Dependency Theory Revisited
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Dependency Theory Revisited

B.N. Ghosh

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Dependency Theory Revisited

B.N. Ghosh

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This title was first published in 2001. An important critical study of the theories of dependency both past and present. Since the theories of dependency are based on the Marxian notion of exploitation and backwardness, the book starts with the elaboration of the Marxian theory of development and underdevelopment. The book analyses various concepts and precepts of dependency as well as critically discussing the individual theories of Baran, Frank, Amin, Emmanuel, Prebisch and Singer. The contributions of more recent writers including Furtado, Kay, Wallerstein and Marini are also considered. The main focus of the book lies in the thorough analysis of all the important traditional as well as modern theories of dependency. The main message of the present book is that the phenomenology of dependency is still relevant as a methodology of study of development and underdevelopment. The book incorporates some pressing contemporary issues to give fresh flavour to the old dependency debate. A special feature of the book lies in the critical appraisal for each of the theories studied. The book is designed to serve as a valuable compendium for students of economic development and political economy and for those interested in the study of the economic backwardness of the Third World countries.

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Economic Theory

The Ontology of Dependency

What is Dependency?

Dependency is a form of unequal international relationship between two sets of countries. One set of countries is called the centre or metropolitan centre, and other set of countries is called the periphery or satellite. The centre represents developed capitalism and the periphery represents underdeveloped region. Dependency is a type of mechanism which can explain the causes of economic development and underdevelopment. The theory of dependency considers the fact that the social and the economic development of less developed countries (LDCs) is conditioned by the external forces which are nothing but the central capitalism. The metropolitan countries are more powerful capitalist countries but LDCs are weaker and they also do not have the full-boiled capitalism. According to the dependency theory, underdevelopment can be explained by the fact of relations of dominance over the LDCs.

The Historicity

The theory of dependence, in a sense, is originally Marxian in character, because it is based on the concept of exploitation of the weaker LDCs by the capitalist DCs. Secondly, it is Marxian in the sense that it explains development and underdevelopment with reference to capitalistic framework of the centre. The theory was first popularised by Paul Baran in 1957 in his book, The Political Economy of Growth. Baran is regarded as the father of modern dependency theory. After Baran, it was subsequently developed by many other illustrious scholars like Frank, Samir Amin, Emmanuel, Furtado and others. It must be pointed out that although the theory of dependency originally started as a Marxist theory, later on many changes were incorporated into the theory, which departed significantly from the classical Marxist proposition. For example, the theory of dependency, unlike the classical Marxist theory, is analysed in terms of exchange relations and not in terms of production relations. Thus, in a sense, a dependency theory cannot be called a proper Marxist theory. However, it is regarded as Neo-Marxist or a Radical theory. There are many writers who have contributed to the development of the theory of dependency. But, there are considerable variations in their attitude and explanation of the basic postulates of the theory, and they also significantly differ from one another in terms of many nuances of the theory. However, one can still find some general trend and thematic similarity of many writers on certain broad and basic positions. In the present analysis, we will stick to this broad thematic presentation.
The theories of dependency, as given by scholars, are mainly concerned with the impact of imperialism and neocolonialism on the economies and society of LDCs. The theory of dependency, it is claimed, can explain the global operation of the capitalist system during the neocolonial era, while accounting for the presence of some colonial features of LDCs, and the dependence of LDCs on the DCs for the development of their poor countries.1 Dependency arises because “….some countries can expand through self-impulsion while others, being in a dependent position, can only expand as a reflection of the dominant countries, which may have positive or negative effects on their immediate development…”.2 According to Dos Santos, dependency is a conditioning situation in which the economies of one group of countries are conditioned by the development and expansion of other more powerful and developed group of countries.3 Dependency theorists inquire into the reasons for such economic dependency when these countries have political independence.
In Marxist tradition, the genesis of dependency theory can be sought in the failure of the theories of imperialism to explain the underdevelopment of LDCs. Bodenheimer, in this context, defines dependency as the obverse side of a theory of imperialism.4 As pointed out earlier, dependency theory is rooted in Marxist tradition where dependency has been distinguished as a formal theory of underdevelopment in contradistinction to a concrete situation of dependency.

Macrocosmic and Microcosmic Systems

In the theory of dependency, we have the juxtaposition of two systems: macrocosmic system and microcosmic system. The macrocosmic system represents world capitalism which is controlling and influencing its subsystem or microcosmic system.

Distinctions Between Microcosmic System and Macrocosmic System

The macrocosmic system is economically more powerful, stronger and better organised. It is important to analyse the dependency from the point of view of internal structure (microcosmic system) and external structure (macrocosmic system). However, there are contradictory relations between the microcosmic system and the macrocosmic system. Gradually the macrocosmic system influences the microcosmic system. Dependency theory speaks of dichotomy or a double system - one subsumed under the other, where the relation between the two is necessarily antagonistic - a two-system zero-sum game i.e. the gain of the macro system is the equivalent loss of the micro system. By implication, in such a situation, the study of underdevelopment of the weaker micro system is very much related to the stronger system. But the micro system cannot exploit the macrocosmic system because it is already subsumed under the larger macrocosmic system. The idea is that the micro system cannot derive any gain from the macro system. We can now point out some important distinctions between the peripheral microcosmic system and central macrocosmic system, as in the following chart.
In such a schematic world structure, the surplus is extracted from the subsumed and dependent microcosmic system by the macrocosmic system. Thus, there is apoplexy in the centre and anemia at the periphery. This explains, at least partly, as to why the periphery is underdeveloped. There is no other way for the periphery but to be dependent on the centre. It cannot voluntarily snap its ties from the centre. However, dependency, unless it is forced, implies that the dependent country is getting at least some indirect benefits, though temporary from the centre, although the benefits may be more than swamped out by exploitation. Ultimately, the LDCs are impoverished due to the backwash effect generated by the actions of the centre. But there is no spread effect which can help the peripheral countries.
These two effects require a little elaboration. When two regions (namely, the centre and the periphery), are developing side by side, the stronger and the more powerful region (i.e. the centre) will draw away resources, both physical and human from the weaker and the less powerful region (i.e. the periphery). As a result, a growth-retarding backwash effect would be produced in the region where from the resources are drawn away. Backwash effects imply unfavourable effects. The backwash effects are generally produced through three factors: migration, capital outflow and unequal trade. These factors become favourable for the centre, but unfavourable for the poor peripheries.
A developing region (centre) will produce some adverse effects (backwash effects) which will be reflected on the neighbouring poor region (periphery). Backwash effects, a la Gunnar Myrdal, refer to total cumulative effects that are caused by the process of circular causation between the economic and non-economic factors. The growth of the centre, however, should produce some good effects for the peripheries with respect to technology, demand, market, knowledge and so on. These favourable effects may be called the spread effects of development. These effects can produce new growth momentum for the poor peripheries. But this is possible only when the growth-retarding backwash effects are outweighed by the positive spread effects. This is not really happening for the peripheral poor countries.
When a peripheral country is integrated with the world capitalist system, the world is polarised into two: centre and periphery. The centre draws away the surplus from the periphery, and as a result, the centre becomes developed and the periphery becomes underdeveloped. Thus, development and underdevelopment are the two processes of the same world-wide integrated capitalist system. Underdevelopment can be explained as a historical stage of capitalist development. Development of the periphery is possible only when its relationship with the centre is snapped. Underdevelopment can be explained in terms of the relations of domination in exchange. The domination is manifested mainly in extracting the surplus from LDCs. The result of such a dependency is the widening inequality between DCs and LDCs.

The Nature of Dependency and Exploitation

But how does a periphery become dependent on the centre? The dependency of the periphery is manifested in various ways. First, LDCs are dependent on DCs for technology. Second, the LDCs are dependent on DCs for economic and financial aid. Third, the balance of payments problems require the help from the DCs. Fourth, the LDCs cannot follow an independent policy of capital accumulation. Fifth, LDCs are dependent on DCs for selling raw materials and their primary products. Lastly, without the help of DCs, it is almost impossible for the LDCs to develop economically. Indeed, one can make a detailed menu of various types of dependency relations which have not yet been subjected to comprehensive analysis. In what follows, I provide a rather conservative list of some of the neglected areas of dependency relations which necessitate careful and detailed research for better comprehension and appreciation:
  • (i) Academic Dependency: The education system of LDCs, including curricula, evaluation process and the like, are dependent on the Western education system. In LDCs, the stock and flow of our knowledge, thinking process, academic information and orientation, and also the dimensions of our problems and the suggestions for their possible solutions are based on western books and journals published by a few multinational publishing companies.
  • (ii) Cultural Dependency: The socio-cultural way of life and the value system of LDCs have become completely dependent on those of DCs. The cultural dualism produced this way has led to a crisis of identity in LDCs.
  • (iii) Financial Dependency: This refers to the dependency of LDCs with respect to capital inflows, direct foreign investment, loans, interest on loans, and so on.
  • (iv) Market Dependency: The LDCs are dependent on DCs for various market interactions. To some extent, the domestic inflation rates and currency values of LDCs also depend on DCs. In international transactions, the LDCs have to submit to the market power of DCs.
  • (v) Human Resources Dependency: The training of high quality manpower and the ultimate loss of a part of this manpower, commonly known as Brain Drain problem, is the reflection of a dependency relation through which human capital resources are drawn away from LDCs without the payment of compensation.
  • (vi) Consumer’s Dependency: The tastes, preferences and the consumption patterns of Third World consumers are nowadays very much dependent on DCs, their way of life and systems.
  • (vii) Bio-dependency: The whole field of medical research, human pathology, medicines and treatment processes in LDCs are almost completely dependent on the Western system which dumps not only costly medicines but also banned and harmful drugs to the LDCs.
  • (viii) Environmental Dependency: The DCs are emerging as the vector of environmental protection. For the evaluation and solution of their pollution problems, the LDCs are made to be dependent on DCs.
  • (ix) Military Dependency: These days, the LDCs have to remain dependent for their so-called securities on the DCs who supply the arms and ammunitions for fighting wars and frighten away the enemies if needed. But more often than not, the DCs try to sustain the bones of contention among the LDCs to make them dependent in many ways to DCs.
  • (x) Policy Dependency: The DCs are directly or indirectly interfering with the internal policies of...