Thursday, 14 January 2010

Dependency theory. Consider the defining features of dependency theory and distinguish its major variants. Discuss the extent to which it is an illuminating way of analysing the problem of underdevelopment.

Dependency theory. Consider the defining features of dependency theory and distinguish its major variants. Discuss the extent to which it is an illuminating way of analysing the problem of underdevelopment.
Dependency theory has its intellectual origins in both Structuralism and Neo-Marxism. there are many variations of dependency theory born from these different origins. These variations make it difficult to look at the theory/paradigm as a whole, but there are general agreements and three major variants can be distinguished (albeit tentatively) for the purpose of analysis(Palma, 1981). These will be: firstly the variant based on the reformulation of United Nations Economic Commission for Latin America[1] (structuralism); secondly the (neo-) Marxists, and; thirdly those who reject the creation of a mechanico-formal theory (for example Cardoso) i.e. a Marxism-cum-structuralism variant. While dependency theory is seen as radical by the mainstream economic thought its analysis can be illuminating when applied to underdevelopment, where it is more accepted by historicists and sociologists(Munck, 1984). This is because of its (eventual) attempt to go beyond a static, linear, mechanico-formulaic model, particularly in the Marxism-cum-structuralism variant.
The Structuralist (Keynesian influenced) Singer-Prebisch theory of the ‘Centre’ and ‘Periphery’ economies (i.e. developed industrial countries at the centre and underdeveloped primary-goods producing countries in the periphery, being industrialised with the spread of capitalism from the centre[2]) was generally accepted by dependency writers but they did not accept that Latin America was underdeveloped and proceeding to become developed[3], as was the mainstream belief of the time (Modernisation theory). The dependency writers instead proposed that the underdevelopment was in fact a part of the historical relationship with the central metropolis, brought about by the industrialisation[4] of the central economies and creation of the world capitalist system(Munck, 1984).
It is the works of Celso Furtado and Osvaldo Sunkel, who took and advanced upon the ECLA’s work while criticising it’s ‘na├»ve optimism’, which Gabriel Palma[5] and Ronaldo Munck[6] take to represent the ‘conservative’ wing of Dependency theory (the first variant). The ECLA had thought it possible to escape the deterioration of the terms of trade through ‘import substitution’ industrialisation and state intervention (Palma, 1981 p.54-55) but Furtado and Sunkel’s rethinking of the ECLA analysis was written in reaction to the apparent stagnation of the previous ECLA policy of ISI[7]. According to the new analysis, the industrialisation was hindered by the political, economic and social structures of the Latin American countries(Palma, 1981). Sunkel showed that with ‘international integration’ in the centre comes a ‘national disintegration’[8] in the periphery(Munck, 1984) while Furtado made a structural and historical analysis of development[9]. They distinguished economic growth from economic development (growth in GNP as the former and redistribution of income and national control of economic-political spheres as the latter) and questioned the ‘perverse’ growth in the periphery but not ‘the essence of capitalism’ itself(Munck, 1984), embodied in stagnationist theories. What seemed to become obvious was that, parallel to industrialisation, agrarian and land reform was a necessity (Palma, 1981) and that this could alleviate countries from dependency. They were not claiming that development was impossible without ‘a revolution of an immediately socialist nature’, as radical neo-Marxist dependency writers were, but that reform within the capitalist system would allow the escape from dependency (Palma, 1981). However, this is not to say there aren’t similarities between these ‘conservative’ dependency writers and the radical dependency writers.
Both sets of dependency writers emphasise deteriorating terms of trade, but the neo-Marxists do not believe it possible for periphery countries to escape the dependency trap within the capitalist world economic system. The neo-Marxist writer Andre Gunder Frank is the icon of dependency outside of Latin America (Munck, 1984 p10) and it is Paul Baran’s ‘The Political Economy of Neo-Colonialism’ (1975) and the Marxist imperialism theory (Lenin, R. Luxemburg) that formulates the neo-Marxist variant of dependency theory. In imperialism theory the advanced nations used colonies for surplus extraction by forming bonds with the pre-capitalistic ‘indigenous’ elites, gaining direct, cheap access to resources as traditional modes of surplus extraction[10] were kept (Palma, 1981). The elites would also be negatively affected by a change to capitalist mode of production and therefore complied to the capitalist advanced nations’ wishes.
In the dependency theory the colonial ties of surplus extraction (or surplus drain) from underdeveloped countries to developed countries have been replaced by the tie of multinational companies (while ‘imperialist nations’ are merely ‘assistants’ or ‘shadows’)(Todaro, 1985). These MNCs are seen as a ‘major instrument of penetration of the periphery by the centre’ by the dependency theorists, through payment of interest, repatriated profits (i.e. those profits taken from the host country to the original country of the MNC) and ‘flight capital’ which is the exchanging of the local elites’ savings from the periphery to the centre[11] for security (Todaro, 1985). These parts represent surplus drain of the periphery, meaning that there cannot be development[12] as any surplus of the periphery country is immediately extracted. The ‘vicious circle’ theory is also rejected by neo-Marxists. Baran says that it fails to accept that the early development of capitalism required ‘primitive accumulation’ or looting of the colonies[13]. It is regarded as a weapon for the ‘creation of a climate of dependency… thus helping to perpetuate their [underdeveloped countries’] poverty’(Todaro, 1985) as it encourages them to depend on aid.
For the early neo-Marxists this surplus drain was enough of a factor to claim ‘impossibility’ of economic development, assuming that a high percentage of surplus was drained and that the part not drained was not used productively, i.e. ‘squandered’ by local elites not reinvested by a capitalist class(Palma, 1981). However this dogmatic ‘impossibility’ theory came under heavy fire as being unrealistic, which led Amin and Thomas to replace it with an ‘inappropriate pattern’ of development thesis which allows for some of the surplus left with the local elites to be employed rationally, allowing some economic development (Todaro, 1985). This accounts for the ‘observed fact’ of growth of aggregate income[14]. The ‘less-than-satisfactory’ growth is then blamed upon the countries’ belonging to the periphery of the ‘world capitalist system’(Todaro, 1985). Since this seems more accountable to the facts it would appear that the inappropriate patterns theory would be more illuminating and appropriate way of analysing the problem of underdevelopment. Nevertheless, since in both theories Latin America is already capitalist[15], all that will occur is the ‘deepening of underdevelopment’ without a socialist revolution (Munck, 1984).
Critiques of these dependency writers from other dependency writers[16] have focussed on the criticism of the theory being too ‘mechanico-formal’. Robert Brenner (1977) accuses them (particularly Frank) of being too ‘economised’ and thus failing to properly take class structures and class struggles into account(Palma, 1981). It is however, critically advanced upon by Brazilian sociologist Theotonio dos Santos, who especially dismisses Franks satellite/metropolis analysis and replaces it with “the formation of a certain type of internal structures conditioned by the international relationships of dependence” (dos Santos, 1969, p80). Distinguishing different types of dependency – colonial, industrial-financial, and industrial-technological – he and sociologists Vania Bambirra and Ruy Mauro Marini were more interested in showing the differences between countries in the periphery and their different forms of dependency[17] in contrast to Frank’s attempts at showing the similarities(Palma, 1981).
The industrial-technological dependence is seen in the relationship between MNCs and countries in the periphery. The introduction of inappropriate science and technologies which are capital intensive in countries with ‘surplus labour’[18] is one factor, along with the arguments against MNCs made earlier. Although dos Santos put forward that industrial-technological dependency[19] came after the industrial-financial dependency more recently it was been argued that a new financial dependency exists. This is USA hegemony with the dollar, put forward by Vernengo (2004)[20], especially in reference to the Bretton Woods agreement which allowed the US more freedom in respect to financial acts.
Another important judgement in dependency is that of ‘international dualism’. The concept of dualism is that of a world of dual societies – rich and poor nations as well as domestically rich and poor areas in the periphery economies. Growing international inequalities refute growth and structuralist change models. The effect of dualism is to give strong countries control and the ability to manipulate markets to their advantage, permitting them to dominate via foreign investment and exporting inappropriate science and technology to periphery countries(Todaro, 1985). However dos Santos and similar writers also fall into the trap of lumping together different social formations in the name of formalising a theory of dependence, and once again negate the class struggle, though not to the same extent as the early neo-Marxists(Palma, 1981). It is in the Structuralist-Cum-Marxist variant that this tendency is most rigorously avoided.
Cardoso is the most recognised of the Structuralist-Cum-Marxist writers. He concentrated on methodology and[21] proposed that instead of generating a general theory or model of dependency, each society must be analysed separately, analysing their specificities. They claim that diversity of national resources, geographic location and social organisation must be studied to understand the dependant societies(Palma, 1981). Cardoso dismissed the idea that ‘capitalist development in Latin America is impossible’ and while accepting that the periphery’s development is dependent upon the centre, also claimed that ‘the struggle for industrialisation’ was ‘the goal of foreign capital’, which therefore created a dependent growth. (Palma, 1981) Munck advanced upon this and called the neo-Marxist approach an ‘impoverished linear conception of history based on simplified models of exploitation’(Munck, 1984), stating Cardoso’s claim that all the theses behind it were created to support each other, making the neo-Marxist approach dysfunctional. Cardoso also analyses ‘domestic dualism’, showing the gap between the wealthy elites and the poor, as well as the gap between the modern and traditional methods of production which help emphasise the rich/poor divide[22](Todaro, 1985).
Cardoso came to believe that the prime mover in relation to the class struggle and development was politics (Munck, 1984) and wrote (with Faletto) “the relationship between internal and external forces are forming a complex whole whose structural links are not based on mere external forms of exploitation”(1977, pp.10,11)[23]. They claimed that it came down to the relationship between the local elite classes and the external international forces, and the relationship between the local elite and the local classes being dominated. This seems to be a more illuminating point of view; however its limitations are pointed out by Palma when he writes that the historicism of the variant, while helping it progress from other dependency theories also shows its problem: that ambiguities and surprises will always crop up in historical analysis(Palma, 1981, p. 62).
Among those who critique the dependency theorists, Warren is one of the most adamant. Following on from Geoffrey Kay’s conceptual argument that dependency wasn’t caused by the exploitation by capital of the underdeveloped countries, but that it didn’t exploit them enough, calling for a ‘return to Marx’[24](Munck, 1984, pp. 20-21) , Warren argues that capitalism is an instrument of social advance[25], and that it was ‘through imperialism… that revolutionary seeds were sowed in the rest of the world’[26](Munck, 1984). Also questioning the concept of various dependency theories is Lall, who argues that the reasons stated for the underdevelopment of the dependent countries are also characteristics of ‘non-dependent’ countries, making them just an analysis of capitalism. He says that analysing these does not show a ‘causal relationship between these characteristics and underdevelopment’(Palma, 1981), arguing that they are therefore not illuminating for analysis of underdevelopment.
To add to the conceptual critique Thomas Weisskopf and Warren investigate the empirical evidence of dependency. Weisskopf takes Lall’s analysis and adds the empirical data to support it (Palma, 1981) while Warren uses data himself. However, the empirical analysis should be questioned. Warren takes the example of Brazil, Taiwan and South Korea to show that dependency writers often underestimate the spread of capitalism, but Munck does not accept that these countries necessarily represent the Third World, arguing that the capitalist penetration is uneven and statistical data not always entirely useful[27](1984). Warren’s attack on income redistribution ‘for its own sake’ being ‘unjust’ (Munck, 1984, p. 21) can also be counter-argued, as Todaro writes: “there are…general reasons why many development economists now believe the above argument [[28]] to be incorrect and why greater equality in developing countries may in fact be a condition for self-sustaining economic growth”(Todaro, 1985, pp. 159,160). Another argument is that the example of South Korea shows a protectionist, authoritarian and export driven development (Griffin, 1989, pp. 121-128) in contrast to the ISI policies of the Latin American countries which had exacerbated the technological dependency and therefore cannot be directly compared in terms of dependency[29].
While there are distinct arguments against the dependency theories presented, there are cases where dependency theorists fit the facts, i.e. Amin’s ‘inappropriate patterns theory’. To want a purely economical underdevelopment theory would be folly and it must be seen in respect to political, social and anthropomorphic circumstances as well as economic ones. Therefore, purely economic theories, including early neo-Marxist dependency theory seems less than adequate particularly when as polemic as Andre Gunder Frank’s writings. In particular the works of Cardoso and others seem to be the furthest reaching and most useful for a full on approach to dependency and underdevelopment. The increased use of historical analysis, taken from concrete situations is a positive point: taking theories beyond the abstract is important for making analysis illuminating. Thus, considering all these points, it would be extremely unfair to dismiss the dependency theories completely.

Frank, A. G. (1984). Critique and Anti-Critique Essays on Dependence and Reformism. London: The MacMillan Press Ltd.
Griffin, K. (1989). Alternative Strategies for Economic Development (91 reprint ed.). Hong Kong: MACMILLAN ACADEMIC AND PROFESSIONAL LTD.
Munck, R. (1984). Politics and Dependancy in the Third World; The Case of Latin America. London: Zed Books Ltd.
Palma, G. (1981). Dependancy Theory A Critical Reassessment. (D. Seers, Ed.) London: Frances Pinter (Publishers) Ltd.
Todaro, M. P. (1985). Economic Development in the Third World (3rd ed.). New York: Longman, Inc.

[1] Otherwise known as the ECLA
[2] As advocated and adopted by the influential ECLA
[3] As in the transition from feudalism to capitalism via industrialisation
[4] Rise of capital(ism)
[5] (Dependancy Theory A Critical Reassessment, 1981)
[6] (Politics and Dependancy in the Third World; The Case of Latin America, 1984)
[7] Although it also tied in some ways to the Cuban revolution and growing nationalism, such as the Allende regime in Chile [Frank, 1984]
[8] An increased gap between rich and poor in the country
[9] Furtado, C. (1970) Economic Development in Latin America. A Survey from Colonial times to the Cuban Revolution. Cambridge, Cambridge university press
[10] For example; plantations owned by land-owners who copied expenditure patterns of the centre and therefore replaced the surplus to the centre (Todaro, 1985)
[11] Or the satellite to the metropolis, respectively, in Andre Gunder Frank’s terminology (Munck, 1984)
[12] The surplus made by the country needs to be put into development for development to occur
[13] and Russia, through Stalinist tyranny, something similar. P. Baran, The Political Economy of Growth (New York: Monthly Review Press, 1968)
[14] which Baran’s more radical theory cannot allow. Frank calls the impossibility of deveopment ‘the development of under-development’ as where there is positive growth of the centre/metropolis then there will be negative growth is the periphery. Amin calls this ‘dependant development’.
[15] Since the colonisation of Latin America by Spain
[16] Within what we have called the Marxist variant; evidence of how hard it is to categorise properly the different variants.
[17] (Munck, 1984)
[18] Labour which could be employed productively but currently is being employed for use in unproductive activity, e.g. family farm where the work of 2 people may be done by the whole family.
[19] Which was strengthened by the ISI policies recommended by the ECLA (Palma, 1981).
[20] Matias Vernengo, "Technology, Finance and Dependency: Latin American Radical Political Economy in Retospect", Working Paper No: 2004-06, University of Utah Dept. of Economics, 2004
[21] in his critique of the neo-Marxist approach
[22] The ‘spread effect’ is also questioned when studying domestic dualism, where traditionally a ‘trickle-down’ from industrialised sectors to others would be expected, there is little evidence of it happening[22] (Todaro, 1985).
[23] Extract from (Palma, 1981)
[24] Although, Munck points out that what Marx said was actually that the more backward country will “suffer not only from the development of capitalist production, but also from the incompletedness of that development”. (Munck, 1984, p. 20)
[25] as regards to Marx’s generally progressive nature of capitalism
[26] Warren, B. (1980) Imperialism, p.136 << extracted from (Munck, 1984)
[27] The problem of statistical data is perhaps best exemplified by Munck in his example where Libya’s gross national product (per capita) in 1980 was $8,640, comparing well with Britain’s $7,920 and even the USA’s $9,363. Despite these statistics, Libya has not been elevated from the Third World (in 1984)(Munck, 1984).
[28] [that an economy characterized by highly unequal distributions of income would save more and grow faster than one with a more equitable distribution of income]
[29] Plus it is possible that it was mainly related to the political occurrences of the time, i.e. splitting of korea into north/south.(Griffin, 1989)