DEPENDENCY

1
DEPENDENCY THEORY (1960s)
2
SOURCES

• Franko, pp. 52-53.
• Cardoso, Chapter 3.
• Prebish, Raul. A critique of peripheral
  capitalism, Cepal Review, 1976.
• Lall, Sanjaya. Is Dependence a Useful Concept
  in Analysing Underdevelopment? World
  Development, 1975, Vol. 3, Nos. 11 12, 799-810.

3
AIM

• Explain underdevelopment

Hypothesis dependence causes underdevelopment.
4
THEORY

• DEPENDENT
• ECONOMIES
• ALL NON-
• SOCIALIST
• LDCs

• CENTER
• ECONOMIES
• ALL RICH
• INDUSTRIALIZED
• COUNTRIES

5
PHENOMENA OF HEGEMONY

• Center Government Policy
• Main goal of foreign policy is to promote the
  profits of U.S. companies.
• Protectionist policies tariffs, etc.
• High tariffs on manufactures
• Low tariffs on primary products
• Political interference
• Military intervention

6
PHENOMENA OF HEGEMONY

• Multinational Corporations (MNCs)
• Manipulate consumers through ads
• Supply conspicuous consumption goods
• Low income people lack money to demand

7
PHENOMENA OF HEGEMONY

• (MNCs)
• Exploit natural resources
• Remit rather than reinvest profits
• Transfer inappropriate technology
• e.g. Belizes wood

8
PHENOMENA OF HEGEMONY

• (MNCs)
• INVEST IN COMMODITY EXPORT SECTOR
• Reduces relative export prices
• Inelastic demand supply increases
• Few linkages
• Do not develop peripheral industries with
  comparative advantage.

9
PHENOMENA OF HEGEMONY

• (MNCs)
• Punish independence movements
• External credit restrictions
• Trade barriers
• Force
• E.g. United Fruit Co. in Guatemala uses political
  connections
• E.g. ChileAllende Pinochet

10
PHENOMENA OF HEGEMONY

• MNCs
• Lower domestic S I
• Stifle domestic business
• Import intermediate products rather than purchase
  locally

11
PHENOMENA OF HEGEMONY

• MNCs
• Cause foreign exchange shortages
• Lack of foreign exchange is an important cause of
  underdevelopment.
• Must import to produce
• Import intermediate capital goods
• Repatriate profit and management fees

12
PHENOMENA OF HEGEMONY

• MNCs
• Reduce government revenues
• Government is an important source of S I
• Tax concessions
• Investment allowances
• Disguised public subsidies
• Tariff reductions
• Transfer pricing to evade taxes

13
PARTICIPATION OF ELITES

• Imitate conspicuous consumption patterns rather
  than invest.
• Lack interest in industrialization
• Willing participantsboth want stability

14
POLICY

• INDUSTRIALIZE

15
CONVENTIONAL VIEW OF MNCs

• Increase I
• Increase local production
• New technology training
• Increase competition
• Foreign market access
• Scale economies

16
CRITIQUE

• Source Sanjaya Lall

17
QUESTION

• Can the concept of dependence serve a useful
  analytical purpose?

Two criteria
1. Unique characteristics?
2. Inhibit development?
18
SOCIO-POLITICAL DEPENDENCE

• There is certainly dominance and dependence, but
  it applies just as much to countries within the
  center as to countries outside it (?).

19
HEAVY PENETRATION OF FOREIGN CAPITAL

• Does not vary on consistent basis between
  dependent and independent countries
• Canada Belgium more dependent than Pakistan or
  India

20
CAPITAL-INTENSIVE TECHNOLOGIES

• Advanced countries depend heavily on foreign
  technology
• Dependence in Denmark that of Colombia.

21
CAPITAL-INTENSIVE TECHNOLOGIES
Most advanced technology often the most
appropriate.

• Sometimes attacks on capitalism, not dependence.

22
FORCEDSPECIALIZATION IN PRIMARY PRODUCTS

• Some dependent economies break circle.
• The question how?

23
DISTORTED CONSUMPTION

• Differences in consumption patterns between
  classes always mark societies

24
INCREASING INEQUALITIES

• Not true of all dependent economies.

25
DEPENDENCE BLOCKS GROWTH

• Some dependent economies have raised the living
  standard of the poor.
• (Could they have raised it more?)
• All economies depend upon the international
  system.

26
CONCLUSION

• The concept of dependence is impossible to define
  and cannot be causally related to a continuance
  of underdevelopment.

27
POLICY

• Concentrate on the conditions within LDCs that
  inhibit growth.
• Or study how to break out of the capitalist
  mould.

28
REFLECTIONS

• Its all their fault
• El Salvador
• Domination/Subordination within
• How did Latin America become dependent?