Dependency Theory

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Dependency theory came forth in the 1940’s in opposition to the dependency theory of modernization. It is highly influenced by the Marxist perspective which states that globalization is the basis for market capitalism, cheap labor and advancement of technology in developed nations. Raul Prebisch found that the growth of wealth in developed nations appeared to be at the expense of the underdeveloped nations. According to the modernist paradigm, the periphery countries are at an early stage of development and need to look to the core countries to follow the path of development. On the contrary, dependency theory looks at the historical trends to explain the current state of the underdeveloped countries. Prebisch states that the periphery countries…show more content…
Moreover, it does not provide ways to improve the present. Frank uses Latin America as an example for his model. He refers to the urban centers of the country as metropolis. The metropolis in Latin America acts as a satellite to the metropolis nation-state, which further function as satellites to the core countries. These satellites supply cheap primary goods to rich countries which manufacture them and send them back to the poor countries to make profit. Frank argues that this metropolis-satellite relationship only serves the interests of the metropolis which use this global system to promote their own development. Hence, he explains the title, “The development of underdevelopment”. “We must conclude, in short, that underdevelopment is not due to the survival of archaic institutions and the existence of capital shortage in regions that have remained isolated from the stream of world history. On the contrary, underdevelopment was and still is generated by the very same…show more content…
For example, major regions in Latin America, which are labeled as being underdeveloped today, provided the life blood of mercantile and industrial capitalist development to the world metropolis. These regions became a typical structure of underdevelopment of a capitalist export economy. Ultimately, when the market for sugar and mines disappeared, the metropolis abandoned them. Thus, these regions were left to themselves and degenerated into an ultra-underdevelopment. For example, Mexico has been attributed as a depression to the economy because it was facing a major decline in mining and a shortage in labor during the time when urban population and demand were growing. Uncertainties caused by the rich countries cause losses for the poor countries. Essentially, the poor countries should solve this problem by specializing in production. It can open markets in poor countries, strengthen their method of production and kickoff local businesses. Vincent Ferraro addresses the possible issues which make this policy difficult to follow. He argues that the local markets of poor countries do not benefit from economies of scale because they are relatively small. Moreover, he states his second issue which revolves around the argument whether these poor countries had the political will to transform themselves
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