Dependency theory is an approach to understanding economic underdevelopment that emphasizes the constraints imposed by the global political and economic order. It suggests that resources flow from a "periphery" of poor and underdeveloped states to a "core" of wealthy states, enriching the latter at the expense of the former. The theory gained prominence in the 1960s and 1970s, with its roots in the late 1950s when it was first proposed by the Argentine economist and statesman Raúl Prebisch.
Key points about dependency theory include:
- Underdevelopment is mainly caused by the peripheral position of affected countries in the world economy.
- Underdeveloped countries offer cheap labor and raw materials on the world market, which are then sold to advanced economies that have the means to transform them into finished goods.
- Ex-colonial powers are believed to retain wealth at the expense of impoverished former colonies due to the wide-ranging effects of dependency.
- The theory suggests a connection between the role of the capitalist system and the underdevelopment of the periphery.
There are different perspectives within dependency theory. Moderate dependency theorists, such as the Brazilian sociologist Fernando Henrique Cardoso, considered some level of development to be possible within the existing system. On the other hand, more radical scholars, such as the German American economist Andre Gunder Frank, argued for a complete transformation of the global economic order.
