Critically Examines the School of Thought known as Dependency Theory, precursor to World Systems Theory

1. DEPENDENCY THEORY: A Critical Review
by Craig Collins, Ph.D.
Dependency Theory evolved in response to the question: "What is the nature
of the relationship between rich and poor nations?" This is a complicated,
thorny and emotionally charged question. The widely divergent, polarized
views that characterize the literature on this issue are clearly illustrated by
the choice of adjectives used to characterize the countries involved in this
relationship. For instance, while some scholars see a relation between
developed and developing nations, or established and emerging nations,
others see an interaction between an imperialist core and an exploited
periphery, or between dominant and dependent nations.
Dependency Theory (and its close relative, World Systems Theory) look at
the relationship between rich and poor countries as one of dominance and
dependence. Implicit in the word "dependency," regardless of how it is
defined or ill-defined, are two essential elements: integration and
subordination. As a group, dependency theorists tend to agree that poor
nations have a dependent relation to rich nations in-so-far as their interaction
is both close and asymmetrical, with the result that poor countries are, in
some significant way, subordinated to rich ones.
Historical Background
The dependency school emerged as an intellectual current in the late 1950s
and early 60s, but its roots must be traced back at least as far as the period of
rapid de-colonization that followed WWII. During this period, world
capitalism revived under American leadership, while colonialism "bit the
historical dust." During the previous decades, global depression and war had
sparked anti-colonial movements and weakened European empires. The
emerging rival superpowers—the Soviet Union and United States—
generally opposed any significant return to the old colonialism. As the Cold
War intensified, each superpower sought to extend its influence over the
emerging nations of Asia, Africa, and Latin America, which became known
collectively as the Third World.
The leaders of these newly independent Third World nations were eager to

2. overcome their history of poverty and colonialism and rapidly modernize
their countries. Each superpower claimed to possess the secret of success.
The United States sought to head-off Soviet expansion by replacing
colonialism with formally independent states that were economically,
politically, and militarily tied to American influence. The USSR dubbed this
strategy "neo-colonialism." The Kremlin championed the “non-capitalist" or
"socialist" path to development. It supported anti-American national
liberation movements that--after driving out US influence--would model
themselves after the Soviet Union and integrate themselves into “the
socialist camp”.
However, in the Third World, movements for national independence often
resisted any attempts at foreign control over their destinies and rejected both
superpowers' development strategies. Instead, they sought some form of
non-aligned development strategy and attempted to collectively express their
demands for global economic reform through the United Nations and the
non-aligned movement.
In Latin America, where formal independence under American dominance
had been a reality for some time, a current of political thought arose that
blasted the American model of development as incapable of producing either
widespread economic development or genuine independence. These Latin
American scholars and activists articulated a somewhat coherent political
critique of orthodox western modernization theory. This new outlook
borrowed from structuralism, the Leninist theory of imperialism, and a
seminal analysis of monopoly capitalism’s impact on underdeveloped
countries by the American Marxist, Paul Baran. These scholars became
known as dependency theorists, or “dependistas”.
Dependency Theory Challenges Superpower Developmentalism
Though dependency theory arose as an explicit challenge to Western
developmentalist theory, it was also an implicit criticism of the Soviet model
of development as well. Many “dependistas” were quick to point out that
both superpowers' development schemes held some parallel, self-serving
assumptions, despite their obvious differences.
The most renowned spokesman for Western developmentalism was Walt
Rostow, a famous cold war liberal and high-ranking member of the Kennedy
administration. He presented his theory as a direct challenge to the soviet

3. theory of development and as a guideline for all emerging nations to follow.
His book, Stages of Growth: An Anti-Communist Manifesto, describes
modernization in terms of linear, evolutionary stages that eventually lead
poor countries toward affluent, capitalist, industrial societies like the United
States. Rostow assumed economic growth and progress to be possible for all
countries—given the proper levels of savings and investment. Also, he
assumed that each country is on an evolutionary ladder—a developmental
continuum—whose apex is the United States.
Despite apparent differences, Soviet developmentalism held some notable
similarities to Rostow's "stagist" theory of growth. For example, Soviet
theory also described development as a series of stages or production modes
(i.e., primitive, slave, feudal, capitalist, and socialist) through which every
country must pass to reach affluent, industrial communist society. Also,
Soviet theory assumed development to be possible for all countries—
providing they carried out the necessary revolutionary transformations,
culminating in a state-managed economic system. Also, like Rostow's
theory, Soviet developmentalism assumed that each country lies on a socio-
economic evolutionary ladder whose apex is the USSR (not the US).
Dependency Theory challenged both Western and Eastern "stagist" theories
of development, and rejected both the US and the Soviet Union as ideal
models of development. Instead, Dependency Theory insisted that nations
are not isolated economic units with separate parallel histories, but
integrated parts of a single, global, political economy with a hierarchical
division of labor, resources, capital, and power--united by a world
market. Dependistas insisted that the fundamental unit of political and
economic analysis must be this multi-state world economy.
If the world system is the focus of analysis, then divergent historical patterns
of development are to be expected as each state (or group of states) takes on
a different role in the global division of labor. The system’s industrial
core—where you find high wages, large capital concentrations,
advanced technology and high energy use—presupposes its symbiotic
opposite: a low-tech, low wage, low energy, capital-scarce periphery.
These two production zones, buffered by a medium-range zone some
call the semi-periphery, constitute the essential structural features of a
global capitalist system. Dependency theorists generally agreed that each
state, or group of states, must have dramatically different historical
trajectories, internal socio-economic profiles and political systems in order

4. to fulfill their particular function, or niche, in this international division of
labor.
According to prominent dependistas like Andre Gundar Frank and Immanuel
Wallerstein, this global system came into existence long ago and has
expanded while passing through three phases--agricultural, merchant, and
industrial. However, its basic elements (core, periphery, and semi-periphery)
have remained intact, as has its central motor force—the ceaseless drive
for profit maximization and capital accumulation.
Though disputes exist between dependency theorists over the amount of
upward and downward mobility possible within this global system, it is
generally recognized that, overall, the periphery is held in a
dependent/subordinate relation to the core through specific economic,
technological, political, and military relationships which perpetuate
peripheral subordination. According to the dependistas, the more
productive and self-reliant a national economy is, and the stronger the state
machinery it possesses, the more capable a country is of distorting the world
market in its favor. Core states are more powerful and productive than
peripheral states and can therefore set the rules of economic exchange.
From this position of dominance they can impose a condition of unequal
transfers of wealth, in trade, finance and resource extraction upon the
periphery.
This view leads dependistas to the conclusion that upward mobility in
the world system requires a strong state which can resist core efforts to
dominate and exploit it. Thus, in the Third World, the persistence of
nationalism is closely associated with the belief that only a strong nation-
state can defend a country from core exploitation, promote independent
economic development and initiate upward mobility in the world system.
An example of a country that has been able to successfully pursue this
strategy would be China.
In the decades after World War II, most political analysts saw the world as
divided between capitalism and communism, East and West, US vs. USSR.
However, dependency theorists argued that, even during the Cold War, the
deepest underlying contradiction in the world was between the weak
peripheral states of Asia, Africa, and Latin America and the industrial core
powers that exploit them. Further, dependency theorists took the openly
partisan stance that this exploitive hierarchical relation between core and

5. periphery is detrimental to most of the world’s people and, therefore, must
be transformed into a more egalitarian international system.
However, dependistas have been unable to reach some common agreement
on the mechanisms of this exploitive relationship and, therefore, they cannot
agree upon a strategy for overcoming it. Without a unified analysis of the
actual process of center-periphery exploitation, or a specific understanding
of what measures or social forces can overcome it, the dependency outlook
cannot qualify as a consistent theory. Instead, it remains on the level of a
descriptive analysis. In Ronald Chilcote’s words, “There is no unified body
of thought called Dependency Theory." Chilcote believes that the most
obvious divisions and disagreements among dependistas are a reflection
of their divided allegiances to two opposing paradigms or “schools of
thought”: 1) the bourgeois, structural reformist paradigm, and 2) the
neo-Marxist, revolutionary paradigm.
The Reformist School of Dependency
While the reformist dependistas agree that center-periphery inequality
has been, historically, an aspect of the world capitalist system, they do
not believe that the structures that promote peripheral dependency are
inseparably wedded to global capitalism. Consequently, this school of
dependency theory contends that, with some key structural reforms,
dependency and underdevelopment can be overcome. The most
prominent representatives of this camp of dependency theorists were the
Argentine economist and banker, Raul Prebish, and the Brazilian economist,
Celso Furtado. As members of the UN's Economic Commission on Latin
America (ECLA), they presented a perspective on dependency that was anti-
core, but pro-capitalist.
Prebish’s theory linked dependency and underdevelopment to worsening
terms of trade between the core’s industrial exports and the primary products
exported by the periphery. He felt that an intensely competitive buyer's
market for primary goods drove the price of Third World exports down,
while an oligopolistic seller's market for manufactured products kept the
price of core exports high. According to Prebish and Furtado, these
structural inequities in the world market could be overcome through
commodity cartels (oil, coffee, sugar, etc.) and an aggressive program of
import substitution industrialization in the Third World. Prebish felt that
state-sponsored industrial development in Latin America could

6. overcome its consumptive dependence on the core's manufactured
goods, create a strong industrial class in the periphery, and sweep aside
the traditional landed elites which had paralyzed development by
limiting peripheral economies to agricultural and raw material export.
As strategies for independent economic growth, commodity cartels and
import substitution industrialization have been less than successful. Except
for OPEC's partial success, most commodity cartels have been unable to
overcome the competitive forces that undermine their solidarity. As for
import substitution, small-scale, relatively inefficient peripheral enterprises
have been unable, in most cases, to compete with large, efficient multi-
nationals—especially without imposing extremely low wages and state
protections which have tended only to subsidize and perpetuate inefficiency.
Markets for these protected industries have been restricted by artificially
high prices, the limited consumptive capacity of a low paid domestic work
force, and the fledgling industries’ inability to compete on a global basis,
outside their protected markets. Also, most import substitution
industrialization schemes have been financially dependent on foreign loans
and have, therefore, increased peripheral debt dependence on core lending
institutions.
However, some nations with comparative advantages in key areas of
industrial production--like South Korea, Taiwan, China and Brazil—have
experienced very rapid industrial growth over the last several decades.
Nevertheless, critics point out that this growth is either wedded to financial
and technological dependence on the core, or is the direct result of multi-
national corporate investment. They also point out that this type of industrial
production is directed primarily toward markets in the core, not the
country’s domestic consumers. Many radical dependistas also criticize this
development strategy for increasing the exploitation and marginalization of
the vast majority workers and peasants in order to increase the profits of the
tiny peripheral elite and its international corporate and financial backers.
Despite the obvious deficiencies of protected industrialization as a panacea
to peripheral dependence and economic backwardness, most Third World
elites were wedded to this strategy during the 1960s and 1970s. The non-
aligned movement's program for ending dependence, and promoting growth
through industrialization and structural reform, became the centerpiece of
their demand for a New World Economic Order.

7. The Revolutionary School of Dependency
Revolutionary dependistas approached the problem of dependency from a
very different angle. This neo-Marxist, radical paradigm sees the
exploitive relation between core and periphery as inseparable from, and
irresolvable within, a capitalist international framework. For them,
peripheral dependence is inherent in a system of imperialism. The
system's global dynamic of profit maximization and capital
accumulation requires a periphery vulnerable to exploitation by a more
developed core, i.e., a ready source of cheap labor and raw materials, as
well as a lucrative, if limited, source of capital investment.
Behind the political inequality between core and periphery the radicals see a
more fundamental economic relation—a constantly evolving dynamic of
labor and resource exploitation and unequal trade with the periphery
fostering profit and capital concentration, technological innovation and
increased consumption in the core. Hence beneath the structural symptom of
political dependency lies a more fundamental process of labor exploitation
and the extraction of surplus wealth from the periphery. Like Marx, who
argued that European capitalist growth must create ever-widening disparities
between concentrated wealth and widespread poverty, radical dependistas
extended this phenomenon to a global level.
They contended that the more fully peripheral zones are drawn into an
exploitive relation with the industrial core the worse-off the majority of
people in these countries will become. Thus, while financial and corporate
elites in the core, and their junior partners in the periphery, grow ever
more wealthy and powerful, the vast majority experience a decline in
their standards of living. This drop in living standards is accompanied
by a drastic uprooting of traditional patterns of rural existence, as
subsistence farming is replaced by mechanized export agriculture, and
peasants are forced from their land into the crowded shanty towns
surrounding all major Third World cities.
For the revolutionary dependistas, industrialization in the periphery cannot
solve its basic problems. Multinational investment in peripheral industry or
state-sponsored industrial growth tends to only exacerbate the polarity
between those social strata linked to the modernizing industrial sector and
those in the traditional sector who are uprooted and exploited by the
modernizing elite. The renowned radical dependency theorist, Andre Gunar

8. Frank labeled this process the “development of underdevelopment”.
Brazil is often cited as an outstanding example of this phenomenon. A
decade after embarking on a crash program of industrial growth in the
1960s, Brazil was being touted, in the West, as a miracle of development. It
had the highest rate of economic growth of any Third World country by
1971. However, during this same period, the revolutionary dependistas note
that unemployment skyrocketed along with infant mortality, while per capita
calorie intake dropped, the balance of payments worsened, and a repressive
military regime seized control of the state. For this reason, radical
dependistas opposed capitalist industrialization and structural reform as a
solution to peripheral dependence, underdevelopment, and poverty.
Consequently, their solutions tended to be revolutionary in nature. Many
envisioned a process of protracted social revolution in the Third World,
pitting those strata that suffer from this global system against those who
profit. The status quo will be defended by a class alliance of corporate and
financial elites in the core and their junior partners in the periphery. This
peripheral elite consists of large landowners, state bureaucrats, military
leaders, and the industrial elite tied to foreign investment and finance. The
revolutionary forces resisting capitalist globalization would come from the
poor peasants and farmworkers in the countryside; and in the cities, from the
low-paid workers, the unemployed slum dwellers and the small merchants
and local entrepreneurs, unable to compete with the giant multi-nationals.
Like the reformist solution, the revolutionary solution has not met with
much success so far. Following the example of the Russian and Chinese
revolutions, the second half of the 20th Century saw self-proclaimed
revolutionary socialist/communist movements take power in countries like
North Korea, Albania, Yugoslavia, Vietnam, Cuba, Chile, Tanzania, Angola,
Mozambique, and Nicaragua. They toppled corrupt elites, cut or sharply
reduced their ties to the global capitalist system and pursued some form of
self-reliant, nationally-based, government-directed development.
But these initial efforts at trying to build self-sufficient "socialist" political-
economies have not been successful. Third World revolutionary
governments have not been able to sustain themselves surrounded by a
global system antagonistic to their survival and bent on their destruction.
Core capitalist countries viewed these movements as a threat to their global
military and political dominance; and economically, these self-reliant states

9. reduced the core’s unfettered access to cheap labor, resources, markets, and
super-profits.
Led by the United States, the core capitalist states tried to prevent these
revolutions from succeeding; when this failed, they embarked on a strategy
of overt and covert military and political encirclement, hostility and
subversion, combined with economic strangulation and sabotage. New
revolutionary governments were forced to adopt a guarded, closed and
defensive posture, often to the point of paranoia; this environment was not
conducive to political freedom, democracy, or economic development. To
defend their revolution, the new governments had to devote large portions of
their resources to national security and military defense. Inevitably, this
undermined democracy and reduced the resources available for economic
development.
Unlike the capitalist countries of the core, these new revolutionary states
could not rapidly modernize through slavery, colonization or any of the
more modern methods of exploiting the vast resources and cheap labor of
the periphery. Instead, their development had to be based solely on the
country’s own domestic resources. Initially, a slow, but fairly balanced and
egalitarian economic growth was achieved in many of these countries,
accompanied by a marked improvement in living standards compared to pre-
revolutionary times. This was clearly the case for China (under Mao) and
Cuba.
But even for giant countries like the USSR and China, this was an arduous
task requiring hardship, sacrifice and hard-nosed political will. For smaller
countries, isolated development became a nearly impossible hardship.
Embattled revolutionary governments faced economic stagnation and social
discontent. These extreme difficulties and the ever-present temptation to
speed-up growth with injections of foreign technology and investment
produced a tendency for revolutionary leaders to backslide. Core capitalist
powers took advantage of every opening to strangle, undermine and discredit
these experiments in egalitarian self-sufficient development and promote
rapid, capital intensive, export-oriented growth.
In countries like China, Vietnam and Tanzania these tensions produced deep
political schisms between those leaders committed to revolutionary self-
reliance and those who wanted to modernize rapidly by opening up their
country to foreign investment and export-oriented growth. The rapid

10. modernization path proved very tempting because it presented revolutionary
elites with the prospect of getting rich as the junior partners of foreign
capital. When socialist governments experimented with opening their
economies to injections of foreign capital and export enclaves, these boom
sectors quickly overpowered and undermined slower, balanced, more labor-
intensive development plans.
In short order, state managers were drawn into the role of providing foreign
investors with cheap labor and resources and assuming large foreign
development loans. Threatened by the military might surrounding them and
tempted by the possibility of wealth and luxury should they re-join the
capitalist world as junior elites, revolutionary political leaders in most of
these countries (with notable exceptions, like embargoed Cuba) eventually
succumbed to the Russian and Chinese examples of re-opening themselves
to capitalist penetration and exploitation.
Ironically, the disappointing record of nationally based revolutionary
experiments actually reinforced dependency theory’s central
assumption: nations are not isolated units; they are part of a global
political economy. Thus, fundamental change can only come from a
crisis and breakdown at the world system level.
For now, the immense concentration of wealth and power enjoyed by the
elites of the world's small industrial core and the reciprocal impoverishment
of the vast majority of the people in the periphery remains basically
unaltered. But for the distant future, revolutionary "dependistas" like Andre
Gunar Frank, Samir Amin, and Immanuel Wallerstein envision a general
systemic crisis, more devastating than the Great Depression of the 1930s,
which will weaken the financial, economic, technological, military and
political structures of the core. Freed from the weakened grip of a crisis-
ridden core, social upheavals throughout the periphery will topple local
elites, creating regional, and possibly continental, breakaways from world
capitalism. Marx's long awaited vision of a worldwide anti-capitalist
revolution will then materialize first in the periphery and later in the core.
Conclusion
Dependency Theory emerged as a challenge to both Soviet and American
developmentalist models. By viewing rich and poor nations as inseparable
polarities in a global economic system, dependency theory denies the

11. possibility that all nations can rise to affluence by following the prescribed
stages of growth recommended by either competing superpower. However,
the dependency perspective lacks strong theoretical cohesion, and is split
between reformist and revolutionary camps. Each camp views the struggle
as a collective effort on the part of the periphery to re-structure the global
hierarchy. However, the reformists believe this can be accomplished within
a capitalist framework, gradually, through industrialization and collective
bargaining between North and South. However, revolutionary dependistas
do not believe a more just world order will emerge without a global system-
wide crisis, protracted and sweeping political change, and the establishment
of a democratic socialist world system.