According to Viotti & Kauppi (2013) Dependency theory of development is an international relations theory that examines the relationships and interactions often between Global North and Global South states, where the Global South states are often reliance on the Global North for trade.
Others have focused on dependency theory in other ways, as they “describe the ways classes and groups in the ‘core’ link to the ‘periphery’. Underdevelopment and poverty in so many countries is explained as a result of economic, social, and political structures within countries that have been deeply influenced by their international economic relations.”
The global capitalist order in the view of Theotonio Dos Santos (1971) argued that “[Dependency is]…an historical condition which shapes a certain structure of the world economy such that it favors some countries to the detriment of others and links the development possibilities of the subordinate economies…a situation in which the economy of a certain group of countries is conditioned by the development and expansion of another economy, to which their own is subjected.”
Dependency as a system is comprised of twin sets of states in the opinion of Ferrara: described as dominant/dependent, center/periphery or metropolitan/satellite. The dominant states are the advanced industrial nations in the Organization of Economic Cooperation and Development (OECD). The dependent states are those states of Latin America, Asia, and Africa which have low per capita GDP and which rely heavily on the export of a single commodity for foreign exchange earnings.
Both definitions [Ferrara’s and that of Sunkel & Dos Santos] “have in common the assumption that external forces are of singular importance to the economic activities within the dependent states. These external forces include multinational corporations, international commodity markets, foreign assistance, communications, and any other means by which the advanced industrialized countries can represent their economic interests abroad.”
A third definition-theory of dependency in recent times is that all countries must go through development stage were at one time or another are dependent on other countries for needs of technology, capital and know how in order to gain an incremental stage in the process a development.
Historical Precedent of Dependency Theory
Dependency theory has its origin in Karl Marx’s work on economic structuralism and the economic relationships between economically rich and economically poor states.
“Prebisch and his colleagues were troubled by the fact that economic growth in the advanced industrialized countries did not necessarily lead to growth in poorer countries. Indeed, their studies suggested that economic activity in the richer countries often led to serious economic problems in the poorer countries. Such a possibility was not predicted by neoclassical theory, which had assumed that economic growth was beneficial to all (Pareto optimal) even if the benefits were not always equally shared.”
Because of the lack of explanation of this economic imbalance, and economic conditions that arise when the rich states were getting richer, Prebisch looked to explain what was happening. What he initially argued was that “poor countries were sending their raw materials to the Global North, who in turn would turn these into finished products, then sell them back to the poorer states.” The reason he said, is that these products were worth much more as finished goods, than they were as unfinished products. This reliance Prebish—continued— on exports of food and raw materials would inevitably lead to a deterioration of Latin America’s terms of trade, which would further affect its domestic accumulation of capital.
Many authors agree with the problems of development that the Global South states are going through and these issues can be traced to the Post-WWII time period.
International organizations formed soon after the war ended such as the World Bank, the IMF, and the GATT (which is today the World Trade Organization, WTO) were created in assistance of post war Europe and for the development of the world in general. These more recent views take the conversation to another area of discussion into the concept that international trade in a Pareto model will not only allocate resources efficiently but commercial interest among nations will prevent armed conflict.
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