Dependency theory
종속이론
The theory that looks for the cause of poor countries' poverty not in backwardness within them but in the way they were incorporated into the world market. It began with the thesis of Raúl Prebisch and Hans Singer in 1949 that the terms of trade of primary-commodity exporters worsen over the long run, and divided into the structuralist economics of the UN Economic Commission for Latin America (CEPAL) and the Marxist dependency theory of Paul Baran, Andre Gunder Frank, Ruy Mauro Marini and others. It holds that a wealthy "core" draws in the resources and surplus of a poor "periphery", and that the periphery is not taking late the steps the developed countries once took but is held in underdevelopment by its dependent position.
In depth
Why did the theory arise?
After the Second World War the mainstream account of the poverty of the newly decolonised countries and of Latin America was modernisation theory. It held that all societies pass through similar stages of development and that today's underdeveloped areas are simply where today's developed countries once stood. The task, then, was to help them along that path faster through investment, transfers of technology and closer integration into the world market.
Dependency theory rejected this premise. Underdeveloped countries, it said, are not immature versions of developed ones but societies with structures of their own, and above all they stand on the weaker side of the world market. Poor nations provide natural resources, cheap labour, a destination for obsolete technology and markets for the developed nations, which could not enjoy their standard of living without them. Wealthy nations keep this dependence in place not only through the economy but through finance, politics, education and culture.
What does the Prebisch–Singer thesis say?
The starting point was the terms of trade: how much a country can import for one unit of its exports. Take some numbers as an illustrative assumption. If a coffee-exporting country could buy one tractor for 1,000 sacks of coffee in 1950 but has to hand over 1,500 sacks in 1970, it must export more labour and land to obtain the same manufactured good. That is a "deterioration in the terms of trade".
In February 1949 Hans Singer, then at the UN Department of Economic Affairs, published a paper showing that the terms of trade of underdeveloped countries had declined significantly between 1876 and 1948, and in May of that year the Argentine economist Raúl Prebisch presented a paper on the same decline at the second session of the Economic Commission for Latin America in Havana. The statistical argument was Singer's, but Prebisch, who stressed the business cycle and the different behaviour of wages in the core and the periphery, became the better-known name. Their explanation ran as follows. As incomes rise, demand for manufactures grows faster than demand for primary products such as food. And when technology improves, the core can retain the gains as higher wages and profits through strong unions and commercial institutions, while the weaker firms and workers of the periphery have to pass them on to buyers as lower prices. The benefits of technical progress and international trade therefore accrue to the core.
In 1950 Prebisch published The Economic Development of Latin America and its Principal Problems and became executive director of the commission (CEPAL by its Spanish initials). Under his influence it became the centre of Third World advocacy within the UN, and import substitution industrialisation, industrialising by replacing imports with domestic production, came out of it together with Latin American structuralist economics. Prebisch himself, however, criticised Perón's protectionism from 1956 and import substitution from at least 1963, and as the founding secretary-general of the UN Conference on Trade and Development (UNCTAD) in 1964–69 he argued for trade and regional integration among developing countries.
How did it divide into structuralist and Marxist streams?
Two main streams are usually distinguished: the Latin American structuralism of CEPAL, with Prebisch, Celso Furtado and Aníbal Pinto, and the American Marxism of Paul Baran, Paul Sweezy and Andre Gunder Frank. Baran developed the theory from a Marxist perspective in The Political Economy of Growth (1957). He put surplus extraction and capital accumulation at the centre. Development requires that part of the surplus, what is produced beyond bare subsistence, be invested in new means of production; but in the periphery the plantation surplus went into landowners' luxury consumption of foreign imports, and the surplus of industry set up by foreign capital was remitted as profit to foreign shareholders or lost in conspicuous consumption. Baran therefore thought political revolution was needed to break the pattern.
In the 1960s structuralist scholars argued that the system allowed more latitude than the Marxists believed. Pointing to the partial industrialisation of Argentina, Brazil and Mexico, they put forward "dependent development": development, but under the control of outside decision makers. Fernando Henrique Cardoso, later president of Brazil (1995–2002), set out this line while in exile. Against it the Brazilian Ruy Mauro Marini, after a close reading of Marx, built a specifically Marxist dependency theory in which super-exploitation, pressing peripheral workers below the value of their labour power, and unequal exchange arise from the specific forms of dependent capital reproduction and the class relations particular to it. Theotonio dos Santos described a "new dependency" that took in both the external and the internal relations of the periphery.
The theory spread beyond Latin America. The Guyanese Marxist historian Walter Rodney argued in How Europe Underdeveloped Africa (1972) that conscious exploitation by European imperialists led directly to the modern underdevelopment of Africa, and in the Arab world the Egyptian economist Samir Amin refined the theory. Immanuel Wallerstein expanded its Marxist side into world-systems theory. Frank's thesis of the development of underdevelopment and the theory of unequal exchange of Emmanuel and Amin are among the stream's best-known claims.
How does it connect with Lenin's theory of imperialism?
Dependency theory shares many points with the classical Marxist theories of imperialism of Luxemburg and Lenin, and has kept the interest of Marxists for that reason. The emphasis differs, however. Lenin's Imperialism puts at the centre the way monopoly, finance capital and the export of capital divide the world as a stage of capitalism in the advanced countries. Dependency theory looks at the results from the side of the periphery and asks why peripheral societies fail to reach industrialisation and self-sustaining growth. Some writers hold that "standard" dependency theory differs from Marxism in doubting any hope of progress in less developed nations towards industrialisation and a liberating revolution. That difference fed into the debate over whether Latin American societies were feudal or capitalist and into the strategic dispute over alliance with the national bourgeoisie (see the entry on the development of underdevelopment).
What criticisms did it meet?
The economist Sanjaya Lall argued that the concept of economic dependence lacked a clear criterion separating dependent economies from other capitalist economies, and that dependency theorists had not shown that dependence itself, rather than broader features of capitalism, explained differences in development. The political scientist Tony Smith faulted it for leaning too heavily on international economic structures and neglecting the political autonomy of developing countries and their capacity to mobilise domestic resources. The growth of India after it moved from state-controlled business to open trade, and the growth of some East Asian economies, are often cited as counter-examples that reduced the theory's influence. The Indian economists Utsa Patnaik and Prabhat Patnaik replied that this may reflect the formation of a globalised reserve workforce and a change in how imperialism presents itself rather than a clear counter-example.
The record of import substitution was also in dispute. The economic historian Robert C. Allen called the theory's claims "debatable" because the protectionism offered as a solution failed, leaving Latin America heavily indebted and in recession, and the national markets were too small to produce complex manufactures such as cars efficiently. The Third World debt crisis of the 1980s and the stagnation of Africa and Latin America in the 1990s raised doubts about the feasibility of "dependent development" as well.
How is it used today?
Dependency theory no longer dominates scholarship as it did in the 1970s, but it is still used as a conceptual orientation to the global division of wealth. It left its mark on NGO campaigns such as the fair trade movement, and today's discussions of the Global South, research on global value chains and studies that try to measure the value drained from South to North through unequal exchange carry on its concerns. Recent statistical research has given the Prebisch–Singer thesis qualified support on the long-run fall of primary commodity prices, and in 1998 Singer said the thesis had joined the mainstream by entering the advice the Bretton Woods institutions give developing countries.