Structural Dependency

Core Versus Periphery

The underlying mechanism for the declining terms of trade was associated with different income elasticities for primary commodities such as food, and secondary commodities such as manufactured goods. The demand for manufactured goods was forecast to increase at a faster rate than the demand for primary commodities as incomes grew. Besides this greater demand for manufacturing goods as incomes grow, contributing to the higher values of manufactured goods, barriers to entry into the manufacturing sector, such as the need for capital and technology, would make it more difficult for countries to enter into this relatively more lucrative market. Both of these factors would result in an economically deteriorating position for developing countries.

This thesis was formalized as the Singer-Prebisch thesis. Under the Singer-Prebisch thesis, the structure of the world economy would work against the economic development of latecomers to development that had comparative advantage in primary commodities. Prebisch would later advocate for import substitution as a strategy to overcome the disadvantage of being a latecomer to development, but it is likely that this strategy slowed development by requiring countries to develop technologies that were available at a lower cost on the international market.

This dependency theory had considerable influence among neo-Marxist economists in the 1960s and 1970s because it explained how core capitalist countries would be able to exploit a dominant position in the world economy at the expense of countries at the periphery. Andre Gunder Frank developed an analysis of dependency that focused on an exploitative relationship between town (metropole) and country (satellites) projected into the relations between states in the international system. He argued that when the relationship between the metropole and satellites are weakened, such as during the Great Depression and World War II, when Latin American countries experienced significant economic development, economic growth is possible in the satellites, but when normal conditions return, the economic stranglehold of the metropolitan countries is reestablished. The only way to escape this relationship would be to overthrow the existing economic relationships and establish a socialist developmental state.

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