Dependency Theory

Definition

Dependency theory is an economic and social theory that suggests that the resources and wealth of developing countries are exploited by developed countries, leading to a cycle of dependency. This theory highlights how historical and structural inequalities in the global economy contribute to the underdevelopment of certain regions while enriching others. It emphasizes the interconnectedness of nations and the way globalization can perpetuate inequities between richer and poorer countries.

5 Must Know Facts For Your Next Test

1. Dependency theory emerged in the 1960s as a critique of modernization theories that suggested all countries could follow a similar path to development.
2. One key argument of dependency theory is that developed countries maintain their wealth by exploiting developing nations through unequal trade relationships.
3. The theory underscores that many developing nations are trapped in a cycle where they are forced to rely on foreign investment and aid, perpetuating their underdevelopment.
4. Critics of dependency theory argue that it can oversimplify complex global relationships and ignore internal factors contributing to a country's economic situation.
5. In the context of globalization, dependency theory explains how global capitalism can lead to increased inequality, as wealthier nations continue to dominate international markets.

Review Questions

• How does dependency theory explain the relationship between developed and developing countries?
  • Dependency theory posits that developed countries exploit developing nations for resources and labor, creating a cycle of dependency. This exploitation occurs through mechanisms like unequal trade relationships and foreign investment that benefit wealthier nations at the expense of poorer ones. As a result, developing countries struggle to achieve independent economic growth and remain reliant on external support, which hinders their development.
• Discuss how globalization relates to dependency theory in the context of New Zealand's economy and society.
  • In New Zealand's context, globalization has led to increased economic ties with larger developed nations, potentially reinforcing elements of dependency. While globalization can offer opportunities for trade and investment, it may also result in New Zealand's economy becoming heavily reliant on foreign markets. This dependence can expose vulnerabilities in local industries and raise concerns about national sovereignty over economic decisions as global market forces dictate local economic conditions.
• Evaluate the implications of dependency theory for understanding New Zealand's role in the global economy during periods of rapid globalization.
  • Evaluating the implications of dependency theory highlights how New Zealand's integration into the global economy can lead to both opportunities and challenges. As globalization accelerates, New Zealand must navigate its position between being a developed nation while also engaging with larger economies. This duality can create risks such as over-reliance on foreign investment or export markets, limiting domestic growth potential. Additionally, it raises questions about equity and sustainability in an increasingly interconnected world where smaller economies may struggle against more dominant players.

Related terms

Core-Periphery Model: A model that describes the relationship between developed (core) and developing (periphery) nations, illustrating how resources flow from periphery to core, reinforcing economic disparities.

Neocolonialism: The practice of using economic, political, and cultural pressures to control or influence a country, typically former colonies, without direct military or political control.

Globalization: The process of increasing interconnectedness and interdependence among countries through trade, investment, technology, and cultural exchange, often impacting economic and social structures.