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A critique of Dependency Theory 

By

Ugo Yenimikikuro

Department of History and diplomacy, Niger Delta University

Bayelsa State

Phone:07033836370

Email:ugoyen@gmail.com 

Abstract

There are various economic developmental theories in existence in the world today. Some of these were; Mercantilism and physiocracy theories, Economic nationalism theories, Post-WW11 theories, Linear- stage-of-growth theories, structural-change theories, and neo-classical theories that have prescribed models that states will have to adopt  inoder to become developed or given explanations to why some states are developed and others are not. Theories such as the economic nationalism has stated that, all societies develop through similar situations, while Post-WW11 theories have explained that there was economic recessions in the 1920s and the first and second World Wars between (1914-1918) and (1939-1945,) because there was lack of multilateral political and economic organizations that was needed to regulate relations of nation, hence the existence of such organizations would forestall a repeat of such occurrences. As a response to these theories, various international global organizations amongst which were the United Nations (UN) the World Bank, GATT that later became World Trade Organization (WTO), International Monetary Fund (IMF) etc. were established in late 1940s to meet the popular yearnings of the time. As from 1960s, there was the attainment of several newly independent states which were former colonies or dependencies of European states that reconfigured the socio-politial and economic landscape of the world from this time, new developmental theories came into existence basically driven by national interest of state. One of such theories that have gained wide recognition is the Dependency Theory, which is a theory that critical examines the effects of aids on newly developing states.  Prior to the 1950s, the earlier theories that existed have advocated that foreign aid was a potential for development of less developed states, and that aids provided by developed nations or the Bretton wood multilateral institutions which came in the form of technological transfers, financial assistance, integration into the world market and foreign investments was necessary tools for the development of Third World nations. But this claim was challenged as untrue by some neo-Marxist Dependency Theorist in South American countries in the 1960s. On the contrary, Dependency theorist have aurgued that rather than alleviate the multiple challenges newly independent states were faced with for there development aids hindered or impeded them as the conditionality’s attached to the aids were difficult for the recipient states to meet. Studies on these topic revealed that most of the advocates of the pro aids theorists are those from the industrialized and developed states of the West and the United States that are the aids donors, while most of the ant- aids or dependency theoriast consisted of the Third World states of Latin America, Asia and Africa, the hitherto colonised states which also are the aids most recipient states.in the course of this research, the research methodology mostly relid upon was the hisorical and multidisciplinary approach.   

 

Introduction 

Dependency Theory is one of the neo-Marxist economic developmental theories that emerged in the 1960s.  It provided understanding on historically embedded political economic relations of peripheral capitalist countries. It is basically a critique of the development paths, policies and strategies followed in Latin America and other Third World countries in Africa and Asia. The theory owes its origin to the works of economists under the United Nations Economic Commission for Latin America (ECLA). However, it was transformed by more critical nations that furthered the spread of Marxist and Neo-Marxist critiques of imperialism (Dennis & Nikolas, 2008,). Dependency theory addresses the problems of poverty and economic underdevelopment throughout the world. Dependency theorists argue that dependence upon foreign capital, technology and expertise, by developing states for development was retrogressive and impedes their economic development rather than engender or facilitate their development as claimed by the aid donor states and institutions.

Until the 1960s, the prevailing theory of economic development was the modernization theory, which maintained that industrialization, the introduction of mass media, and the diffusion of Western ideas by newly independent nations would transform their traditional economies and societies, as these influences would place poor countries on a path of development similar to that experienced by Western industrialized nations during the 19th and 20th centuries. This position has been  severely contended against by the advocates of Dependency Theory, who have argued that aids was a major contributor to the slow pace of development experienced by former colonial nations or were underdeveloped because of their dependence on Western industrialized nations in the areas of foreign trade and investment. They have also argued that rather than benefit developing nations, dependency relationships stunted Third World’s growth and their relevance in global arena.

Given the above introduction, the rest of this work shall proceed to discuss meaning of dependency, relate this to the dependency theory  as a concept, trace the historical background, identify the various schools of dependency theories and their propositions, state the implications of dependency theory, and make summary and conclusions by making recommendations were necessary.

Conceptual Clarification

Dependency is a noun meaning; “that which is dependent, a subject or tributory state”. It is derived from the word dependence, which is defined as “the act or the relation of depending, or the state of being dependent on or determined by someone or  something else” (Webster Dictionary, Ency ed.). According to (Sunkel,1969:23), dependency is an explanation of the socio-political, and cultural development in a nation that s influenced by outside activities. To (Santos, 1971:226), dependency is an historical condition that shapes certain structure of the world economy such that it favours some countries to the detriment of others and limits the development possibilities of the subordinate’s economies. It is also a situation whereby the economies of the peripheral states are conditioned by the development and expansion of another to which their own is subjected.

To (Ferraro, 2008,), dependency is a world system that entails three characteristics. The first is that, the international system constitutes two sets of states which are dominant/dependent states, or centre/peripheral states or metropolitan/ satellite states. by this classification, dominant, centre or metropolitan represent those states which are developed, while, dependent peripheral and metropolitan states refers to the Third World underdeveloped or developing states. The second characteristic is that, external forces are of singular importance to the economic activities within the dependent states. This means that the inputs   that come from the developed countries in the form of aids don’t contribute meaningfully to the development of the peripheral states. The third feature is that, the relationship between the centre and peripheral states maintain as well as promote unequal patterns.

The centre states by the definition above are the developed states which include USA, Britain China, Russia etc. making up the Organization of Economic Cooperation and Development (OECD). And on the other hand are, the non-industrialized states found mainly in Africa, Asia and Latin America. By the present state of world economic and political formations, the peripheral states are represented by the activities of multinational corporations, international commodity markets, foreign assistance, communication etc. And for (Anthony, 2005), dependency is a situation where one nation is subordinated by another to the extent that the subdued nation is not able to take independent actions that would ensure its development.

Aside being a state, dependency is also deemed to be a process which has its roots in historical antecedents such as colonialism, internationalization of capitalism and globalization forces. For instance, the roots of dependency were established in Africa since the 15th century and in Latin America since the 16thc, when European states made contacts with these places and consequently, colonized these states. Through this process, the colonizing powers were able to redefine the socio-political and economic paradigm of the colonized states to the extent that, they have come to perpetually depend on their erstwhile colonial master even after their attainment of independence on the other hand, the erstwhile colonial states have continued to take measures that continued to ensure their dominance over the peripheral states, basically for the purpose of being able to have vantage advantage  that will enable them consistently dominate world political and economic developments.

 

Historical development of Dependency Theory

Dependency Theory originated in the 1950s, in Latin America as a reaction to earlier developmental theories that stated that all societies develop through similar situations. And that the roles played by developed nations in granting aids which come in the form of technological transfers, financial assistance, integration into the world market and investments is a task that is done to facilitate the development of Third World, also referred to as underdeveloped nations. The theory owes its origin to the works of economist sponsored by United Nations Commission for Latin American Countries (ECLA). However, it is stated, it was transformed by more critical notions that further the spread of Marxist and Neo-Marxist critiques of imperialism Development (Dennis & Nikolas, 2008).

Some proponents of this theory are Hans Singer, Raul Prebishc, Paul A. Baran etc. These theorists have submitted that the terms of trade as practiced by the underdeveloped countries vis-à-vis the developed countries had diminished over time with the developed countries benefitting at the expense of the underdeveloped countries. Other dependency theorists have also faulted the claim that all states follow the same developmental path. This is so because, underdeveloped nations have unique features and structures from the developed nations, therefore, the level of connectedness to the world market as it is done now was a factor responsible for their underdevelopment, as the overbearing influences imposed on them by the more developed nations based on this interconnectivity hinders the freewill they needed to formulate their developmental schemes as well as pursue them in line with their own needs.

 

Structural Context of Dependency

Dependency School of thought is classified into Marxist, Neo-Marxist and naturalist schools. According to (Abraham, 2010:160),  the three schools agree that, dependency on aids engenders underdevelopment of peripheral states and the promotion of the expansion and development of industrialised countries. Development and under-development are parts of a unified system. Underdevelopment is a persistent natural condition, not a temporary, pre-capitalist stage. And dependency affects politics and society in general.

They also agree that by the present world economic system, it is the poor nations that provide natural resources, cheap labour, and markets to the developed nations, thereby contributing to the wealth and development of the industrialized nations at their own expense; that wealthy or developed nations engender the under-development of the poorer states by means of  media control, banking, financial aids and grants, education, sport, recruitment, training, politics etc. and that developed nations enforce their dominance through imposition of economic or trade sanctions and their use of military force.( Rob Clark, 2008)

Propositions of Dependency Theory

Most dependency theorists have posited that dependency has its roots in international capitalism. For instance, Andre Gunder Frank, has stated that contemporary underdevelopment is an historical product that continued to promote the socio-political and economic disparity between underdeveloped and developed nations.  Gunder and his compatriots have further argued that the disparity between the two divides is largely the doing of capitalist forces which make the peripheral states provide raw material such as cheap minerals, agricultural commodities, cheap labour and repository for surplus capital, out-dated technologies and other articles. And the industrialized nations utilize the inflows from peripheral states for the production of finished goods which are exported to the former as consumables (Gunder, 1972).

On propositions of Dependency Theory, Vincent Ferraro, (2008:58-64) identifies five characteristics of Dependency Theory. The first states that underdevelopment as a condition is fundamentally different from underdevelopment. This is because, the former refers to a situation where resources are been used in a manner that this usage benefits dominant states at the expense of poorer states. And the later refers to a situation where the resources are not either used or under used.  To him, the latter was the case with North American and African Continents before the time of colonization.

The second factor is that, the distinction between development and underdevelopment places poor countries of the world in a profoundly different historical context. This implies that peripheral states are not poor because they are not on the same footing with the technological transformations or values of the West, but because, they were forcefully integrated into the Western economic systems that deprived them the privilege of using or marketing their product as they liked.

The third factor is that, Dependency Theory suggests alternative uses of resources are preferable to the resource usage patterns imposed by dominant states. The proposition made here is that western imposition on peripheral states is misplaced. This is why most nations which produce for export purposes are characterize by endemic poverty and malnutrition because, what they produce is not used locally.  Hence, the land of peripheral states should be used for crop production.

The forth factor is that, there exists a clear national economic interest which should be articulated for each country. This presupposes that determination of the needs of a nation by external authority is inappropriate, and that needs assessment of a state should be determined by the poor within the society rather than through the satisfaction of collective or governmental needs. And five, that diversion of resources overtime has not been perpetrated by dominant states alone but also through political leaders or power elites of the dependent states. This implies that, the dependent nature of the dependent states in a way is also caused by the elites. However, this so because, the elites were trained in the dominant states, which makes their private interest coincide with that of the dominating forces, and also because, they also share similar interests, values and cultures with the elites in dominant states as most of them were products of colonial tutelage.

 

Effects of Dependency on Peripheral States

The division of labour that exist between the two divides is reputed to have cast some negative impact on the peripheral states. Arguments in this regard, have stated that the widespread poverty, underdevelopment, political instability, persistent existence of diseases on third world nations to a large extent is due to the character of the division of labour which makes them providers of raw materials and labour as against the developed nations which are refiners or processor. Besides, it is also inferred that capitalism as practiced in the above manner has also helped the concentration of political and economic power on the core states thereby making the periphery states weaker and dependent states.

The adoption of democracy as a model or systems of government by former colonial states  has also been identified by dependency theorist as a form by which poor nations become subject to there former colonial imperialist nations. It is argued that, the traditional political systems and  social values of the the colonial states and that of the colonial imperist nations differed. Hence, adopting such models of government creats rooms for dependency and cultural imperialsm. which, the developed state avail on to impose their values through  which they dominate and hinder the development of the poor states.(Wickrama, and Mulford, 1996)

 

Policy Implication of Dependency Theory

An analysis of the Dependency Theory reveals that, the economic and socio-political differences between core and peripheral states will continue to remain the way it is if the present economic order continues, hence what is required for poor economies to develop beyond considerations of comparative advantage, capital accumulation and import and export strategies. To achieve development, peripheral states must understand that, the success of advanced industrial economies doesn’t serve as a model for the currently developing economies. This is because; it is no longer possible for poor states to adopt the exploitative colonial relationships that have enhanced the development of the erstwhile imperialist nations. They must also understand that dependency repudiates the central distributive mechanism of the neoclassical model which pays little attention to the question of distribution of wealth. That since the market only rewards productivity measures such as GDP or trade indices is abandoned. And those dependent states should pursue policies of self-reliance and should not depend on the policies advanced by the international financial institutions such as the World Bank, International Monetary Fund (IMF), and World Trade Organization (WTO) for their development.

By the 1980s, Dependency theory has gained much ground, and helped to impact on economic related developments in world. For instance, influences of the arguments for and against dependency in a way were seen to affect The GATT Uruguay Rounds of 1983-1993 held at Pumta del Este, Uruguay, in September 1986 ( Sidue, 1988).

A notable characteristic of this bi-lateral gathering was the pursuance of divergent ideological and interest goals by the USA, European Community and the Third World represented by Brazil and India. Although, US, Britain and Japan espoused different interests yet, as industrialized states, they favoured the status quo which saw aids as agents of development rather than underdevelopment as claimed by the Third World Dependency theorist and leaders.

During the preparatory phases, India and Brazil represented the prevailing orthodoxy of the developing countries. Industrial countries were for the problems of the trading system and should take steps to resolve the problems; developing countries were not responsible and while prepared to support a new round, should not be expected to liberalize to meet industrial country concerns. In the early 1980s, this was the litany that characterized many interventions by the developing countries. Members of industrial countries welcomed the more active interest shown by developing countries at GATT affairs, but they bemoaned obstruction and group solidarity, as well as their fascination with texts and political statements. For the first half of the decade, it led to stalemate and rising frustration with the GATT process. (Michael, 1990)

As discussions preceded, however, more and more of the developing countries began to see their interest being served by a more open, rules based system that imposed obligation on them as well as on their industrial trading partners. This more pragmatic strategy reflected changing attitudes and approaches to economic development. The politics of the 1960s and 1970s was by the late 1980s, widely regarded as inadequate and counterproductive. In its place a consensus appeared to be developing around a policy that accepted that sound macroeconomic management and disciplines on various microeconomic policies were as important for developing countries as for industrial courtiers (Deepak, 1985)

By the closing steps of round, many of the non advanced developing countries in Asia and Latin America were acting on the understanding that their economics had reached a stage where they could add economic clout to moral and political arguments. As a result, they had learned to maximize their limited bargaining leverage through alliances.

 

Conclusion

Dependency theory as a development theory, argued that former colonial nations were underdeveloped because of their dependence on Western industrialized nations in the areas of foreign trade and investment. Rather than benefiting developing nations, dependent relationships stunted their development. Drawing upon various Marxist ideas, dependency theorists observed that economic development and underdevelopment were not simply different stages in the same linear march toward progress. They argued that colonial domination had produced relationships between the developed and the developing world that were inherently unequal. Dependency theorists believed that without a major restructuring of the international economy, the former colonial countries would find it virtually impossible to escape from their subordinate position and experience true growth and development.

In the 1960s, dependency theorists emphasized that developing nations were adversely affected by unequal trade, especially in the exchange of cheap raw materials from developing nations for the expensive, finished products manufactured by advanced industrial nations. They argued that modernization theory did not foresee the damaging effect of this unequal exchange on developing nations. Even the achievement of political independence had not enhanced the ability of former colonial nations to demand better prices for their primary exports.

Some developing countries attempted to counter the inequalities in trade by adopting import-substitution industrialization (ISI) policies. ISI strategies involve the use of tariff barriers and government subsidies to companies in order to build domestic industry. Advocates of ISI view industrialization as the precondition of economic and social progress. However, many developing nations that managed to manufacture their own consumer products continued to remain dependent on imports of capital goods. ISI also encouraged multinational companies with headquarters in the industrialized world to establish manufacturing subsidiaries in the developing world.

Dependency theorists have also focused on how foreign direct investments of multinational corporations distort developing nation economies. In the view of these scholars, distortions include the crowding out of national firms, rising unemployment related to the use of capital-intensive technology, and a marked loss of political sovereignty.

From the perspective of dependency theory, the relationship between developing nations and foreign lending institutions, such as the World Bank and the International Monetary Fund (IMF), also undermines the sovereignty of developing nations. These countries must often agree to harsh conditions—such as budget cuts and interest rate increases—to obtain loans from international agencies. During the 1980s, for example, the foreign debt of many Latin American countries soared. In response to pressure from multilateral lending agencies such as the World Bank and the IMF, these nations enacted financial austerity measures in order to qualify for new loans. In the short term, these economic policies led to higher levels of unemployment and slower economic growth.

There is no gainsaying that that globalization has its merits and demerits just like every other economic development that have existed in time past. Frankly development of any nations depends on so many domestic and external factors. Therefore, blaming the woes of Third world countries solely on dependency factors is not tenable, as some countries which were in this category such as the Asian Tigres have availed on the opportunities provided by globalization factors to attain developed and semi-developed status. For instance showing commitment, determination, and the presence of political will by its leaders Malaysia has since become an economic nation to reckon with. Bearing in mind the gains of global economy and globalization and taking the advantages offered by this, she has currently become a fast developing nation that is most likely to change her status from a developing nation to developed nation in the near future say by 2020, while most countries in Africa  which was in the same category with Malaysia and had the same colonial experienceare still struggling to change status from under-developed nation and blaming globalization agents and institutions for their state of underdevelopment . it is true that globalizations imposes some consequences such as cybercrimes, internet fraud, and great unhealthy competitions, yet the fact remains that Third World nations are still in the underdeveloped deplorable state they find themselves due more to domestic factors of poor leadership in terms of governance coupled with high rate of unbridled corruption among leaders lack of political will by leaders etc. And that if they look inward by dealing with the factors of corruption, lack of political will and other attributes of poor governance as well as the diplomatic models in which the foreign polices used by other Asian tigressuch as looking inwards they could use the opportunities offered by globalization trends to achieve development. In fact, this was a factor acknowledged by Gen. Ibrahim Babangida on assumption of leadership of the military administration in August, 1985 when he stated as follows;

“Nigeria’s foreign policy has been characterised by inconsistency and incoherence. It has lacked the clarity to make us know where we stood in matters of international concern to enable other countries relate to us with seriousness our external relations have been conducted by a policy of retaliatory reactions……. ‘African problems and their solutions should constitute the premise of our foreign policy’.

 

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