AP Human Geography
Dependency Theory – Associated with Andre Gunder Funk, Raul Prebisch
Dependency theory is a body of social science theories stemming from the 1960’s, both from
developed and developing nations, that create a worldview which suggests that poor underdeveloped
states of the periphery are exploited by wealthy developed nations of the centre, in order to sustain
economic growth and remain wealthy.
Dependency theory states that the poverty of the countries in the periphery is the result of how they
are integrated into the world system, whereas free market economists argue that they are not 'fully'
integrated.
The premises of dependency theory are:
Poor nations provide a destination for obsolete technology, and markets to the wealthy nations, without
which the latter could not have the standard of living they enjoy.
First World nations actively, but not necessarily consciously, perpetuate a state of dependence through
various policies and initiatives. This is multifaceted, involving economics, media control, politics, banking
and finance, education, sport, politics and all aspects of human resource development.
Attempts by the dependent nations to resist the influences of dependency often result in
economic sanctions and/or military invasion and control. Many dependency theorists advocate social
revolution to effect change in economic disparity.
Dependency theory first emerged as a reaction to liberal free trade theories in the 1950s, advocated by
Raul Prebisch, whose research with the Economic Commission on Latin America (ECLA) found that
the wealth of poor nations tended to decrease when the wealth of rich nations increased. Paul Baran
developed dependency theory from Marxian analysis. The theory quickly divided into diverse schools.
Some, like Andre Gunder Frank, adapted it to Marxism. "Standard" dependency theory differs sharply
from Marxism, however, arguing against internationalism and any hope of progress in less developed
nations towards industrialization and a liberating revolution. Theotonio Dos Santos described a 'new
dependency', which focused on both the internal and external relations of less-developed countries of
the periphery, derived from a Marxian analysis. Former Brazilian President Fernando Henrique Cardoso
wrote extensively on dependency theory while in political exile, arguing that it was an approach to
studying the economic disparities between the centre and periphery. The American sociologist
Immanuel Wallerstein refined the Marxist aspect of the theory, and called it the "World-system." It is
has also been associated with Galtung's Structural Theory of Imperialism.
Spread of the Dependency Theory
Dependency theory became popular in the 1960s and 1970s as a criticism of modernization
theory (also known as development theory) that seemed to be failing due to the continued widespread
poverty of large parts of the world. With the seeming growth of the East Asian economies and India in
the last few years, however, the theory has fallen somewhat out of favour. It disagrees sharply with
classical and free-market economics. It is far more accepted in disciplines such as history and
anthropology. It can also be detected in some of the reasoning underpinning recent NGO campaigns
such as Make Poverty History and the Fair Trade movement.
Dependency was said to be created with the industrial revolution and the expansion of European
empires around the world due to superior power and accumulated wealth. Some argue that before this
expansion, the exploitation was internal, with the major economic centers dominating the rest of the
country (for example southeast England dominating Britain, or the Northeast United States dominating
the south and east). Establishing global trade patterns in the nineteenth century allowed capitalism to
spread globally. The wealthy became more isolated from the poor, because they gained
disproportionately from imperialistic practices. This minimized the dangers of domestic peasant revolts
and rebellions by the poor. Rather than turn on their oppressors as in the American Civil War or in
communist revolutions, the poor could no longer reach the wealthy and thus the less developed nations
became engulfed in regular civil wars. Once the imperialist rich nations established formal control, it
could not be easily removed. This control ensures that all profits in less developed countries are
remitted to the developed nations, preventing domestic reinvestment, causing capital flight and thus
growth.
Implications
While there are many different and conflicting ideas on how developing countries can alleviate the
effects of the world system, several of the following protectionist/nationalist practices were adopted at
one time or another by such countries:
Import Substitution
Promotion of domestic industry and manufactured goods. By subsidizing and protecting industries within
the periphery nation, these third-world countries can produce their own products rather than simply
export raw materials.
Import limitations
By limiting the importation of both luxury goods and manufactured goods that can be produced within
the country, supposedly, the country can reduce the amount of its capital and resources that are
siphoned off.
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.
Nationalization. Some governments have forcibly taken over foreign-owned companies on behalf of
the state, in order to keep profits within the country.
Criticism of Dependency Theory
Dependency theory has been criticized by free-market economists such as Peter Bauer and Martin Wolf,
who believe it will lead to:
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Corruption. State-owned industries may have a higher rate of corruption than privately owned
companies.
Lack of competition. By subsidizing in-country industries and preventing outside imports,
these companies may have less incentive to improve their products, to try to become more
efficient in their processes, to please customers, or to research new innovations.
Proponents of dependency theory claim that the theory of comparative advantage breaks down when
capital - including both physical capital like machines and financial capital - is highly mobile, as it is under
the conditions of globalization. For this reason, it is claimed that dependency theory can offer new
insights into a world of highly mobile multinational corporations.
Market economists point to many examples they claim disprove dependency theory: the improvement
of India's economy after it moved from state-controlled business to open trade is one of the most often
cited (see also economy of India, Commanding Heights). India's example seemingly contradicts
dependency theorists' claims concerning comparative advantage and mobility, as much as its economic
growth originated from movements such as outsourcing - one of the most mobile forms of capital
transfer. However, South Korea was able to rise out of poverty using many tenets which Dependency
theory advises.
Free market thinkers see dependency theorists' complaints as legitimate, but their policy prescriptions as
self-fulfilling prophecies, in that the policies only aggravate the disparity between the developed nations
and under-developed nations by isolating them from free markets. Liberal trade advocates see the
current structure of capitalism and trade favoring the capital owners rather than consumers, but also
believe that dependency theorists' prescriptions lead only to more wealth for the capital owners and
more poverty for the third world; meaning that their advocacy of restricted trade and self development
leads to the same outcome as mercantilist trade as experienced under colonialism. Free market thinkers
criticize dependency theory because it conflates free market economics with current capitalist economic
trading arrangements, and thus assumes that free market international trade will not increase economic
growth and development.
Economic Theories
World-Systems Theory – Immanuel Wallerstein
In his book, The Modern World System: Capitalist Agriculture and the Origins of the European World
Economy in the Sixteenth Century, Immanuel Wallerstein develops a theoretical framework to
understand the historical changes involved in the rise of the modern world. The modern world system,
essentially capitalist in nature, followed the crisis of the feudal system and helps explain the rise of
Western Europe to world supremacy between 1450 and 1670. According to Wallerstein, his theory
makes possible a comprehensive understanding of the external and internal manifestations of the
modernization process during this period and makes possible analytically sound comparisons between
different parts of the world.
THE NEW EUROPEAN DIVISION OF LABOR
Wallerstein argues that Europe moved towards the establishment of a capitalist world economy in order
to ensure continued economic growth. However, this entailed the expansion of the geographical size of
the world in question, the development of different modes of labor control and the creation of relatively
strong state machineries in the states of Western Europe. In response to the feudal crisis, by the late
fifteenth and early sixteenth centuries, the world economic system emerged. This was the first time that
an economic system encompassed much of the world with links that superseded national or other
political boundaries. The new world economy differed from earlier empire systems because it was not a
single political unit. Empires depended upon a system of government which, through commercial
monopolies combined with the use of force, directed the flow of economic goods from the periphery to
the center. Empires maintained specific political boundaries, within which they maintained control
through an extensive bureaucracy and a standing army. Only the techniques of modern capitalism
enabled the modern world economy, unlike earlier attempts, to extend beyond the political boundaries
of any one empire.
The new capitalist world system was based on an international division of labor that determined
relationships between different regions as well as the types of labor conditions within each region. In this
model, the type of political system was also directly related to each region's placement within the world
economy. As a basis for comparison, Wallerstein proposes four different categories, core, semiperiphery, periphery, and external, into which all regions of the world can be placed. The categories
describe each region's relative position within the world economy as well as certain internal political and
economic characteristics.
The Core
The core regions benefited the most from the capitalist world economy. For the period under
discussion, much of northwestern Europe (England, France, Holland) developed as the first core region.
Politically, the states within this part of Europe developed strong central governments, extensive
bureaucracies, and large mercenary armies. This permitted the local bourgeoisie to obtain control over
international commerce and extract capital surpluses from this trade for their own benefit. As the rural
population expanded, the small but increasing number of landless wage earners provided labor for farms
and manufacturing activities. The switch from feudal obligations to money rents in the aftermath of the
feudal crisis encouraged the rise of independent or yeoman farmers but squeezed out many other
peasants off the land. These impoverished peasants often moved to the cities, providing cheap labor
essential for the growth in urban manufacturing. Agricultural productivity increased with the growing
predominance of the commercially-oriented independent farmer, the rise of pastoralism, and improved
farm technology.
The Periphery
On the other end of the scale lay the peripheral zones. These areas lacked strong central governments
or were controlled by other states, exported raw materials to the core, and relied on coercive labor
practices. The core expropriated much of the capital surplus generated by the periphery through
unequal trade relations. Two areas, Eastern Europe (especially Poland) and Latin America, exhibited
characteristics of peripheral regions. In Poland, kings lost power to the nobility as the region became a
prime exporter of wheat to the rest of Europe. To gain sufficient cheap and easily controlled labor,
landlords forced rural workers into a "second serfdom" on their commercial estates. In Latin America,
the Spanish and Portuguese conquests destroyed indigenous authority structures and replaced them
with weak bureaucracies under the control of these European states. Powerful local landlords of
Hispanic origin became aristocratic capitalist farmers. Enslavement of the native populations, the
importation of African slaves, and the coercive labor practices such as the encomienda and forced mine
labor made possible the export of cheap raw materials to Europe. Labor systems in both peripheral
areas differed from earlier forms in medieval Europe in that they were established to produce goods for
a capitalist world economy and not merely for internal consumption. Furthermore, the aristocracy both
in Eastern Europe and Latin America grew wealthy from their relationship with the world economy and
could draw on the strength of a central core region to maintain control.
The Semi-Periphery
Between the two extremes lie the semi-peripheries. These areas represented either core regions in
decline or peripheries attempting to improve their relative position in the world economic system. They
often also served as buffers between the core and the peripheries. As such, semi-peripheries exhibited
tensions between the central government and a strong local landed class. Good examples of declining
cores that became semi-peripheries during the period under study are Portugal and Spain. Other semiperipheries at this time were Italy, southern Germany, and southern France. Economically, these regions
retained limited but declining access to international banking and the production of high-cost high-quality
manufactured goods. Unlike the core, however, they failed to predominate in international trade and
thus did not benefit to the same extent as the core. With a weak capitalist rural economy, landlords in
semi-peripheries resorted to sharecropping. This lessened the risk of crop failure for landowners, and
made it possible at the same time to enjoy profits from the land as well as the prestige that went with
landownership.
According to Wallerstein, the semi-peripheries were exploited by the core but, as in the case of the
American empires of Spain and Portugal, often were exploiters of peripheries themselves. Spain, for
example, imported silver and gold from its American colonies, obtained largely through coercive labor
practices, but most of this specie went to paying for manufactured goods from core countries such as
England and France rather than encouraging the formation of a domestic manufacturing sector.