This document provides an overview of dependency theory, which emerged in Latin America in the 1960s. It defines key concepts like core and periphery countries, and describes how dependency theory views the global economic system as exploiting developing nations. The document outlines the background and influence of economists like Prebisch, Frank, and Wallerstein. It explains the central tenets of dependency theory, including that underdevelopment is caused by core nations extracting surplus from the periphery. The critique section notes that dependency theory ignores variations among developing countries and possible benefits of globalization.

1. College of Development Studies
Center for Regional and Local Development Studies
Dependency Theory
By Turufat Tukura
November 2023.
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2. Presentation outline
❖Definition of dependency
❖Background of dependency theory
❖Dependency theory
❖Pushing factors of dependency theory
❖Central tenets of dependency theory
❖Critique of dependency theory
❖Conclusion
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3. Definition of dependency
❖ The economy of a country is conditioned by the economic development and
expansion of another country.
❖A country or region relies on another for support, survival, and growth.
❖A form of unequal international relationship between two sets of countries
❑ Core ( metropolitan, dominant, capitalist, advanced, developed) –winners
❑ Periphery ( satellite, dependent, less developed, main hub) –losers
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4. Background of dependency theory
❖Emerged in the 1960s in Latin America by a group of economists (Raul
Prebisch, Osvaldo Sunkel, and Celso Furtado)
❖Shortly after World War II
❖The group of economists were the members of the United Nations
Economic Commission for Latin America and the Caribbean (UNECLAC)
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5. Overview of UNECLAC
❖Established in 1948 in Latin America
❖ Later in 1984 Caribbean countries joined and became UNECLAC
❖ Comprised of 46 member States (20 in Latin America, 13 in the
Caribbean, and 13 from outside the region), and 14 associate members.
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6. Function of the UNECLAC
❖Conducts research
❖Provides technical advice to governments, upon request
❖Organizes intergovernmental and expert group meetings
❖Helps to formulate and articulate a regional perspective within
global forums
❖Introduces global concerns at the regional and subregional levels.
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7. Functions of UNECLAC
❖Operational activities extend to economic and development planning,
demography
❖ Economic surveys
❖Assessment of the socioeconomic impacts of natural disasters
❖ Data collection and analysis
❖Training, and assistance with the management of national economies.
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8. Overview Development of Latin America
❖In the 20th C the Latin American economy was based on the export of raw
materials and agricultural products.
❖ Export-based development weakened due to the great depression in
the 1930s.
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9. Dependency theory
❖ A constellation of modernization, neo-Marxist, and world system theories.
dependency theory Neo-Marxist theory
Exploits Exploits
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Minority, core nations,
metropolis
Majority (peripheral) satellites
Capitalism (smaller)
Workers (majority)

10. Dependency theory
Dependency theory
❖Focus on external development factors
❖ Bi-modal, tri-modal
❖Over generalization: believes unless
breaking out from capitalism, development
is impossible which is contrary to Asian
Tigers’ development
❖Homogenous
❖System stratification ( core vs periphery)
❖Most radical perspective on global
inequality
❖Development and underdevelopment are
the opposite sides of the same coin
Modernization theory
❖Focuses on internal development factors
❖ linear approach to traditional vs modern
society
❖Homogenous approach
❖Disregards indigenous wisdom
❖Prescriptive approach which does not fit
into the context.
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11. Frank: Three stages of exploitation
Historical background of exploitation
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Mercantile
capitalism
15th and 16th Cs
❖ European explorers started to trade in the
North Pole and encountered cultural
differences.
❖ To expediate their trade, Europeans used
military, germs (smallpox).
Colonialism
16th c -20th c
❖ Formalized the exploitative relation
expanded to the South pole
❖ Small farmers snatched fertile land, the
slave trade to care for cash crops, and
local cottage industries collapsed
genocide.
Neocolonialism
20th c onwards
❖ Former colonizers rely on their
colonies
❖ Finished products sold at Inflated
prices to colonies
❖ Debt burden, heavy tax, calling
for development policies to keep
colonies in poverty.

12. Dependency theory
❖Dependency theory flourished from three main sources
1. Neo-Marxist school of thought
❑ Current word economic structure systematically implemented based
on global class division
❑ Industrial nations exploited developing countries
❑ Opposes inequalities created by industrial nations on developed
nations
❑ Believes imperialism is responsible for underdevelopment
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13. Neo-Marxist school of thought argument points
❖Underdevelopment: developed countries developed at the expense of
underdeveloped countries.
❖Dependency: underdeveloped countries are dependent on developed.
❖World system: the world is divided into three: core, semi-peripheral, and
peripheral countries. Core exploits the semi-peripheral and peripheral
countries
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14. Neo-Marxist school of thought
❖ Developed theory of “monopoly capitalism”
❑Large corporations increasingly took over or outcompeted small
companies
❑ Small companies demised
❑ Restricted competition
❑Accumulation of surplus
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15. Dependency theory
2. Critical radical economic thinking ( UNECLAC) -Raul Prebisch
❖To find alternative explanations for the problems of underdevelopment in the
poorer regions of the world.
❖ Use a bi-modal approach ( Core and peripheral)
❖Designed important substitution economic policy to offset capitalist dominance
❖Discontented by modernization theory – linear and prescriptive approach
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16. Theotonio Dos Santos- Economist from UNECLAC group
❖Identified three types of dependency
1. Colonial: monopoly of trade, mines, and raw materials European colonial
powers and their colonies.
2. Financial-industrial: hegemony of centre and search of raw materials
and agricultural products in peripheral countries Financial-industrial
3. New dependence (technological industry dependence): capital
investment of multinational companies in LDC
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17. Dependency theory
❖Bi-modal approach
1. Core countries – haves, metropolis, the main hub, developed countries.
2. Periphery countries – Have nots, satellites, less developed countries.
❖Based on the concept of exploitation of the weaker by the capitalist developed countries
❖Explain development and underdevelopment with reference to the capitalistic framework
of the center
❖Mainly concerned with the impact of imperialism and Neocolonialism on the economies
and societies of less developed countries.
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18. Bi-modal analysis of dependency theory
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19. Dependency theory
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20. Dependency theory
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21. Pushing factors of dependency theory
❖Dissatisfaction of UNECLAC was the major pushing factor
Why was UNECLAC dissatisfied?
❖Adoption of capitalist policy by Latin American states
❖Export of cheap raw materials and agricultural products
❖Weakened price of raw materials
❖Import of high-priced finished products from core countries
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22. Roadblocks - Theotonio Dos Santos
❖Roadblocks of less developed development stem from two sources
1. The way they integrated into the world economic system
2. Internal development policy
❖ He suggested social revolution as the way out
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23. World system theory
❖Focused on the study of the whole world system as one unit.
❖Interconnect politics, economics, and social-cultural analysis.
❖In 1970 Immanuel Wallerstein created the world system theory
❖ He believes bi-modal ( core, periphery) is inadequate to describe the world economy
❖Proposed tri-modal: core, semi-periphery, and periphery analyze global economy
❖Version of dependency theory which believes semi-periphery nations are available.
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24. World system theory
1. Core, dominant. advanced, rich, powerful, center, capitalist (USA and Europeans)
❖Conditions development of less developed countries
❖use technology, finance, and the market as the systematic tools for exploitation
❖Exploit less developed countries
❖Economy built on market exchanges
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25. World system theory
2. Semi-peripheral (South Korea, Taiwan, Mexico, Brazil, India, Nigeria, South
Africa)
❖Global middle-class countries
❖More developed than peripheral countries
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26. World system theory
3. Peripheral countries
❖ poor countries
❖Dependent on core countries for technology, finance, market
❖Export raw materials and agricultural products at low cost
❖Primary economic activity
❖Weak government
❖Unstable politics
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27. The flow of capital between
core and periphery
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28. Tri-model of Immanuel
Wallerstein
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29. Dependency theory /world
system theory
Modernization theory or neoliberalism
theory
Development is possible with More relations Less relation/ breaking out
Development is An economic process An economic process
International relations is Good
The problem of developing countries are External factors ( capitalist countries
exploitation)
Internal factors( culture, corruption, policy,
politics)
Environmental issues Free from environmental
degradation
Environmental degradation, neo-populism
Social cohesion Preserved( communal) Breaks social cohesion (individualism),
environmental pollution
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30. Tenets of dependency theory
❖ Minority (Core) exploited the majority (Peripheral)
❖Core countries systematically impoverished peripheral countries
❖Extraction of surplus from the poor countries
❖The social and economic development of less developed countries is
conditioned by the external forces of central capitalism
❖ Solution break away from capitalist imperialism
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31. Microcosmic system & Macrocosmic system
❖According to Ghosh (2001), dependency involves two systems:
❑Macrocosmic System and
❑Microcosmic System.
❖Macrocosmic System: world capitalism which is controlling and
influencing its sub-system or microcosmic.
❖Microcosmic System: poor and backward regions and countries.
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32. Core - periphery relationship: Theoretical basis
❖Based on two competing regional planning theories.
❑Unbalanced growth approach: Emphasizes the need to maintain
imbalances in backward economies to overcome barriers to growth ( Albert
Hirschman’s (1958)
❑Trickle-down effects (convergence of development gaps): Development
concentrates at the core and will promote development at the periphery.
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33. Core - periphery relationship: Theoretical basis
Gunnar Myrdal’s 1957- theories
1. Theory of Backwash effect(BWE) - Spread effect (SPE)
2. Cumulative Causation Theory of economic development.
3. Institutional reforms theory of development.
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34. Theory of Backwash effect (BWE)
❖Developed region is developing at a faster rate at the cost of backward
region.
❖Income earned by developed region is not reinvested in the region but is
deported to the developed sector/region leading to more development in
these areas.
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35. 2. Cumulative Causation Theory of economic development
❖Theory emphasizes that “poverty is further perpetuated by poverty”
where BWE>SPE and “Affluence is further promoted by affluence”
where SPE>BWE.
❖Backward region problems creates more problems and developed
region’s auto solution solves all problems,
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36. ❖Growth-retarding factors
❖ Generated by the actions of the center.
❑Resources extraction through migration (brain drain), capital outflow
(withdrawal of surplus), and unequal trade.
Spread effects (SPE) of development-gain: growth of the center produces
some favorable effects for the peripheries with respect to technology, demand,
market, and knowledge.
Backwash effect (BWE)-Losses
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37. Dependency of the periphery on the center. How?
❖ Market for selling raw materials and primary products- market/trade
dependency
❖Dependence on technology and capacity building- technology dependency
❖Dependence on economic and financial aid- Aid dependency
❖The balance of payments help
❖ Capital accumulation policy dependency -monetary policy, technocrats,
foreign investment
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38. Mechanisms of Core Countries Exploitation
1. Wealth extraction in two forms
❑Direct:
❖Looting and predatory of resources from LDCs
❖Surplus extraction (in the form of rent, interest)
❑Indirect: through unequal exchange
❖Purchase raw materials and primary products from LDCs at low rates
and sell their products in LDCs at high prices.
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39. Mechanisms of Exploitation … (cnt’d)
2. The technology, that is being transferred to LDCs, is mostly old and obsolete, unsuitable,
and very costly.
❑transfer of Green Revolution inputs (like chemical fertilizers, herbicides, insecticides), which in the short-run could
substantially boost productivity, but with disastrous long-term environmental and human health implications.
❑Installation of old types of machinery with no spare parts.
3. Imposition of control over the domestic economics of LDCs through aid and other
means.
❑Imposition through policy consultation (IMF and WB)
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40. Paul Baran’s Analysis of Economic Backwardness and
Economic Growth
❖Paul Baran: father of modern Dependency Theory (1957): “The Political Economy of Growth”.
❖Argues that underdevelopment is a result of the world process of capital accumulation.
❖Rejects popular assumptions [modernization] in relation to the obstacles in poor countries for economic
development.
Obstacles of development according to Paul Baran
❑Lack of entrepreneurial talent
❑ Lack of capital
❑Population problem: overpopulation must be considered only with reference to the means of production and employment.
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41. Paul Baran’s Analysis of Economic Backwardness
❑Forwarded 3 principal explanations for the underdevelopment
❖The way in which their potential surplus is utilized.
❖Much of the realized economic surplus is misused
❖The center tries to keep the periphery under its firm control.
❑Suggested 3 solutions:
❖Social revolution (social change)-forceful removal of the existing system
❖Establishment of a socialist planned economy.
❖Mobilizing the potential economic surplus 41

42. Andere Gunder Frank’s Analysis of ‘Development of
Underdevelopment
❖Poverty of less developed nations and their dependence on wealthier nations as
inevitable
❖Relations of imperialism and domination trapped poor nations at the bottom of the
global economy.
❖Used Macro and Microscale structures in analyzing underdevelopment.
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43. Micro-Structure
❖Structure of a backward country:
❑ having its periphery (p) and metropolis (m)
❖A backward state metropolis (m) is a periphery of the world capitalism
❖Within the micro-system of the country, surplus is extracted from (p) and sent to
(m)
❑ (p) becomes underdeveloped, and (m) becomes comparatively developed.
❖When surplus is extracted from the state metropolis (m) by the world metropolis (M),
(m) becomes underdeveloped.
❖Generally, Macro capitalist structure unfavorably influences the micro-structure
of the backward country and produces underdevelopment in LDCs
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44. Macro-structure
❖Relates to the structure of the Capitalist world:
❑ having its peripheries (P), and Metropolis (M).
❖Surplus is extracted from all dependent colonies/state centers (m), and it goes to metropolis (M)
❖Metropolis of the world capitalism is not periphery of anybody or anything.
❑No exploitation is possible by the micro-structure.
❑For Metropolis (M), no surplus is lost, but it is gained from all peripheries.
❖Generally, Micro-structure of LDCs helps the development of the macro-structure in DCs
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45. Macro/micro structures of explotation
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46. Andere Gunder Frank’s Analysis… (cont’d)
Frank suggests less developed countries should :
❖Break away from the capitalist and turn towards socialist system
❖Internally, overthrow the bourgeoisie who are in consent with the
imperialist foreign power and start a socialist liberation movement by
cutting all connections with the industrial capitalist countries.
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47. Main Critiques to Frank`s Model
❖Less attention to production relations unlike exchange relations
❖ Neglected the specificities of the internal mode of production and class structure of the
periphery and their impact.
❖Frank’s theory of underdevelopment seems empirically incorrect.
❑ The cause of underdevelopment may not only be because of imperialist
penetration.
❑Suggestion for a complete break out of capitalism and a revolution for
socialism. But socialism itself was imposed from the outside. 47

48. Critiques of Dependency Theory
❖Class analysis has been ignored within the countries (social strata)
❖Ignores the possible spread effect - Asian Tigers development
❖Unable to explain variations among less developed countries- Homogenization, BRICS
❖Globalization concept ignored ( integration is mandatory to benefit from it)
❖Focus greatly on the backwash effect- loss
❖ Rejects the contribution of core countries to less developed countries’ development
❖Externalizes reasons for underdevelopment in less developed countries
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49. Conclusion
❖Continued globalization disapproves solutions of dependency theorists
❖Ignored internal factors of underdevelopment (politics, policy, social system)
❖It is a constellation of theories with perspectives of intersectionality
❖ Technology, finance, and market are the key instruments of core countries
❖ Bi-modal and Tri-modal approaches explain dependency theory
❖Much focus on the economy and disregard for political, social, cultural, and environmental factors that contribute to
underdevelopment.
❖Pessimistic and unrealistic suggestion for disconnection in a globalized world.
❖Endogenous (land, labor, and capital) and exogenous ( demand for products of the region from other areas ) factors are
determinants of regional growth.
❖ Dependency theory was greatly advocated by Andere Gunder Frank.
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50. Thank you for your attention !!
Reflection session ?????
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