Economically, the north and the south are very strikingly different. Although in recent decades there has been an attempt to improve the situation of developing countries, it is a fact that rich countries end up having the best chance of increasing their wealth, while the poor run the risk of increasing their wealth. risk losing what little they have.
The relationship between rich countries and poor countries has been approached and analyzed by Latin American intellectuals throughout the last century, notably by noting that, although not being the colonies of any metropolis, the countries of Latin America had very difficult to industrialize.
Raúl Prebisch’s dependency theory is an approach that attempts to explain why developed and underdeveloped countries are so, adopting a Marxist and critical perspective of international trade. Let’s explore it further below.
What is dependency theory?
The dependency theory is an economic approach that studies the relationships between countries, assuming that trade and capital flow relations between nations are based on the existence of dominant and dependent nations, also known as central and peripheral countries.
This theory was developed in the middle of the last century by social scientists, particularly interested in the situation of socio-economic stagnation experienced in Latin America during the 20th century.
This approach uses the idea of metropolitan-satellite duality (or central region vs. peripheral region) to justify and denounce that the world economy has an unequal conception and that, in practice, it always harms the least developed countries.
The vast majority of these underdeveloped countries are in the southern hemisphere, they are poor and have acquired a subordinate role with the rich countries of the north, providing them with low value-added raw materials to the dominant countries to manufacture their manufactured products. and market them with high added value.
The dependency theory holds that, Despite their apparent political independence, the fundamental decisions that shape life in poor countries are made in rich countries., decisions aimed at meeting the needs and benefiting these second countries. Central countries have industry and wealth, while peripheral countries cannot produce their own manufactures and are responsible for providing raw materials to industrialized countries to maintain their high standard of living.
The theory of dependence has a lot to do with the current Marxist, being considered in fact as a derivative of Marxism. In this theory, current economic relations and the global economic system are seen as a continuation of colonialism: neocolonialism.
Origin of the theory
The historical context of the theory is 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 in the 1960s and 1970sArgentine economist Raúl Prebisch is a key figure in dependency theory thanks to his pioneering work for the United Nations Economic Commission for Latin America (ECLAC). Prebisch is considered the leader of the development school and the intellectual ideologue of theory.
With the end of World War II and the beginning of the end of actual colonization, the majority of the world had apparently achieved full political and economic independence. However, Latin American intellectuals realized that their region, although it was nobody’s colony, had a very low degree of development.. Centuries ago they had become independent from Spain and Portugal, and although there were still colonial regions like Guyana, they were in principle all free to manage their own industrialization.
However, it was a fact that Latin America did not have sufficient independence to embark on the path of 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 inequality of trade between the countries of Latin America and the rest of the world. Thanks to Prebisch, an explanation of why would be obtained, the Argentine being the one who would explain the factors underlying this degree of underdevelopment in Latin America.
Premises of dependency theory
One of the main premises of independence theory is that in order for there to be rich countries that have a high degree of development, there must be others that are just in the opposite extreme, underdeveloped and without industry or mass production.
1. Unequal power relations
Relations between central and peripheral countries are unequal. There are unequal power relations, relations which are expressed not only in the form of economic subordination but also in the political and cultural sphere. These relationships determine the trade relationship and the degree of dependence between the developed nation and the underdeveloped nation.
2. Development and underdevelopment
Raúl Prebisch considered that the underdevelopment of the countries of the South was not a natural heritage. The reason why underdeveloped countries were because the way the dominant nations of the north had developed had implanted it like this.
In theory, development and underdevelopment are considered as two concepts which 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 capital flows
Central countries obtain cheap raw materials and labor by exploiting peripheral countries. Since developed countries are those with industrial and manufacturing capabilities, these they return what poor countries have given them in the form of manufactured goods, produced from the same natural resources that poor countries have given them.
As a result, rich countries make more profits than peripheral countries, which continue to supply core countries with raw materials.
The flow of capital goes from the poorest to the richest. Developing countries end up running out of wealth and capital, being forced to borrow from developed countries or international institutions. This makes them even more dependent on dominant nations, increasing their debt and making it impossible to break dependency ties without risking economic sanctions (eg, corralito), diplomatic crises and conflicts.
Poor countries are also the ideal destination for obsolete and unusable technologies used in developed countries. Those things that are no longer of interest in developed countries, either because it no longer works or because it’s junk and taking up space, are sent to the underdeveloped world which has become in the world. over the years the great landfill for rich countries.
4. International trade
International trade is designed to always benefit developed countries. Multinational corporations and international trade agreements are designed to meet the needs and goals of dominant nations, without thinking about the needs of underdeveloped countries.
International trade and the free market benefit the interests of dominant countries, making them even richer, but it has the opposite effect of making peripheral countries even more dependent and poorer.
5. The north wants the south to be poor
Rich countries actively seek to perpetuate the state of dependence of the least developed countries in order to maintain the standard of living they have and maintain production and the degree of industrialization achieved. This is done by controlling aspects of less developed nations that influence their economy, politics, media, education, culture and even their sports. Any aspect that in one way or another influences the degree of human development is being manipulated.
6. Sabotage of independence
Rich nations seek to eliminate all attempts by dependent nations to free themselves from their influence. The countries of the north commit 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 migratory flows and goods.
7. Import substitution and application of protectionism
The theory of dependence maintains that, in order to enrich developing countries and initiate the economic independence of central powers, exports must be diversified and industrialization accelerated by import substitution.
It is also considered that protectionist policies must be applied, seen as effective measures to limit the power of international trade and weaken the one-way flows of capital from poor countries to rich countries. Countries must impose high tariffs in order to reduce their dependence on foreign manufactured goods and increase their domestic production to satisfy their own consumption.
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