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Report Prebisch Frank dependency theory

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Report Prebisch Frank dependency theory

  1. 1. Dependency Theory In partial completion of IR220- HRD @ the National Level Prof. ROSA MERCADO By Alfredo V. Primicias III
  2. 2. Dependency Theory In partial completion of IR220- HRD @ the National Level Prof. ROSA MERCADO By Alfredo V. Primicias III TOPICS: 1.Who are Prebisch and Frank? 2.Dependency Theory 3.Criticisms of the Model
  3. 3. In partial completion of IR220- HRD @ the National Level Prof. ROSA MERCADO By Alfredo V. Primicias III • Raul Prebisch (April 1901- April 1986) • Argentine Economist • Structural and Neo- Marxist economist • Contributed the Prebisch- Singer hypothesis (basis of dependency theory) Dependency Theory • Andre Gunder Frank (Feb 1929- April 2005) • German- American economic historian and sociologist • Promoted Dependency Theory and World- Systems Theory Sources: http://en.wikipedia.org/wiki/Ra%C3%BAl_Prebisch http://en.wikipedia.org/wiki/Andre_Gunder_Frank
  4. 4. In partial completion of IR220- HRD @ the National Level Prof. ROSA MERCADO By Alfredo V. Primicias III Dependency Theory Increase in the wealth of the richer nations at the expense of the poorer ones. Poor countries exported primary commodities to the rich countries who then manufactured products out of these commodities and sold them back to poorer countries Fisherman Abundant marine life Backward ways in fishing Sufficient supply Businessman Foreigner Machines & Technology BUSINESS RELATIONSHIP Sells fish LOW PRICE Sells sardines 5x higherBorrows Money to afford sardines Lends money
  5. 5. In partial completion of IR220- HRD @ the National Level Prof. ROSA MERCADO By Alfredo V. Primicias III Dependency Theory SOLUTION: Poorer countries must go for IMPORT SUBSTITUTION program (not to purchase manufactured products from the richer countries). SOLUTION: Poorer countries must sell primary products on the world market BUT foreign exchange reserves must be used to develop their countries. REFUTE: Internal markets of the poor countries are not large enough to support the economies of scale used by richer countries to keep prices low. REFUTE: Poor countries don’t have enough political will to transform their base as product producers only. REFUTE: Poorer countries can’t control external forces when selling products abroad. Source: Vincent Ferraro, Development Economics Reader, London
  6. 6. In partial completion of IR220- HRD @ the National Level Prof. ROSA MERCADO By Alfredo V. Primicias III MORE DEFINITIONS: Dependency Theory [Dependency is…] historical condition which shapes a certain structure of the world economy such that it favors some countries to the detriment of others and limits the development possibilities of the subordinate economies… a situation in which the economy of a certain group of countries is conditioned by the development and expansion of another economy, to which their own is subjected. (“The Journal of Development Studies, Vol. 6, no. 1, Oct. 1969, p23”) Theotonio dos Santos Brazilian Economist INTERNATIONAL SYSTEM • DOMINANT • CENTER • METROPOLITAN • Advanced industrial nations • Dependent • Periphery • Satellite • Latin America, Asia, Africa with low per capita GNPs  MNC  International Commodity Markets  Foreign Assistance  Communications  Technology  Dependency occurs due to the interaction  Internationalization of capitalism Source: Vincent Ferraro, Development Economics Reader, London
  7. 7. In partial completion of IR220- HRD @ the National Level Prof. ROSA MERCADO By Alfredo V. Primicias III MORE DEFINITIONS: Dependency Theory • DOMINANT • CENTER • METROPOLITAN • Advanced industrial nations • Dependent • Periphery • Satellite • Latin America, Asia, Africa with low per capita GNPs cheap minerals, agricultural products, and labor Surplus capital, obsolescent technologies, manufactured goods, self-serving ECONOMIC INTEREST CA Comparative advantage is an economic law that demonstrates the ways in which protectionism is unnecessary in free trade. Popularized by David Ricardo, comparative advantage argues that free trade works even if one partner in a deal holds absolute advantage in all areas of production - that is, one partner makes products cheaper, better and faster than its trading partner. Source: Vincent Ferraro, Development Economics Reader, London
  8. 8. In partial completion of IR220- HRD @ the National Level Prof. ROSA MERCADO By Alfredo V. Primicias III Central Propositions: Dependency Theory Underdevelopment Undevelopment Resources not being used Resources being used for the dominant states Underdevelopment • Latin America, Asia and Africa are NOT UNDERDEVELOPED • Became POOR only when coercively integrated into the European Economic system (producers of raw materials or repositories of cheap labor) Export Agriculture • Poor economies have high rates of malnutrition despite being producers of food for export Peripheral Elites • Elites maintain a dependent relationship since their private interests coincide with the dominant states Source: Vincent Ferraro, Development Economics Reader, London
  9. 9. In partial completion of IR220- HRD @ the National Level Prof. ROSA MERCADO By Alfredo V. Primicias III Dependency Theory POLICY IMPLICATIONS 1. The success of richer countries was contingent to their respective economic history (exploitative colonial relationships) to which would be entirely different to other countries. 2. Dependency theory refutes the central distributive mechanism of the neoclassical model– or on how to distribute wealth– primary concern is on efficient production and assumes that the market will allocate the rewards in a rational and unbiased manner. 3. Aside from GDP and GDP as measurements– use life expectancy, literacy, infant mortality, education and other social indicators as economic parameters. Source: Vincent Ferraro, Development Economics Reader, London
  10. 10. In partial completion of IR220- HRD @ the National Level Prof. ROSA MERCADO By Alfredo V. Primicias III RETROSPECT INTERNATIONAL SYSTEM Dominant Center Dependent Periphery Socialism
  11. 11. In partial completion of IR220- HRD @ the National Level Prof. ROSA MERCADO By Alfredo V. Primicias III RETROSPECT: HRD @ THE NATIONAL LEVEL 0.00% 10.00% 20.00% 30.00% 40.00% 50.00% 60.00% 1990 1995 2000 2005 2009 Agriculture Industry Sector Service Sector Trend in Employment by Industry 1990- 2009 (Prof. Cabegin IR 204) Briones (2011) said that “since 1990, considerable headway has been made towards eradication of poverty, reduction in child mortality, as well as improvement in household potable water and sanitation.” Page 3. Assessing Development Strategies to Achieve MDGs in the Republic of the Philippines, Roehlano M. Briones, UN Department for Social and Economic Affairs, 2011. Catelo and Pabuayon (2013) explain: “agricultural sector is important in the Philippine economy; providing for the food needs of the population and the raw material requirement of industry, creating jobs and wealth, and generating foreign exchange.” Page 1, Overview of PH Agriculture, 1990- 2009, Salvador Catelo and Isabelita Pabuayon, UPLB- College of Economics and Management, 2013. Park and Shin (2012): “GDP share of services in 1980s @ 81.7%, 1990s @ 58.3%, and 200s @ 62.8%.” Page 8, The Service Sector in Asia: Is it an Engine of Growth, Donghyun Park and Kwanho Shin, ADB, 2012.
  12. 12. In partial completion of IR220- HRD @ the National Level Prof. ROSA MERCADO By Alfredo V. Primicias III RETROSPECT: HRD @ THE NATIONAL LEVEL 3.7 4.8 3.4 5.2 3.4 4.4 3.2 4.6 1999 2000 2001 2002 Arroyo GNP GDP NEDA’s Socio Economic Report 2002 positioned the Philippine economy as the “firmest growth in the post- Asian crisis period. The growth was supported by policies that encouraged healthy domestic and foreign demand; a low inflationary environment as induced by prudent monetary policy.” Page 1, Chapter 1, Socio Economic Report 2002, National Economic Development Authority. • Strong surge in OFW remittances, growing at an annual average of 19.1 percent for the period 2004-2006. • Total remittances in 2007 rose by 13.2 percent to US$14.4 billion • World Bank reports that GDP was worth US$272.02B billion in 2013 http://www.tradingeconomics.com/philippines/gdp
  13. 13. In partial completion of IR220- HRD @ the National Level Prof. ROSA MERCADO By Alfredo V. Primicias III RETROSPECT: HRD @ THE NATIONAL LEVEL • PH economic growth decelerated to 5.7% in the Q1 2014 • PH continued to outperform other countries in the region surpassed only by China (7.4%) and Malaysia (6.2%) • Growth of overall investment at 7.7% driven mainly by domestic investment • Growth slowed down due to  weak government consumption and private construction on the demand side  weak agricultural production on the supply side Source: PH Economic Update, World Bank, August 2014

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