1) Dependency Theory

Module One
(Discovery of Americas to the rise of industrial capital,

1492-1770)
1) DEPENDENCY THEORY (1960’s):

 Introduction:
Dependency theory is the notion that resources flow
from a "periphery" of poor and underdeveloped states to a "core"
of wealthy states, enriching the latter at the expense of the former. It is a
central contention of dependency theory that poor states are impoverished
and rich ones enriched by the way poor states are integrated into the
"world system".
Periphery
countries cannot move to the Center as their exploitation is an integral
part. (Structural hierarchy is static). Integration of developing countries in
the world market is not the beginning of the progress rather it is beginning
of exploitation (the action or fact of treating someone unfairly in order to
benefit from their work.).
Dependency Theory developed in the late 1950s
under the guidance of the Director of the United Nations Economic
Commission for Latin America, Raul Prebisch. Prebisch and his colleagues
were troubled by the fact that economic growth in the advanced
industrialized countries did not necessarily lead to growth in the poorer
countries. Indeed, their studies suggested that economic activity in the
richer countries often led to serious economic problems in the poorer
countries. Such a possibility was not predicted by neoclassical theory,
which had assumed that economic growth was beneficial to all (Pareto
optimal) even if the benefits were not always equally shared.
 External Factors:
There are some external factors that were also
present which stops or slow down any country’s growth and development.
Low level of contribution is global market. Since the world had become a global
village so if a country is away from the international trade the country will not
prosper if its export is very low. Results of that will be integration of capitalist
world (Trade). International political relations are most important in a
country’s prosperity. The better one has the more opportunities are there for
them. There are many other factors also like improper economic system.
 Direct Exploitation and Indirect Exploitation:

Dependency
theory posits that the cause of the low levels of development in less
economically developed countries (LEDC's) is caused by their reliance and
dependence on more economically developed countries (MEDC's). The LEDC's
are undeveloped because they rely on the MEDC's. Some proponents of
dependency theory assert that LEDC's will remain less developed because the
surplus that they produce will be siphoned off by MEDC's - under the guise of
multinational corporations. There is, as such, no profit left for reinvestment
and development because of unequal distribution of income and unfair terms
of trade.
OR
The exploitation thesis has a prominent place in which asserts that the
international exploitation of developing countries can take direct or indirect
forms. The open or covert transfer of profits by foreign investors in developing
countries, thereby "decapitalising" them, constitutes direct exploitation.
Indirect exploitation relates to the deterioration in the terms of trade of
developing countries and unequal exchange between developed and
underdeveloped economies. The two forms of exploitation frequently overlap
in the literature on dependency.
 Criticism on Dependency Theory:

Dependency theory make the
mistake of treating LDCs (least developed countries) as homogeneous (having
the same characteristics). They fail to understand that value systems and
institutions tend to be culture-specific. For example, Ethiopia and Somalia may
be neighbouring LDCs but their cultures are quite different from one another
and may each require different development programmes. The theories also
make the mistake of treating capitalist societies as homogeneous and
consequently fail to acknowledge that there are different types of capitalism
and cultural reactions to it. For example, American capitalism (based upon
Fordism) tends to have a different character to Japanese capitalism. The
theory can be accused of being over-deterministic in that they make little
attempt to explore the interpretations of people in the LDCs. The theory fail to
acknowledge that LDC people might rationally choose to take a capitalist path,
might rationally choose to hang on to their own culture or might rationally
choose to combine elements of capitalism and their own cultures as in Japan.
Same as with South Korea, Hong Kong, Singapore, Tunisia, etc are the example
of countries that become developed from the zero condition.

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1) Dependency Theory

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Module One

(Discovery of Americas to the rise of industrial capital,

1) DEPENDENCY THEORY (1960’s):

 Direct Exploitation and Indirect Exploitation:

 Criticism on Dependency Theory:

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