Dependency Theory

Dependency Theory

1. The 1950s-1960s have witness a remarkable change about the ultimate nature of economic development; (dominated by modernization and neoclassical theory).
2. Advanced countries had all passed the stage of take off into self sustaining growth”, while underdeveloped countries were still in either the traditional society or the preconditions stage.
3. Modernization theory offers an internal explanation of third world development (traditional culture, over population etc.).
4. Dependency theory in contrast, offer an external explanation stressing the roles of the historical experience of colonialism and foreign domination.
5. Around 1960s as a reaction to some earlier theories of development this held that all societies progress through similar stages of development. 
6. The notion that resources flow from a periphery of poor and underdeveloped states to a core of wealthy states.
7. It is a central contention of dependency theory that poor states are impoverished and rich ones enriched  by the way poor states.

Assumption of Dependency Theory

1. Dependent countries suffer from direct exploitation, foreign firms send back profits in his own country.
2. Out model technology is used in poor countries. 
3. Foreign interest and the foreign economy keeps the state weak.
4. Leads to susceptibility to price manipulations in the domestic and overseas market.
5. Confines economic growth into small enclaves.
6. Leads to triple alliance state, local capital and traditional companies.

Notion of Dependency Theory

1.  Poor countries provide natural resources, cheap labor, obsolete technology, and markets to the wealthy countries.
2. Wealthy nations actively achieve a state of dependence (economics, media control, politics, banking and finance, education, culture, sport, and all aspects of human resource development).
3. Wealthy nations actively counter attempts by dependent nations to resist their influences by means of economic sanctions and / or the use of military force.

Former Brazilian President Fernando Henrique Cardoso:

1.  Financial and technological penetration by the developed capitalist centers of the countries of the periphery and semi-periphery. 
2. Produces an unbalanced economic structure both within the peripheral societies and between them and the centers.
3. Leads to limitations on self-sustained growth in the periphery.
4. Favors the appearance of specific patterns of class relations;

Suggestion of Solution:

1. Poor country should comeback on programs of import substitution so that the need not purchase the manufacturing products from the richer countries.
2. The poorer countries should still sell their primary products on the world market.

Criticize 

• It simplifies the core- periphery classification of countries.
• It plans down endogenous factors in explaining underdevelopment.
• It plays too much emphasis on material and economic factors.