Early Perspectives on Dependence

Early Perspectives on Dependence

Dependency Theory Early Perspectives on Dependence

Introduction to Early Perspectives on Dependence

Until the 1960s, the prevailing theory of economic development, known as modernization theory, maintained that industrialization, the introduction of mass media, and the diffusion of Western ideas would transform traditional economies and societies. These influences would place poor countries on a path of development similar to that experienced by Western industrialized nations during the 19th and 20th centuries (see Industrial Revolution).

Dependency theory rejects the central assumptions of modernization theory. In the 1960s advocates of dependency theory-mostly social scientists from the developing world, particularly Latin America-argued that former colonial nations were underdeveloped because of their dependence on Western industrialized nations in the areas of foreign trade and investment. Rather than benefiting developing nations, these relationships stunted their development. Drawing upon various Marxist ideas, dependency theorists observed that economic development and underdevelopment were not simply different stages in the same linear march toward progress (see Karl Marx). They argued that colonial domination had produced relationships between the developed and the developing world that were inherently unequal. Dependency theorists believed that without a major restructuring of the international economy, the former colonial countries would find it virtually impossible to escape from their subordinate position and experience true growth and development.

In the 1960s, dependency theorists emphasized that developing nations were adversely affected by unequal trade, especially in the exchange of cheap raw materials from developing nations for the expensive, finished products manufactured by advanced industrial nations. They argued that modernization theory did not foresee the damaging effect of this unequal exchange on developing nations. Even the achievement of political independence had not enhanced the ability of former colonial nations to demand better prices for their primary exports.

Some developing countries attempted to counter the inequalities in trade by adopting import-substitution industrialization (ISI) policies. ISI strategies involve the use of tariff barriers and government subsidies to companies in order to build domestic industry. Advocates of ISI view industrialization as the precondition of economic and social progress. However, many developing nations that managed to manufacture their own consumer products continued to remain dependent on imports of capital goods. ISI also encouraged multinational companies with headquarters in the industrialized world to establish manufacturing subsidiaries in the developing world.

Dependency theorists have also focused on how foreign direct investments of multinational corporations distort developing nation economies. In the view of these scholars, distortions include the crowding out of national firms, rising unemployment related to the use of capital-intensive technology, and a marked loss of political sovereignty.

From the perspective of dependency theory, the relationship between developing nations and foreign lending institutions, such as the World Bank and the International Monetary Fund (IMF), also undermines the sovereignty of developing nations. These countries must often agree to harsh conditions-such as budget cuts and interest rate increases-to obtain loans from international agencies. During the 1980s, for example, the foreign debt of many Latin American countries soared. In response to pressure from multilateral lending agencies such as the World Bank and the IMF, these nations enacted financial austerity measures in order to qualify for new loans. In the short term, these economic policies led to higher levels of unemployment and slower economic growth.” (1)

Resources

Notes and References

Guide to Early Perspectives on Dependence

In this Section

Dependency Theory, Early Perspectives on Dependence and Evolution of Dependency Perspectives.


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