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.
“Dependence is a conditioning situation in which the economies of one group of countries are conditioned by the development and expansion of others.
A relationship of interdependence between two or more economies or between such economies and the world trading system, becomes a dependent relationship when some countries can expand only as a reflection of the expansion of the dominant countries, which may have positive or negative effects on their immediate development” (Dos Santos, 1970)
As illustrated by Theotonio Dos Santos, the dependent countries of the periphery can only develop themselves, according to the development of the countries of the centre. Therefore, in no circumstance can the periphery develop before the centre.
An important distinction between dependence and inter-dependence is depicted here, which is, that the countries in the centre (capitalist countries), have the opportunity to share each others technologies, to trade and invest in each others economies; all for their mutual benefits. This situation is referred to as inter-dependence. Whilst the centre countries can expand through ‘self-growth’, dependent countries can only expand as a reflection of the growth of the central dominant economies.
The concept of dependence allows us to see the internal situation of these countries as part of world economy. In the Marxian tradition, the theory of imperialism has been developed as a study of the process of expansion of the imperialist centres and of their world domination. In the revolutionary movement of the Third World, we have to develop the theory of laws of internal development in those countries that are the object of such expansion and are governed by them. This theoretical step transcends the theory of development, which seeks to explain the situation of under-developed countries. Although capitalist development theory admits the existence of an ‘external’ dependence, it is unable to perceive under-development in the way that the present theory perceives it. Such as, a consequence and part of the process of the world expansion of capitalism, a part that is necessary to and integrally linked with it.
Three central propositions that are common to all dependistas are; firstly, persistent surplus extraction or persistent exploitation by the centre, from the periphery, this systematically deprives the periphery of investable resources. The basis of this exploitation is the predominance of the countries of the centre over the dependent countries in terms of commerce, technology, capital, trade and social and political power. This stress of surplus extraction derives from the Russian born, Paul Baran, who was very influential in the 1950’s. He introduced the neo-Marxist term, surplus extraction to dependency writings. Surplus extraction is the mechanism of its own perpetuation. As capital accumulation is being drained away from the periphery, it creates an increasing dependence on the centre for flows of foreign capital and technology.
Secondly, technological dependency, which is brought about by the absence of an indigenous capacity in the periphery. Dos Santos sees technological dependence as the key to the dependency situation and also the key to escaping from the situation of dependency. Only with a fully developed capital goods sector, can the periphery require an indigenous technological capacity for self-sufficient expansion. If a dependent peripheral economy can establish a high degree of productive autonomy, by developing an important capital goods sector in the economy. Then, it is argued that foreign capital will lose its capacity to determine the character of peripheral development. However, surplus extraction through multinationals, prevents this development of the capital goods sector. Therefore, we end up with industrial stagnation of the periphery, but this is also due to many other reasons, including, failure to carry out land reform and failure to change the distribution of income, to name a few.
Finally, the powerful presence of multinationals in the periphery. Both surplus extraction and technological dependence, are factors that derive from the presence of multinationals. Multinationals would be negatively affected by full-integrated industrialisation of the periphery, according to dependency writers. So, the multinationals must come up with a way to prevent this industrialisation form occurring. Exports of a wide range of particular capital goods are also essential for the prevailing dominance of the centre, so steps must be taken to ensure that peripheral industrialisation does not occur.
The ability of multinationals to do this depends on the extent of their political power over the dependent countries. This includes, power over the government policy in the periphery, power over the classes behind the peripheral states and influences over government policies in the centre countries.
Manifestations of dependence include, the dependence on foreign trade, despite the fact that import coefficients and export coefficients had declined; the continuing importance of exports of primary commodities, for example, mining and agricultural products; dependence on a variety of imports crucial to the operation of the economy; resort to foreign commercial loans and foreign aid; inability to generate their own technology; inappropriate foreign technology; foreign investment via multinationals and finally, subordination to America and entry of multinationals.
The problem of under-development and dependency can still be located in the world economic system, divided into the centre, specialising in an industrial sector, production of export and manufacture, and the periphery, specialising in the production of export and private commodities in the centre.
The developed centre has an indigenous capacity for growth, whereas the under-developed periphery, where under-development is not a stagnant stage, but an ongoing process, experiences induced growth.
There are three major variants of dependency;
- The ECLA Structuralist Perspective
- The Marxist Perspective
- The Marxist-cum-structuralist Perspective
ECLA structuralist writers include Furtado, Sunkel, Pinto, and Paz, to name a few. The influence of Prebisch is also strong amongst these writers, as their argument is concentrated on the relationship of the centre and the periphery.
They focus on the long-run deterioration of the terms of trade for peripheral exports; this is still seen by these writers as the significant mechanism for surplus extraction from the periphery. The operation of multinationals also plays a critical role here, through both imports of technology and transfer pricing.
It is important to note that most structuralists welcomed multinationals and very large inflows of foreign capital. However, some structuralists began to criticise the role of multinationals as they clearly had control over imports of technology and the price at which peripheral countries gained access to that technology. Mechanisms of transfer pricing increased price of imports and decreased the price of exports, this affected the terms of trade. They developed a strategy for decreasing the degree of national autonomy over their internal pattern of development, as well as entering into many negotiations. An element of this strategy included the establishment of Latin American multinationals doing something about income distribution and land reform. The policy of Latin American integration resulted in the expanding size of the domestic market.
The Marxist and neo-Marxist writers take the intellectual influence of monopoly capitalist, Paul Baran, into their argument. These writers include Dos Santos, Frank, Marini and Braun. Classical Marxism saw capitalist development as a progressive historical stage. Baran was writing at a stage of monopoly capitalism, he argues that capitalism in the centre blocks capitalist development in the periphery. There are different views of historical capitalist development. Economic development in the periphery is seen to be fairly hostile, due to the dominant stress in capitalist countries. Central to the whole relationship is a whole series of surplus extraction. Andre Gunder Frank, introduced a theory of ‘Development of Under-development’, this was the concept of under-development as a process, being imposed on the periphery by the centre.
“if it is satellite status which generates underdevelopment, then a weaker or lesser degree of metropolis-satellite relations may generate less deep structural underdevelopment and/or allow for more possibility of local development” (Frank, 1967)
Here we can see that Frank is referring to the centre as the satellite and the periphery as the metropolis, as a result the periphery was incorporated into the world economic system by the end of the 15th century.
According to the neo-Marxist dependency writers, there is no reformist solution to dependency possible. Development is possible, in this case, independently of the centre; this implies a revolutionary break with the countries of the centre. From the experience of revolution in Latin America, South Asia and Africa, development is not possible independently, there is no reform possible and nor is it possible for a revolutionary break. Peripheral countries must wait until the centre countries have fully developed.
The third variant of dependency theory, draws on the traditional Marxist perspective and the structuralist perspective, not so much on the neo-Marxist view. These writers include Cardoso, Faletto, Quijano, Ianni and Fernandes. The Marxist position, taken up by writers, such as Cardoso, focuses on the importance of class analysis, unlike the neo-Marxists that focus on the centre and the periphery. This is seen to be a much more empirical approach, rather than
theoretical, like the neo-Marxist perspective. Dependency can be characterised by structural dynamism. Multinationals concentrated on extraction of raw materials and cheap exports to the centre countries. Multinationals were more interested in producing manufactured goods to sell within the centre economies.
“Dependency theory found the lack of development to be external to the socio-economic formations of the less-developed nations.”
Therefore, internal backward institutions of the less-developed nations were not treated seriously by dependency writers as a subject of analysis or were seen as extensions of external domination. The negative influence of transnational corporations, multilateral institutions like the World Bank and the International Monetary Fund, and the extensive influence of foreign governments in the internal affairs of less-developed nations were highlighted.
The historical specificity of the situation of underdevelopment derives from the relationship between the central and the peripheral countries. Underdeveloped countries must be distinguished from those without development; the latter economies and people are those that do not have relations with the industrialised countries.
As with underdeveloped countries, the link between the periphery and the world market can sometime be seen as ‘colonial’, whereas in others the peripheral economies belong to ‘national societies’. The situation of underdevelopment came about when commercial capitalism and then industrial capitalism expanded and linked to the world market non-industrial economies that went on to occupy
different positions in the overall structure of the capitalist system. Therefore, a difference exists among the developed and under-developed economies, not only of the stage and the state of the production system, but also of the function and position within the international economic structure of production and distribution.
The concept of underdevelopment refers to a type of economic system with a predominant primary sector, a high concentration of income, little diversification in its production system and overall, an external market far outweighing the internal market.
Dependency theory illustrates many important ideas and provides relevant analysis to the problem of underdevelopment. It explains the emergence of underdevelopment and seeks to provide an explanation for it. Dependency theory highlights how the peripheral economies can overcome the situation of dependency, as a result of underdevelopment. Even though the peripheral countries are ‘restricted’ in their own development, in that, they must wait for the centre economies to fully develop, before they can begin to reduce their dependency on the them and develop themselves.
We can see that the dependency theory does provide us with some explanation and solution of the problem of underdevelopment. Regardless of the fact that in a practical setting, for the periphery to overcome underdevelopment, it is a long process, that is relies on the development of the centre, for it’s own expansion.
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.
BIBLIOGRAPHY
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Dependency & Development in Latin America, 1979, F. Cardoso & E. Faletto, University of California Press.
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Dependency Theory- A Critical Reassessment, 1981, D. Seers, Frances Pinter (Publishers) Ltd.
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Development & Underdevelopment, 1993, M.A. Seligson & J.T. Passé-Smith, Lynne Rienner Publishers.
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Development Theory & 3 Worlds, 2nd Edition, 1995, B. Hettine, Longman Scientific & Technical.
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Latin American Theories of Development and Underdevelopment, 1989, C. Kay, Routledge Publishers.
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The Dependency Movement, 1992, R.A. Packenham, Harvard University Press.
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The Process of Economic Development, 1997, J.M. Cypher & J.L. Dietz, Routledge Publishers.
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The Underdevelopment of Development, 1996, S. Chew & R. Denemark, Sage Publications.
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Lecture Notes, Economics of Developing Countries, Dependency Theory, 26/11/2001 and 29/11/2001.
Pg. 8, sited in The Dependency Movement, 1992, R. A. Packenham, Harvard University Press.
Pg. 3, sited in The Dependency Movement, 1992, R. A. Packenham, Harvard University Press.
Pg. xxii, Preface, Dependency & Development in Latin America, 1979, F. Cardoso &E. Faletto, University of California Press.
Pg. 93, Development Theory & the 3 Worlds, 2nd Edition, 1995, B. Hettine, Longman Scientific & Technical.
Pg. 44, sited in Dependency Theory- A Critical Reassessment, 1981, D. Seers, Frances Pinter (Publishers) Ltd.
Ch.6, The Process of Economic Development, 1997, J.M. Cypher & J.L. Dietz, Routledge Publishers.