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DEPENDENCY “THEORY”
WORLD SYSTEMS THEORY
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2 DEPENDENCY THEORY

Dos Santos, T (1970). The Structure of Dependence. The

American Economic Review, 60 (2):231-236
Price, R. M. (1984). Neo-Colonialism and Ghana's
Economic Decline: A Critical Assessment. Canadian
Journal of African Studies, 18 (1):163-193
Ray, D. (1973). The Dependency Model of Latin American
Underdevelopment: Three Basic Fallacies
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1. Dominant /dependent relationships

2. Exploitative relationship
3. Metropolitan
4. Center/periphery
5. Semi-periphery
6. Advanced countries/LDCs
7. Structure of economies based on international
division of labor
8. Primary producers/manufactured goods
 DEPENDENCY THEORY
4
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• “Dependency” (Dependentista School of Thought) emerged in

the 1950s and 1960s in response to the criticism levelled against
modernization theory and international division of labor
(comparative advantage theory)
• Raul Prebisch (Director of the UN Economic Commission
for Latin America)
• Dos Santos
• Andre Gunder Frank
• Wallerstein (World systems)
 6
CRITICISMS OF MODERNIZATION THEORY 7/13/2023

• The causes of underdevelopment is more than what

modernization theory suggest
1. The nation-state is the sole unit of analysis (no historical
linkages with the outside world)
2. The disregard of the world-historical development of
transnational structures that constrain local and national
development
3. Why would all countries could follow a single path of
evolutionary development?
4. The dichotomous idea of “tradition” versus “modernity”
• Modernization theory came under attack; the search for
alternative theories to explain underdevelopment began
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7 CRITICISMS LEVELLED AGAINST THE

INTERNATIONAL TRADE THEORY
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• Dependency (Dos Santos, 1970:231) :

• “A situation in which the economy of certain countries is
conditioned by the development and expansion of another
economy to which the former is subjected….The dominant
countries can expand and can be self sustaining, while the
dependent country can only do this as a reflection of that
expansion”

• Relationships (external)
• Structure of economies
• Exploitation
• Expansion
• Development/underdevelopment
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CORE ARGUMENTS (EXTERNAL FORCES)

1. It is impossible to discuss the internal economic and

political systems of LDCs without references to external
relationships
• Levels of development of any country can be explained in
terms of their historical relations to other societies

2. Underdevelopment can be explained in terms of activities

of the advanced countries
• Development of industrialized countries was made possible
only by the corresponding underdevelopment of LDCs
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3. The relationships between advanced countries (dominant)

and LDCs (dependent) countries are unequal and
exploitative (unequal exchange);
• Economic growth in the advanced industrialized countries did
not necessarily lead to growth (as claimed by the classical
economists)
• Trade is not beneficial to all countries because it is monopolist
and controlled by the core for its own benefit
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4. International division of labor accounts for the peripheral

positions of LDCs resulting in poverty and underdevelopment
(Tausch 2010: 468).

a. Productive capacities of peripheral countries are geared

towards the interests of metropolitan countries under
the guise of international division of labor
b. Primary products exported by LDCs are bought cheaply;
and highly priced manufactured (value added) and sold
back to LDCs

c. LDCs are characterized by monoculture and primary

production while the economies of advanced countries
are diversified and industrialized

• Based on international division of labor, how could poorer

countries earn enough to pay for their imports?
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5. The penetration of foreign capital and de-

capitalization:
• Global capital works towards the interests of rich
countries and the elite
• Surpluses generated from dependent nations are
transferred to dominant nations hence limiting their
growth potentials

6. Technological dependence from the leading countries

7. Class structure (domestic elites collaborate with their
international counterparts)
 13 WORLD SYSTEMS THEORY (WALLERSTEIN, 1974)
• Wallerstein’s ‘theory’ was underpinned by dependency theory,
Marxism’s criticisms of capitalism (social conflicts among social
groups; capital accumulation, unequal distribution, class struggles)

• The modern state exists within a broad political, economic and

legal framework; development of countries cannot be
understood without reference to this broad system

• Understanding of “periphery/ core-periphery relationships

• States are conceptually viewed as lying on a core-periphery

continuum
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• "a world-system is a social system, one that has

boundaries, structures, member groups, rules of
legitimization, and coherence. Its life is made up of
the conflicting forces which hold it together by
tension and tear it apart as each group seeks
eternally to remold it to its advantage”
15 CHARACTERISTICS OF THE SYSTEM
1. Nation-states are variables
2. Structural relationships:
• Core; this is where capital accumulation occurs
• Semi-periphery (Core regions in decline or peripheries
attempting to improve their relative position; these states
act as buffer zones between core and periphery,

• Periphery; subordinate status,

• Production of raw materials using labor-intensive
techniques and for export at relatively low value and
importing manufactures of high value
• Peripheral countries have externally orientated
economies
16

4. There is “unequal exchange” and the systematic

transfer of surpluses from lower ranked countries
to industrial core (higher ranked countries with
high-technology)

5. All parts are connected to the system; the

differential strengths within this hierarchy is crucial
to maintaining the system as a whole

6. Strong states reinforce and increase the differential

flow of surplus to the core countries
17

7. Development of the parts of the system occurs at the

expense of others

7. The process of capital accumulation involves the

appropriation of peripheral surplus (de-capitalization)

8. Wealth is created at the metropolis/center/core/dominant

countries and poverty at the satellite or the periphery
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1. Territorial division of labor among two interdependent but

geographically/economic different from each other: core and
periphery.
2. The periphery focuses on labor-intensive
3. The core focuses on capital-intensive production.
4. Semi-peripheral states which act as “buffer” between core
and periphery has a mix of activities and institutions
5. The core-periphery relationship is structural.
19
20

• Several subsystems
nested within the
world-economy
• State-level
• Urban/rural
21
CHARACTERISTICS OF THE CORE
• Core (wealth is accumulated here through extraction of
surpluses from the periphery
• Core countries are characterized by:
a. Developed strong central governments with large
armies
b. Extensive bureaucracies
c. Capital intensive production processes using advanced
technology
d. Secondary and tertiary economic activities
(manufacturing, producer services)
e. They exert control over world trade and economic
agreements and so set up prices for agricultural
products
f. They attract artists and intellectuals
g. Core states engage in periphery-like behaviors e.g. US
exports unprocessed lumber to Japan
22
PERIPHERY
a. Processes requiring less skilled and more extensive
labor
b. Producers of primary goods and exports raw
materials to the core
c. Weak political systems/Controlled by other states
d. Unable to control the terms of trade
e. Capital surpluses were expropriated to the core
through unequal trade exchange
f. Lacked strong central governments or were
controlled by other states
g. Exported raw materials to the core
23

• Semi-periphery
• Cores in decline (Portugal, Spain, Southern France)
• Peripheries improving on their relative importance
• They often also served as buffers between the core and the
peripheries.
• Semi-peripheries exhibited tensions between the central
government and a strong local landed class
24
THREE PRINCIPAL FACTORS INFLUENCING
DEPENDENCY
1. Colonial powers
2. Global capital (FDI)
3. International Financial institutions
25
COLONIAL POWERS
1. Colonies plundered minerals, had monopoly of lands and
appropriated our manpower
2. Production and exported primary products is determined by
demand in dominant countries
3. Rigid specialization and monoculture; destroyed indigenous
economies
4. After decades of colonial rule
1. A dominant social class has emerged within the dependent
nations who participate in the exploitation process
2. The dominant class (elites) has acquired foreign taste leading to
high import bills; they deny all that is good locally which
contributrf to "genuine" national development
26 FOREIGN DIRECT INVESTMENTS
1. Globalization of financial capital allow money to flow across
political borders and to switch investments from region to region
• Loss of political sovereignty: Nations have little choice but to provide
concessions (lower taxation, industrial estates; exemptions) to attract
investments
2. FDI’s are exempted from foreign exchange controls for the
importation of machinery
3. Appropriation of profits
• Repatriation of profits (made possible or guaranteed by tax
concessions in the LDCs and other exemptions)
• Foreign firms are unwilling to train local people to take over
management positions
• Foreign firms have been prospering while LDCs have been
economically declining;
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3. Technology monopoly & industry

• Capital intensive production technology demands a high degree
of skilled labor and creates fewer job opportunities
• Patents on machinery and royalties to be paid
• Foreign technology compete unfairly with and destroy local
production techniques, creating a pool of unemployable and
"marginalized" people (Ahiakpor, 1985)
• West Africa had crafts industries to prior to colonization
• Clothes (leather, cotton, palm fiber or bark)
• Leatherwork, woodwork, pottery, iron-smelting and smith,
gold and silver smith, cotton spinning, weaving and dyeing,
bronze and brass casting
28

• Iron-ore pits and smelting furnaces in

northern Nigeria
• Iron and Steel Making in Niger bend and
other areas where the raw materials could be
found
• Tools (for craftsmen, domestic and farm use,
ammunition)

4. FDIs distort the local economy

29 INTERNATIONAL FINANCIAL INSTITUTIONS
1. The dominance of a few currencies in the world exchange
system
2. World Bank and the International Monetary Fund (IMF) are
not genuinely disposed to help LDCs; they controlled by the
developed countries
3. Foreign aid provided at unfavorable terms of trade
• High "world" interest rates which impact the ability of LDCs to
borrow funds for their development needs
• Preconditions for loans (budget cuts and interest rate increases,
devaluation, retrenchment) lead to unemployment and slower
economic growth
• Capital outflow greater than capital inflow (Dos Santos, 1970)
30

The attractiveness of the theory

• Development and underdevelopment can be explained in terms of
their historical relations
• Underdevelopment attributed to the growth of capitalism as a world
system and a dominant social class within dependent countries that
participate in this exploitative relationship
• Dependency theory, promises prosperity, equity, and justice once the
political obstacles to economic transformation have been overcome
31
SOLUTIONS PROFFERED BY THE
THEORISTS
1. Revolutions and the overthrow of governments when the local
elite is too "foreign-oriented”
2. Nationalization of foreign-owned firms
• “... the economic tasks of national democratic revolution involve
liquidating the monopoly, control and domination of the economy
through its main agencies, transnational corporations.. .. This is a
process which must start with the nationalization of such
companies as Barclay's Bank .. UAC, UTC, SCOA, and CFAO ...“
(NUGS, 1982 as cited in Akiakpor, 1985
• The PNDC chairman [Jerry Rawlings] said that Ghana's problems
stemmed from the activities of the multinationals and that the
current revolution was meant to cut off the stronghold these
companies had on Ghana (West Africa, 28 June 1982 as cited in
Ahiakpor, 1985)
32

3. Developing “appropriate" technologies locally

4. Import substitution industrialization (ISI)
5. Form regional trade blocks (south-south cooperation)
6. Addressing concerns of the international market and
multi-national corporations
• Regulate the importation consumer goods to change foreign
tastes
• Discouraging foreign investments in the primary, export
sector
• Influence international financial institutions through
concerted effects of LDCs
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33

• Major restructuring of the international economy

to allow developing countries to escape from
their subordinate position

• Negotiate for fair trade, investment and

development through United Nations Conference
on Trade and Development (UNCTAD) (1964)
dealing

• Self-reliance
34 CRITICISMS OF DEPENDENCY THEORY

1. Complete non-dependence (autarky) is not achievable nor

desirable
2. Dependency theorists are too emotional and disguise
fundamental issues; neo-colonialism is insufficient to explain the
economic woes of LDCs
• Ethiopia and Liberia were never colonized but still poor
3. Countries may not be connected in a logically consistent and
coherent manner as portrayed
• One can rank nations according to the degree that they exploit/are
exploited but such rankings do not point to any structured set of
relations among nations (Friedman and Wayne, 1977)
 35
4. The impacts of foreign investments are over-simplified
• Different types of foreign investments may have widely different
effects on the development process (Money is also lost in
unsuccessful ventures
• LDCs could achieve substantial development despite their
dependence on foreign businesses, banks, and governments for capital,
technology, and trade
• Multinationals contributed to economic growth and development
(Brazil, Taiwan, and South Korea, Canada and Australia during the
1960s and 1970s)
5. Net capital outflow does not necessarily mean de-capitalization;
• Nations may have increased total local capital through the multiplier
effects (through wages, local purchases, taxes)
• Capital accumulation occurs at the local level; local entrepreneurs
have emerged
• LDCs acquire vital technology in the process
36

6. The theory ignores the significance of the nation-state: sees

them as mere appendage, agents of metropolitan interests to
the international economic system
7. There is the tendency to gloss over the degree of diversity in
the ‘peripheral’ countries
8. Some LDCs which were less well endowed in human capital,
natural resources, and geography, more neo-colonial in
structure) did better than Ghana during the 1980s
• Ivory Coast, Kenya, and Cameroon were among the most open
to and penetrated by international capital
9. Why is there underdevelopment within the metropolitan
countries which have been identified as the ultimate termini of
the surpluses?
37 ASSIGNMENT
• To what extent does the dependency theory explain Ghana’s
economic woes during the late 1970s and 1980s?

Ahiakpor, J. C. W. (1985). The Success and Failure of

Dependency Theory: The Experience of Ghana. International
Organization, 39 (3):535-552