Dependency Theory

1. Dependency Theory and the
Latin American Experience

2. • 1500’s – European explorers spread
throughout the Americas, Africa and Asia
claiming land or Europe.
• 1900’s – The United states soon sprawled out
through the North America and took control
of Haiti, Puerto Rico, Guam, the Philippines,
the Hawaiian Islands and parts of Panama and
Cuba.

3. • With colonialism came the exploitation of
both natural and human resources.
• The Transatlantic slave trade followed a triangular route
between Africa, the American and Carribean colonies, and
Europe.
• The colonial model kept going strong.
– In 1870, only 10% of Africa was colonized. By 1940
, only Ethiopa and Liberia were not colonized.

4. • Under this colonial regime, European
countries took control of land and raw
materials to funnel wealth back to the west.
• Most colonies lasted until the 1960’s and the
last British colon, Hongkong was finally
granted independence in 1997.

5. After the Second World War,
• Why are so many countries in the world not
developing?
• Traditional answer : because these countries are
not pursuing the right economic policies or their
government are authoritarian and corrupt.
• Latin Americans were critical of this answer and
are intrigued by their regions development which
lead to the conceptualization of the Dependency
theory.

6. Dependency Theory
• Dependency is the condition in which the
development of the nation-states of the South
contributed to a decline in their independence
and to an increase in economic development
of the countries of the North.
• It argues that liberal trade (free trade) causes
greater impoverishment, not economic
improvement to less developed countries.

7. Dependency theory
• Moreover, it sees trade protectionism through
import substitution as the key to self-sustaining
path to development not liberal trade or export.
• It also focuses on how poor countries have been
wronged by richer nations.
• It argues that in a world of finite resources, we
cannot understand why rich nations are rich
without realizing that those riches came at the
expense of another country being poor.
• Global stratification starts with colonialism, in this
view.

8. Dependency theory
• It was initially developed by Hans Singer and
Raul Prebisch in the 1950’s
Two main sub theories:
• North American Neo-Marxist Approach
• Latin American structuralist Approach

9. Dependency theory
• Peripheral nations are counties that are less
developed and receive an unequal distribution
of the world’s wealth.
• Core countries on the other hand are more
industrialized nations who receive the
majority of the worlds wealth.

10. Its major assumptions
• Although generally divided into core or periphery,
dependency theorist recognize that there are a
number of different kind of states in the world.
• Even after de-colonization, there are still
important ties between the developed and less
developed countries, which mainly consists in the
exploitation of peripheral natural resources and
workforce by the center. (Anton, 2006, p.2)

11. • It argues that the development of peripheral
nations is stagnant because of the exploitative
nature of the core nations.
• Less developed countries are said to primarily
serve the interests of wealthier countries and
end up having little to no resources to put
toward their own development.

12. Economies of
periphery rely
on manual
labor and to
the export of
raw materials
to core nations
Economies of core
nations process
these raw
materials and sell
them back for
higher price to
Periphery nations.
Some countries
were not
developing
because the
international
system was
preventing them
from doing so.

13. North American Neo-Marxist
Approach
• Its proponent Andre Gunder Frank (1969)
argued against the idea that less developed
countries would develop by following the path
taken by less developed countries.
• As the path taken by the developed countries
does not guarantee the same fate for the
underdeveloped countries.

14. • Frank also rejected the idea that internal
sources/ problems cause a country’s
underdevelopment.
• Rather, it is their dependency to capitalist
system that causes lack of development.

15. Latin American structuralist Approach
• Palma (1978) noted that the main reason for
Latin American’s underdevelopment was the
excessive reliance on exports of primary
commodities (agricultural products and food)
which were the object of changing process
and a downward trend in the relative value in
the long term.

16. • As a result of the influence of structuralist
approach, most Latin American countries
adopted strategies to achieve autonomous
and self-sustaining development.
• By diversifying exports, accelerating
industrialization through import substitution,
erecting High tariff walls – which reduced the
regions dependence on foreign goods and
thus, the developed North.

17. Historical-structural Approach
• Cardoso and Faletto argues that dependency is
not a general theory of underdevelopment but a
methodology for the analysis of concrete
situations of dependency.
• Cardoso and Faletto believed that Latin American
economies were the results of capitalist
expansion in the United States and Europe.
• This approach did not just focus on the
asymmetrical relations between countries but
also among groups and classes both between and
within nation.

18. • What differentiates it form other approaches is:
“the identification of interest networks –
business, technocrats, the military, the middle
class – that bind the dynamics of local political
and economic processes to material and political
interests in the industrialized world.
• It saw development as historically open-ended
and allowed for the possibility that the nature of
dependent relations could change over time.