Dependency Theory: Definition, Approaches, Examples, limitations

Dependency theory is a school of thought in modern social science that aims to comprehend underdevelopment, analyse its origins, and to some extent, provide ways to overcome it. It first appeared in Latin America in the 1960s, quickly moved to North America, Europe, and Africa, and is still relevant in today’s debates. It also gained a lot of traction in academic settings and at regional organizations. The formation of Dependency Theory began as a counterargument to the notions of modernization and development put forth and defended by Western and Marxist thinkers. It inevitably involves a harsh critique of both Marxist and structuralist theories.

The theory starts by examining the effects of colonialism on local socioeconomic and political structures. It then goes on to analyse the new socioeconomic structure’s characteristics and attempts to track its development in relation to both internal shifts and developments in the global capitalist system. According to Andre Gunder Frank (1971), developing countries haven’t advanced due to “internal impediments to development,” as modernization theorists contend, but rather because the industrialized West purposefully underdeveloped them, leaving them in a dependent position (thus, “dependence theory”).

The theory offers a structural and macro historical viewpoint. It entails distancing oneself from Marxist and Continuum theories of development and underdevelopment. It explains underdevelopment as the result of capitalist expansion accompanied by unequal exchanges, in which the Centre/Core/Metropolis takes advantage of the resources and labour of the Periphery. The underdeveloped, dependent periphery exhibits both dependency and underdevelopment. As a result, dependence refers to the connection between developed countries and their dependents. It is a circumstance that limits how well the underdeveloped can advance. It is constrained by capitalism’s growth. Its old forms were imperialism and colonialism, while its modern manifestation is neo-colonialism, or a situation in which the developing world’s periphery (the new states) is dependent on the less developed world (the former imperialist- colonialists).

The majority of dependency theorists analyse the nature and extent of international relations as well as the characteristics of underdevelopment that define the political systems of the underdeveloped using the centre-periphery paradigm. Andre Gunder Frank, Wallerstein, Dos Santos, Osvaldo Sunkel, Celso Furtado, Rodolfo Stavenhagen, EuzoFalleto, and Frantz Fanon are the prominent proponents of dependency theory. They all concur that the Third World’s underdevelopment—the “wretched of the Earth,” as Frantz Fanon calls them—is directly tied to their neo-colonial life, or their reliance on the industrialised nations on the outside.

Approaches

The Marxian Theory

The Political Economy of Growth, written by Paul Baran in 1957, has a full explanation of this idea that was created from a Marxist standpoint. Earlier Marxist views of imperialism have many similarities with dependency theory. Even today, Marxists are still interested in it. One of the first economists to use the word “dependence” and to claim that underdevelopment and development are two facets of the same economic structure was Celso Furtado of Brazil. Keynes and Myrdal both had a significant impact on his thinking about the relationship between the economy and power, the critical function of the state, and the manner in which the global economy influenced or restrained the growth of national economies.

Marx suggested that creative destruction is a hallmark of capitalism. Both regeneration and destruction are effects of it. Paul Baran stressed how destructive capitalism can be in developing nations. He didn’t discover any indications of regeneration. Contrary to the competitive capitalism of the nineteenth century, the monopoly capitalism of the twentieth century had a vested interest in keeping the periphery poor and dependent. In Latin America and Africa, the pessimistic and stagnationist school of dependency blossomed as a result of Baran’s analytical contribution. India was Baran’s favourite illustration of how capitalism can be disastrous. After seeing British imperialism, he saw that Indian social scientists had evolved ideas that were very comparable to those of the late nineteenth-century dependency theorists.

Dependency theory holds that the combination of the capitalists’ reasoning and clever rapacity with the oppression and violence they inherited from the feudal history increases the rate at which people are exploited. Many nations, like India, did not experience a rise in productive wealth as a result of capitalism. These fruits were exported and used to finance a domestic parasitic bourgeoisie. The prospects for a better future were non-existent, and people lived in abject misery. Underdevelopment and poverty persisted. They lost their traditional occupations, their arts and handicrafts. There was no contemporary industry to replace them with new ones. They were forced into close touch with the west’s cutting-edge science, but they remained in the deepest level of backwardness.Baran came to the following findings after studying colonialism’s historical development:

1. Profit margins shrink as a result of workers’ demands for higher pay
2. Foreign capital is used as a target to increase state revenue by, for instance,imposing higher taxes and royalty payments.
3. Foreign currency restrictions are put in place to stop money from being sent back home as gains.
4. Import tariffs are introduced to safeguard native manufacturing.

The state could theoretically end this impasse by choosing new initiatives that would make import substitution industrialization (ISI) more effective and dynamic. However, the state in underdeveloped areas is unable to take the actions required to advance on any rung of the development ladder. Political revolution, according to Baran, is required to end this cycle. He maintained that these nations cannot expect to reach Rostow’s stage of “high mass consumption” by taking the capitalist path. These nations would instead move closer to their own economic and social graveyards. The less developed nations could therefore expect some relief from poverty by choosing the socialist path.

The Structuralist Theory of Dependency

This group disagrees with the idea of stagnation. The most well-known author among them was Fernando Henerique Cardoso, a prominent economist and sociologist from Brazil. He claimed that countries on the periphery experience “peripheral capitalism” in some kind. Economic stagnation, or, in the words of renowned dependency author Andre Gunder Frank, “development of underdevelopment,” is one of the key characteristics of these economies. According to Cardoso, the dependent nations aren’t going nowhere. The economies and communities in the periphery are constantly changing.

The structuralists contend that there should be no surprise about some economic advancement and that there is no reason to believe that the least developed nations have no control over their future. No permanent stagnation exists. Some economic growth and progress do take place under this new system, when the authoritarian state and transnational businesses work together. In the age of global competition, the transnational firms keep costs down. GDP increases, and perhaps even the average person’s level of living does as well. Cardoso refers to a new method of capital accumulation as “associated dependent development.” Cardoso rules out the likelihood of a political upheaval in these nations that would lead to a revolution at this time. As the new alliance between domestic capital and Transnational corporations spurs economic growth, new opportunities for the working class, the techno-bureaucracy, and the state begin to emerge.

Many economists contend that achieving political independence is enough to overcome all barriers to social and economic advancement. It progressively takes away all obstructions to advancement. Outdated institutions and structures are swept away by the development of capitalism’s production techniques. Both the least developed countries and the advanced countries will expand. Therefore, a dependent relationship is not a zero-sum game.

Limitations: Dependency Theory

1. Lack of a Categorical Definition of Dependency: The proponents of dependency theory are unable to define and categorically explain reliance and underdevelopment. They provide no liveable criteria for separating dependent from non-dependent nations.
2. Limitations of the Centre-Periphery Model: The dependence theorists’ categorization of the globe into the developed and the underdeveloped, the metropolis and the satellite, is highly arbitrary and even misleading. Accepting that all developing nations, especially local goliaths like South Africa, Mexico, Brazil, and India, are equally reliant on the developed is undoubtedly challenging.
3. A Negative Attitude: According to S.K. Sahu, the dependency theory’s founders were more focused on criticising the capitalist system’s attractiveness in the periphery than the condition of being “dependent.” The focus of dependency theory is more on analysing the flaws in global capitalism than on finding solutions to reduce dependency in developed nations.
4. Support for Socialism and Radicalism: Dependency theorists don’t make form a cohesive group. Furtado and Sunkel, among others, are socialistic nationalists, while Dos Santos and A.G. Frank are radicals and socialist revolutionaries, respectively (Wallerstein).
5. A number of developing nations’ poor actions and policies have also contributed to underdevelopment: The Third World’s underdevelopment has also been primarily attributed to its incomplete industrialization and the failure of the underdeveloped nations to create and implement fully thought-out and coordinated industrial plans. The underdeveloped nations themselves have fallen short of adequately utilising their resources, both human and material. The fact that some nations—like India, Brazil, and even Mexico—have achieved significant levels of rapid industrial and technological development while others have not tended to support the idea that the underdeveloped nations themselves, and not just the capitalist nations, are to blame for their dependence.
6. Failing to take into account the various aspects of underdevelopment: When we examine the underdevelopment in a number of Third World nations, we find that it varies from nation to nation and continent to continent. Dependency would have been uniform in character and breadth if it had simply arisen as a result of the globalisation of capitalism. In contrast to Asia and Africa, Latin America has experienced underdevelopment of a different kind.
7. Lack of Consensus Among Dependency Theorists: According to the critics, there is no agreement among dependent theorists regarding the precise nature of dependence and underdevelopment, the mechanism at play in dependency relations, or potential solutions. Dependency Theory is merely a compilation of many concepts and not a theory.
8. Failure to define the term “unequal exchange”: According to detractors, the term “unequal exchange,” which is employed by dependency theorists, fails to accurately assess the factors contributing to the Third World nations’ underdevelopment. Additionally, there isn’t and never will be a widely accepted standard for determining the type and extent of “unequal exchange,” which is thought to be the root of the underdeveloped’ s dependence on the developed world.
9. Limitations of the surplus value idea; The dependency theory incorrectly relies on the surplus value concept to define underdevelopment in terms of capitalist exploitation. Since the idea of surplus value has inherent restrictions, it cannot be recognised as a legitimate premise.
10. Failure of Socialist Solutions and Systems: The former Soviet Union’s and Eastern European countries’ socialist development systems’ failures tend to show that socialist revolutions or socialism cannot abolish dependence.

The dependence theorists’ concepts are mostly rejected by Marxists, revolutionary socialists, and communists, particularly their conceptualization of capitalism as a social structure distinguished by a certain type of economic connection rather than as a mode of production.

Criticism

The dependency theorists’ approach is contested by certain economists, including Peter Bauer and Martin Wolf. The autonomy of peripheral nations results in higher levels of domestic corruption, opportunity costs, lack of competitiveness, and sustainability in these nations. A chorus of voices began to oppose reliance theory by the late 1970s.
The following are criticisms of dependency theorists’ claims:

1. The developing nations on the periphery are not doomed to stagnation. Dependency theory therefore provides a partial and erroneous account of the socioeconomic circumstances of least developed countries.
2. There are a lot of peripheral dependent nations. Their economic system does alter. They have achieved extraordinarily quick economic growth, claims Prof. Warren.
3. This theory ignores the numerous economic ills that dependent development pattern countries experience, including regressive income distribution, a focus on luxury products, underutilization and abuse of human resources, excessive reliance on foreign companies for capital-intensive technology, and the enduring issues of poverty and unemployment.
4. Many countries that are neither in the centre nor on the periphery are unaffected by this hypothesis. They are referred to as semi-peripheral nations.
5. It’s not necessary to accept dependency as a situation in which the centre wins and the periphery suffers. The dependency condition offers prospects for a mutually beneficial relationship in which both industrialised nations and least developed countries benefit.
6. The reliance paradigm is no longer relevant given the economic expansion of East Asian and India. In fields like history and anthropology, it is more universally recognised.

Conclusion

We must not minimise the significance of the dependency theory because of all these criticisms. Not only should it be appreciated for highlighting the flaws in conceptions of development and underdevelopment, but also for emphasising the analysis of both the historical process and socio-economic, political, and cultural aspects that influence both. It did excellent to draw attention to the flaws and prejudices in the continuum model of development, especially as proposed by structural functionalists.

Undoubtedly, the Dependency Theory has not been entirely successful in providing an objective analysis of the nature, extent, and causes of under-development as well as potential solutions for removing the dependency status. It is important to keep in mind, nevertheless, that it has been successful in recognising and explaining the signs and negative outcomes of underdevelopment. It offers a list of dependencies’ descriptive qualities as well as their causal relationships. Nobody can contest the fact that reliance exists within the current and growing interconnectedness in modern international relations. Therefore, no one can or should disregard the theories advanced by dependency theorists for reducing the negative effects of the Third World’s dependence on the industrialised world. It correctly draws attention to the necessity of eradicating the harmful effects of the advancing global capitalist system (Neo-Colonialism and Hegemony).

References
IGNOU. (2017). Unit-3 Dependency Theory. IGNOU. https://http://hdl.handle.net/123456789/8993

Namkoong, Y. (1999, March). Dependency Theory: Concepts, Classifications, and Criticisms. International Area Review, 2(1), 121–150. https://doi.org/10.1177/223386599900200106