In this chapter explain about debating between neo-marxist theories and other expert’s theories which try to explain the cause of underdevelopment and dependency. In this context, Marx arrived at the conclusion that imperialism would probably destroy important elements, including local small-scale manufacturing, and set in motion a significant exploitation of the colonial areas; on the other hand, he believed that the European penetration would at the same time remove basic obstacles to the development of capitalism. We will deal with the Neo-marxist mainstream and followed by focusing on some of the several theorists who have rejected this interpretation and instead asserted that imperialism has actively underdeveloped the surrounding societies or at the very least obstructed their development. These theorists as proponents of dependency theory argue that economic domination, as pressured by the highly industrialized countries, is a much more important development-impeding factor than all the internal conditions in the backward countries that feature so prominently in the growth and modernization theories (Bagchi, 1982).
Causes of underdevelopment: Baran
Baran emphasized that the backward countries were characterized by dual economies: they comprised large agricultural sectors (where productivity was extremely low and the marginal productivity of labor close to zero), and they had small industrial sectors with a high level of productivity.
The important new feature in Baran’s approach and analysis was his attempt to explain that capitalism can make the Third World (backward societies) remained underdeveloped using the economic theories emphasized on class relations and their impact upon the utilization of the economic surplus. The extraction of economic surplus in backward countries, based on Baran, is taken from wage labor, land rent, interest on credit, and profit from trade. Capital does exist on feudal aristocracy / landowners, moneylenders, merchants / traders, and capital owners (both foreign and national). However, these economically dominant classes do not have vital interest in promoting industrialization and the accompanying transformation of the surrounding economies because it would threaten their access to the traditional sources of economic surplus and a more comprehensive industrialization process would undermine their monopoly position and force them in competition with new entrepreneur.
Baran focused mainly on the internal condition of backward societies and international circumstances. In internal conditions, more specifically in the distribution of power among these classes and control over the economic surplus, Baran found the primary barriers had prevented the poor countries from copying the industrialized countries and reaching similar stage of development. While international circumstances factor is underlining that economic development in backward countries was profoundly opposite to the dominant interest of capitalist countries. Therefore, countries governed the international economic system, the underdeveloped countries remained trapped in poverty. The recommended strategy to out of the misery was through extensive state interventions to promote nationally-controlled industrialization.
Metropoles and satellites: Frank
Frank argued that the crucial mechanism for extraction of the surplus was trade and other kinds of exchange of goods and service not only international trade, but also exchange internally in the peripheral societies. Frank described the exchange relations and the network as pyramidal structure with metropoles and satellites. The agricultural labourers and the small farmers in the rural regions of the periphery were satellites at the bottom linked through trade to the landowners and local center of capital accumulation (surplus extraction) as local metropoles.
Frank’s basic point is that the satellites would be developed only to the extent and in the respects which were compatible with the interest of their metropoles. In fact, countries had closest links to the industrialized countries were the proportionally least developed. Therefore, the explanation of underdevelopment lay primarily in the meropole-satellite relations which not only blocked economic progress, but also often actively underdeveloped the backward areas. For this reason, backward countries would be better off if they disassociated themselves from the industrialised countries and the best development strategy was de-linking from the world market.
Center and periphery: Amin
Amin was more concerned with the conditions and relations of production. Amin worked out two ideal-type societal models: autocentric center economy and dependent peripheral economy.
- Autocentric center economy or autocentric reproduction structure is characterized by the manufacturing of both means of production and goods for mass consumption; it has self reliant but does not have self sufficient.
- Peripheral economy is dominated by an over-developed export sector and a sector that produces goods for luxury consumption. It is not self-reliant but heavily dependent on the world market and the links to production and centres of capital accumulation in the center countries.
Amin endorsed that capitalism dominates the periphery within the sphere of circulation, but he asserted that pre-capitalist modes of production continue to exist and that they exert considerable influence on the total structure of reproduction. The distorted production structure in the peripheral countries and their dependence is a result of the dominance of the center countries. The center countries, also, prevented the establishment of national capital goods industries and the manufacturing of goods for mass consumption. In these areas, the rich continue to have a vital interest in selling their goods in the peripheral markets. In this place, developed countries should expand regional co-operation and internally pursue a socialist development strategy.
Theories of unequal exchange: Emmanuel and Kay
Emmanuel tried to explain the deteriorating terms of trade with reference to Karl Marx’s labor theory of value. Based on Emmanuel, the industrialized countries could buy goods at prices below the cost involved in producing the same goods in the industrialized countries due to the very low wages in the peripheral countries. This is a kind of over-exploitation in the poor and dependent countries. However, Emmanuel argued that the over-exploitation was a more important mechanism of surplus extraction than monopoly control over trade.
Kay analyses the cause of underdevelopment. He argued that the unequal exchange was the preferred mechanism for extracting economic surplus of a particular social class, termed pre-capitalist commercial bourgeoisie. This bourgeoisie, did not acquire revenue from surplus value produced by labor, but by exploiting the distortion of prices. Kay consider that the establishment of industrial capitalism in the peripheral would pave the way for the growth of a normal capitalist commercial bourgeoisie, so that the unequal exchange would not be necessary.
Dependent development: Cardoso, Senghass, and Menzel
Cardoso reject the notion that peripheral countries could be treated as one group of dependent economies, as well as he rebutted the idea that the world market and other external factors should be seen as more important than intra-societal conditions and forces. Cardoso claimed that the external factors would have very different impacts, depend on the dissimilar internal conditions. Cardoso’s analysis reflected systematic attempts at combining economics and political science (social class, distribution of power, and the role of the state). He deliver the term development in dependency. It is characterized as dependent, associated development – that is development dependent on and linked to the world market and the center of economies.
Senghass and Menzel carried out a series of extensive historical studies of both center and peripheral societies; besides, they also arrived at the dissolution of the dichotomy between center and periphery. Further, the more important conclusion were the internal socio-economic conditions and political institutions in determining whether the economy in a given country could be transformed from a dependent export economy to an autocentric, nationally integrated economy.
The Capitalist World System: Wallerstein
Wallerstein tries to explain that to understand the stagnation and underdevelopment in the very poor and dependent countries requires not only dependency theory, but also particular emphasis on the global framework and conditions. He assumed that their development prospects depended on the nature of global system than internal structures. The development prospects are determined by the national position in the international economic and political system; thus there are 3 main categories: center, semi-peripheral, and peripheral.
Elimination of dependency: Warren
Warren main point was certainly imperialism has led to the creation of a system characterized by inequality and exploitation, but at the same time this imperialism has created the conditions for the spreading of capitalism to the Third World. Warren argued that in the long run it would lead to the elimination of dependency – development out to dependency. Moreover, he said that to promoting more independent national development, the form of competitions like competitions between different industrialized countries and many transnational corporations could effectively influenced. The difficulties were chiefly the internal conditions in each country.