Dependency Theory

Dependency theory, sometimes called foreign dependency, is used to explain the failure of non-industrialized countries to develop economically despite investments made into them from industrialized nations. The central argument of this theory is that the world economic system is highly unequal in its distribution of power and resources due to factors like colonialism and neocolonialism. This places many nations in a dependent position.

The dependency theory states that it's not a given that developing countries will eventually become industrialized if outside forces and natures suppress them, effectively enforcing dependency on them for even the most basic fundamentals of life.

Colonialism and Neocolonialism

Colonialism describes the ability and power of industrialized and advanced nations to effectively rob their own colonies of valuable resources like labor or natural elements and minerals.

Neocolonialism refers to the overall domination of more advanced countries over those that are less developed, including their own colonies, through economic pressure, and through oppressive political regimes.

Colonialism effectively ceased to exist after World War II, but this didn't abolish dependency. Rather, neocolonialism took over, suppressing developing nations through capitalism and finance. Many developing nations became so indebted to developed nations they had no reasonable chance of escaping that debt and moving forward.

An Example of Dependency Theory

Africa received many billions of dollars in the form of loans from wealthy nations between the early 1970s and 2002. Those loans compounded interest. Although Africa has effectively paid off the initial investments into its land, it still owes billions of dollars in interest. Africa, therefore, has little or no resources to invest in itself, in its own economy or human development. It's unlikely that Africa will ever prosper unless that interest is forgiven by the more powerful nations that lent the initial money, erasing the debt.

The Decline of Dependency Theory

The concept of the dependency theory rose in popularity and acceptance in the mid to late 20th century as global marketing surged. Then, despite Africa's troubles, other countries thrived despite the influence of foreign dependency. India and Thailand are two examples of nations that should have remained depressed under the concept of the dependency theory, but, in fact, they gained strength.

Yet other countries have been depressed for centuries. Many Latin American nations have been dominated by developed nations since the 16th century with no real indication that that is about to change.

The Solution

A remedy for dependency theory or foreign dependency would likely require global coordination and agreement. Assuming such a prohibition could be achieved, poor, undeveloped nations would have to be banned from engaging in any sort of incoming economic exchanges with more powerful nations. In other words, they could sell their resources to developed nations because this would, in theory, bolster their economies. However, they would not be able to purchase goods from wealthier countries. As the global economy grows, the issue becomes more pressing.