’ to govern over all other
ethnic groups in the territories.
3. Turning the colonies into mono-crop plantation systems, dependent on low value
agricultural exports, which hampered their development post-independence.
4. MOST IMPORTANTLY (and most difficult to understand and evaluate) – colonialism
established a world capitalist system which locked poorer countries into unequal power
relations with richer countries – if poor countries wished to develop within the system,

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 they required expensive imports from the industrialised European powers. For this
reason, poor countries will always remain poor within this system.

Neo-Colonalism keeps poor countries poor because:

1. Unfair terms of Trade and unfair trade rules lock poor countries into unequal
relationships with the west
2. Transnational Corporations play a major role in exploiting countries today, not just rich
countries
3. Aid through the World Bank is used by rich countries to promote ‘neoliberal’ policies
which make rich countries easier to exploit

To develop, developing countries need to isolate themselves from the capitalist system
(protectionism)

Dependency Theory argued that developing countries should seek to break away from the world
capitalist system and find their own path way to development – mainly through socialism –
development through socialism means countries focus on their own development, seeking to
produce everything for themselves rather than integrating into a global trade system.

Modernization Theory

By the end of the Second World War many of the countries in Africa, Asia and Latin America
had failed to develop and remained poor, despite exposure to capitalism. There was concern
amongst the leaders of the western developed countries, especially the United States, that
communism might spread into many of these countries, potentially harming American business
interests abroad and diminishing U.S. Power.

In this context, in the late 1940s, modernisation theory was developed, which aimed to provide a
specifically non-communist solution to poverty in the developing world – Its aim was to spread
a specifically industrialised, capitalist model of development through the promotion of Western,
democratic values.

By the end of the Second World War many of the countries in Africa, Asia and Latin America
had failed to develop and remained poor, despite exposure to capitalism. There was concern
amongst the leaders of the western developed countries, especially the United States, that
communism might spread into many of these countries, potentially harming American business
interests abroad and diminishing U.S. Power.

In this context, in the late 1940s, modernisation theory was developed, which aimed to provide a
specifically non-communist solution to poverty in the developing world – Its aim was to spread
a specifically industrialised, capitalist model of development through the promotion of Western,
democratic values.

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Modernisation theory thought the ‘third world’ should develop like the ‘first world’

There are two main aspects of modernisation theory – (1) its explanation of why poor countries
are underdeveloped, and (2) its proposed solution to underdevelopment.

Modernisation theory explained the underdevelopment of countries in Asia, Africa and Latin
America primarily in terms of cultural ‘barriers’ to development’, basically arguing that
developing countries were underdeveloped because their traditional values held them back; other
modernisation theorists focused more on economic barriers to development.

In order to develop, less developed countries basically needed to adopt a similar path to
development to the West. They needed to adopt Western cultural values and industrialise in
order to promote economic growth. In order to do this they would need help from Western
governments and companies, in the form of aid and investment.

Modernisation theory favoured a capitalist- industrial model of development – they believed

that capitalism (the free market) encouraged efficient production through industrialisation, the
process of moving towards factory based production.

Industrial –refers to production taking place in factories rather than in the home or small
workshops. This is large scale production. (Think car plants and conveyer belts).

Capitalism – a system where private money is invested in industry in order to make a profit and
goods are produced are for sale in the market place rather than for private consumption.

There are alternative systems of production to Capitalism – subsistence systems are where local
communities produce what they need and goods produced for sale are kept to a minimum; and
Communism, where a central authority decides what should be produced rather than consumer

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demand and desire for profit. (Need drives production in Communism, individual wants or
desires (‘demand’) in Capitalism)

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Modernisation Theory: What Prevents Development?

According to Modernisation Theorists, obstacles to development are internal to poorer countries.

In other words, undeveloped countries are undeveloped because they have the wrong cultural and
social systems and the wrong values and practices that prevent development from taking place

The Caste System in India is a good example of an ascribed status system based on traditional
values

Talcott Parsons (1964) was especially critical of the traditional values of underdeveloped
countries – he believed that they were too attached to traditional customs, rituals, practices and
institutions, which Parsons argued were the ‘enemy of progress’. He was especially critical of the
extended kinship and tribal systems found in many traditional societies, which he believed
hindered the geographical and social mobility that were essential if a country were to develop (as
outlined in his Functional Fit theory).

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Parsons argued that traditional values in Africa, Asia and Latin America acted as barriers to
development which included –

• Particularism – Where people are allocated into roles based on their affective or familial
relationship to those already in positions power. For example, where a politician or head
of a company gives their brother or someone from their village or ethnic group a job
simply because they are close to them, rather than employing someone based on their
individual talent.
• Collectivism – This is where the individual is expected to put the group (the family or the
village) before self-interest – this might mean that children are expected to leave school
at a younger age in order to care for elderly parents or grandparents rather than staying in
school and furthering their education.
• Patriarchy – Patriarchal structures are much more entrenched in less developed
countries, and so women are much less likely to gain positions of political or economic
power, and remain in traditional, housewife roles. This means that half of the population
is blocked from contributing to the political and economic development of the country.
• Ascribed Status and Fatalism – Ascribed status is where your position in society is
ascribed (or determined) at birth based on your caste, ethnic group or gender. Examples
include the cast system in India, many slave systems, and this is also an aspect of extreme
patriarchal societies. This can result in Fatalism – the feeling that there is nothing you can
do to change your situation.

In contrast, Parsons believed that Western cultural values which promoted competition and
economic growth: such values included the following:

• Individualism – The opposite of collectivism This is where individuals put themselves

first rather than the family or the village/ clan. This frees individuals up to leave families/
villages and use their talents to better themselves ( get an education/ set up businesses)
Universalism – This involves applying the same standards to everyone, and judging
everyone according to the same standards This is the opposite of particularism, where
people are judged differently based on their relationship to the person doing the judging.
• Achieved Status and Meritocracy – Achieved status is where you achieve your success
based on your own individual efforts. This is profoundly related to the ideal of
meritocracy. If we live in a truly meritocratic society, then this means then the most
talented and hardworking should rise to the top-jobs, and these should be the best people
to ‘run the country’ and drive economic and social development.

Parsons believed that people in undeveloped countries needed to develop an ‘entrepreneurial

spirit’ if economic growth was to be achieved, and this could only happen if less developed
countries became more receptive to Western values, which promoted economic growth.

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Criticisms of Modernisation Theory

Firstly, there are no examples of countries that have followed a Modernisation Theory approach
to development. No countries have followed Rostow’s “5 stages of growth” in their entirety.
Remember, “Modernisation Theory” is a very old theory which was partly created with the
intention of justifying the position of western capitalist countries, many of whom were colonial
powers at the time, and discrediting Communism. This is why it is such a weak theory.

Secondly, Modernization Theory assumes that western civilisation is technically and morally
superior to traditional societies. Implies that traditional values in the developing world have little
value compared to those of the West. Many developed countries have huge inequalities and the
greater the level of inequality the greater the degree of other problems: High crime rates, suicide
rates, poor health problems such as cancer and drug abuse. Thirdly, Dependency Theorists argue
that development is not really about helping the developing world at all. It is really about
changing societies just enough so they are easier to exploit, making western companies and
countries richer, opening them up to exploit cheap natural resources and cheap labour.

Fourth, Neo-Liberalism is critical of the extent to which Modernisation theory stresses the
importance of foreign aid, but corruption (Kleptocracy) often prevents aid from getting to where
it is supposed to be going. Much aid is siphoned off by corrupt elites and government officials
rather than getting to the projects it was earmarked for. This means that aid creates more
inequality and enables elites to maintain powe

Fifth, Post-Development thinkers argue that the model is flawed for assuming that countries
need the help of outside forces. The central role is on experts and money coming in from the
outside, parachuted in, and this downgrades the role of local knowledge and initiatives. This
approach can be seen as demeaning and dehumanising for local populations. Galeano (1992)
argues that minds become colonised with the idea that they are dependent on outside forces.
They train you to be paralysed and then sell you crutches. There are alternative models of
development that have raised living standards: Such as Communist Cuba and The Theocracies of
the Middle East

Sixthly, industrialisation may do more harm than good for many people – It may cause Social
damage – Some development projects such as dams have led to local populations being removed
forcibly from their home lands with little or no compensation being paid.

Rostow’s five stage model of development

Modernisation Theorists believed traditional societies needed Western assistance to develop.

There were numerous debates about the most effective ways to help countries develop, but there
was general consensus on the view that aid was a good thing and if Developing countries were

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injected with money and western expertise it would help to erode ‘backward’ cultural barriers
and kick starts their economies.

The most well-known version of modernization theory is Walt Rostow’s 5 stages of economic
growth. Rostow (1971) suggested that following initial investment, countries would then set off
on an evolutionary process in which they would progress up 5 stages of a development ladder.
This process should take 60 years. The idea is that with help from West, developing countries
could develop a lot faster than we did.

Stage 1 – Traditional societies whose economies are dominated by subsistence farming. Such
societies have little wealth to invest and have limited access to modern industry and technology.
Rostow argued that at this stage there are cultural barriers to development (see sheet 6)

Stage 2 – The preconditions for take off – the stage in which western aid packages brings
western values, practises and expertise into the society. This can take the form of:

• Science and technology – to improve agriculture

• Infrastructure – improving roads and cities communications
• Industry – western companies establishing factories

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These provide the conditions for investment, attracting more companies into the country.

Stage 3 – Take off stage –The society experiences economic growth as new modern practices
become the norm. Profits are reinvested in infrastructure etc. and a new entrepreneurial class
emerges and urbanised that is willing to invest further and take risks. The country now moves
beyond subsistence economy and starts exporting goods to other countries

This generates more wealth which then trickles down to the population as a whole who are then
able to become consumers of new products produced by new industries there and from abroad.

Stage 4 – The drive to maturity.

More economic growth and investment in education, media and birth control. The population
start to realise new opportunities opening up and strive to make the most of their lives.

Stage 5 – The age of high mass consumption. This is where economic growth and production
are at Western levels.

Variations on Rostow’s 5 stage model

Different theorists stress the importance of different types of assistance or interventions that
could jolt countries out their traditional ways and bring about change.

• Hoselitz – education is most important as it should speed up the introduction of Western

values such as universalism, individualism, competition and achievement measured by
examinations. This was seen as a way of breaking the link between family and children.
• Inkeles – media – Important to diffuse ideas non traditional such as family planning and
democracy
• Hoselitz – urbanisation. The theory here is that if populations are packed more closely
together new ideas are more likely to spread than amongst diffuse rural population

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W.W. Rostow and the Stages of Economic Growth

One of the key thinkers in 20th-century Development Studies was W.W. Rostow, an American
economist and government official. Prior to Rostow, approaches to development had been based
on the assumption that "modernization" was characterized by the Western world (wealthier, more
powerful countries at the time), which were able to advance from the initial stages of
underdevelopment. Accordingly, other countries should model themselves after the West,
aspiring to a "modern" state of capitalism and liberal democracy. Using these ideas, Rostow
penned his classic "Stages of Economic Growth" in 1960, which presented five steps through
which all countries must pass to become developed: 1) traditional society, 2) preconditions to
take-off, 3) take-off, 4) drive to maturity and 5) age of high mass consumption. The model
asserted that all countries exist somewhere on this linear spectrum, and climb upward through
each stage in the development process:

• Traditional Society: This stage is characterized by a subsistent, agricultural-based

economy with intensive labor and low levels of trading, and a population that does not
have a scientific perspective on the world and technology.
• Preconditions to Take-off: Here, a society begins to develop manufacturing and a more
national/international—as opposed to regional—outlook.
• Take-off: Rostow describes this stage as a short period of intensive growth, in which
industrialization begins to occur, and workers and institutions become concentrated
around a new industry.
• Drive to Maturity: This stage takes place over a long period of time, as standards of
living rise, the use of technology increases, and the national economy grows and
diversifies.
• Age of High Mass Consumption: At the time of writing, Rostow believed that Western
countries, most notably the United States, occupied this last "developed" stage. Here, a
country's economy flourishes in a capitalist system, characterized by mass production and
consumerism.

Rostow's Model in Context

Rostow's Stages of Growth model is one of the most influential development theories of the 20th
century. It was, however, also grounded in the historical and political context in which he wrote.
"Stages of Economic Growth" was published in 1960, at the height of the Cold War, and with the
subtitle "A Non-Communist Manifesto," it was overtly political. Rostow was fiercely anti-
communist and right-wing; he modeled his theory after western capitalist countries, which had
industrialized and urbanized. As a staff member in President John F. Kennedy's administration,
Rostow promoted his development model as part of U.S. foreign policy. Rostow's model
illustrates a desire not only to assist lower-income countries in the development process but also
to assert the United States' influence over that of communist Russia.

Stages of Economic Growth in Practice: Singapore

Industrialization, urbanization, and trade in the vein of Rostow's model are still seen by many as
a roadmap for a country's development. Singapore is one of the best examples of a country that

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grew in this way and is now a notable player in the global economy. Singapore is a southeast
Asian country with a population of over 5 million, and when it became independent in 1965, it
did not seem to have any exceptional prospects for growth. However, it industrialized early,
developing profitable manufacturing and high-tech industries. Singapore is now highly
urbanized, with 100% of the population considered "urban."1 It is one of the most sought-after
trade partners in the international market, with a higher per-capita income than many European
countries.

Criticisms of Rostow's Model

As the Singapore case shows, Rostow's model still sheds light on a successful path to economic
development for some countries. However, there are many criticisms of his model. While
Rostow illustrates faith in a capitalist system, scholars have criticized his bias towards a western
model as the only path towards development. Rostow lays out five succinct steps towards
development and critics have cited that all countries do not develop in such a linear fashion;
some skip steps or take different paths. Rostow's theory can be classified as "top-down," or one
that emphasizes a trickle-down modernization effect from urban industry and western influence
to develop a country as a whole. Later theorists have challenged this approach, emphasizing a
"bottom-up" development paradigm, in which countries become self-sufficient through local
efforts, and urban industry is not necessary. Rostow also assumes that all countries have a desire
to develop in the same way, with the end goal of high mass consumption, disregarding the
diversity of priorities that each society holds and different measures of development.

For example, while Singapore is one of the most economically prosperous countries, it also has
one of the highest income disparities in the world. Finally, Rostow disregards one of the most
fundamental geographical principals: site and situation. Rostow assumes that all countries have
an equal chance to develop, without regard to population size, natural resources, or location.
Singapore, for instance, has one of the world's busiest trading ports, but this would not be
possible without its advantageous geography as an island nation between Indonesia and
Malaysia.

In spite of the many critiques of Rostow's model, it is still one of the most widely cited
development theories and is a primary example of the intersection of geography, economics, and
politics.

Additional References:

Binns, Tony, et al. Geographies of Development: An Introduction to Development Studies, 3rd

ed. Harlow: Pearson Education, 2008

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What is the Harrod-Domar Model?

The Harrod-Domar economic growth model stresses the importance of savings and investment
as key determinants of growth

The Harrod Domar Growth model is a growth model and not a growth strategy!

A model helps to explain how growth has occurred and how it may occur again in the future.
Growth strategies are the things a government might introduce to replicate the outcome
suggested by the model.

Basically, the model suggests that the economy's rate of growth depends on:

• The level of national saving (S)

• The productivity of capital investment (this is known as the capital-output ratio)

The Capital-Output Ratio (COR)

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 • For example, if £100 worth of capital equipment produces each £10 of annual output, a
capital-output ratio of 10 to 1 exists. A 3 to 1 capital-output ratio indicates that only £30
of capital is required to produce each £10 of output annually.
• If the capital-output ratio is low, an economy can produce a lot of output from a little
capital. If the capital-output ratio is high then it needs a lot of capital for production, and
it will not get as much value of output for the same amount of capital.

Key point: When the quality capital resources is high, then the capital output ratio will be lower

Basic Harrod-Domar model says:

Rate of growth of GDP = Savings ratio / capital output ratio

Numerical examples:

• If the savings rate is 10% and the capital output ratio is 2, then a country would grow at
5% per year.
• If the savings rate is 20% and the capital output ratio is 1.5, then a country would grow at
13.3% per year.
• If the savings rate is 8% and the capital output ratio is 4, then the country would grow at
2% per year.

Based on the model therefore the rate of growth in an economy can be increased in one of two
ways:

• Increased level of savings in the economy (i.e. gross national savings as a % of GDP)
• Reducing the capital output ratio (i.e. increasing the quality / productivity of capital
inputs)

LDCs often have an abundant supply of labour it is a lack of physical capital that holds back
economic growth and development. Boosting investment generates economic growth which
leads to a higher level of national income. Higher incomes allow more people to save.

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What are some of the key limitations / problems of the Harrod-Domar Growth Model?

• Increasing the savings ratio in lower-income countries is not easy. Many developing
countries have low marginal propensities to save. Extra income gained is often spent on
increased consumption rather than saved. Many countries suffer from a persistent
domestic savings gap.
• Many developing countries lack a sound financial system. Increased saving by
households does not necessarily mean there will be greater funds available for firms to
borrow to invest.
• Efficiency gains that reduce the capital/output ratio are difficult to achieve in developing
countries due to weaknesses in human capital, causing capital to be used inefficiently
• Research and development (R&D) needed to improve the capital/output ratio is often
under-funded - this is a cause of market failure
• Borrowing from overseas to fill the savings gap causes external debt repayment problems
later.
• The accumulation of capital will increase if the economy starts growing dynamically – a
rise in capital spending is not necessarily a pre-condition for economic growth and
development – as a country gets richer, incomes rise, so too does saving, and the higher
income fuels rising demand which itself prompts a rise in capital investment spending.

Exam tip: The mathematical derivation of the Harrod-Domar model is not required at A level.

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