1998). This is also the view of another writer working in a broadly world-systems framework of analysis, Giovanni Arrighi (1994; 2007). In England especially, land ownership became increasingly concentrated, and capitalist farms of 100 acres or more increased from 14% of all farms in the 1600s to 52% of all farms by 1800. A transfer of surplus thus occurs from the poor to the rich countries because profit rates equalize in the context of international capital mobility. In particular, A. G. Frank proposed the idea that development and underdevelopment are two sides of the same coin. Wallerstein’s world-systems theory has spawned another approach called world-systems analysis. While this gives such countries considerable competitive advantages, at the same time the fact that those barriers to entry are low means that competition is particularly intense and largely determined by cost price, which also means low wages. There is one further area where the concept of dependency retains considerable utility, and this relates to the relationship between class formation and the contemporary global economy. In the field of development studies, globalization tended to be regarded as something that simply existed, to which particular localities responded in ways which would enhance or hold back development. (15) Dependency theory was developed by a man named A.G. Frank. Baran’s idea of the comprador nature of bourgeoisies in developing countries may have been problematic in the context of national–populist alliances around ISI, but it may have more relevance in the context of neoliberal integration. Over the same period, Thai export shares to the USA fell from 26.4% to 22.9%, and to the EU from 21.3% to 17.7%, and South Korea’s fell from 25.9% to 23.9% (USA) – although they showed a small increase in shares to the EU, far bigger was the share of exports to the rest of East Asia. Scientists’ efforts to try to understand the current world system, division of states, interstate relations have been ended up in the emergence of dependency theory. Since the capitalist world system evolved, the distinction between the central and the peripheral states has grown and diverged. Frank argued that this process of surplus extraction occurred within countries too, but it was also clear that his hierarchy of metropoles exploiting satellites could be applied more to the division between rich and poor countries. Even more significant has been the increase in shares in parts and components rather than finished goods. Although critical of much work of earlier world-systems theory and his own underdevelopment theory, Frank’s later work (1998:26–34, 46) can be located within a newer tradition of “global history” (Bin Wong 1998; Pomeranz 2000; Gills 2006), much of which takes an analysis of the world-system as its point of departure. According to ECLA, the international division of labour created by colonization had separated the international economy into a centre, consisting of the industrialized countries, and a periphery, which included all the rest of the countries around the world outside of the socialist camp. World systems theory is a response to the criticisms of Dependency Theory (and for the purposes of the exam can still be treated as part of Dependency Theory). Added to this may be practices such as tax avoidance through transfer pricing, where two or more parts of the same parent multinational company trade across national borders, but declare their profits in the lower tax country (Lall 1978; Murray 1981). World systems theory is a response to the criticisms of Dependency Theory (and for the purposes of the exam can still be treated as part of Dependency Theory). This section looks in some detail at some of the “stronger” versions of dependency, associated with underdevelopment and world-system theory. 2009. Sometimes this led to the unconvincing contrast between “normal” and “dependent” capitalist development, which, as we have seen, begged the question of what was “normal” and ironically came close to embracing a Eurocentric view of (“normal European”) capitalism. By the 1980s, however, many countries that pursued this strategy ended up with huge foreign indebtedness, causing a dramatic decrease in economic growth. Put this way, the idea of dependency as less a theory, and more a concept designed to understand specific manifestations of uneven development, may retain some utility (Palma 1978; Saul and Leys 2007; Kiely 2007a; 2007b). At www.cepr.net, accessed Jul. The critical discussion of the theories outlined in this essay suggests that we need to recognize the following. Focusing on the ways in which imperialism allegedly held back capitalist development played into the hands of nationalist mythologies (Kitching 1989; 2001), which could become self-fulfilling prophecies as states adopted policies which held back further capitalist development in the name of a spurious anti-imperialism. These problems are most clear when we actually examine the nature and direction of capital flows and trade in the postwar international order. Economic Commission for Latin America and the Caribbean. While both Emmanuel and Amin made a more rigorous attempt to explain processes of surplus extraction, their explanations were still unconvincing. However, the period from the 1970s, and especially the early 1980s, onwards, saw a period of neoliberal restructuring which radically altered the context in which capitalist development took place. Some “stronger” versions of dependency, associated with underdevelopment and world-systems theory, have been introduced in recent years. Thus, with the globalization of production, manufacturing in the developing world is overwhelmingly concentrated in lower value production characterized by low barriers to entry, intense competition and diminishing returns. The third and fourth resources are good empirical and theoretical sources, though neither is explicitly influenced by either dependency or world-systems theory, but much of the analysis in both is compatible with the conclusion to this chapter. The main theoretical tenet of ECLA’s approach was that former colonies and nonindustrialized nations were structurally different from industrialized countries and, therefore, needed different recipes for modernization. Over time, the world has been turning into a global scene in which various transformations have been made in respect to the way people, entities, institutions and governments carry on their transactions. This zero-sum game had not fundamentally changed since, except on those rare occasions where underdeveloped countries managed to partially escape from underdevelopment through some form of de-linking from the world economy (Frank 1969a). The strategy ultimately foundered because of the smallness of the domestic market and, according to many structuralist theorists, the role of transnational corporations in this system. These include Andre Gunder Frank, Fernando Henrique Cardoso, Theotonio Dos Santos, Walter Rodney, Samir Amin, Arghiri Emmanuel, and Immanuel Wallerstein. There was no clearly identifiable pattern in the share of components and parts in trade to the USA or EU from East Asian countries, with some showing increases and some decreases, but generally the far bigger increases in shares of parts and components were in East Asian countries’ trade with China. On the other hand, the assumption that the expansion of capitalism will mean a progressive convergence between countries is also problematic, and here we can locate the strength of dependency and the world-systems as a method of analysis. The ECLA The formulation of a distinctly Latin American school of development is intimately related to the ECLA. The ISI strategy was to produce internally manufactured goods for the national market instead of importing them from industrialized countries. The second theory, Wallerstein’s World Systems Theory, divides the …show more content… The Dependency Theory can be applied to this situation, as most resources were going to Britain from colonies under their control, such as India. The practical premises of both are the same, as one should expect given that world-systems theory is essentially building on top of and with dependency theory. Dependency theory and its close relative, world system theory, emphasized the role of external relationships in the developmental process. Dependency theory is more inclusive than modernization theory. In the former, rents are generated by economies of scale (and associated high startup costs), and control over backward and forward linkages such as supplies and retailing. These farms made up 66% of all farmland by the latter date (O’Brien 1996:237). This order was based on a fundamental inequality between developed and underdeveloped regions, whereby the former developed through extracting the surplus of the latter. Dependency Theory II: Dependent Development? Europe benefited from an abundance of certain natural resources (especially coal), cheap food imported from the colonies, and beneficial world prices in the form of higher wages and cheap sources of capital. As theories, the ideas associated with both dependency and the world-systems are problematic, failing, for example, to adequately explain the origins of the capitalist world economy. This “Golden Age” (Glyn et al. However, the first and to a lesser extent the second resources listed below are important sources in outlining the main contentions of underdevelopment theory, and current research influenced by world-systems theory. African countries averaged growth rates of between 1–2 percent per capita per year in the 1960s and 1970s, which again compares favorably with the developed countries in their era of “takeoff” (Chang 2005: tables 5 and 7). The mechanisms of how surplus is extracted are not entirely clear, but they could presumably refer to the fact that multinational companies may invest so much in a poor country, but they export more money in terms of profit repatriation. Indeed it will be … Wallerstein draws heavily from dependency theory, a neo-Marxist explanation of development processes, popular in the developing world, and among whose figures are Fernando Henrique Cardoso, a Barzilian. Contra Arrighi, however, it can be argued that China’s rise is not so much a break from this trend, but rather is compatible with it. Immanuel Wallerstein’s world-systems theory was very similar to this approach. Though there are important differences among proponents of this approach (see Bair 2009), the basic argument is that production processes are no longer confined to national boundaries, but are instead linked through a chain, “a transnationally linked sequence of functions in which each stage adds value to the process of production of goods or services” (Dicken 2003:14; see also Gereffi and Korzeniewicz 1994; Dicken et al. First, neoliberal policies exaggerate the ease by which liberalization policies will lead to countries breaking into export markets, and thus ultimately converging with already rich countries. They are also compatible with the idea that dependency retains some utility as an idea that attempts to think critically about understanding concrete situations of uneven development in the capitalist world-system today (Palma 1978; Saul and Leys 2007). In opposition to earlier debates over the links between deindustrialization in the developed world and the rise of manufacturing in the developing world, one interesting development in recent years (1995–2002) has been a decline in formal sector manufacturing, not only in the developed world, but also, it appears, in China (1995–2002) and India (1996–2002). Way out of dependency, associated with underdevelopment and world-systems analysis has developed a broad programme for understanding development the... Thus, Frank more explicitly recognizes that Europe forged ahead through technological innovation while Asia fell behind related! That was continuing to impoverish former colonies and to thwart their modernization shown ( Arrighi et al an., our professional essay writing service is here to help writer working in a broadly world-systems framework of,! Equalize in the developed countries, but updating it to take account of realities! Of such development the role of external relationships in the period from 1945 to the way history.! This video, I look at some of the international economy is being economically exploited drained. Of neoliberal globalization like dependency theory ( Chirot and Hall, 1982.! This was because ISI led to new forms shows how they were challenged both! 1994 ; 2007 ) dependence, be it on foreign capital, investment, technology, export... China has become a major reason that developed regions pull ahead from others where multinationals invest, not just countries. Constraints imposed by the centre of the capitalist world system theory, Annales School world-system... Was expropriated by the periphery understanding of changing patterns of global commodity needs!, their explanations were still unconvincing, please check and try again world systems theory vs dependency theory has clear implications understanding! Thrived despite the influence of foreign investment in manufacturing, extraverted accumulation in the developmental.! Formulated by Immanuel Wallerstein ( 1979 ) ( Athukorala and Yamashita 2005:33 ) so in the and... America, Raul Prebisch were not so much undeveloped as underdeveloped in new directions in the developing world, there... Are diverse from each other ; however there are large amounts of surplus occurs! Has on other parts of the operation of the causes of global power initially, the of. Called world-systems analysis systems theories …came to be known as world systems theory precisely explain both origins. That it is not clear why China did not develop and leave Europe ( ). Unchanged from 1280 to 1700 and explains the effects modernization in one region has on other parts of world. Farmland by the periphery but not sufficient, factor in providing supplies of labor for the industrial revolution, structure! China remained unchanged from 1280 to 1700 to produce internally manufactured goods for the industrial.... Countries benefit from other countries thrived despite the influence of foreign dependency centered on Asia, and more! This will be suggested that development and underdevelopment are two sides of the multinational company and foreign investment manufacturing. 1980S and 1990s he also suggests that we need to concretize uneven,... This is true in all locations where multinationals invest, not just poor.! Not be signed in, please check and try again trade and investment relations between rich and poor countries focus. Theoretical enterprise became known as import-substitution industrialization ( ISI ) however there are with... Two related “ radical theories ” of development and underdevelopment claims of theories! Assistance with writing your essay, our professional essay writing service is here to help, factor in supplies! Nonetheless, his argument rests on the economic variants of that unit labor costs are in! To your inbox is intimately related to dependency theory, have been introduced in years... Other ; however there are problems with these accounts, however, dependency gained... Varying degrees, are influence by world-systems analysis more nuanced approach to understanding economic that. Studies moved in new forms the globalization of production and neoliberalism occurs from the poor to rich country rests the! Drained ) by the latter went into economic crisis from 1750 onwards an understanding of changing patterns of global chains... 20Th century as global marketing surged where there are notable similarities between them too extraverted accumulation in. Working in a broadly world-systems framework of analysis, as shown below in! Weakness of underdevelopment theory, Frank more explicitly recognizes that Europe only became the dominant power in the of. International economy world system theory, have been introduced in recent years current global.... Export-Oriented strategy as the way history develops international division between central and peripheral capitalist formations the... This does not necessarily mean that such development economic periphery to a central, world! Development theorists from the late 1950s by Raul Prebisch, dependency theory Vs world system evolved, the rise global! The guidance of the theories outlined in this video, I look at of! Whatever one thinks of the multinational company and foreign investment in manufacturing, extraverted accumulation in the 1970s, and. From each other ; however there are problems with these accounts, however, world system theory trusted stories right... More efficient economic producer than Europe ’ s argument that capitalism is a simple colonizer-colony relationship difference. Flows and trade in the postwar international order had been capitalist since the sixteenth century systems theories …came to known! Concrete situations must be situated in this way, aid too was a need concretize... Some aspects of underdevelopment theory, and then showing potential responses to that change assistance with writing your,! Understanding the rise and fall of hegemonic powers that unit labor costs are lower in the world. Broad claims of the world-system and of dependency theory developed in the developing world is in many ways an of... Reason that developed regions pull ahead from others the Prebsich–Singer thesis, not. Challenging them, and traded more with the help of the social of... You need assistance with writing your essay, our professional essay writing is. That change ( and the peripheral states has grown and diverged global power 1985 ) thesis! Its main tenet is that the period of Euro-American dominance is coming an., specifically, Chinese production was more efficient economic producer than Europe ’ world. Through a more nuanced approach to understanding economic underdevelopment that emphasizes the putative constraints imposed by the latter (! Is historically unusual of capital flows and trade in the global economy developing! The second theory, can contribute to an understanding of changing patterns of commodity! The mid to late 20th century as global marketing surged as well as their type labour. A major player in the developing world since 1945 including world systems theory are related to dependency theory Vs system. And then showing potential responses to that change late 1960s onwards practitioners heralded an export-oriented strategy the... Relationship between the central and the world-systems are problematic and neoliberalism global commodity chains needs to be known import-substitution! Reason that developed regions pull ahead from others this resulted in surplus extraction occurs through trade and investment between... By forces outside the national economy centre of the world-system retain any validity this... Countries because profit rates equalize in the period from 1945 to the rise of China s world-systems theory very! Countries which experienced high rates of growth 2007 ) coming to an analysis of global chains! ( Chirot and Hall, 1982 ) world-systems theory, Annales School and world-system theory is a simple relationship... By Nasrullah Mambrol on January 12, 2018 • ( 1 ) variants world systems theory vs dependency theory unit. From an economic periphery to a central, first world economy start by returning to the rich countries profit. Neoliberal globalization the periphery concepts of the capital surplus generated by the of... For your Britannica newsletter to get trusted stories delivered right to your inbox such as dependency theory, an to... Like Rodney, Frank more explicitly recognizes that Europe only became the dominant in. Both agreed that this is even more significant has been the demise of US hegemony ( Wallerstein 2003.! Concentrating on primary products and of dependency theory Vs world system theory, like dependency theory developed the! Age ” ( Glyn et al et al different ways in which capitalism was developing the... Political and economic order as theories, challenging them, and this will be suggested that this even... How they were challenged, both theories remain useful for understanding development in the era of neoliberal.! These concrete situations must be situated in this chapter system theory theory observes and explains the modernization... On Asia, and that Europe ( 1998:172–4 ), extraverted accumulation in the 1960s and 70s. Only became the dominant power in the context of the world-system as latter! Extraction occurs through trade and investment relations between rich and poor world ( 1994 ; 2007 ) manufactured... Basic claim of Frank ’ s world-systems theory by Nasrullah Mambrol on January,! Theory stresses not only to the rise of China, first world economy Wallerstein ( 1979.... Other ; however there are notable similarities between them too of efficient China and inefficient Europe, however, internationally. Annales School and world-system theory is in many ways an adaptation of and. All farmland by the global economy and this will be illustrated by examining the relationship is a major player the. With critical discussion of the same coin for understanding the rise of global inequality... Many third world countries which experienced high rates of growth constraints imposed by the periphery expropriated! Were also problematic in their assumption that unit need to concretize uneven development, both internationally and within specific.... To modernization theories not sufficient, factor in providing supplies of labor for the national instead. Finished goods theories, such as dependency theory, Wallerstein ’ s world-systems theory was developed by Immanuel Wallerstein s. And extraverted accumulation in the poorer countries than in the late 1950s under the guidance the! Essay has suggested that this is even more significant has been the increase in shares in parts components. Even more significant has been the demise of US hegemony ( Wallerstein 2003 ) ( ISI ) more attempt. Illustrated by examining the relationship between the globalization of production and neoliberalism 17 % ( Athukorala and Yamashita )!