Dependency Theory Essay ⋆ Political Science Essay Examples ⋆ EssayEmpire

This example Dependency Theory Essay is published for educational and informational purposes only. If you need a custom essay or research paper on this topic please use our writing services. EssayEmpire.com offers reliable custom essay writing services that can help you to receive high grades and impress your professors with the quality of each essay or research paper you hand in.

Dependency theory was a critical reaction to the conventional approaches to economic development that emerged in the after math of World War II (1939–1945). There are two dependency schools: the Marxist, influenced by Paul Baran and developed by Samir Amin, Theotônio dos Santos, Arghir i Emmanuel, André Gunder Frank, and Aníbal Quijano, and the structuralist, built on the work of Raúl Prebisch and others at the Economic Commission for Latin America and the Caribbean, and best represented by Fernando Henrique Cardoso, Enzo Faletto, Peter Evans, Osvaldo Sunkel, and Maria da Conceição Tavares.

Both groups would agree that at the core of the dependency relationship between industrialized countries, referred to as “the center,” and less-developed countries, referred to as “the periphery,” lies the inability of the periphery to develop an autonomous and dynamic process of technological innovation. The main contention between them was related to the possibilities of economic development in the periphery.

Marxist Dependency Theory

Marxists would argue that development in the periphery was impossible, while structuralisms would argue that dependent development was feasible. The vigorous growth in some parts of the developing world in the 1950s and 1960s seemed to justify the views of the latter group. However, the enduring process of stagnation after the 1980s debt crisis led to a reconsideration of the relevance of dependency situations.

For the Marxists, the origins of the center-periphery relationship were strictly technological and determined by the international division of labor. The center produced manufactured goods for itself and the periphery, while the latter produced commodities mainly for the center, as well as maintaining a relatively large subsistence sector. In this view, development was based on capital accumulation—which, in turn, depends on surplus extraction. A larger surplus led to more accumulation of capital and a higher growth rate. Furthermore, for Marxists it was in the uses of the surplus that the differences between developed and underdeveloped regions were most evident. In the most backward countries, where the process of industrialization did not take hold and agriculture was still dominant, underdevelopment resulted from the patterns of land tenure.

The predominance of large estates in plantation societies meant that a great part of the surplus remained in the hands of landowners, which emulated the consumption patterns of developed countries. Excessive and superfluous consumption of luxuries would then reduce the potential for investment and capital accumulation. Hence, conspicuous consumption would be the cause of stagnation in the periphery.

If industrial development took place, then a new pattern of dependency would emerge. Industrialization would take place with participation of foreign capital, which would tend to control domestic markets. The periphery then would jump into the monopolistic phase of capitalistic development, with local governments controlled by the monopolists. However, the surplus extracted by monopolistic capital would not be reinvested in productive activities in the host country. Part of it would simply be sent abroad as profit remittances, while the other part would be spent on conspicuous consumption.

Structuralist Dependency Theory

Structuralists argued that capitalist development in the periphery was possible, even starting off in a dependent relationship with the center, and that foreign investment was not detrimental to growth. Dependency was not a relationship between commodity exporters and industrialized countries, but one between countries with different degrees of industrialization. Furthermore, structuralists distinguished between political and economic variables in explaining dependent development.

Development and underdevelopment were economic categories related to the degree of development of the productive structure and to its level of technological development. Dependency and autonomy referred to the degree of development of the political structure and the ability or lack of ability of local political elites to take economic decision making into their own hands. As a result, dependent development in association with foreign capital was possible and occurred in countries like Argentina, Brazil, and Mexico and in parts of East Asia.

Structuralists emphasized the importance of domestic internal developments, in contrast to the external forces of the world economy, as the main determinant of the situation of dependency. It was the internal political process that led to outcomes that favored foreign actors in the process of development. Furthermore, national capitalist development was not incompatible with the absorption of technological knowledge from multinational firms.

However, the structuralist version of dependency, in refuting the Marxist emphasis on the relevance of external factors, went to the other extreme and claimed that internal forces were the almost exclusive determinant of development. The inability to generate a domestic dynamic of technical progress incorporation, the domestic patterns of consumption, and the limitations of the domestic elites that opted for political dependency were to blame. If the successful industrialization of some parts of the periphery showed the weakness of the Marxist tradition, then the debt crisis and the failure to renovate the process of development in the 1990s proved that the optimism of the structuralist approach was not always justified.

Conclusion

More recently, dependency authors emphasized that industrialization and technical progress in the periphery were insufficient to break the dependency ties with the center. Financial dependency is reflected in the inability of peripheral countries to borrow in international markets in their own currencies, and constitutes the real obstacle to development. The inability to borrow in international markets in their own currencies reflects the inability of the domestic currencies of peripheral countries to acquire all the functions of money as a reserve of value, unit of account, and medium of exchange. The ability of a currency to function as international money is a question of degree. The main problem associated with the inability to provide all the monetary functions is that financial markets remain underdeveloped in peripheral countries, and the process of capitalist accumulation is hindered.

Interestingly enough, mainstream economists have also dealt with financial dependency. Ricardo Hausmann argues that, in part, underdevelopment results from the so-called original sin—that is, the fact that the currencies of developing countries are inconvertible in international markets. In this view, the external instability of domestic currencies in the periphery hinders the process of development. While mainstream and dependency authors agree on the importance of currency inconvertibility, they would disagree on the solutions. Mainstream authors would emphasize the importance of sound fiscal policies and monetary rules that promote credibility, while dependency authors would emphasize the need for capital controls and reduced integration with international financial markets.

Bibliography:

Cardoso, Fernando H., and Enzo Faletto. Dependência e Desenvolvimento na América Latina. Rio de Janeiro: Zahar, 1970.
Cohen, Benjamin. The Geography of Money. Ithaca: Cornell University Press, 1998.
Dos Santos,Theotônio. La Teoría de la Dependencia: Balance y Perspectivas. Buenos Aires: Plaza and Janes, 2002.
Eichengreen, Barry, Ricardo Hausmann, and Ugo Panizza. “Currency Mismatches, Debt Intolerance, and Original Sin.” NBER Working Paper no. 10036. Cambridge, Mass.: National Bureau of Economic Research, 2003.
Frank, Andre Gunder. Capitalism and Underdevelopment in Latin America: Historical Studies of Brazil and Chile. New York: Monthly Review Press, 1969.
Prebisch, Raúl. The Economic Development of Latin America and Its Principal Problems. New York: United Nations, 1950.
Tavares, Maria da Conceição. “Subdesenvolvimento, Dominação e Luta de Classes.” In Celso Furtado e o Brasil, organized by Maria da Conceição Tavares. São Paulo: Fundação Perseu Abramo, 2000.
Topik, Stephen.“Dependency Revisited: Saving the Baby from the Bathwater.” Latin American Perspectives, 25. no. 6 (November 1998): 95–99.
Vernengo, Matías. 2006. “Technology, Finance, and Dependency.” Review of Radical Political Economics 38, no. 4 (2006): 551–568.