The Dependency Theory: rich countries subjugating poor countries

The Dependency Theory tries to explain why poor countries make little progress.

Economically, North and South differ very strikingly. Although in recent decades attempts have been made to improve the situation of developing countries, it is a fact that the rich countries are the ones that end up having the best chances of increasing their wealth, while the poor run the risk of losing what little they have.

The relationship between rich and poor countries was addressed and analyzed by Latin American intellectuals throughout the last century, especially after seeing that, despite no longer being colonies of any metropolis, Latin American countries found it very difficult to industrialize.

Raul Prebisch's theory of dependence is an approach that tries to explain why developed and underdeveloped countries are developed and underdeveloped.taking a Marxist and critical perspective on international trade. Let's explore it further below.

What is dependency theory?

Dependency theory is an economic approach that studies the relationships between countriesIt assumes that the relations between nations at the level of trade and capital flows are based on the existence of dominant nations and dependent nations, also called central countries and peripheral countries.

This theory was developed in the middle of the last century by social scientists, especially interested in the situation of socioeconomic stagnation experienced in Latin America during the 20th century.

This approach uses the idea of the metropolis-satellite duality (or central region vs. peripheral region) to justify and denounce that the world economy has an unequal design and that, in practice, it always harms the less developed countries..

These underdeveloped countries are overwhelmingly located in the southern hemisphere, are poor and have acquired a subordinate role with the rich countries of the North, supplying them with raw materials at low added value so that the dominant countries can manufacture their products and market them with high added value.

Dependency theory holds that, despite their apparent political independence, the fundamental decisions that condition the lives of poor countries are taken in the rich countries, decisions aimed at satisfying the needs of the poorest countries.The dependency theory holds that, despite their apparent political independence, the fundamental decisions that condition the lives of poor countries are made in the rich countries, decisions aimed at satisfying the needs and providing benefits to these second countries. The central countries possess industry and wealth, while the peripheral countries cannot produce their own manufactures and are responsible for supplying raw materials to the industrialized countries to maintain their high standard of living.

The theory of dependency has much to do with the Marxist current, being considered in fact a derivative of Marxism.. Within this theory, current economic relations and the global economic system are seen as a continuation of colonialism: neocolonialism.

Origin of the theory

The historical background of the theory is to be found in the multiple historical events that shook the first half of the 20th century, such as the World Wars, the Cold War, globalism and the struggle between communism and capitalism.

The theory itself was forged during the 1960s and 1970s.Argentine economist Raúl Prebisch was the key figure of dependency theory thanks to his pioneering work for the UN Economic Commission for Latin America (ECLAC). Prebisch is considered the leader of the developmentalist school and the intellectual ideologue of the theory.

With the end of World War II and the beginning of the end of colonization proper, most of the world had apparently achieved full political and economic independence. However, Latin American Latin American intellectuals began to realize that their region, despite not being anyone's colony, had a very low degree of development.. They had been independent from Spain and Portugal for centuries and, although there were still colonial regions such as Guyana, in principle they were all free to manage their own industrialization.

However, it was a fact that Latin America did not have enough independence to start on the road to development. Supported by the studies of the German-British economist Hans Singer, everything seemed to indicate that the economic deterioration of the region was due to the unequal commercial exchange of Latin American countries with the rest of the world. Thanks to Prebisch, an explanation as to why would be obtained, being the Argentinean who would explain the underlying factors of this degree of underdevelopment in Latin America.

Premises of the dependency theory

One of the main premises of the theory of independence is that, for there to be rich countries with a high degree of development, there must be others that are just at the opposite extreme, being underdeveloped and lacking industry and mass production.

Unequal power relations

Relations between the central and peripheral countries are unequal.. Unequal power relations exist, relations that are expressed not only in the form of economic subordination but also on the political and cultural levels. These relations determine trade relations and the degree of dependence between the developed and undeveloped nations.

2. Development and underdevelopment

Raúl Prebisch considered that the underdevelopment of the countries of the South had not been inherited naturally. The reason why the underdeveloped countries were underdeveloped was because the way in which the dominant nations of the North had because the way in which the dominant nations of the North had developed had implanted it in this way..

In the theory, development and underdevelopment are seen as two concepts that should not be studied separately, but should be examined in terms of causality. The fact that industrialized nations are developed, according to the model, is thanks to the underdevelopment of poor countries.

3. Asymmetric flow of capital

The central countries obtain raw materials and cheap labor by exploiting the peripheral countries. Since the developed countries are the ones with industrial and manufacturing capacity, they return what the poor countries give back to the developed countries. return what the poor countries have given them in the form of manufactured goods.produced from the same natural resources that the poor countries have given them.

As a result, the rich countries make more profit than the peripheral countries, which continue to supply the central countries with raw materials.

The flow of capital goes from the poorest to the richest countries.. Developing countries end up running out of wealth and capital and are forced to borrow from developed countries or international institutions. This makes them even more dependent on the dominant nations, increasing their debt and making it impossible to break the bonds of dependency without running the risk of economic sanctions (e.g., bailouts), diplomatic crises and conflicts.

Poor nations are also the ideal destination for obsolete and unusable technology used in developed countries. Those things that are no longer of interest in developed countries, either because they no longer work or because they are scrap and take up space, are sent to the underdeveloped world, which over the years has become the great dumping ground of rich countries.

4. International trade

International trade is designed to always benefit developed nations.. Both multinational corporations and international trade agreements are designed to satisfy the needs and objectives of the dominant nations, without thinking about what the underdeveloped countries need.

International trade and free trade benefit the interests of the dominant countries, making them even richer, but have the opposite effect of making the peripheral countries even more dependent and poorer.

5. The North wants the South to be poor

The rich nations actively seek to perpetuate the state of dependence of the less developed countries in order to be able to continue with the standard of living they have and to maintain the production and degree of industrialization they have achieved. and maintain the production and degree of industrialization they have achieved. This is done by controlling aspects of the less developed nations by influencing their economy, politics, media, education, culture and even sports. Any aspect that influences in one way or another the degree of human development is manipulated.

6. Sabotage of independence

Rich nations seek to eliminate any attempt by dependent nations to free themselves from their influence. The countries of the North carry out all kinds of sabotage to the economic, cultural and political independence of the countries of the South through economic sanctions, the use of military force or the control of the flow of migration and goods. through economic sanctions, the use of military force or the control of the flow of migration and goods.

7. Import substitution and the application of protectionism

Dependency theory holds that, in order to enrich developing countries and initiate economic independence from the central powers, exports must be diversified and exports accelerated, exports must be diversified and industrialization accelerated through import substitution..

Protectionist policies, considered effective measures to limit the power of international trade and weaken the unidirectional flow of capital from poor to rich countries, are also considered necessary. Countries must impose high tariffs in order to reduce their dependence on foreign manufactures and boost their domestic production to satisfy their own consumption.