Dependency theory is a macro-level theoretical perspective concerned with questions of extreme disparities between modern nations. How do we account for such disparities (income, standard of living, etc.) between nations? The dependency theorists argue that the economic and political arrangements of the global capitalist economy are the root cause of such disparities. According to the dependency approach, and contrary to the neoliberal economics or modernization theory, being integrated into the global capitalist economy exacerbates the Third World nations' dependency, instead of alleviating it. While the national economies' positions in the global hierarchy are determined by the external 'rules of the game,' their internal political, economic, and class dynamics are also structured by the asymmetric relationship between the economic center and the periphery. The major social actors — such as the state, domestic business elites, and labor are involved in internal struggles with each other as well as external alliances with transnational business classes and multinational corporations.
Keywords Compradores; Dependency; Dependency Theory; Division of Labor; Economic Integration; Triple Alliance; Undeveloped Economies; Underdeveloped Economies
Global Stratification: Dependency Theory
Dependency theory is entrenched in a conflict perspective on inequality and was articulated in part to address the modernization argument which asserted that 'traditional' societies remain poor and fail to advance because they fail to adopt 'modern' institutions and technologies. Instead, dependency theorists — such as Andre Gunder Frank, Fernando Henrique Cardoso, Raul Prebisch — turned to a critical examination of the historical events which they argued have given rise to extreme inequality between nations. By examining the legacy of colonialism, the dependency theorists brought attention to the historical roots of the disparities between nations. Colonial dependence was characterized by the colonialist European states commandeering the financial capital, land, and manpower of the colonized nations. By the end of the 19th century, dependence became financial-industrial in nature, and constituted an expansion of industrial production of raw materials and agricultural products in the periphery of the world economy, to be consumed in the core economic regions. Finally, in the aftermath of World War II, dependence was solidified in the industrial-technological form, with transnational corporations being the main vehicle of capital flow and larger investment in production which was geared towards domestic markets of the underdeveloped nations (Dos Santos, 1970).
Dos Santos (1970) offers the following definition of dependency:
By dependency we mean a situation in which the economy of certain countries is conditioned by the development and expansion of another economy to which the former is subjected. The relationship of interdependence between two or more economies, and between these and world trade, assumes the form of dependence when some countries (the dominant ones) can expand and become self-sustaining, while other countries (the dependent ones) can do this only as a reflection of that expansion, which can have either a positive or a negative effect on their immediate development (p.232).
In the view of dependency theorists, world trade relations are defined by monopolistic control and transfer of surplus from the dependent countries to the core economies and are characterized by lack of control over productive resources in the dependent economies.
Dependency theorists argue that either of these forms of dependency not only characterize the external, international linkages of the underdeveloped regions with the world economy, but also to a great extent determine their internal economic, social, and political structures. For example, the extractive form of economic production in the underdeveloped countries encourages an internal stratification into 'metropolitan' and 'colonial' centers, creating acute stratification in domestic wage labor. Furthermore, such dependent industrialization does not promote increased wages — and consequently purchasing power — or job creation beyond the extractive sector of the economy, and does not permit for accumulation of economic surplus. The consequence of such an arrangement, according to the dependency theorists, is the result of capitalist integration in the world economy and the most crucial obstacle to economic development.
The seminal volume that defined the intellectual terms of the dependency perspective was the book that came out of the collaboration between Fernando Henrique Cardoso (a Brazilian sociologist and a prominent public intellectual who later became a two term president of Brazil) and Enzo Faletto (a Chilean social historian) in 1969. "Dependency and Development in Latin America" was published in Spanish, and an English translation did not appear until ten years later. At the same time, the English speaking theorists first encountered the works of Andre Gunder Frank, a German born economic historian who first articulated some of the conceptual basics of the dependency perspective and for almost a decade in the 1970s served as the conduit of the ideas on dependency emanating from the Latin America. Frank popularized the ideas of dependency theory in the English speaking world. As Gereffi (1983) observes, together Cardoso and Frank have "formulated dependency analysis that …served the same double purpose: they were a response to the perceived failure of national development through the import substituting national industrialization strategy…, and … an alternative to the ahistorical and apolitical structural-functionalist assumptions of modernization approaches" (Gereffi,1983, p. 7). In the early 1970s however, Frank adopted a radical position which — in the name of ending the Latin American dependency-advocated pursuing radical socialism and discontinuing the region's economic integration into the capitalist world.
Influence of Capitalism
Frank (1967) once remarked, "I believe, … that it is capitalism, both world and national, which produced underdevelopment in the past and which still generates underdevelopment in the present" (as cited in Kay, 2005, p. 1178). In fact, Frank maintained that success and development of the core capitalist economies was predicated on underdevelopment of the peripheral regions. Coining the now key term of the dependency theory — 'the development of underdevelopment,' Frank argued that the core capitalist countries may have been undeveloped in the past, but that the contemporary underdeveloped countries are largely the product of the capitalist world order and the outcome of the asymmetrical political and economic conditions that define the linkages between the center and the peripheral regions in the world. Thus, contrary to the neoliberal doctrine, which advocates economic integration as the panacea for underdevelopment, Frank asserted that such linkages in fact perpetuate the situation of dependency rather than providing a solution for it. As he states, the "satellites experience their greatest economic development if and when their ties to the metropolis are weakest" (as cited in Gereffi, 1983, p. 16). Thus, for Frank, it logically follows that there is no real possibility for sustained development within the system, and the only two feasible outcomes for the...
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