Consider the Defining Features of Dependency Theory and distinguish its Major Variants. Discuss the Extent to which it is an Illuminating Way of Analysing the Problem of Underdevelopment.

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Economics of Developing Countries                Tarandeep Baxi                                                                                            

BSc Development Economics                117514

Consider the Defining Features of Dependency Theory and distinguish its Major Variants.  Discuss the Extent to which it is an Illuminating Way of Analysing the Problem of Underdevelopment

Studies of dependency, constitute part of the constantly renewed effort to re-establish a tradition of analysis of economic structures and structures of domination; one that would not suffocate the historical process by removing it from the movement which results from the permanent struggle among groups and classes…        (Cardoso, 1977)

Of all the approaches to development, in particular Latin American development, in the last 25 years, none has had deeper or more pervasive influence than the dependency perspective.  The dependency theory has influenced every social-science discipline, some humanities and various applied professional fields.  

What began in the late 1960’s as a challenge, entered the mainstream and became the new orthodoxy in scholarly areas and beyond.

“dependency explanations… are no longer confined to academic sanctuaries; they are now common currency of a growing body of generals, bishops, editors, chiefs of state, even Latin American businessmen.”        (Falcoff, 1980)

Mark Falcoff, as illustrated above, noted the growing influence of the dependency perspective in his writings about Latin America.

The origins of dependency theory emerged from the convergence of two major

intellectual trends; one with its background in Marxism and the other rooted in Latin American structuralism. Dependency theory is, however, mainly built on the ideas of structuralists, specifically Raul Prebisch’s distinction between the centre and the periphery.

 In this distinction, the centre was seen as the cause and the periphery as the effect.  

According to dependency writers, the less-developed nations, the periphery, had to be understood as part of a global process.  Their role was to provide the more advanced nations, the centre, with inputs or to receive their cast-off, low wage manufacturing processes under trading conditions, which were likely to worsen.

There are fundamental disagreements between some dependency theory writers, about how serious dependency relationships are, how to escape dependency and lastly, about how to deal with the dependency situation.  

From an economic point of view, a system is dependent when the accumulation and expansion of capital cannot find its essential dynamic component inside the system.   In capitalistic economies the most important component for the drive to expand, is the capacity to enlarge the scale of capital.  This involves the creation of new technologies and the continuous expansion of the production of capital goods, such as machinery and equipment, to allow the continuing growth of enterprise expansion and capital accumulation.  

It is assumed that ‘modern’ economies are interdependent.  Interdependency in this case can take various forms, such as, some national economies need raw material produces by unskilled labour, or industrial goods produced by cheap labour and others need to import equipment and capital goods in general.  

Even when peripheral economies are no longer restricted to the production of raw materials, they remain dependent in a very specific form; their capital-goods production sectors are not strong enough to ensure continuous advance of the system, in financial as well as in technological and organisational terms.  

Characterisation of contemporary forms of development could be perhaps the most significant contribution by ‘dependentistas’ to the theory of capitalistic societies.  It was foreseen how a general trend (industrial capitalism) creates concrete situations of dependency with features distinct from those of advanced capitalist societies.  Therefore, peripheral industrialisation is based on products which in the centre are mass consumed, but which are typically luxurious consumption in dependent economies.  Industrialisation in dependent economies enhances income concentration as it increases sharp differences in productivity without generalising this trend to the whole of the economy. Whereas the production of cars, televisions, and similar types of goods is based on modern technology, important parts of food products, textiles, and other goods that constitute the basic consumption for the masses are still based on more traditional technology and relations of production.  The wages of technicians, managers and specialised workers, although not directly determined by productivity, are incomparably higher than those earned by peasants or workers employed in traditional sectors.  Hence, industrialisation in the periphery increases disparity of income among wage earners accentuating what has been called in Latin America the “structural heterogeneity”.  

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These considerations stress that dependent capitalistic economies are not identical to central capitalistic economies.  

A real process of dependent development exists in some Latin American countries.  Development in this context is referring to ‘capitalist development’.  

This form of development, in the periphery as well as the centre, produces as it evolves, in a cyclical way, wealth and poverty, accumulation and shortage of capital, employment for some and unemployment for others.  So, the notion of development does not particularly mean a more egalitarian or more just society, these consequences are not expected from capitalist development, especially in peripheral economies. ...

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