Dependency theory.

What is dependency theory all about?

The background

From the 1950s the United Nations Economic Commission for Latin America (UNECLA) inquired to know the real causes of underdevelopment in Latin America a continent which, despite being politically independent for more than a century, remained underdeveloped. The advocates of this theory copied it from the 1949 version of the work of Raúl Prebisch. During the 1960s Marxists developed the model further, and the theory became more and more Marxist in form.

The OAU charter and dependency

The  Organisation of African Unity’s (AOU now the African Union) charter (Principles: Article III) advocated for an absolute dedication to making the countries, like Luso colonies, that were still depended on the West to gain their political and economic independence. And generally, a policy of non-alignment was, again, anticipated to work with inline with independence initiatives.

Dependency explained

The Western capitalist force employs the 3rd world economy at its own benefit. They extract or import unprocessed resources at a low cost and sell the products after processing with a higher value to the third world. This relationship between the ‘core’ of wealthier capitalists and the ‘periphery’ of poor countries usually weakens the latter in that the third world is always a subject of trade deficit.

Multinational corporations and the IMF work hand in hand, weakening the economy of Africa and South America. The Security Council intervenes with a military action so that when the country is anguished both politically and economically it will be seemingly open for the multinational corporations.

China vs the West

Between 1970 and 2002, Africa accepted $54 billion in loans from the International Monetary Fund. It has already paid $55 billion in interest-stake and the principal__In 2002 $29,5 billion was still owing. Whilst China has, from the 1990’s, offered loans at zero intrest.i

Albeit, the Chinese actions on African development should not be differentiated from the West. Offering ‘free loans’, is a how they can convince Africa to let them loot Africa’s resources. The Dragon (China), just like the West, has actively sponsored war projects in Sudan for their own interests. When Sudan witnessed a genocide, the Dragon was draining and shipping oil off to Shenzhen. Africa is increasingly becoming dependent on China, it’s not a joke, and this time the Dragon has a second motive different to the Western ones, that is: “To create cheap products for this arising market_Africa”.

Africa is increasingly becoming dependent on China, it’s not a joke, and this time the Dragon has a second motive different to the Western one, that is: “To manufacture cheap products for this rising market_Africa”.

Wenjie Chen and company discovered that China invests, mostly, in countries with weak government institutions, whilst the West prefers the opposite.i Is there any reason for that? When weak government institutions develop (and an incessantly destabilising economy), corruption and any other forms of bad governance become a case. It will become much easier to exploit DRC, for example, than Botswana with a strong democratic government. Incorporate tax is often charged by ministers whilst having some refreshments in a coffee bar. Multinationals will thus benefit more without any restrictions and a lot of tax burden.

China has a higher investment goodwill to many undemocratic governments; they liberated Africans from the European burden and they share the same ideology with the dominant ruling parties___semi-Marxist (this is the case with Equatorial Guinea). China’s economic policies, however, are much pro-Western and favours liberalism.

Since 1990s Chinese relations with Africa has increased and over the time the former’s economy has grown rapidly. By 2002 China had emerged as a largest African trading partner.

A solution offered by the proponents of the dependency theory.

The theory advocates for protectionism on the part of the third world, thus weakening the first world economy and opening an opportunity for development.

Raúl Prebisch advanced that the key to dependent development laid in industrialisation (import substitution industrialiastion―ISI) achieved at a faster pace. The lifeblood of industrialisation was none other than markets. At home, import substitution and trade protectionism were essential (1) at least to secure local markets (2) and assure the development of local infant industries in the absence of fierce competition.

During the 1950s several countries in Latin America pursued much of the ideas from Raúl’s concept but, in less than a decade, it had not proved any avail, but a catastrophe. Rigid structures which resembled the colonial system remained in place. The elites were few, and yet they demanded imported luxuries. The commercial revolution in Europe prior to the industrial revolution had enhanced the purchasing power of the people in general. Thus when industries started to expand the ‘market defect’ was never a problem.  Latin America at this point appeared to be starting well ahead of the programme, therefore failure was inevitable.

 

Dependency theory in Africa
Dependency expalined

 

 Sources and annotations

i Check the original source *right here

ii Wenjie Chan at.al, “Why China is investing in Africa: Evidence from the firm level”, Access the article here

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