-Dependency theory views economic underdevelopment as the result of exploitative relations
between rich and poor countries.
- Substantial foreign investment: Investment by multinational corporations has
positive effects for rich countries and negative consequences for poor countries.
- Support for authoritarian governments: Give support to local authoritarian
governments. Gunboat diplomacy is when Western governments send troops and
- Mounting debts: Poor countries have to borrow money from Western banks and
governments, leading to the interest to grow every year.
Effects of Foreign Investment
-Modern theorists want more foreign investment in poor countries and freer trade because they
believe it will promote economic growth and general well being.
-Dependency theorists disagree as they think foreign investment drains wealth out of poor
-Therefore, they want poor countries to go against the rich and throw up barriers to free trade and
investment and find its own path to economic growth.
-Some researchers studied the effects of free trade and foreign investment and came to 2
-1, in 1990 and 1980, international trade and foreign investment led to economic growth.
-2, openness to international trade and foreign investment led to an increase in inequality
-In conclusion, countries have different social structures and histories as they may adopt
economic policies that influence the effects of international trade and foreign investment.
-Factors that may affect how a country responds to international trade and foreign investment
include history, structure, and policy factors.
Core, Periphery, and Semiperiphery
-Immanuel Wallerstein said that capitalist development resulted in the creation of an integrated
world system comprising the 3 tiers.
1. Core capitalist countries: Include the United States, Japan, and Germany. They are
major sources of capital and technology.
2. Peripheral capitalist countries: Include Guatemala and Angola. They are major
sources of raw material and cheap labour.
3. Semiperipheral capitalist countries: Include South Korea, Taiwan, and Israel. They
attempt to become prosperous.
-Semiperipheral countries differ from peripheral countries in 4 ways:
1. Type of colonialism: South Korea and Taiwan became colonies of Japan until 1945.
Japanese built up economies of their colonies as they established transportation
network and communication systems. This led to an advantage for South Korea and
Taiwan compared to Ghana, for example.
2. Geopolitical position: United States feared that South Korea and Taiwan might fall
to the communist, therefore, provided aid to both countries in 1960. Also, Israel