Dependency Theory

Dependency theory falls within a group of neo-Marxist theories that attempt to explain development, underdevelopment, and inequalities in the global system. Dependency theory is a response to the earlier modernization theory and its failure to generate economic growth in Latin America in the 1950s and 1960s. Whereas modernization theory was the brainchild of thinkers in core countries, that is, the economically developed world, dependency theory was the product of intellectuals in the world periphery or less developed countries disillusioned by the idea of modernization. Instead of arguing that poor countries are simply further behind richer countries in terms of development, dependency theorists argued that poorer countries are exploited by richer, developed countries, or, more pointedly, that the development of European and other Western countries depended on the underdevelopment of non-Western countries. In this framework, poorer regions such as Latin America are peripheral to the capitalist industrial core, or the rich, developed countries of Europe and North America. Dependency theory was important in opening the door within geography and in other social sciences to discussions around the social construction of poverty.

The roots of dependency theory lie in the work of the United Nations Economic Commission for Latin America (ECLA) in the 1960s, under the direction of Argentinean Raúl Prebisch. Prebisch, in his “ECLA Manifesto,” criticized the international division of labor, in which Latin America provided food crops and raw materials for the industrial core and received finished goods in return. In his opinion, the continuation of this relationship would inhibit Latin America's process of capital accumulation because of the unbalanced terms of trade. Prebisch proposed instead that Latin America industrialize, which would require protectionism and a heavy role on the part of governments. The ECLA's proposal was not received well by Latin American governments and indeed was overly optimistic in assuming that industrialization would solve all the problems of development in the region.

The ideas planted in the ECLA then emerged in more radical forms in the late 1960s and 1970s from two main sources. In the United States, socialist writers such as Paul Baran of the leftist journal Monthly Review argued that developing economies were kept in stagnant positions by monopolistic corporations that controlled competition and profits and that the only way to achieve true development was to exit the global [Page 713]capitalist system of monopolies and build society and economies on a socialist base. In Latin America, a group of radically critical intellectuals, including Fernando Cardoso, Enzo Falleto, and Celso Furtado, known as dependistas, developed a more radically critical set of theories of dependence that held that the rich countries’ development was the result of the destruction of poor countries’ social and economic systems through forced integration into the global capitalist economy and thus a changing of their previously viable institutions. This was a parting from the original idea of underdevelopment, which was conceived by core modernist thinkers as the state of being in the periphery before core intervention, that is, the problem to be solved by development. In the dependistas‘ thinking, underdevelopment is not an original condition but an active process.

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