Dependency Theory Example
Please explain dependency theory by applying it to a country.
The dependency theory states that underdeveloped, non-industrialized countries are not able to become developed countries even though there is a significant amount of investment in these countries. The main factor is that there is an uneven distribution of wealth and resources, mainly due to colonization, that prevents these underdeveloped countries from becoming developed countries.
As colonies were created, the colonizing nation took resources from its colonies to make products. These products were then sold in the colonies. This put the colony in a state of dependency because the colony relied on the colonial power for products and also for financial support. In many instances, these colonies acquired a lot of debt; it was then very difficult for the colonies to function independently.
A good example of this would be the countries in Africa. African countries received huge sums of money in the form of loans from colonial powers. Even though the African countries repaid the principal, they were not able to repay the compound interest as a result of these loans. As a result, these countries continue to be dependent on the developed countries. A similar situation exists in some Latin American countries.
Dependency theory essentially argues that less-developed countries will be unable to develop because the rich world uses them as the equivalent of colonies. That is, the rich world uses the less-developed countries as sources of raw materials and of cheap labor but never lets those countries get to where they can have major domestic industries of their own.
To understand this, think, for instance, of Mexico. For much of its history, Mexico was used as a source of raw materials for the US. The US, for example, bought copper from Mexican mines while selling finished goods to Mexico. Nowadays, Mexico is a source of cheap labor. This is why there are so many factories, especially in border areas, all meant to provide cheap goods for the US market. At the same time, Mexico cannot develop its own domestic industries. If, for example, a Mexican car maker tried to get started, it would never be able to compete with foreign car makers who could offer lower prices than a Mexican firm could at first.
For this reason, development theory says, less-developed countries like Mexico will tend to be unable to catch up to the rich world.
Dependency theory is the perception that the world system is developed such that the developed countries benefit at the expense of the developing countries. This happens when the developed countries use resources derived from the underdeveloped countries to enrich themselves. The theory presumes that the wealthy nations are actively involved in ensuring the status quo is maintained, whereby the state of dependence by underdeveloped countries continues. This not only guarantees the developed nations a market for their products and services but also access to raw materials and cheap human resources. Those in support of changing this situation presented by the dependency theory argue that it is important for underdeveloped countries to practice some level of protectionism with regard to the economy by controlling their imports and exports. This idea has, however, been criticized with other theorists citing high levels of corruption within state-owned firms and the lack of competition due to such protectionism efforts.