Dependency theory has been put forward by social science theorists in an attempt to explain how developed and developing nations affect each other. It implies that the resources flow from poorer countries to the wealthier countries. It is viewed as an opposing view to the notion of a free market economy as it points out deficiencies in that system. This theory has been highly influenced by the work of Hans Singer and Raul Prebisch.
What is Dependency Theory?
This theory is comprised of three main ideas:
- Wealthy nations are able to control poorer nations and make them dependent. This is done using a variety of means such as political and economic interventions.
- The wealthier nations also use the media, education systems, and international sporting events to maintain their control over the poorer nations.
- The rich nations benefits from the resources of the poorer nations so that they can enjoy a much higher standard of living.
- If a poorer nation makes any attempt to resist against the power of the rich nations they may have to face military force or economic sanctions.
This theory argues that the rich nations are only able to enjoy their privileged position because of their ability to keep other nations down. Although the days of colonial powers is said to be over this theory views that things remain essentially the same. The poor countries are still forced to hand over their wealth to the richer countries. The World Bank and International Monetary Fund are viewed as the main forces used to keep some nations down.
Free Market Economy versus Dependency Theory
One of the main claims of those who support a free market economy is that this system is fair. The market forces are viewed as working to keep everything in check and to lead to a situation where everyone can benefit. Dependency theory argues against this because it views the current situation as being one where only some countries can benefit. Free market economy theorists are all for free trade between companies, but this leaves the door open for exploitation — according to dependency theorists.
Although this theory tends to be used to describe the situation between different countries it can also be used to describe the situation within one country. This is because you will usually find within any country there are rich urban areas and poorer rural areas. It could be argued that those living in the rich parts of the country get to benefit from the resources of those who are less privileged.
Criticisms of Dependency Theory
This theory seems to have been particularly popular during the 1960s, but it has since lost some of its attraction. The success of countries such as India seems to argue against the idea of dependency. As such countries move from underdevelopment to becoming serious economic heavyweights it can be used to argue against the theory. There is also claims that attempts to apply development theory to economic policy has led to disastrous economic consequences. There still remains quite a lot of support for this theory but not as much as there once was.