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Dependency theory was established in 1950s by Raul Prebisch. Prebisch and his friends developed it in an attempt to understand why some countries in the world remained underdeveloped. There was a concern that the richer nations were prospering while poverty heightened in the underdeveloped nations (Kendall, 2010). During that time, research showed that the economic practices in the wealthy nations were instrumental in the poor countries' deterioration. These results contrasted with the neoclassical theory that had stated that economic growth benefited all the countries. According to Prebisch, the exports made by the poor countries directly benefited the rich countries since they use them as the raw materials for their industries.
Surprisingly, these rich countries export the end products to the poor countries. Consequently, the rich countries earn foreign exchange at the expense of the poor countries (Kegley, 2009). Some of them include the small internal markets in the underdeveloped countries, failure of the poor countries to make a change, and restriction of the poor countries to export their products. It is for this reason that the scholars developed the theory of dependency.
Consequently, scholars developed the dependency theory in an attempt to justify the intensity of poverty in the underdeveloped countries (Pfeffer, 2003). Earlier on, the neoclassical theory condemned the poor countries, attributing their economic status to their delay in handling making important economic decisions. However, the dependency theory opposed their views with claims that poverty in these countries resulted from exploitations by the capitalists (Ghosh, 2000).
The dependency theorists argued believe that the international imperialists are instrumental in the perpetuation of dependency in the poor countries. One of these theorists is Andre Gunder Frank who asserts that further underdevelopment of the poor countries is caused by the capitalists economic practices (Daft, 2010). Dependency theory is based on the Marxist theories that explain the reasons for the international inequality. They assert that economic elites use idealism and realism ideologies in order to justify disparities among the wealthy and poor countries worldwide (Brewer, 2010). Therefore, dependency theory bases its arguments on the Marxist theories. Dependency theory argues that the developed countries use the concept of class to establish certain strategies that guard and support their needs.
There are certain principles of the dependency theory that are based on the Marxist theory. First, it states that the world is segmented into certain classes based on economy rather than politics. It asserts that the economy is superior to politics. Therefore, the theory holds that the imperialists created global state system so as to address the interests of the rich countries and organizations (Johnson, 2009). This explains the ongoing poverty in the poor countries, and prosperity in the wealthy nations. The rich and the poor countries form vital parts of the world system. That is the rich countries are that the central rich nations that posses and prosper from the natural resources (John, 2007). On the other hand, the poor countries give the majority of the human and natural resources that the rich nations exploit. Therefore, the rich nations take advantage of the poor countries' resources in furthering their economic activities. As a result, the economic gap between these countries widens. Additionally, the theory argues the global economic laws perpetuate the international inequality. For instance, one of these influential laws is the World Trade Organization (Ritzer, 2003).
The dependency theory and the other Marxist theories try to explore ways of addressing the issue of international economic difference. One of these ways is involves the efforts to bring change among themselves. They should make viable economic decisions and policies that are capable of changing their status in a way. This means that their strategies should aim at freeing them from the economic bondage by the strong international forces. They should also champion for the reduction of the wealthy countries' control on their economic activities. For example, they should seek ways of breaking the import barriers in the case of the import substitution. Although Frank is not the initiator of the underdevelopment theory, he made it very popular (Bardach, 1998). He borrowed a lot of Paul Baran's work. He believes that capitalism is caused by underdevelopment in the developing countries in the world.
There are certain reasons that led to the uneven development in these countries. Furthermore, Frank maintained that the increase in the imperialism in Europe is influential in transforming the world into one global system. He further explains the extent to which these capitalists had gained access to the Latin America. Subsequently, this has a negative impact on the country's economy. This, in turn, results in uneven development across the nations. For instance, there are some places that we realize positive development while others record underdevelopment. This happens because the world system consists of the metro-polis satellite relations. These relations are used by the satellite but not committed to the satellite. Using the examples of Chile and Brazil, Frank explains that Chile had an experience of monopoly of imperialists' structure (Martin, 2002). As a result, these metropolis relations facilitate a stronger bond between the capitalists and the metropolises to their respective centers. It also extends the capitalists rule to the businessmen, stockholders and the tenants. In Brazil, Frank had the same ideas on the effect of capitalism in the country. He explains the transmission of these capitalistic effects from the merchants to the tenants.
Additionally, Frank elaborates on the involvement of the monopolistic system in the countries. According to him, this system involves the poor usage and wastage of a country's resources in the system (Chilcote, 2003). The unequal expropriation and appropriations lead to the development and the underdevelopment of the countries; hence the difference in the economic status.
Imperatively, Frank elaborated on the operations of the satellites and their effects on the world system. First, he explains that the political, social, and cultural aspects are linked to the metropolis. Secondly, establishes that a metropolis is having dependent progress. Thirdly, there are weak bonds between the satellites and the metropolis. The fourth idea is that strengthening of these links might result in further underdevelopment of the metropolises.
Nevertheless, Frank opposed the notion that underdeveloped world had more than one economies; the current and the ancient economies. He explains that capitalism had deepened its roots in Latin America. Though these countries seemed to be doing ell economically, there was a decrease in the performance of the export industries. For example, there was a decline in the productivity of the sugar company in Brazilian North-East (Petrella, 2003). This collapse was as a result of weak ties between the metropolises. Therefore, anything that looked like feudal characteristics results from underdeveloped imperialism.
There are certain criticisms of the dependency theory by certain scholars. Just like any other theory, dependency theory has its share of strengths and weaknesses. To start with, dependency theory has the following strengths. Firstly, the theory analyses the inequality existing between the poor and the rich countries. Moreover, the theory breaks some political bonds and explains reasons why the wealthy nations are taking advantage of the poor countries (Doukhan, 2003). Also, dependency theory dismisses the neoclassical theory's claim that the existing global inequality is caused by the poor countries' laziness. In stead, it argues in favor of these underdeveloped countries and blames the imperialists.
On the contrary, certain scholars argue that the theory has some limitations. One of the weaknesses concerns the theorist, over-generalization and over simplification. Explicitly, frank should have investigated other parts of the world other than Latin American situation. In such a situation, it is essential different parts of the world, for example, the African countries and Asia (Martin, 2002). Therefore, his ideas are not realistic in that he used a few examples in his arguments.
Another weakness of the dependency theory is that does not explain other factors that lead to underdevelopment other than the role played by the wealthy nations. The terms 'core' and 'periphery' are different from the terms 'traditional' and 'modern.'
Additionally, dependency theory is weak in that in Frank failed in his attempt to provide solutions to the situation. His suggestions were very unrealistic and over-ambitious. Moreover, these solutions created certain dependencies among themselves. For example, it was impossible for Cuba to disentangle itself from the economic dominion with the USA (Willer, 1999).
Furthermore, Frank attempted to prove that the imperialism is the major cause of the economic difference. Instead, he bases arguments on unrealistic perceptions. In addition; the theory is weak in that Frank failed to consider all class relations in his ideas. He also misinterpreted the Marxist's concepts. Frank only addresses market relations.
Some critics also challenge the theory by maintaining that it will cause corruption; with the higher markets and the other markets. Corruption is quite intense in the government industries than in than in others. It also causes lack of competition in the industries of both wealthy and poor countries. The completion is as a result of the restriction of imports to the poor countries, and subsidization of inducements (Ghosh, 2000).
Finally, dependence theory encompasses certain scholars such as Karl Marx, Friedrich Engels, Vladimir Lenin, Fernand Braudel, Giovanni Arrigi, Samir Amin, Hans Singer, Frank Gunder and Raul Prebisch.
In conclusion, dependency theory is influential in explaining the international inequality in terms of economy. Dependence theory asserts that the disparity is a resultant of the imperialism by the powerful and wealthy nations in the world. Therefore, they take advantage of the poor countries, hence widening the gap between them. However, there are a lot of criticisms on the theory that display more weaknesses than the strengths. Therefore, this theory may not be suitable in the explaining global inequality.