What is Dependency theory with background and assumptions

Dependency theory

Dependency theory is based on the center-periphery model, which states that the poverty of certain (peripheral) countries is due to a historically disadvantaged position in relation to the most powerful countries (those in the center), so that the latter were enriched at the expense of the former.

In the 50s and 60s, several Latin American social scientists and intellectuals developed a theory to respond to the underdevelopment suffered by their territory.

Background of Dependency theory

Social Darwinism and Colonialism

The first symptoms of the center-periphery model in the subcontinent occurred in the middle of the 19th century, with the creation of National States, through the so-called social Darwinism .

This movement led to the promotion of modernization models implanted in Europe, totally colonial and slave, in Latin America.

However, the sociocultural results in this territory were defective, resulting in a partial and underdeveloped modernity across the subcontinent.

The Great Depression

In October 1929, the crash of the Wall Street Stock Exchange, known as the Crack of ’29, led to the great crisis of capitalism in the 1930s, which quickly spread to almost every country in the world. This period was called the Great Depression and lasted until the years of World War II.

This great crisis caused a series of theories that questioned the classic functioning of the capitalist economy. This caused Latin American countries to start raising ideas of a more Marxist nature, advocating greater state intervention in the economy.

ECLAC and dependency theory

After World War II, the United Nations created a series of economic commissions to encourage growth and development in less developed countries. One of these was the Economic Commission for Latin America and the Caribbean (ECLAC), created in 1948.

ECLAC, located in Santiago, Chile, started to strategize following classical development theory. However, some member economists and sociologists began to notice how Latin America had socioeconomic circumstances that impeded its development.

It was in 1949, when the Argentine Raúl Prebisch (member of ECLAC) and the German Hans Singer published two documents that gave rise to what would be called dependency theory.

In them, the authors began by observing the existence of central and peripheral countries, where the former receive raw materials (primary goods) from the latter to produce secondary goods.

They say that this situation favors the countries of the center, which have greater benefits; and harms those on the periphery, which are those with much lower returns and worse commercial conditions (Cypher & Dietz, 2009).

ECLAC itself received the theory, as it had the most recognized Latin American intellectuals of the time. The most important of the project, in addition to Prebisch, were the Brazilians Theotonio Dos Santos, Ruy Mauro Marini and Celso Furtado, and the German André Gunder Frank.

Basic assumptions of the theory

In its most extreme form, dependency theory has Marxist roots. View the world from the perspective of globalization as a form of exploitation of certain countries over others, rich against poor.

In addition, it defends an “internal” look to achieve development: greater state performance in the economy, greater barriers to trade and nationalization of the main industries.

The premises on which dependency theory is based are the following (Blomström & Ente, 1990):

  1. There is inequality in power relations, which is decisive in the deterioration of commercial conditions and, consequently, in maintaining the state of dependence of peripheral countries.
  2. Peripheral countries provide core countries with raw materials, cheap labor and, in return, receive obsolete technology. Central countries need this system in order to maintain the level of development and well-being they enjoy.
  3. Core countries are interested in perpetuating the state of dependency, not only for economic reasons, but also for political, media, education, culture, sports and other fields related to development.
  4. Core countries are willing to repress any attempt by peripheral countries to change this system, either through economic sanctions or by force.

Raúl Prebisch

Raúl Prebisch was an Argentine economist, member of ECLAC, known above all for his contributions to the so-called economic structuralism and for his Prebsich-Singer thesis, which gave rise to dependency theory.

Prebisch argued that there was a tendency to worsen trade conditions in relations between powerful countries (center) and weak countries (periphery), benefiting the former and harming the latter.

According to him, the path for these weak countries to develop successfully was through industrialization and economic cooperation between countries in the same peripheral group (Dosman, 2008).

In this way, and thanks in part to his role as executive secretary of ECLAC, reforms were carried out in the 1950s and 1960s, mainly focused on import substitution industrialization (ISI) (ECLAC, nd).

Andre Gunder Frank

André Gunder Frank was a German-American economist, historian and sociologist of the neo-Marxist ideology. Heavily influenced by the Cuban revolution, in the 1960s he led the most radical branch of theory, joining Dos Santos and Marini, and in contrast to the more “developmentalist” ideas of other members such as Prebisch or Furtado.

Frank claimed that the existence of dependency relationships between countries in the world economy was a reflection of structural relationships within countries and communities themselves (Frank, 1967).

He argued that, in general, poverty is the result of the social structure, labor exploitation, income concentration and the labor market in each country.

The Decline of Dependency Theory

In 1973, Chile suffered a coup d’état that resulted in a collapse of ECLAC thinking and caused the project to lose influence over time.

Finally, with the fall of the Soviet bloc in the 1990s, the “dependent” intellectuals who were still alive (Prebisch died in 1986) went their separate ways.

Some more radical ones, like Dos Santos, worked on developing anti-globalization theories, others, like Marini, dedicated themselves to the academic field, and others, like Frank and Furtado, continued to work around world economic policy.

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