DEPENDENCY THEORY

Session Outline
• Dependency Definition
• Dependency Theory
• Examples of the Dependency Theory
• Why is the Dependency Theory Important?
• Reference
Dependency Definition
• From the root word – Dependent
• determined or conditioned by another
• relying on another for support
Dependency Theory
• An approach to understanding economic
underdevelopment that emphasizes the putative
constraints imposed by the global political and
economic order. First proposed in the late 1950s by the
Argentine economist and statesman Raúl Prebisch,
dependency theory gained prominence in the 1960s
and ’70s.
Dependency Theory
• According to dependency theory, underdevelopment is
mainly caused by the peripheral position of affected
countries in the world economy. Typically,
underdeveloped countries offer cheap labour and raw
materials on the world market. These resources are
sold to advanced economies, which have the means to
transform them into finished goods.
Dependency Theory
• Underdeveloped countries end up purchasing the
finished products at high prices, depleting the capital
they might otherwise devote to upgrading their own
productive capacity. The result is a vicious cycle that
perpetuates the division of the world economy
between a rich core and a poor periphery.
Dependency Theory
• While moderate dependency theorists, such as the
Brazilian sociologist Fernando Henrique Cardoso (who
served as the president of Brazil in 1995–2003),
considered some level of development to be possible
within this system, more-radical scholars, such as the
German American economic historian Andre Gunder
Frank, argued that the only way out of dependency was
the creation of a noncapitalist (socialist) national
economy.
Examples of Dependency Theory
• Many nations have been affected by both the positive
and negative effects of the Dependency Theory. The idea
of national dependency on another nation is not a
relatively new concept even though the dependency
theory itself is rather new. Dependency is perpetuated
by using capitalism and finance. The dependent nations
come to owe the developed nations so much money and
capital that it is not possible to escape the debt,
continuing the dependency for the foreseeable future.
Examples of Dependency Theory
• An example of the dependency theory is that during the years of 1650
to 1900 European nations such as Britain and France took over or
colonialized other nations. They used their superior military
technology and naval strength at the time to do this. This began an
economic system in the Americas, Africa, and Asia to then export the
natural materials from their land to Europe. After shipping the
materials to Europe, Britain and the other European countries made
products with these materials and then sent them back to colonized
parts of the Americas, Africa, and Asia. This resulted in the transfer of
wealth from these regions’ products to Europe for taking control of
the products.
Examples of Dependency Theory
• Armenia's economy depends on its ore exports as the country lacks
the technology to produce high-value consumer goods from these
ores. Therefore, other countries produce goods with these ores with
which Armenia then buys from them.
• Dependency theory is considered rather controversial and many say it
is not still in effect. Some scholars and politicians claim that with the
decline of colonialism, dependency has been erased. Other scholars
counter this approach, and state that our society still has national
powerhouses such as the United States, European Nations such as
Germany and Britain, China, and rising India that hundreds of other
nations rely on for military aid, economic investments, etc.
Why is the Dependency Theory
Important?
• Dependency theory holds important lessons for understanding and
combating the global hierarchies of forms of production, innovation
and finance that constrain developing countries’ policy space to
address the crisis effectively. This leads us to discussions about how to
change the global economic architecture, for example through a
global green new deal, reform of the international monetary system,
reform of global systems of food production, and reform of
governance of international trade and intellectual property rights.
Why is the Dependency Theory
Important?
• COVID-19 exacerbates these constraints that developing countries
already face. While domestic policies remain important to tackle the
crisis, especially with regards to provisioning of health services and to
compensate for incomes lost, the dependency perspective highlights
how a domestic response is completely inadequate.
References
• https://www.merriam-webster.com/dictionary/dependent
• https://www.britannica.com/topic/dependency-theory
• https://en.wikipedia.org/wiki/Dependency_theory
• https://www.ppesydney.net/beyond-the-stereotype-how-
dependency-theory-remains-relevant/#:~:text=Dependency
%20theory%20holds%20important%20lessons,to%20address%20the
%20crisis%20effectively.