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POLSCI 1G06 Lecture Notes - International Monetary Fund, Dependency Theory, Postcolonialism

Political Science
Course Code
Todd Alway

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The modern global economy is characterized by both great wealth and
great poverty. Certain states have high per capita incomes, developed
infrastructures, and the international influence that comes along with
this. Other states suffer through extreme destitution, economic
vulnerability, and a seeming inability to benefit from the global
economic system.
How does dependency theory explain this divide? According to the
theory, why are some states able to develop economically while others
are underdeveloped?
Why are some nations prosperous with all of life’s necessities as well as luxuries, while other nations live in
extreme destitution and economic vulnerability? It is a common question that many ponder upon and will be
the basis of this paper, highlighting and explaining dependency theory, as well as exploring attempts to
solve this underdevelopment and suggest policies that may lead to development.
Dependency theory is a theory of how developing and developed nations interact. It can be seen as an
opposition theory to the popular free market theory of interaction. Dependency theory was first formulated
in the 1950s, drawing on a Marxian analysis of the global economy, and as a direct challenge to the free
market economic policies of the post-War era.
Dependency theory, holds that there are a small number of established nations that are continually fed by
developing nations, at the expense of the developing nations’ own health. For example, the economic
development of European states only occurred because of the economic underdevelopment of non-
European states. These developing nations are essentially acting as colonial dependencies, sending their
wealth to the developed nations with minimal compensation. In dependency theory, the developed nations
actively keep developing nations in a subservient position, often through economic force by instituting
sanctions, or by proscribing free trade policies attached to loans granted by the World Bank or International
Monetary Fund.
Dependency theory was incredibly popular during the 1960s and 1970s, when the free market policies of
development theory seemed to have led much of the developing world to the brink of economic collapse. In
the 1990s, with the rising success of countries such as India and Thailand, dependency theory lost some
support, as it appeared development theory may indeed have been working. These days, although not as
popular as in its heyday, dependency theory is nonetheless widespread in progressive circles, particular
among groups working on alternative modes of capitalism in the developing world.
The critiques of dependency theory can be leveled within a nation as well as internationally. In fact,
dependency theory tends to trace its roots to back before the emergence of modern post-colonialism. On an
internal level, dependency theory can be seen applying to regions within a country. In the United States, for
example, historically the industrial Northeast can be seen drawing wealth from the agricultural south in a
pattern reflected in the modern world by the industrial northern hemisphere and the productive southern
Dependency theory also posits that the degree of dependency increases as time goes on. Wealthy countries
are able to use their wealth to further influence developing nations into adopting policies that increase the
wealth of the wealthy nations, even at their own expense. At the same time, they are able to protect
themselves from being turned on by the developing nations, making their system more and more secure as
time passes. Capital continues to migrate from the developing nations to the developed nations, causing the
developing nations to experience a lack of wealth, which forces them to take out larger loans from the
developed nations, further indebting them (exploitation according to Andre Gunder Frank).
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