DEPENDENCY

THEORY
Dependency Theory
Refers to the idea that ex-
colonial powers retain wealth
at the expense of the
impoverished former colonies
due to the wide-ranging
effects of colonialism in Africa,
Asia, and Latin America. The
developed west has
‘underdeveloped’ poor nations
effectively by relegating them to
a state of dependency.
It explains that underdeveloped
nations enriched advanced
countries with resources their
own
expenses. Dependency theory
explains how poor countries
depend on rich countries. It goes
further and indicates that rich
countries cause dependence by
destabilizing the weak countries
causing them to be need.
The rich exploit the raw
materials of poor countries and
lead these countries to debt for
their benefit.
Example of Dependency Theory

Country A has raw materials in

plenty. Country A is a poor
country. Country B comes and
starts taking away the resources
from Country A by destabilizing
the country through things such
as
colonialism or neocolonialism.
Country B purchases raw
materials from country A at a
law costs and refines the raw
material, and then sells the
material back to country A at a
high cost.
History of Dependency Theory

Dependency Theory originates

with two papers published in
1949, one by Hans Singer and
one by Raul Prebisch, in which
the authors observe that the
terms of trade for
underdeveloped countries had
deteriorated over time: the
underdeveloped countries
were able to purchase fewer
and fewer manufactured goods
from the developed countries
in exchange for a given
quantity of their raw materials
exports. This idea is known as
the Prebisch – Singer thesis.
Prebisch, an Argentine
economics at the United
Nations Commission for Latin
America (UNCLA), went on to
conclude that the
underdeveloped nations must
employ some degree of
protectionism in trade if they
were to enter a self-sustaining
development path. Raul
Prebisch also the most
representative author.
He become the executive
director of the Economic
Commission for Latin America.
Among the main authors of the
dependency theory we have:
Andre Gunder Frank, Raul
Prebisch, Theotonio Dos Santos,
Enrique Cardoso, Edelbert
Torres-Rivas and Samir Amin.
Criticism’s of Dependency Theory

 Some countries which have

close links with the north have
recently shown economic
development .
Example: Taiwan, South Korea,
and Brazil
It is difficult for small
countries to raise enough
investment capital on their
own to break off links with the
north.
Characteristics of dependency
theory
1. Two sets of nations are
involved which includes an
advanced and poor nations
2. Poor nations depend on rich
nations
3. Advanced nations actively
cause dependence
4. Advanced nations are
interested in the resources of
the poor nations
Prepositions of Dependency Theory

The dependency theory highlights

various prepositions are:
• Poor economic growth in

developing nations results from

the difference in unequal
exchange with advanced
countries.
These poor economic nation
act as suppliers of raw
materials and cheap labor to
developed nations, but they
are in turn given assistance in
the form of huge debts that
they are left paying for years.
• Undeveloped and
underdeveloped countries are
highly dependent on
advanced nations.
Undeveloped nations involve
those countries that have not
begun developing, while
underdeveloped ones involve
those that have started
developing but have not reached
the developed state yet.
• The dependency theory also

explains underdeveloped
countries could use their
resources to advance
themselves. However, these
resources are sold to
advanced countries, refined,
and then resold to
underdeveloped countries at
high prices. This process
causes underdeveloped
nations to deplete their
resources.
Dependency Theory Problems

One of the main issues is the

different theoretical
frameworks associated with it.
The dependency theory has
two categories of theorist;
1. neo-Marxists – there is an
established understanding that
there must be an unequal
distribution of wealth for a
capitalistic system to function.
2. Liberal reformists – find this
approach inappropriate and
even restricts governments
involvement in any country’s
business activities.
Conclusion of Dependency Theory

Arno Tausch draws a

connection to dependency
theory and concludes that
poverty and backwardness in
the “periphery” and “semi-
periphery” are caused by the
very peripheral or quasi-
peripheral position.
Periphery- refers to countries
that have low levels of
economic development, usually
in Africa, Asia and Central
America.
Semi-Periphery- refers to
countries who are in a
transition stage between the
core and periphery. This
includes the NICs (New
Industrialised Countries) of Asia.
Core- refers to the countries
with the highest levels of
economic power. European,
North America, and Australian
countries.
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