Dependency theory

Definition

Dependency theory is a framework that explains the persistent economic inequalities between developed and developing countries, arguing that the latter are kept in a state of underdevelopment due to their dependence on the former. This theory suggests that economic growth in developing nations is hindered by their reliance on foreign capital, trade, and aid, which often benefits the wealthier nations instead.

5 Must Know Facts For Your Next Test

1. Dependency theory emerged in the 1960s and 1970s as a critique of modernization theory, which suggested that all countries could achieve development through similar paths.
2. Proponents argue that international trade relationships often favor developed nations, leading to unequal exchanges where developing countries export raw materials and import finished goods.
3. The theory emphasizes that foreign aid can perpetuate dependency by creating reliance on external support instead of fostering self-sustaining growth.
4. Critics of dependency theory point out that it can overlook internal factors within developing countries, such as governance issues and resource management.
5. Dependency theory has influenced development policies and debates surrounding globalization, trade agreements, and the role of international institutions in shaping economic outcomes for poorer nations.

Review Questions

• How does dependency theory challenge traditional views of economic development and modernization?
  • Dependency theory challenges traditional views by arguing that development is not a linear process applicable to all nations. It posits that many developing countries remain underdeveloped due to their historical and ongoing economic relationships with developed countries. Unlike modernization theory, which assumes all countries can follow a similar trajectory to development, dependency theory highlights how external dependencies can hinder growth and sustain inequalities.
• Discuss the implications of dependency theory for foreign aid policies directed at developing countries.
  • Dependency theory suggests that foreign aid can create a cycle of dependence rather than foster genuine development. Aid often benefits donor countries or comes with strings attached that reinforce existing power dynamics. This has led to calls for rethinking aid strategies to prioritize self-sufficiency, capacity building, and local empowerment rather than simply providing financial assistance without addressing structural issues.
• Evaluate the relevance of dependency theory in analyzing the economic dynamics between emerging economies like the BRICS nations and developed countries.
  • Dependency theory remains relevant when analyzing BRICS nations as it helps illuminate how these countries navigate their relationships with more developed economies. While BRICS countries have made significant strides in economic growth, they still face challenges related to global market dependence and unequal trade relationships. Analyzing these dynamics through the lens of dependency theory reveals ongoing vulnerabilities as well as potential pathways for redefining these relationships to promote more equitable economic interactions.

Related terms

World Systems Theory: A sociological perspective that categorizes countries into core, semi-peripheral, and peripheral nations, emphasizing the global economic system's hierarchical nature.

Neo-colonialism: A form of indirect control where powerful nations exploit resources and influence over developing countries through economic and political means rather than direct military intervention.

Structural Adjustment Programs:

Economic policies imposed by international financial institutions on developing countries to promote structural reform and stabilize economies, often criticized for exacerbating poverty and inequality.