Economic Dependency

Definition

Economic dependency occurs when a country's economy relies heavily on another country for trade, investment, or financial support, making it vulnerable to external economic fluctuations. This relationship often leads to unequal power dynamics, where the dependent country may struggle to achieve sustainable growth or autonomy due to its reliance on external actors. Economic dependency can hinder local industries and perpetuate cycles of poverty and inequality, especially in developing nations.

5 Must Know Facts For Your Next Test

1. Countries that experience high levels of economic dependency may find their development goals undermined by external economic pressures and policy changes.
2. Economic dependency can perpetuate cycles of underdevelopment, where local economies are unable to grow independently due to reliance on foreign investment or exports.
3. During the Green Revolution, many developing nations increased their dependency on Western agricultural technologies and products, impacting local farming practices.
4. Economic dependency often leads to debt crises, as countries may borrow heavily from foreign entities, making it difficult to escape the cycle of dependence.
5. The impact of economic dependency can vary; while some countries may benefit from foreign investment, others might suffer from exploitative practices and loss of sovereignty.

Review Questions

• How does economic dependency affect a country's ability to achieve sustainable growth?
  • Economic dependency can severely limit a country's ability to achieve sustainable growth by making it vulnerable to external shocks and decisions made by foreign entities. When a nation relies heavily on trade or investments from another country, any shifts in the global market or changes in foreign policy can directly impact the dependent nation’s economy. This vulnerability can hinder the development of local industries and entrepreneurship, leading to long-term stagnation.
• In what ways did the Green Revolution contribute to economic dependency in developing countries?
  • The Green Revolution introduced advanced agricultural techniques and high-yield crop varieties primarily developed in Western countries. While this led to increased food production in many developing nations, it also created a dependence on imported technologies, seeds, and fertilizers. As these countries relied on foreign companies for agricultural inputs, they became economically dependent and were less able to invest in local agricultural innovation or self-sufficiency.
• Evaluate the implications of economic dependency for social equity within dependent countries during the Green Revolution.
  • Economic dependency during the Green Revolution often exacerbated social inequities within dependent countries. The benefits of increased agricultural productivity were frequently concentrated among wealthier landowners who could afford new technologies, leaving smallholder farmers marginalized. This disparity not only widened the income gap but also limited access to resources and opportunities for poorer communities, leading to deeper social divides and hindering inclusive economic development.

Related terms

Neocolonialism:

A modern form of colonialism where foreign powers exert influence over developing countries through economic means rather than direct political control.

Globalization:

The process by which businesses or other organizations develop international influence or start operating on an international scale, often leading to increased economic interdependence among nations.

Import Dependency: A situation in which a country relies heavily on imports to meet its domestic needs, which can lead to vulnerability in times of global economic shifts.