In this installment of the International Relations Theory series, we will delve into the topic of Dependency Theory in International Relations. We will provide an overview of the various definitions, historical background, diverse perspectives, and the nature of Dependency Theory. Additionally, we will highlight the five core assumptions that have been identified as central to this theory.
Defining Dependency Theory
Oswaldo Sunkel, a Chilean economist, and scholar, is one of the prominent contributors to the Dependency Theory and is credited with defining dependency as an explanation of the economic development of a state in terms of the external influences, political, economic, and cultural, on national development policy.
According to Sunkel, the relationship between rich and poor countries is not equal, and the poorer countries are dependent on the rich countries for their development, making it difficult for them to achieve economic growth and development independently.
This theory argues that the economies of poorer countries are structured in such a way that they are unable to break free from the grip of the rich countries, leading to a cycle of poverty and underdevelopment.
There is another definition of dependency given by Dos Centos, who emphasized the historical dimension of the dependency relationship. He stated that dependency is a historical condition that shapes the structure of the world economy, leading to the advantage of some countries and the hindrance of others, limiting the developmental possibilities of the subordinate countries.
This definition of dependency describes a situation in which the economy of a group of countries is determined by the development and expansion of another economy to which they are subject. This definition is crucial as it highlights the historical trajectory of certain countries being rich and others being poor, created under specific conditions. These conditions persist and lead to the persistent rich-poor divide whenever the rich countries interact with the poor countries, due to the terms of exchange and the nature of exchange.
3 Common Features to these deifinitions
There are three common features to these definitions if we analyze them, which are as follows –
1] International System Comprised of Two Set of States
The first one is that dependency characterizes the International System as comprised of two sets of states, variously described as the dominant or dependent stage or as the center and periphery, or metropolitan and satellite.
This has been broadly highlighted by world systems theory, which states that there is a division between central or core countries and peripheral countries. Furthermore, it has been analyzed that over time, certain semi-peripheral countries or states have emerged and play a role as a balancer in these dependency relationships within the world system.
The dominant states are the advanced industrial nations in the Organization for Economic Cooperation and Development, while the dependent states are those states in Latin America, Asia, and Africa with low per capita Gross National Products (GNPs) and that rely heavily on the export of a single commodity for foreign exchange earnings.
Thus, the relationship between dominant states and dependent states can be understood in terms of core and peripheral states.
2] Importance of External Forces
The second common feature that can be derived from these definitions is that external forces play a crucial role in the economic activities within the dependent states. This means that the economic activities within these states are not carried out, planned, or implemented by the state itself, but rather dominated by external forces.
These external forces include multinational corporations, international commodity markets, foreign assistance, communications, and various international economic organizations such as the World Trade Organization, IMF, and World Bank.
These organizations are largely controlled by advanced industrialized countries, which further their economic vision and agenda through these organizations. As a result, the internal and external economic activities within the dependent states are largely controlled by outside forces.
3] Relationships Between Dominant and Dependent States are Dynamic
The third conclusion that can be drawn from these definitions is that the relationships between dominant and dependent states are dynamic. This means that the interaction between the two sets of states not only reinforces but also intensifies the unequal patterns of exploitation and inequality.
The dependency relationship between dominant and dependent countries is perpetuated and strengthened by the internationalization of capitalism, making it a permanent feature of international economic exchange.
Dependency is also an ongoing process that has been present since the 16th century and has contributed to the underdevelopment of Latin America. The particular series of relationships that Latin American states have with the International System has resulted in their persistent poverty.
Historical Background of Dependency Theory
Dependency Theory is closely linked to the Marxist theory of international relations, meaning that Dependency Theorists have an economic critique of international relations or the International System.
Dependency Theory developed in the late 1950s under the guidance of Raul Prebisch, the director of the United Nations Economic Commission for Latin America.
His colleagues were concerned that economic growth in advanced industrial countries did not necessarily lead to growth in poorer countries, as it was assumed that overall growth in the International System would benefit all countries.
However, their studies showed that economic activity in richer countries often caused serious economic problems in poorer countries. This was not predicted by the New Classical Theory, which assumed that economic growth was beneficial to all, even if the benefits were not equally shared.
Prebisch and his colleagues found that the higher growth rate in developed economies was actually responsible for poverty in poorer countries, which was not explained by New Classical Economics.
The initial explanation for this phenomenon was straightforward; poorer countries exported primary commodities to rich countries, who then manufactured products from those commodities and sold them back to the poorer countries. The value added by the manufacturing process always cost more than the primary products used to create those products. This meant that the gap between the price of raw materials and the price of manufactured goods was high, and the value added went to the developed countries.
Therefore, Dependency Theorists argued that poorer countries would never earn enough from their export earnings to pay for their imports and that their export earnings were generally lower than their imports. In fact, they had high imports because they had to import almost everything from other states.
Prebisch’s solution was also straightforward; he suggested that poorer countries should embark on programs of import substitution, so they would not have to purchase manufactured products from rich countries.
What is Import Substitution?
Import substitution refers to a country producing goods that it previously imported from other countries. The goal of import substitution is to reduce the country’s dependence on other states by producing the goods domestically.
This way, a country’s foreign exchange reserves would not be used to purchase manufactured goods from abroad, and instead, the money would be used to purchase raw materials and other inputs to produce the goods locally.
Import substitution does not mean that a country will stop selling its raw materials in the international market, but rather it allows the country to minimize the amount of money it has to spend on imports.
Issues Before Import Substitution Policy
There are several issues that make it difficult for countries to follow the import substitution policy.
- 1] Weak Domestic Market: The first issue is that the internal markets of poorer countries are not large enough to support the economies of scale used by developed countries to keep prices low. For example, not many countries can compete with the manufactured goods produced in China due to their large scale production and cost-effectiveness.
- 2] Lack of Political Will: The second issue is the political will of poorer countries to transform from being primary product producers, which indicates the political determination to carry out this transformation. There may be doubts about whether it is possible and the numerous problems that may arise when trying to compete with larger players in developed countries.
- 3] Extent of Domestic Market Abroad: The third and final issue revolves around the extent to which poor countries have control over their primary products, especially in the area of selling these products abroad. This raises questions about the government’s capability and control over its own resources. For example, in many African states, there is a lot of competition among the ruling elite classes and the gap between the rich and poor is high, so the government may lack control over the state’s natural resources, making it doubtful whether the state can start a business venture or manufacturing unit using these resources.
These obstacles to the import substitution policy led others to think more creatively and historically about the relationship between rich and poor countries.
Different Presepective on the Reasons for Persistent Poverty in Poorer Countries
Dependency Theory argues that the persistent poverty of the poorer countries is due to their being integrated into the world economy in a way that limits their economic development. It suggests that the relationship between the rich and the poor countries is exploitative in nature, and that the rich countries are not only dependent on the raw materials and low-wage labor of the poor countries, but also control the global financial and trading systems to their own advantage.
According to Dependency Theory, the poorer countries remain poor because they are unable to break free from their dependency on the rich countries, who control the financial and trading systems in such a way that it benefits them and limits the development of the poorer countries. The theory argues that the poorer countries are forced to specialize in producing primary products and exporting them to the rich countries, while they continue to import manufactured goods from the rich countries, leading to a vicious cycle of poverty and dependency.
Dependency Theory provides a different perspective on the reasons for persistent poverty in the poorer countries and suggests that the solution to this problem lies in breaking the dependency relationship between the rich and the poor countries and creating a more equitable global trading system.
Marxist theorists believed that the unequal distribution of wealth and resources between countries was a direct result of the capitalist exploitation of the poorer countries by the richer countries. They saw the capitalist system as inherently exploitative, and believed that the wealth of the rich countries was built on the backs of the poor countries, which were being exploited for their natural resources and labor.
This view held that the relationship between the rich and the poor countries was not simply a matter of late entry into the modern economic system, but was instead a fundamental feature of the capitalist system itself. As a result, Marxist theorists believed that the poverty of the poorer countries would persist as long as the capitalist system remained in place.
Why Need Dependency Theory?
Dependency Theory aims to provide an explanation for why many nations in the world are in a state of underdevelopment by analyzing the patterns of interaction between countries.
The theory argues that the inequality between nations is a crucial aspect of these interactions, and that this inequality is perpetuated through the ongoing relationship between dominant, developed countries and dependent, underdeveloped countries.
Dependency theorists examine the history of these relationships, including the terms of economic exchange, who dominates the interaction, and what the nature of the economic activity is in each country. Many dependency theorists attribute this relationship to International capitalism, arguing that it is the driving force behind these dominant-dependent relationships.
Dependency Theory provides a critical perspective on the current state of global inequality, by examining the historical patterns of interaction between nations and the role of International capitalism in perpetuating these unequal relationships.
Nature of Dependency Theory
1] The Capitalist System and Rigid International Division of Labor
The capitalist system enforces a rigid international division of labor, which is responsible for the underdevelopment of many regions of the world. This division of labor determines the economic activities of independent countries, such as their manufacturing or raw material supplying status, their imports, the technologies they use, and the source of investments. These factors directly impact the economic productivity of dependent countries.
2] Dependent States and Their Economic Activities
Dependent states mainly supply cheap materials, agricultural commodities, and cheap labor to the international market. They also serve as repositories for surplus capital, obsolete technologies, and manufactured goods. Dependent countries largely remain dependent on imports for the goods they consume, as they rarely manufacture these products.
3] Orientation of Economies Towards the Outside
Money, goods, and services do flow into dependent states, but the allocation of resources is determined by the economic interests of the dominant states. The argument is that the dominant-dependent relationships between states are determined by the economic interests of the dominant states, not by the economic requirements or interests of the dependent countries. This leads to the neglect of the economic interests of dependent countries, causing them to remain poor.
4] Explanation for Poverty
The international division of labor is the primary explanation for poverty in independent countries. This division of labor puts the economic activity of independent countries outside of their control, making it difficult for these states to serve their economic interests.
5] Distinction between Dependency Theory and Marxist Theory of Imperialism
Dependency Theory shares some core assumptions with Marxist theories of imperialism, but it is important to distinguish between the two. Marxist theory of imperialism explains the dominant state expansion while Dependency Theory explains underdevelopment. Marxist theory is self-liquidating, while the dependent relationship is self-perpetuating. The primary difference between the two is that Marxist theory explains why imperialism occurs, while Dependency Theory explains the consequences of imperialism.
5 Key Propositions Identified by Dependency Theory
Dependency theory is a development theory that argues that poor countries are poor not because of their lack of resources or development, but because of their relationship with rich countries. According to dependency theory, poor countries are integrated into the global economic system in a way that benefits rich countries, and not the poor countries themselves.
The theory identifies five key propositions that help to understand this relationship better –
1] The distinction between underdevelopment and undevelopment
The first proposition is the distinction between underdevelopment and undevelopment. Underdevelopment refers to a situation where a country is putting in its best efforts to develop, but still facing difficulty in doing so. On the other hand, undevelopment refers to a lack of willingness or ability to utilize one’s own resources.
Dependency theory argues that underdevelopment in many poor countries is not due to their own shortcomings or late adoption of economic liberalization, scientific transformation, or industrialization. Rather, it is because these countries have been forcibly integrated into the European economic system only as producers of raw materials or sources of cheap labor and have been denied the opportunity to market their resources in a way that competes with dominant states.
2] Different historical context
The second key proposition of Dependency Theory places poor countries in a different historical context and argues that they are poor because of the historical relationships they have had with dominant states, not because they lack scientific transformation or industrialization. This relationship was not mutual and was based on the interests of dominant states, not the poor countries.
3] Alternative uses of resources
The third proposition suggests that dependent countries should explore alternative uses of their resources instead of selling them in international markets at the prices and conditions set by dominant states. Dependency theorists argue that this will allow the dependent countries to utilize their resources better in the present globalized environment.
4] National economic interest
The fourth proposition is that dependent countries should prioritize their national economic interests instead of serving the interests of dominant states. This is similar to the realist approach in international relations, which argues that every country should prioritize its national interests. However, dependency theorists have not provided a clear operational definition of national economic interests.
5] Power of elites in dependent states
The fifth and final proposition is that the diversion of resources over time is maintained not only by the power of dominant states but also by the power of elites in dependent states. Dependency theorists argue that these elites, or the wealthy and powerful class within dependent states, also obstruct the path of their economic development.
This highlights the need for not only addressing the relationships between dominant and dependent states but also addressing the internal class structures within dependent states that maintain economic inequality and prevent economic development.