depency assignment

Dependency theory, sometimes called foreign dependency, is used to explain global power
structure in which weaker countries are economically reliant on stronger countries, allowing the
stronger countries to exercise significant control over the weaker countries’ economic and
political behavior.
The dependency theory can be considered as an opposition to the well - known free market
theory. The free market ideology holds that open markets and free trade benefit developing
nations, helping them eventually to join the global economy as equivalent players.
This assignment is about the dependency theory and ways in which developing countries can
reduce or eliminate dependence. I will begin by explaining the term Dependency Theory and the
effects of the Dependency Theory then will look at the background, following by giving
examples of the Dependency Theory and lastly will be looking at ways that can help Developing
countries eliminate or reduce the Dependency system.
Dependency theory, in contrast, holds that there are a small number of established nations that
are continually fed by developing nations, at the expense of the developing nations’ own wealth.
The developing nations are essentially acting as colonial dependencies, sending their wealth to
the developed nations with minimal compensation. In dependency theory, the developed nations
actively keep developing nations in a subservient position, often through economic force by
instituting sanctions, or by proscribing free trade policies.
According to this view, the capitalist system has enforced a rigid international division of labor
which is responsible for the underdevelopment of many areas of the world. The dependent states
supply cheap minerals, agricultural commodities, and cheap labor, and also serve as the
repositories of surplus capital, obsolescent technologies, and manufactured goods. These
functions orient the economies of the dependent states toward the outside: money, goods, and
services do flow into dependent states, but the allocation of these resources is determined by the
economic interests of the dominant states, and not by the economic interests of the dependent
state. This division of labor is ultimately the explanation for poverty and there is little question
but that capitalism regards the division of labor as a necessary condition for the efficient
allocation of resources. The most explicit manifestation of this characteristic is in the doctrine of
comparative advantage.
Dependency theory also posits that the degree of dependency increases as time goes on. Wealthy
countries are able to use their wealth to further influence developing nations into adopting
policies that increase the wealth of the wealthy nations, even at their own expense. At the same
time, they are able to protect themselves from being turned on by the developing nations, making
their system more and more secure as time passes.
Dependency on foreign aid can also play a significant role in shaping the economy and politics
of the recipient country. Although foreign aid can have positive economic and political impacts,
such as increasing political participation and local public expenditures on social programs in
developing countries, donor countries often use promises of aid (or threats of stopping aid) to
pressure recipients into adopting the political or economic policies preferred by the donor.
The latter problem is particularly important with regard to loan acceptance. A country that
obtains loans from the World Bank, for example, must agree to adjust its economic structure,
liberalize its economy, and increase its international financial accountability. Moreover, paying
off the debt from loans often leads to balance-of-payments difficulties for the recipient, further
sustaining and deepening its economic dependency.
Some experts regard foreign dependency as an extension of colonial trade patterns. Lessdeveloped countries are often former colonies whose economies were focused on the production
of raw materials destined for the manufacturing industries of their colonial masters. Upon
achieving independence, few former colonies had modern industrial economies or trained
workforces that could compete in the global marketplace, so they continued to export cheap raw
materials to former colonial powers. The industrial countries then sold manufactured goods back
to their former colonies at a profit.
Dependency Theory was developed in the late 1950’s by Raul Prebisch, Director of the United
Nations Economic Commission for Latin America, as a reaction to modernization theory. He
believed that the economic growth in the advanced industrialized countries (the First world) did
not necessarily lead to growth in the poorer countries (the Third World). Indeed, economic
activity in the richer countries often led to severe economic problems in the poorer countries. As
a field, development economics looks not only at traditional economic rubrics, such as GDP or
per-capital income, but also looks at things like standard of living, health care, education, and
equal rights opportunities.
This theory, which is now widely regarded as being influenced by Marx, states that
industrialized countries derived greater benefit from trade than the poor countries from which
they imported raw materials and commodities. R. Prebisch said that the price of primary products
tended to decline in comparison to the price of manufactured goods. This implied that the
developed Western countries bought commodities from the developing countries at low prices.
These raw materials were then converted into manufactured goods. There was a high degree of
value addition at this stage, a factor that gave the West a great economic advantage.
In the period from 1650 to 1900, the European nations and especially Britain used their
military power and naval strength to colonize large parts of the world. They introduced an
economic system that resulted in their colonies in America, Asia, and Africa exporting raw
materials to Britain and Europe where the manufacturing activity took place. The
manufactured goods were then shipped back to the colonies where they were sold. This
resulted in a transfer of wealth from the colonies to Europe.
Africa received many billions of dollars in the form of loans from wealthy nations between
the early 1970s and 2002. Those loans compounded interest. Although Africa has effectively
paid off the initial investments into its land, it still owes billions of dollars in interest. Africa,
therefore, has little or no resources to invest in itself, in its own economy or human
development. It's unlikely that Africa will ever prosper unless that interest is forgiven by the
more powerful nations that lent the initial money, erasing the debt. This system where
countries controlled other countries was referred to as the following;
o Colonialism and Imperialism which describes the ability and power of industrialized
and advanced nations to effectively rob their own colonies of valuable resources like
labor or natural elements and minerals.
o Neocolonialism which refers to the overall domination of more advanced countries
over those that are less developed, including their own colonies, through economic
pressure, and through oppressive political regimes.
Colonialism effectively ceased to exist after World War II, but this didn't abolish dependency.
Rather, neocolonialism took over, suppressing developing nations through capitalism and
finance. Many developing nations became so indebted to developed nations they had no
reasonable chance of escaping that debt and moving forward.
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Promoting education; all levels of education are important stepping-stones to development,
from the fundamentals of grade one to the advanced courses at the university. Each class
ought to be taught with the overarching goals of quality of life and economic improvement in
mind. Hence the country or continent must promote growth in education. Education stops
terrorist groups from gaining strength and trains doctors and scientists to research and cure
diseases, train engineers to construct and other professions.
o It is one of the primary moves that help developing nations to help themselves.
Studies have shown that the greater number of many years children attend school, the
healthier that nation’s economy becomes.
o Education in every sense is one of the fundamental factors of development. No
country can achieve sustainable economic development without substantial
investment in human capital.
Education enriches people's understanding of themselves and world. It improves the
quality of their lives and leads to broad social benefits to individuals and society.
o Education raises people's productivity and creativity and promotes entrepreneurship
and technological advances. In addition it plays a very crucial role in securing
economic and social progress and improving income distribution.
Promotion of domestic industry and manufactured goods and services, imposing subsidies to
protect domestic industries, poor countries can be enabled to sell their own products rather
than simply exporting raw materials. This reduces dependency on foreign products, hence
creating more jobs and opportunities for citizens who work in these industries.
Import limitations. By limiting the importation of luxury goods and manufactured goods that
can be produced within the country, the country can reduce its loss of capital and resources.
The failure of many countries of the periphery to make the investment in physical and
institutional infrastructure needed to expand the volume of agricultural and raw materials
exports is a more significant source of lag in development than overdependence on
exports.(Hayami and Ruttan,1985).
Forbidding foreign investment. Some governments took steps to keep foreign companies and
individuals from owning or operating property that draws on the resources of the country.
Reduce foreign investment and Nationalize; some governments have forcibly taken over
foreign-owned companies on behalf of the state, in order to keep profits within the country.
This assignment was explaining the dependency theory and its explanations is that the world
economic system is highly unequal in its distribution of power and resources due to factors like
colonialism and neocolonialism hence leading to the increase in wealth in the developed world at
the expense of the poor nations. This places many nations in a dependent position. Capital
continues to migrate from the developing nations to the developed nations, causing the
developing nations to experience a lack of wealth, which forces them to take out larger loans
from the developed nations, further indebting them. The assignment also gave views on how
developing nations can reduce or eliminate dependency or foreign aid. In conclusion proper
education is the only tool that can be used to reduce this problem hence the country must work to
educate its citizens in all fields whether agriculture, mining, construction and other profession
rather than depending on foreign aid.
Rodney, W. (1972). How Europe underdeveloped Africa. Beyond borders: Thinking critically
about global issues, 107-125
Alvin Y. 1990. Social Change and Development: Modernization, Dependency, and WorldSystems Theory. Newbury Park, London and New Delhi: Sage Publications
Vincent Ferraro, ( 2008, pp. 58-64), "Dependency Theory. An Introduction," in The
Development Economics Reader, ed. London: Routledge publication.