Details of Module and its Structure

Module Detail

Subject Name Sociology

Paper Name Development, Globalisation and Society

Module Name/Title Conceptualizing Development – Dependency Theory

Pre-requisites To have an understanding of modernisation as a developmental theory as

dependency theory emerged in response to it
Objectives This module looks at the dependency theory and how it examines the
relationship between the developed “core” countries with the
underdeveloped “periphery”
Keywords Terms of Trade, core, periphery, LEDC/ Less Economically developed
Countries, MEDC/More Economically Developed Countries, trickle-down
effect, Prebisch–Singer hypothesis, economic growth, economic
development, per capita income

Structure of Module / Syllabus of a module (Define Topic / Sub-topic of module)

Conceptualising Dependency Theory

Role Name Affiliation

Principal Investigator Prof. Sujata Patel Department of Sociology, University

of Hyderabad
Paper Coordinator Prof. Sherry Sabbarwal Department of Sociology, Panjab
University, Chandigarh
Content Writer/Author Parneet Kaur Sandhu and Department of Sociology, Panjab
(CW) University, Chandigarh (UT)
Department of Sociology,
Dr. Manoj Kumar Post Graduate Government College
for Girls, Sector-11, Chandigarh (UT)
Content Reviewer (CR) Prof. Sherry Sabbarwal Department of Sociology, Panjab
University, Chandigarh
Language Editor (LE) Prof. Sherry Sabbarwal Department of Sociology, Panjab
University, Chandigarh
 Course: Development, Globalisation and Society
Unit: Conceptualising Development
Module Title: Conceptualising Development – Dependency Theory

Dependency Theory – An Introduction

Modernisation theories sought to map out the path of development that societies would follow in

a bid to shed traditional ways and values and to adopt a modern outlook that embraced rapid

economic development and growth in the world market. This growth would put economies in

commercial contact with one another as they all vie for world resources and market space. The

emergence of the dominant economies is based on factors like advancements in technology,

sophistication of production process, the resources available to a country and the level of skill of

its workers. Any backwardness in either of these fields means negative repercussions in the

standing in international economic relations. The dominant economies dictate the terms of trade

and the economies that are at a disadvantage have no choice but to follow, often to their own

detriment. Modernisation charts the growth of a society as a socio-economic power in its own

right but in reality no society can grow in isolation from its immediate geographical neighbours.

As trade and commerce spreads to span the world, economies come in contact with each other as

buyers as well as sellers. The market forces as well as the laws and policies that affect the

international market are all affected by these players. Different economies maintain business

relations with each other to maintain favourable terms of trade. Terms of trade can be interpreted

as the amount of import goods an economy can purchase per unit of export goods.1 Favourable

terms of trade for an economy would be when the amount of goods imported are in balance with

1
http://www.investopedia.com/terms/t/terms-of-trade.asp
or less than the amount of goods exported. A higher ratio of imports with respect to exports puts

the country at a disadvantageous position. As observed in the Prebisch–Singer hypothesis, the

terms of trade of the underdeveloped countries deteriorate over a period of time when compared

to the terms of trade of the developed countries. In other words, the quantity of manufactured

goods that the underdeveloped countries trade from the developed countries in exchange for their

raw materials decreases over a period of time.

Emergence of Dependency Theory

The dependency theory emerged in the 1960s as a response to modernisation theory that states

that underdeveloped countries are just at the previous stage of development as compared to the

developed countries and that they would eventually catch up. Dependency theory rejected this

view, arguing that underdeveloped countries are not merely primitive versions of developed

countries, but have unique features and structures of their own; and, importantly, are in the

situation of being the weaker members in a world market economy.2 The dependency theory

states that the developed countries form the “core” of the world market and the under developed

countries form the “periphery” and the resources flow from the periphery to the core and the core

continues to make economic gains at the expense of the periphery. Seen from the world systems

approach, the poverty of the underdeveloped countries is due to the development of the

international economy where resources are divided in such a way that the developed countries

continue to gain advantages at the expense of the underdeveloped countries.This theory sees the

world market as it exists as a mechanism of exploitation of the underdeveloped countries for

their cheap labor and raw material by the developed countries. In return, obsolete technology is

2
http://www.economicsonline.co.uk/Global_economics/Dependency_theory.html
given to the underdeveloped countries which keeps them at a near constant disadvantage and

increase the marginalised status of the underdeveloped countries. Dependency theory advocated

an inward looking approach to development and an increased role for the state in terms of

imposing barriers to trade, making inward investment difficult and promoting nationalisation of

key industries.3

Dependency theories are based on the following assumptions:

1. The relationship of dependence exists between two groups – centre/periphery,

dominant/dependent or metropolitan/satellite. The centre consists of the countries that

have undergone economic growth at their own pace and have developed technological

advancements to suit their needs and requirements. The periphery consists of those

countries that have adopted the economic models of growth that have yielded results for

the developed countries. These members of the periphery have not achieved optimal

utilisation of their own resources and depend either heavily or in part on the exports made

from the developed countries. The developed countries are also called MECD or more

economically developed countries and the underdeveloped countries are called LECD or

less economically developed countries.

2. The dependency theorists reject the definition of underdeveloped as given by

modernisation theorists – that underdeveloped countries follow the same stages of

economic development, only that they are still in one of the previous stages of

development as compared to the developed stages. According to the dependency theorist,

this approach reduces the very nature of the underdeveloped economies to “primitive” as

opposed to different from the developed economies and denies or ignores their history.

3
http://www.economicsonline.co.uk/Global_economics/Dependency_theory.html
 The historical developments of the underdeveloped countries are negated by treating

them as primitive versions of the developed countries.

3. The underdeveloped countries are deeply affected by developed countries and the various

means by which they represent their economic interests, thus making the dependent

nature of the relationship apparent. In other words, the economy of the underdeveloped

country is directly affected by any changes or fluctuations in the economic conditions of

the developed country.

4. The dependent relationship has been ongoing since the first technological advancements

were made and commercial use was established giving certain countries an economic

advantage over others. Raw material was acquired in return for manufactured goods but

there has always been a discrepancy in the values of the commodities in question and this

discrepancy continually increases. In other words, dependency is historical in nature.

5. The resources that are available at the disposal of the underdeveloped countries are being

used to their potential but the advantage of these resources goes to the developed

countries. In relation to the underdeveloped countries, to whom these resources actually

belong, they reap no benefit from their utilisation.

6. The dependency relationship continues to exist not only due to the economic superiority

of the developed countries and their use of the underdeveloped countries’ resources but

also due to the elites within the underdeveloped countries. The interests of the elites of

the underdeveloped countries align with those of the developed countries and as such

they see no reason to upset the existing system of dependence. The ones who are affected

by the exploitative nature of the dependency relationship are the poor of the

underdeveloped countries.
 7. Dependency theorists suggest that to break out of the cycle of dependency, a common

national economic interest should be established along with the backing and protection of

the government of the underdeveloped countries so as to protect its interests. The needs

of the poor should be one of the deciding factors in determining which course of action

should be adopted to safeguard the interests of the underdeveloped economy as a whole.

However, they do not give any set parameters as to what constitutes these interests and as

such it is difficult to translate these theoretical parameters into a functional approach.

Dependency theory can be further studied from two perspectives – the Marxist perspective and

the power perspective. According to the Marxist view, the capitalist system in the world market

establishes a division of labour between the developed and the underdeveloped countries. The

underdeveloped countries supply cheap raw material in the form of natural resources,

agricultural produce and human resource (both skilled and unskilled) and serves as the market

for obsolete technology, manufactured and consumer goods that no longer have a demand in the

domestic markets of the developed countries. The gains of the developed countries far outweigh

the seeming gains made by the underdeveloped countries and from the broader perspective, it is

the interests of the developed country that are always taken into consideration and not the needs

of the underdeveloped countries. As technology continues to flow into the underdeveloped state,

no matter however obsolete, it serves the immediate needs of the underdeveloped state and as

such no efforts are made to device innovations that are wholly suited to the requirements and

resources of the underdeveloped countries. Instead, underdeveloped countries divert their

spending towards the consumption of goods and services that flow in from the developed

countries. This contributes to the overall poverty of the underdeveloped county and the disparity

and dependency between the underdeveloped and developed country continues to grow. All in
all, the dependence of the underdeveloped country makes it nearly impossible for it to achieve

self-sustaining economic growth.

However, not dependency theorists take the Marxist view of world market relations. The state of

affairs is more complicated than a capitalist framework of the world market. The dependent

relationship between the dominant and dominated countries is self-perpetuating i.e. unless there

is external disruption, the dependent and exploitative relationship continues to exist. The

existence of dominant countries does not come to an end as they fight for world resources as

given under the Marxist-Leninist framework. Instead, the dominant countries might change in

identity, depending on who acquires power once the struggle settles and the economic

relationship of dominant and dependent states continues with different players. This concludes

that the dependency is not solely based on the capitalist nature of the world market and

international economics. Instead, it is based on the disparity of power that exists between the

different countries. The countries that are economically strong and technologically advanced

hold power over the lesser developed countries in terms of trade. It is this power that enables the

developed countries to maintain their dominant position and the dependent and exploitative

relationship between the developed and underdeveloped countries continues, supported by

capitalist workings, giving developed countries economic superiority.

Policies to overcome dependency

The cycle of dependency between the underdeveloped economies and the developed economies

can only be broken if the development of the underdeveloped economy becomes the key area of
growth, thereby eliminating the dependent relationship altogether. To achieve this overarching

goal, the dependency theorists give the following points:

1. The underdeveloped countries should not use the developed countries as models of

economic growth and try to imitate their developmental path. The economic growth that

the developed countries have undergone has been organic in nature – it has come about

due to the developments that fulfilled their needs at the time in accordance with the

technological and scientific know-how of the time. Keeping in mind, their requirements

and future aspirations, innovations were made and resulted in economic growth. The

underdeveloped countries should examine their own needs and aspirations and arrive at a

developmental model that best suits their needs and fully utilised the resources available

to them.

2. The trickle-down effect that neoclassical models of development support is repudiated by

dependency theory. The neoclassical model assumes that as economic growth takes

place, the rewards will be spontaneously “flow down” or “trickle down” to reach the

lowest groups in the economy. This assumes that the economy is fluid enough to not

allow stagnation of wealth at any stage and that consumption pattern will change to

accommodate economic development. Dependency theory takes a realistic approach

towards this assumption and focuses on the optimum distribution of wealth. It argues that

as yet developing conditions in a growing economy leave for wealth to be concentrated in

certain pockets and measures should be undertaken to ensure that fair distribution of

wealth takes place. This is where governmental policy comes in to ensure the same and to

combat the impediments brought about by the as yet traditional consumption patterns

governed by social and economic biases.

 3. Dependency theory makes a very clear distinction between economic development and

economic growth. Economic growth is simply an increase in the goods and services

produced in relation to the population of a country over a time period. Growth is

measured only in economic terms and is quantitative in nature. On the other hand,

economic development is a qualitative concept and takes into account the social

indicators of growth and development. The aim of economic development is to bring

about improvement in the overall standard of living while maintaining a growing per

capita income. Other aspects of growth that come under economic development are

improvement in the quality of human resource, better core infrastructure, health,

education, safety etc. Dependency theory makes economic development the aim of the

growing economy with economic growth a sub-category under the developmental process

and tries to achieve holistic results that benefit all sections of the society.

4. The overall aim of the dependent economies should be to become self-reliant and

eliminate or at least diminish the dependency on dominant economies. This can only be

achieved when prospects of growth are undertaken when establishing business relations

with other economies serves their interests first. A disadvantageous economic

relationship will only foster dependence and the requirements of the developing economy

will be sidelined again.

In conclusion, the dependent economies should shift their focus from barely meeting their needs

at the conditions set by developed economies and pursue a developmental model that is

formulated after a careful evaluation of their strengths, the resources available to them, their

immediate and long term needs. A model of self-reliance that is best suited to developing country

should be the end goal.

The criticism for dependency theory addressed the following loopholes that emerge when it is

applied in real time. These points of criticism are as following:

1. With governmental control over the economic resources of an economy, instances of red-

tapism and corruption would rise which would again lead to the consolidation of wealth

in a few pockets, thereby doing the same thing that governmental participation is

supposed to correct.

2. A developmental model that relies heavily on governmental participation is not

sustainable in the long run. The main focus is social welfare and maintenance of the

status quo which stifles industrial innovations. There is considerable resistance to change

and economic development suffers as a result.

3. The rate at which development takes place will be slower as the economy would have to

adopt a hit and trail method of working out which model suits its needs the best. In the

meantime, the social cost of this delay is suffered by the poorer sections of the society for

who are supposed to benefit socially and economically from the developmental process.

Summary

Dependency theory began to decline in popularity as many real time economic developments

were seen as contradiction of the predictions made by this theory. Chief among these was the

development of the Indian economy as it opened itself to the open trade model, discarding the

state-controlled model in almost all sectors. However, some writers have argued for its

continuing relevance as a conceptual orientation to the global division of wealth. (James

1997:226) The dependency theory has been streamlined by Immanuel Wallerstein, an American
sociologist and he calls it the “World System” that applies the Marxist approach to dependency

theory on an international, macro level and states that there exist three categories of counties –

the core that holds the bulk of capital intensive production and skilled labor and the semi-

periphery and the periphery that hold resources like labor (cheap and unskilled), labor intensive

production and raw material. This system is more dynamic as compared to the one proposed by

the dependency theory due to advancements in communication and transportation technology.