CRITICAL THEORIES OF
UNDERDEVELOPMENT
June 1 , 2013
CRITICAL THEORIES
 Critical theories of underdevelopment take issue with the
liberal understanding of global economics.
 Liberal arguments hold that underdevelopment is the result
mostly of internal factors (untrained workforce, inability to
accumulate capital, corruption). It also holds that the global
south can catch up with the north under the current economic
system, and that growth in the north does not come at the
expense of the south.
 Critical theories hold that it is importantly the current
economic system, as well as past economic practices in the
world system, that are mostly or totally to blame for the lack
of development in the global south.
KEY TERMS
 Capital accumulation: the creation and continued
development of standing wealth (factories, roads, machinery)
that either directly or indirectly can be used to create more
wealth.
 Economic surplus: the part of the wealth that is created by an
economy or a global economic system that is not consumed
by maintaining or increasing a nation’s living standards. It can
either be invested into the economy in the form of capital
accumulation, or taken out of the economy (or nation) by
those who control the means of production (i.e., the capital
that creates wealth).
CRITICAL THEORIES: WORLD SYSTEMS
THEORY
World systems theory holds that the reason why
underdeveloped countries lag behind developed countries is
because the world economy is set up such that the developed
countries exploit underdeveloped countries:
 International division of labor in which some countries engage
in high value economic activities and others forced into low
value activities
 Interaction between those types of countries results in a
transfer of wealth from the less wealthy to more wealthy
countries.
WORLD SYSTEMS THEORY
World systems theory is a structural theory; that is, it explains
what occurs in the world economy by pointing to the
relationships among national economies. It does so by positing
that there are three types of countries understood in terms of
their relationship with one another (though the same
relationships also occur within countries as well):
 Core countries: countries that are engaged in high value
economic activities, such as sophisticated manufacturing and
service activities. These activities depend importantly on the
input of cheap raw materials and the products of cheap labor,
or the monopolization of a market (in the form of services).
These activities result in high profit margins which are used to
further accumulate capital and to raise the national standard
of living
WORLD SYSTEMS THEORY
Semi-peripher y: are countries in which there is some high value
manufacturing and some capital concentration, but not as much as in the
core.
Peripher y: countries which expor t raw materials, agricultural products
and labor-intensive, low end manufactured and semi -manufactured
goods. These are then processed in core countries for their own use or
shipped back to peripheral countries in the form of manufactured goods.
Thus core countries are able to extract surpluses from peripheral
countries, leading to the continued lack of development in the latter and
the widening gap between core and peripher y in terms of standards of
living and capital accumulation.
Semi-peripher y countries act as a buf fer between core and peripher y
because they represent countries that have been able to climb out of a
state of underdevelopment; thus, they represent an aspirational state
that tempts peripheral countries to continue cooperating in the world
economy rather than attempting to over turn it.
CRITICAL THEORIES: IMPERIALISM
Imperialist theories are similar to world systems theories in
arguing that more developed countries are to blame for the
backwardness of less developed countries. However, imperialist
theories trace the exploitative relationship back further in time
and add to economic dimensions those of politics, culture and
society.
The modern age of imperialism is understood as beginning around
1500, around the time of the beginning of the European
colonization of North America and is intensive contact with Asia,
Africa and the Middle East.
The height of the imperial period was marked by the dominance of
European powers throughout the world, in the form of their
holdings of both formal and informal empires.
IMPERIALISM
 Formal empires are those in which one country physically
controls another country. It puts its own citizens in positions
of power over the colonized country, sets the policies of the
country, attempts to reform its culture and society and
controls its economy—India (Britain), Vietnam (France), Taiwan
(Japan)
 Informal empires are constituted by the various means by
which a country can control another country without being
of ficially in charge of it. The colonized country might have its
own government or ruler, but those in power put in place by
an outside force, are heavily influenced in policymaking by
outside influences, and its economy is controlled by outside
forces. Such outside forces may be another country, which
uses its ambassador to control political and economic af fairs
(Egypt-Britain, South Vietnam– US, Afghanistan- Soviet Union)
IMPERIALISM
 The history of imperialism played out somewhat dif ferently in
terms of two types of formal colonies:
 Colonies whose population now consists of a majority of immigrants
from the colonial power: US, Canada, Australia, New Zealand: these
have joined the ranks of developed countries, having gained
independence or autonomy relatively early and before achieving that
status were relatively successful in resisting exploitative economic
relationships. US revolution: resistance to Britain treating North
American colonies in the same way Spain treated its South American
colonies.
 Colonies whose population remained mostly indigenous: because not
a major destination of emigration from colonial country, treated in a
more exploitative fashion, policies more tightly controlled, ways of
life molded by colonial power.
IMPERIALISM
Negative ef fects of imperialism on indigenous majority formal colonies:
 Narrow development focused on exploitation of cheap labor and
extraction of raw materials
 Lack of political experience and training among locals
 Of ten systems of racial and cultural discrimination
 Infrastructure built using indigenous resources so as to benefit colonial
countr y rather than colony (emphasis on militar y needs, for example,
rather than economic development)
 Policies that discouraged development of industries that would
compete with those in colonizing countr y
 Lack of expenditures on human capital, including education and
healthcare. Education when provided narrow and promoted culture and
language of colonizing countr y
 Extraction of profit and taxes from the countr y, slowing or eliminating
capital accumulation
 Boundaries set for colonial convenience, of ten cutting apar t ethnic
groups and pushing together ethnic groups with a histor y of conflict.
IMPERIALISM
 Many nations that are now underdeveloped are former colonies that did
not gain independence until af ter WWII, and many in Africa (where
underdevelopment and pover ty were the wor st) did not gain
independence until the 1960s.
Impor tant problems of late independence:
 Longer histor y of exploitation, underinvestment.
 Of ten product of long struggle that also drained indigenous resources
 Lacked of experienced leaders in the economic field, leading to
dependence on outside exper tise and the capital and leadership of
multinational corporations.
 Liberation movements of ten also produced political leader s who were
good at mobilizing people, appealing to narrow identities, and putting
for th messianic plans but not in governing well
 Problems in transitions
 Resistance to joining global economic given past experience.
 Immediately caught up in struggles produced by a bipolar world and
Cold War
IMPERIALISM
 Later legacies of imperialism
 History of strained relations
 Path dependence in terms of types of economic activities pursued:
easier to continue with colonial types of production because that is
where the permanent capital is located. But these are generally
associated with low level manufacturing and extractive enterprises.
 Continued lack of capital for reinvestment
 Resistance of developed countries in negotiating trade agreements,
including through WTO, to help. Developed countries tend to use
these agreements to continue the pattern developed by colonial
countries: privilege import of manufactured goods into developing
countries (preventing them from developing their own, indigenous
industries) and refusing to open their markets completely to the
agriculture goods that developing countries tend to export.
CRITICAL THEORIES: DEPENDENCY
THEORY AS AN EXPLANATION OF POSTCOLONIAL EXPLOITATION
Dependency theory dif fers from imperialist theory in that it
does not address situations of either formal or informal
colonization, but rather the dependency of indigenous
economies on outside capital and expertise.
As such, it also dif fers from world systems theory in that it does
not place as much emphasis on world structure, but on the
connection of indigenous economies with the outside world in
terms of the that economy’s weakness.
DEPENDENCY
Types of dependency:
Enclave dependency: use of foreign capital to develop a sector
of a country’s economy (generally the extraction of raw
materials), then sell the product on the world market. The
profits of these activities go to the holders of the foreign
capital, with only the wages (generally low) paid to workers and
any minimal creation of permanent capital benefiting the host
country. Others, such as government of ficials, might also
benefit through bribes, kickbacks and other arrangements, but
these do not benefit the nation as a whole and generally do not
contribute to capital accumulation.
DEPENDENCY
 Nationally controlled production : production is controlled by a
small indigenous group of capitalists with ties to international
markets and foreign capitalists. This group controls
production, sell on international markets and keep the profits.
This group generally:
 Identifies economically and sometimes culturally with foreign
capitalists through educational and business contacts and through
interest in keeping access to international markets
 Generally attempt to keep wages low to remain competitive
 Only invest minimally in permanent capital because of the expense
and because are afraid that it might be lost to unrest or revolution.
Tend to keep accumulated capital in (in the form of liquid assets or
investments) outside the country
 Therefore tend again to concentrate on extractive enterprises or
agriculture
DEPENDENCY
 MNC-dominated local markets: MNC’s provide capital and
manufacturing expertise to develop consumer goods for the
nation’s market. Encourage policies that lead to the
development of a middle class that can af ford such goods,
generally at the expense of a lower, working class. MNC’s then
extract the profit from this economic activity. Leads to an
increase in the standard of living of a small middle class, but
no improvement for lower classes and no chance for the
national accumulation of capital.