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Theories

Dependency Theory

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Underdevelopment is seen as the result of unequal relationships between rich developed capitalist countries and poor developing ones. In the past colonialism embodied the inequality between the colonial powers and their colonies. As the colonies became independent the inequalities did not disappear. Powerful developed countries such as the US, Europe and Japan dominate dependent powerless LDCs via the capitalist system that continues to perpetuate power and resources inequalities.

Dominant MDCs have such a technological and industrial advantage that they can ensure the global economic system works in their own self-interest. Organisations such as the World Bank, the IMF and the WTO have agendas that benefits the firms, and consumers of primarily the MDCs. Freeing up world trade, one of the main aims of the WTO, benefits the wealthy nations that are most involved in world trade. Creating a level playing field for all countries assumes that all countries have the necessary equipment to be able to play. For the world's poor this is often not the case.

In this model the responsibility for lack of development within LDCs rests with the MDCs. Advocates of the dependency theory argue that only substantial reform of the world capitalist system and a redistribution of assets will 'free' LDCs from poverty cycles and enable development to occur. Measures that the MDCs could take would include the elimination of world debt and the introduction of global taxes such as the Tobin Tax. This tax on foreign exchange transactions, named after its proponent, the American Economist, James Tobin, would generate large revenues that could be used to pay off debt or fund development projects.

Problems

• Power is not easily redistributed as countries that possess it are unlikely to surrender it
• It may be that it is not the governments of the MDCs that hold the power but large multinational enterprises that are reluctant to see the worlds resources being reallocated in favour of the LDCs
• The redistribution of assets globally will result in slower rates of growth in the MDCs and this might be politically unpopular

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Related Glossary Items:
WTO
IMF
MDCs
Dependency Ratio
World Bank
LDCs