Sekelani Lungu

The University of Zambia

Assignment No.1

Question: Less Developed Countries (LDCs) are also often referred to as Under Developed
Countries. Using the writings of Gunder Frank explain the concept of underdevelopment with
examples to illustrate your points.

Gunder Frank was born in Berlin on February 24, 1929 (Darity 2008, p. 187). He was one of
the leading proponents of dependency theory. Based on this theory, he rejected the widely
held belief among development analysts of the time that the lack of development in the less
developed countries could be likened to the earlier transitional stages of the present
developed countries (Ibid.). Much of Gunder Frank’s work concerning underdevelopment
was concentrated in Latin America. Gunder Frank wrote extensively on subject of
underdevelopment. This essay, therefore, will explain the concept of underdevelopment
based on the writings of Gunder Frank.

Todaro and Smith (2015, p. 131) define underdevelopment as an economic situation

characterized by persistent low levels of living in conjunction with absolute poverty, low
income per capita, low rates of economic growth, low consumption levels, poor health
services, high death rates, high birth rates, dependence on foreign economies, and limited
freedom to choose among activities that satisfy human wants. Examples of underdeveloped
countries lie mainly in the South and Eastern Europe, in Asia, Africa and Latin America, and
their economies are regarded as underdeveloped in comparison with the few rich nations
whose economies reveal a wider diversity of activities embodying the fruits of science and
technology and heavy investment of capital (Mountjoy 2009, pp. 17-18).

Mountjoy (2009, p. 18) also states that underdeveloped countries are those countries
characterised by a high degree of subsistence production with a very limited application of
technology. The manufacturing industry is relatively unimportant while the agricultural
sector takes the centre stage for these countries. In most instances even their agricultural
sectors are highly inefficient and generally social and institutional patterns make advance in
any field extremely difficult.

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Frank (1969, p. 4), while working in Latin America, contended that although the present
developed countries (DCs) may have been undeveloped during their transitional stages to
become developed, they were never underdeveloped. This is because, according to Gunder
Frank, these countries never had underdevelopment imposed upon them through the policies
and actions of a powerful external competitor.

In Gunder Frank’s view, underdevelopment did not mean “traditional” or “rural” or “non-
modern” or “informal’ standards of economic, political, and social life but rather the
subjection of less developed countries to colonial or quasi-colonial exploitation and imperial
domination by foreign powers (Cited by Harrison 1996, p. 122). Frank cited some concrete
examples of the creation of underdevelopment, these being; the deindustrialization of India
by British colonialism, the exploitation and enslavement of Africa by European imperialism
and colonialism, as well as the destruction of Incan and Aztec civilizations by Spanish
imperialism (ibid.).

As one of the leading proponents of the dependency theory, Frank (1969, p. 5) saw the
economic development of the rich developed countries of the world as a contributing factor to
underdevelopment of poor countries. Frank further agued that underdevelopment in LDCs is
an essential element of development in the DCs because development and underdevelopment
are the two sides of a single process of the global utilization of the earth’s human and
material resources. In other words, the less developed countries, as the economic satellites of
highly developed regions of the world, especially Europe and North America, must be poor
as a result, and therefore cannot self-generate economic development autonomously
(Harrison 1996, p. 122).

Despite political colonialism having been overtly abolished, LDCs are currently suffering
from economic (colonialism) exploitation. This economic exploitation has always continued
on massive scales through the operations of multinational corporations (MNCs) and such
powerful institutions as the International Monetary Fund (IMF) and the World Bank.
Developmental policies that exist such as replacement of indigenous technologies with more
advanced (foreign) ones were often solely beneficial to subsidiaries of MNCs, and
encouraging the formation of mass local unskilled labour for employment in factories, mines,
and shops.

Frank (1969, p. 4) also states that colonial policies shaped the LDCs solely for trade and
investment in raw materials, in exchange for the DCs’ trade and investment in industrial

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goods. Also, the educational system established in LDCs produced highly educated persons
for unskilled jobs and posts in colonial administrations, and acquainted them with ideas and
values that were alien and even inimical to the cultural, social and economic needs of their
environment.

Participation in international trade as well brings polarization as the LDCs are assigned the
production of primary raw materials through worsening terms of trade and the control of their
economies by MNCs. This leads to their resources (profits) flow out of them into the DCs for
the continuous economic well-being and development of the DCs (Harrison 1996, p. 122).
For example, Zambia is a copper producer but much of this mineral is exported with the price
of the commodity determined by the international community.

Frank attributes the existence and continuance of underdevelopment in LDCs primarily to the
historical evolution of a highly unequal international capitalist system which has created rich
country–poor country relationships (1969, p. 5). Gunder Frank further add that the very
coexistence of rich and poor nations in an international system dominated by such unequal
power relationships between the centre (the developed countries) and the periphery (the
developing countries) renders attempts by poor countries to be self-reliant and independent
difficult and sometimes even impossible (Todaro and Smith 2015, p. 131).

Frank also observed that underdevelopment was perpetuated by certain groups in developing
countries (e.g. landlords, entrepreneurs, military rulers, merchants, salaried public officials,
and trade union leaders-which constitute the elite) that enjoy high incomes, social status, and
political power (1969, p. 5). According to him, the principal interest of these groups,
knowingly or unknowingly, is in the perpetuation of the international capitalist system of
inequality and conformity because they are rewarded. These groups, directly and indirectly,
they serve and are rewarded by international special-interest group such as multinational
corporations, national bilateral-aid agencies, and multilateral assistance organizations like the
World Bank or the International Monetary Fund, which are tied by allegiance or funding to
the wealthy capitalist countries. The elites’ activities and viewpoints often serve to inhibit any
genuine reform efforts that might benefit the wider population and in some cases actually
lead to even lower levels of living and thus to the perpetuation of underdevelopment. To this
effect, Gunder Frank attributes underdevelopment of the developing world to the existence
and policies of the industrial capitalist countries and their extensions in the form of small but

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powerful elite or comprador groups in the less developed countries (Todaro and Smith 2015,
p. 132).

Thus, in his writings, Frank (1969, p. 5) attributes underdevelopment to being an externally

induced phenomenon. He therefore suggests revolutionary struggle or at least major
restructuring of the world capitalist system to free dependent developing nations from the
direct and indirect economic control by their developed world and domestic oppressors.

Frank (1969, p. 6) essentially argues that since its very origin, Latin America, for example,
had been exploited as a periphery by major colonial powers within the context of capitalist
development across the Atlantic. As an advocate of the dependency theory, he claims that
external influences (i.e. political, economic, and cultural) on national development policies
could explain why the third world, Africa, parts of Asia and Latin America in particular, had
been and remained subordinate to Western interests.

Despite colonies having gained nominal independence, their policies still linked the periphery
to the world market by commodity chains, often through the export of single commodities
with a low added value (raw materials). The metropolitan-satellite relationship between
colonizer and colonized was an aspect of world-scale capitalist dynamics and this relationship
continues to impoverish the third world countries long after formal independence due to the
existence of what Frank termed local “lumpenbourgeoisie”, making it impossible for former
colonies to catch up with the West. The West then reinforces this neocolonization through its
use of debt ( Darity 2008, pp. 187-188).

According to Gunder Frank, development strategies promoted by the wealthy countries were
designed to ensure that the “developing” countries remained in a subordinate position (Desai
and Potter 2013, pp. 335-336). In this view, the economies of the colonized regions had been
reorganized so as to meet the needs of the colonizer countries, and ended up producing raw
materials that served the latter’s interests. Underdevelopment is not the natural condition but
an artefact created by the long history of colonial domination in third world countries, and as
such a process of ‘‘development of underdevelopment’’ (Frank 1969, p. 5).

Because the development of the US and Western Europe had been based on the
underdevelopment of the third world, foreign aid policies could only result in the latter falling
further and further behind. In this way, underdevelopment, Gunder Frank claims, is
developed (Ritzer 2007, p. 3072). Gunder Frank’s view has been echoed by Robinson who

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contends that third-world countries of today were drawn into the capitalist world market
under the regimes of formal and informal colonialism as appendages of the metropolitan
nations to supply raw materials and exotic commodities to the industrial centre (1994, p. 60).
For example, minerals had to be produced where the deposits were found.

The sources of raw materials which were developed by investment from the metropolitan
countries are largely still owned and controlled by capitalist corporations, Robinson (1964, p.
60) adds further. Mining companies in Africa, for example, employ local labour and have
been induced to train local personnel for the lower rungs of management but policy is still in
the hands of the overseas headquarters and administered on the spot by expatriates whose
loyalty is to the corporation rather than to the country where they are working.

Multinational corporations operate in many countries and in many activities i.e. fabricating
metal as well as ore. Usually, the amount of profit attributable to any one of these activities
by MNCs can be manipulated by the prices at which products are transferred from one branch
to another, to suit the convenience of the corporation, not the needs of the country where the
activity is carried out (Robinson 1994, p. 61). Also, the share in proceeds that the local
government obtains as royalties and taxes depends upon the relative economic power and
negotiating ability of the parties when an agreement between the corporation and a newly-
independent government was drawn up. For example, the Zambian government has had
challenges in computing how much tax should be paid by mining firms.

According to Frank (1969, p. 8) the contemporary underdevelopment is in large part the

historical product of past and continuing economic and other relations between he satellite
underdeveloped and the now developed metropolitan countries. These past and continuing
economic and other relations are an essential part of the structure and development of the
capitalist system on a world scale as a whole. Frank also sees underdevelopment as being due
to the notion that the development of the underdeveloped countries, and within them of their
most underdeveloped domestic areas, must and will be generated or stimulated by diffusing
capital, institution, values and so on, to them from the international and national capitalist
metropolis. He argues that from past experience, economic development in the
underdeveloped countries can now occur only independently of most of these relations of
diffusion.

Frank (1969, p. 5) cited the “dual” society thesis as being false and that the policy
recommendations to which it leads will, if acted upon, serve only to intensify and perpetuate

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the very conditions of underdevelopment they are supposedly designed to remedy. Frank also
blames the expansion of the capitalist system over the past centuries as effectively and
entirely penetrating even the apparently most isolated sectors of the underdeveloped world
thus leading to further underdevelopment. Developing countries have as well adopted the
economic, political, social and cultural institutions and relations that are the products of the
historical development of the capitalist system.

The present underdevelopment of Latin America is the result of its centuries-long

participation in the process of world capitalist development (Frank 1969, p. 7). Gunder Frank
gives an example of the introduction of capitalism in countries such as Chile which he states
“Chile has become increasingly marked by the economic, social, and political structure of
satellite underdevelopment.” He asserts that this did not only incorporate this country fully
into the expansion and development of the world mercantile and later industrial capitalist
system but that it also introduced the development of capitalism into the Chilean domestic
economy and society itself. Thus the period of colonialism, free trade, and imperialism has
led to developing countries becoming increasingly marked by the economic, social, and
political structure of satellite underdevelopment.

Underdevelopment can also be enhanced due to the expansion of the world economy. For
example, a country may purportedly be converted into export economy as was the case with
Brazil in the sixteenth century, and later be incorporated into the structure and development
of the world capitalist system (Frank 1969, p. 8). Initially, Brazil had experienced what may
have appeared as economic development during the period of its golden age. In reality, this
was a satellite development that was neither self-generating nor self-perpetuating.

Within a developing country, some regions may build up an industrial establishment, for
example Copperbelt in Zambia. But Frank contends that this industrial development cannot
break a developing country out of the cycle of satellite development and underdevelopment
within the capitalist system so far. According to Frank the development of industry in some
regions will not bring greater riches to the other regions of a country. The result is that these
unindustrialised regions will be converted into internal colonial satellites thus further
deepening their underdevelopment (1969, p. 8). In Zambia, for example, compare the
development of Western Province to that of the Copperbelt Province.

Thus despite the initial development for a less developed country being started relatively
autonomous, it will be increasingly satellized by the world capitalist metropolis and its future

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development possibilities are increasingly restricted. Frank states that underdevelopment was
and is still generated by the very same historical process which also generated economic
development: the development of capitalism itself (1969, p. 9). The very existence of
metropolis-satellite structure in this world makes the metropolis to develop and the satellites
to underdevelop. In contrast to the development of the metropolis, which is no one’s satellite,
the development of the national and other subordinate metropolis is limited by their satellite
status (Frank 1969, p. 10).

A corollary of the foregone statement is that when the metropolis establishes the trade and
investment ties which fully re-incorporate the satellites in to the system, or when the
metropolis expands to incorporate previously isolated regions into the worldwide system, the
previous development and industrialization of these developing regions is choked off or
channeled into directions which are not self perpetuating and promising. For instance, the
renewed expansion of trade and the spread of economic liberalism in the eighteenth and
nineteenth centuries choked off and reversed the manufacturing development which Latin
America had experienced during the seventeenth century and in some places at the beginning
of the nineteenth century (Frank 1969, p. 10).

Frank also sees underdevelopment as being created when a developing country becomes a
satellite of a developed nation (1969, p. 10). The introduction of the free trade between these
countries may characterize their economic activities but usually the main beneficiaries are
those in the ruling groups of both nations. In less developed countries foreign competition
usually destroys manufacturing industry, huge chunks of land is taken and concentrated into
large estates and ranches (or latifundia) by what Frank termed “the rapaciously growing
export economy”. This was also the case in Zimbabwe were white settlers shared huge
chunks of fertile land among themselves with the indigenous people who were the majority
occupying small pieces of land. Intra-regional distribution of income becomes much more
unequal, and the previously developing countries become simple satellites of the developed
nations (Frank 1969, p. 11). Also, some less developed countries do not have a chance
against the forces of expanding and developing capitalism by the developed nations and their
own development has to be sacrificed to that of others.

Because of metropolis-satellite structure, Gunder Frank contends that regions that are most
underdeveloped and seemingly feudal today are the ones that had the closest ties to the
metropolis (developed nations) in the past. These regions were the greatest exporters of

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primary products to and the biggest sources of capital for the world metropolis but were
abandoned by the metropolis when for one reason or another business fell off. For example,
when the market for their sugar or the wealth of their mines disappeared, the metropolis
abandoned these regions to their own devices. Therefore, the already existing economic,
political, and social structure of these less developed regions hindered autonomous generation
of economic development and left them no alternative but to take it upon themselves and to
degenerate in to the ultra underdevelopment that is prevalent today (Frank 1969, p. 11).

Frank sees the historical condition of dependency as the reason why economic growth in the
West did not translate into economic growth in the periphery. According to him despite
colonies having gained nominal independence, their policies still linked the periphery to the
world market by commodity chains, often through the export of single commodities with a
low added value (raw materials). Robinson (1994, p. 61) gives an example of Zambia as a
country that has become dependent upon the resources for a single product (such as copper
mines) which is exploited by capitalist corporations, so that national income and government
revenue are largely determined by the terms that they choose to offer.

The metropolitan/satellite relationship between colonizer and colonized was an aspect of

world-scale capitalist dynamics and this relationship continues to impoverish third world
countries long after formal independence due to the existence of a local bourgeoisie thus
making it impossible for former colonies to catch up with the West. The latter then reinforces
this neocolonization through its use of debt (Darity 2008, p. 187-188).

Frank (1969, p. 12) maintains that the experience of most non-industrial nations is explained
by the development of underdevelopment. In other words, the exploitation of peripheral less
developed countries by the core (developed countries) increased the economic, social, and
political misery experienced by the majority populations of those less developed countries.
Alliances between local and international elites actively worked to defend the status quo
distribution of power and privilege at the expense of the peasants and working class
majorities.

Peripheral countries of Asia, Africa, and Latin America specialized in primary products in an
enclave controlled by foreigners while importing consumer goods that were the fruits of
technical progress in the central countries of the West. The increased productivity and new
consumption patterns in peripheral countries benefited a small ruling class and its allies who
cooperated with the developed countries to achieve modernization (economic development

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among a modernizing minority). The result is peripheral capitalism, a capitalism that is
unable to generate innovations and dependent for transformation upon from the outside
(Nafziger 2006, pp. 144-146).

More plainly stated, the economic development of the rich countries contributes to the
underdevelopment of the poor. Development in LDCs is not self-generating nor autonomous
but ancillary. The LDCs are economic satellites of the highly developed regions of Northern
America and Western Europe in the international capitalist system. Frank suggested that
satellite countries experience their greatest economic development when they are least
dependent on the world capitalist system. Japanese economic development after the 1860s is
the classic example illustrating this statement. Japan, unlike most of the rest of Asia, was
never a capitalist satellite (Frank 1969, p. 12).

Underdevelopment does take place also within a country i.e. between different cities. For
example, the growth of major cities such as Sao Paulo and Rio de Janeiro since the nineteenth
century has been satellite development - largely dependent on outside capitalist powers,
especially Britain and the United States (Frank 1969, p. 12). As a result, regions in interior
Brazil have become satellites of these two cities and, through them, of the western capitalist
countries.

The economies of countries such as Argentina, Brazil, Mexico, and Chile grew rapidly during
World War I, the Great Depression, and World War II. Frank states that this was because
trade and financial ties with major capitalist countries were weakest (1969, p. 12). The most
underdeveloped regions today are those that have had the closest ties to Western capitalism in
the past. They were the greatest exporters of primary products to, and the biggest sources of
capital for, developed countries but were abandoned by them when for one reason or another
business fell off. Frank points to India’s Bengal; the one-time sugar-exporting West Indies
and North-eastern Brazil; the defunct mining districts of Minas Gerais (a state with major
deposits in iron ore, coal, gold and diamonds) in Brazil, highland Peru, and Bolivia; and the
former silver regions of Mexico as among examples. He contends that even the latifundium
(a large plantation or hacienda in Spain or Latin America, typically worked by peasants or
slaves) that has contributed so much to the underdevelopment in Latin America, originated as
a commercial, capitalist enterprise, not a feudal institution, which contradicts the generally
held thesis that a region is underdeveloped because it is isolated and precapitalist (ibid. p.13).

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It is an error, Frank feels, to argue that the development of the underdeveloped countries will
be stimulated by indiscriminately transferring capital, institutions, and values from developed
countries to developing countries. He suggests that, in fact, the following economic activities
have contributed to underdevelopment, not development:

1. Replacing indigenous enterprises with technologically more advanced, global, subsidiary

companies.
2. Forming an unskilled labour force to work in factories and mines and on plantations.
3. Recruiting highly educated youths for junior posts in the colonial administrative service.
4. Workers migrating from villages to foreign-dominated urban complexes.
5. Opening the economy to trade with, and investment from, developed countries.

According to Frank, a third-world country can develop only by withdrawing from the world
capitalist system. Perforce, such a withdrawal means a large reduction in trade, aid,
investment, and technology from the developed capitalist countries. Metropolis broadly refers
to the largest, most powerful and culturally influential city of an epoch or region (Haynes
2008, p. 23).

For Gunder Frank, Western development was only possible as a result the creation of a
capitalist world-economy which constituted the central mechanism for both exploiting
economically non-Western areas and preventing them from developing, thus ensuring that
they remained economically ‘underdeveloped’ (Haynes 2008, p. 24). The dominance of
capitalism led into the world economy being divided into ‘core’ (or industrially developed)
states and ‘peripheral’ (or less industrialized) countries that relied for export earnings on
production and sale of primary products abroad. Economic surplus usually flows from
periphery to core maintaining the division between the wealthy and non-wealthy states.

Europeans colonized non-European countries in the nineteenth century, especially in Africa,

Asia and Latin America, for the primary purpose of economic gain. The result was an
interdependent but unequal relationship established between colonizer and colonized (Haynes
2008, p. 25). Gunder Frank states that the high level of economic and human development in
today’s industrialized countries was a direct result from the sixteenth century of their
economic, and later political dominance of today’s underdeveloped countries, a huge
majority of which were colonies. This process in turn drew developing countries into a long-
term structurally disadvantageous relationship, resulting in the development of a few now
developed countries and the long-term underdevelopment of less developed regions. In a

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nutshell, Haynes (2008, p. 26) states that Gunder Frank’s argument was that industrialized
countries’ economic and human development was only possible because of the egregious
underdevelopment of the developing world.

Gunder Frank argues that peripheral countries can only develop when their ties with the core
are weakened or even completely terminated, citing, inter alia, Brazil (in the 1930s) and
Japan (before 1939) as examples. Therefore alternative development strategies for LDCs
should be centred on self-sufficient and inward-oriented policies that would dramatically
reduce metropolitan control. Also, decisive political and economic changes in developing
countries necessarily emanate from outside these countries as a result of metropolitan control
(Haynes 2008, p. 26).

Usually, both the core and the periphery pursue different structural roles - the developing
world’s main role, according to Gunder Frank, in unchanging-supplier of (under-priced) raw
materials to the metropolis (Cited by Desai and Potter 2013, p. 92).

Gunder Frank emphasized that third world economies were bound to stagnate because first
world firms repatriated profits gained in the third world. Thus, third world countries would
never benefit from opening their countries to multinational corporations (Darity 2008, p.
676). For example, Zambia’s main foreign exchange earner, which is copper, is almost
entirely in the hands of foreign multinational corporations. This has made it difficult for the
Zambia government to monitor the proceeds from these mining firms and in the process how
much tax they should pay.

The centre was viewed as cause and the periphery as effect. Less-developed nations, as part
of a global process, their role has been merely to provide the inputs to the advanced nations
or to receive their cast-off, low-wage manufacturing processes under trading conditions
which were likely to worsen. Development challenges faced by less developed nations are
seen to be external to their socio-economic formations. Instead, the negative influence of
transnational corporations, multilateral institutions like the World Bank and the IMF, and the
extensive influence of foreign governments in the internal affairs of less-developed nations
were highlighted (Cypher and Dietz 2004, p.185).

According to Nafziger (2006, p. 741), dependency theory contends that subordination of the
peripheral economies of Latin America, Asia, and Africa to the industrialized economies of
the West contributes to the underdevelopment of these peripheral economies. This theory

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involves such expressions as; ‘core-periphery’, ‘rich-poor’, and ‘developed-underdeveloped’
and these expressions are polar opposites.

Thus from Gunder Frank’s perspective, underdevelopment is brought about in less

developed countries because of adoption of capitalism into their economies. He disagrees the
notion that even current developed countries at one time were also underdeveloped.
Underdevelopment seen to be externally externally induced. Also, multinational national
corporations operating in LDCs aggrevates underdevelopment through repatriation of profit
generated in LDCs. For developing nations to develop, they should break their ties with
developed nations.

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REFERENCES

Cypher, J.M. and Dietz, J.L. (2004) The Process of Economic Development. 2nd Ed,
Routledge, London

Darity, W.A. et al. (2008) International Encyclopaedia of the Social Sciences. 2nd Ed.,
Macmillan Reference USA, Michigan

Desai, V. and Potter, R.B. (2013) The Companion to Development Studies. 2nd Ed.,
Routledge, London

Frank, A.G. (1969) Latin America: Underdevelopment or Revolution. Monthly Review

Press, New York

Harrison, F.E. (1996) Economic Development: Theory and Policy Applictions. Praeger
Publishers, Connecticut

Haynes, J. (2008) Development Studies. Polity Press, Cambridge

Mountjoy, A.B. (2009) Industrialization and Underdeveloped Countries. 2nd Ed., Aldine
Transaction Publishers, New Jersey

Nafziger, E.W. (2006) Economic Development. 4th Ed., Cambridge University Press, New
York

Ritzer, G., (2007) The Blackwell Encyclopaedia of Sociology. Blackwell Publishing,

Massachusetts

Robinson, J. (1994) Aspects of Development and Underdevelopment. Cambridge

University Press, Cambridge

Todaro, M.P. and Smith, S.C. (2015) Economic Development. 12th Ed., Pearson Education
Inc., New Jersey

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