The Dependency Theory: rich countries submitting poor countries

Economically, north and south differ very strikingly. Although in recent decades there has been an attempt to improve the situation of developing countries, it is a fact that rich countries they end up having the best chance of increasing their wealth, while the poor run the risk of losing what little they have. have.

The relationship between rich countries and poor countries was approached and analyzed by Latin American intellectuals throughout the last century, especially as a result of seeing that, despite not being colonies of any metropolis, the countries of Latin America had it very difficult to industrialize.

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

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What is dependency theory?

The dependency theory is an economic approach that studies the relationships between countries

, assuming that the relations between nations at the commercial and capital flow level are based on the existence of dominant nations and dependent nations, also called core countries and countries peripherals.

This theory was elaborated 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 uneven design and that, in practice, it always hurts less 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 world. North, providing them with raw materials with low added value so that the dominant countries can manufacture their manufactured goods and market them with high added value.

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 satisfying the needs and giving benefits to these second countries. Central countries possess industry and wealth, while peripheral countries cannot produce their own. manufactures and are responsible for offering raw materials to industrialized countries to maintain their high level of life.

The dependency theory has a lot 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.

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Origin of the theory

The historical background of the theory is found in the multiple historical events that agitated the first the middle 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 1970sThe Argentine economist Raúl Prebisch being the key figure in dependency theory thanks to his pioneering work for the UN Economic Commission for Latin America (ECLAC). Prebisch is considered the leader of the developmental school and the intellectual ideologue of the theory.

With the end of World War II and the beginning of the end of colonization proper, the majority of the world had apparently achieved full political and economic independence. Nevertheless, Latin American intellectuals were realizing that their region, despite not being anyone'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, 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 the road to development. Supported by the studies of the German-British economist Hans Singer, everything seemed to indicate that the deterioration economic activity in the region was due to an unequal commercial exchange between Latin American countries and the rest of the of the world. Thanks to Prebisch, an explanation of why would be obtained, the Argentine being the one who would explain the underlying factors of this degree of underdevelopment in Latin America.

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Premises of dependency theory

One of the main premises of the theory of independence is that, for there to be rich countries that have a high degree of development, it is necessary It is necessary that there exist others that are just at the opposite extreme, being underdeveloped and without having industry or production in mass.

1. Unequal power relations

Relations between central and peripheral countries are uneven. There are unequal power relations, relations that are not only expressed in the form of economic subordination but also in the political and cultural sphere. These relationships determine trade relationships and the degree of dependency between the developed and the undeveloped nation.

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2. Development and underdevelopment

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

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

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3. Asymmetric flow of capital

The central countries obtain raw materials and cheap labor by exploiting the peripheral countries. As developed countries are those with industrial and manufacturing capacity, these they give back 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 the 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 the dominant nations, making their debt go to more and making it impossible to break dependency ties without risking economic sanctions (p. g., corralito), 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 interesting in developed countries, either because it no longer works or because it is junk and occupies space, is sent to the underdeveloped world that over the years has become the great landfill of the countries rich.

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4. International Trade

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

International trade and the free market benefit the interests of the dominant countries, making them even more rich, but it has the opposite effect of making peripheral countries even more dependent and more poor.

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5. The north wants the south to be poor

Rich nations actively seek to perpetuate the state of dependency of less developed countries in order to continue with the standard of living they have and maintain the production and the degree of industrialization achieved. This is done by controlling the aspects of the less developed nations 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.

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6. Sabotage of independence

Rich nations seek to eliminate all attempts by dependent nations to free themselves from their influence. The northern countries carry out all kinds of sabotage to the economic, cultural and political independence of the southern countries through economic sanctions, the use of military force or the control of the migratory flow and of merchandise.

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7. Import substitution and application of protectionism

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

It is also considered that protectionist policies should be applied, considered effective measures to limit the power international trade and make the unidirectional flow of capital, from poor countries to rich countries, go weakening. Countries must impose high tariffs in order to reduce their dependence on foreign manufactures and boost their domestic production to satisfy their own consumption.