50 years of dependency theory

 




Posted bymichael roberts
<https://thenextrecession.wordpress.com/author/bobmckee/>November 4,
2023November 7, 2023
<https://thenextrecession.wordpress.com/2023/11/04/50-years-of-dependency-theory/>Posted inmarxism <https://thenextrecession.wordpress.com/category/marxism/>    

/Over the next few posts, I aim to review a number of books published in
the last year on key aspects of Marxist economic theory./ /I start with
dependency theory./

Dependency theory emerged in the 1960s and 1970s as a critique of
‘modernisation’ theory, which argued that poor countries could develop
by following the same path as wealthy countries.  Dependency theorists
argued that this was not possible because poor countries are
systematically exploited by wealthy countries.  The theory was developed
mainly in Latin America, when the so-called Golden Age of booming
capitalist development after WW2 in the major advanced capitalist
economies came to an end.

It seemed that economic development as in the ‘West’ did not apply to
economies in South America, the Middle East or Africa.  In 1945, Latin
American countries like Argentina and Brazil had per capita incomes not
so far behind that of the weaker capitalist economies of southern Europe
and it was expected that under governments that looked to follow the
industrial economies of the North, Latin America would prosper.  That
hope evaporated in the downturn in profitability and investment that
ensued in the late 1960s and through the rest of the 20^th century.

<https://thenextrecession.files.wordpress.com/2023/11/dep1.png>

In his book, now published in English
<https://www.haymarketbooks.org/books/2025-dependency-theory-after-fifty-years>, Claudio Katz, a professor at the University of Buenos Aires and author of many books on economics and Latin American society, provides us with a comprehensive account of dependency theory as expounded mainly in Latin America over the last 50 years.  It won the Libertador prize for Critical Thought in 2018.

<https://thenextrecession.files.wordpress.com/2023/11/dep3.jpg>

I think we can start to consider dependency theory from a brief phrase
that Marx wrote in his 1867 preface to Volume one of Capital.  He wrote:
/“The country that is more developed industrially only shows, to the
less developed, the image of its own future.”/  Marx was writing when
Britain was at the pinnacle of its economic power and industrial might.
Capital was an analysis of such a capitalist economy.  And Marx thought
capitalism would spread globally so that other rival capitalist powers
would emerge – and he was right.  Germany, France and, above all, the US
caught up with Britain (in its own ‘image’) by the end of the 19th century.

But we now know that that it would only be a small group of industrial
and commercial capitalist economies that achieved Marx’s prediction.
Those powers were then able through military, financial and
technological prowess to block the progress of capitalists and their
workers in most of the rest of the world.  Lenin wrote in 1915 that
there were just a handful of countries that controlled the world’s
technology, finance and resources.  One hundred years later, those
‘imperialist’ economies are much the same and broadly still dominant.
<https://www.academia.edu/66353020/The_Economics_of_Modern_Imperialism>
And thus we can talk of a dominant imperialist bloc and a ‘dependent’
rest of the world.

But ‘dependency’ can take different meanings and Katz shows us that it
does with his discussion of the variants within the dependency school.
Dependency theorists identify two main groups of countries in the global
economic system: the core and the periphery. The core countries are
wealthy countries that control the global economy. The periphery
countries are poor countries that are dependent on the core countries
for trade, investment and technology.  Indeed, the word ‘periphery’
seems better to me than ‘dependent’.  The latter could imply that the
capitalist class in the periphery plays no independent role in
exploiting its own working class and exploitation is totally the result
of imperialist domination and foreign companies.

Where dependency theory plays a positive explanatory role is in the idea
that resources flow from a “periphery
<https://en.wikipedia.org/wiki/Periphery_countries>” of poor
and underdeveloped states
<https://en.wikipedia.org/wiki/Developing_country> to a “core
<https://en.wikipedia.org/wiki/Core_countries>” of wealthy states
<https://en.wikipedia.org/wiki/Developed_country>, enriching the latter
at the expense of the former. The theory rejects the mainstream theory
of ‘development economics’ upon which the international institutions of
the United Nations (UNCTAD – ‘trade and development’), the World Bank
and IMF stand, that all societies progress through similar stages of
development and that today’s underdeveloped areas are thus in a similar
situation to that of today’s developed areas at some time in the past.
Therefore, the task of helping the underdeveloped areas ‘out of poverty
<https://en.wikipedia.org/wiki/Poverty>’ is to accelerate them along
this supposed common path of capitalist development, by various means
such as investment
<https://en.wikipedia.org/wiki/Investment>, technology transfers
<https://en.wikipedia.org/wiki/Technology_transfer>, and closer
integration into the world market
<https://en.wikipedia.org/wiki/World_economy>.  The periphery is thus
described as ‘emerging’ or ‘developing’ economies.

It would be wrong to think that Marx adopted ‘development economics’ in
that sense as in the quote from Capital.  Then he was referring to the
immediate industrial capitalist economies of his day.  In his later
writings, he emphasised how the most populated countries like India,
Russia and China were exploited and eventually suppressed in their
ability to join the leading industrial nations.

Katz concentrates his account of dependency theory on its Marxist
variant, rather than the mainstream one that argues dependency can be
overcome by national policies of Keynesian-type state spending, import
substitution for foreign goods and financial regulation.  This variant
has shown to have failed in practice in taking countries like Argentina
or Brazil into the top tier of capitalist economies.  Instead, Marxist
dependency theory argues that these countries will remain ‘dependent’
because of the huge extraction of value from labour in their economies
to the imperialist bloc through trade, finance and technology.

‘Unequal exchange’ in international trade is a fundamental component of
Marx’s theory of value.  However, within dependency theory, differences
arise on the nature of that unequal exchange: is it due to wage
differences or technologically driven productivity differences?  Do the
imperialist countries through their multi-nationals gain surplus profits
from the cheap labour of the peripheral countries or from their superior
technology and lower unit costs in international trade?

Katz reckons that the most prominent of Latin American Marxist
dependency theorists, Ruy Mauro Marini /“had greater affinities with
those who ascribed unequal exchange to differences in productivities
rather than wages/.” This maintained that the wage gaps were explained
by disparities in the development of the productive forces rather than
vice versa. “/The wage is a result rather than a determinant of
accumulation, arguing that wage levels in each country depend on
productivity, cycles, capital stock, and the intensity of the class
struggle./”

If this was Marini’s position, then I agree.  My own empirical study
jointly with Guglielmo Carchedi on modern imperialism finds that the
transfer of value from the periphery to the core economies through
unequal exchange in trade is mainly due to productivity differences and
technological superiority (OCC in the graph below), and only to a lesser
extent due to higher rates of exploitation in the periphery (RSV.  And
it is not due to lower wages /per se/.

<https://thenextrecession.files.wordpress.com/2023/11/dep4.png>

However, Marini did propose the concept of super-exploitation, namely
where wages in the periphery fall below the value of labour power or
below the average international wage.  According to Katz, /“it was the
central thesis of dependency theory inspired by Marini.”/  But Katz
argues that ‘super exploitation’ cannot be the main determinant of value
transfer between rich and poor countries.  /“It dilutes the logic of
surplus value”/ and it suggests a Proudhonian concept of theft rather
than the /“objective logic of accumulation/”.  As Katz points out, super
exploitation also exists in neoliberal imperialist economies with
‘precarious employment’ and zero-hours contracts etc.

In my view, the point is that the value transfer to the imperialist
North takes place because of their superior technology and labour
productivity. That enables the imperialist North to sell its goods in
world markets at costs below the international average. The capitalists
of the periphery try to compensate for their lower technical level and
productivity by driving the wages of their workers down. So the higher
rate of exploitation in the South, whether by super-exploitation or not,
is a reaction to the failure to compete against the North.

Was monopoly power the main cause of the dominance of imperialist
companies?  Some dependency theorists claim so.
<https://thenextrecession.wordpress.com/2022/11/16/historical-materialism-conference-monopoly-imperialism-inflation-and-ukraine/>  However, Katz reckons that was not the case with Marini. “/Marini was always closer to the Marxist thinkers like Mandel who highlighted this dynamic of differentiated competition among monopolies. He maintained greater distance from theorists like Sweezy who stressed the unrestrained ability of large firms to manage prices.”/  But Marini did not go so far as Shaikh who Katz argues denies /“the clear existence of gigantic corporations that obtain extraordinary profits in certain markets at the expense of smaller companies.”/

Katz reckons that Marini had what I would call an eclectic understanding
of Marx’s value theory.  /“He belonged to a tradition in Marxist
economics that disagreed with the approaches centered exclusively on the
analysis of value in the sphere of production. That approach quantifies
value only in the initial phase of surplus value creation, insistently
pointing to the weight Marx put on the logic of exploitation and
deducing all the contradictions of capitalism from this sphere./”
 Marini wanted to include /“imbalances located in the sphere of
demand/”.  Katz summed up Marini’s view on economic crises as a
“/multicausal approach to crisis, combining imbalances of realization
with the falling rate of profit tendency”./  Readers of this blog will
know that as a proponent of a ‘monocausal’ analysis of crises,
<https://www.academia.edu/12861439/Tendencies_triggers_and_tulips> I
think that Marini’s view leaves us without a theory of crisis at all.

That is not the only weakness in Marini’s version of dependency theory.
He strongly promoted the idea of ‘sub-imperialism’, a category of
countries intermediate between the dominated periphery and the
imperialist core.  Katz spends several chapters discussing the relevance
of this category.  In summary he says that “/it helps to understand the
hierarchical structure of contemporary capitalism”/ with /“an apex of
central powers and a base of dominated countries… in between are these
subimperial powers trying to obtain regional hegemony/.”

I am dubious that sub-imperialism helps us to understand contemporary
capitalism.  It weakens the delineation between the core imperialist
bloc and the periphery of dominated countries.  If every country is a
‘little bit imperialist’, if it engages in war with a neighbour over
markets, resources and territory, then imperialism starts to lose its
validity as a useful concept.  So-called sub imperialist countries do
not have sustained and huge transfers of value and resources to them
from weaker economies.  In our own work on imperialism and in empirical
work by others, this hierarchical structure of value transfer is not
revealed.  India, China and Russia actually transfer much larger amounts
of value to the imperialist bloc than South America.  See the results of
Andrea Ricci on US transfers below.
<https://thenextrecession.files.wordpress.com/2021/09/wp_ricci_unequal_exchange_and_global_inequality-1-1.pdf>

<https://thenextrecession.files.wordpress.com/2023/11/dep2-1.png>

Take the BRICS, the best candidates for being ‘sub-imperialist’.  There
is no evidence of significantly large and long-lasting value transfers
to them from weaker and/or neighbouring economies.  They just don’t have
the financial, technological and military superiority to obtain such
transfers. Can wars between peripheral countries (eg Iran v Iraq,
Azerbaijan v Armenia) be considered imperialist in any useful way? Are
these not better seen as wars between weak capitalist countries for
economic and political gain?

Indeed, Katz makes the point that Brazil is not sub-imperialist as
Marini saw it.  It has not become a rising industrial power dominating
the sub-continent.  The great hope of the 1990s, as promoted by
mainstream development economics, that Brazil, Russia, India, China and
South Africa (BRICS) would soon join the rich league by the 21st
century, has proven to be a mirage. These countries remain also-rans and
are still subordinated and exploited by the imperialist core. And the
gap between the imperialist economies and the rest is not narrowing – on
the contrary. And that includes China, which also will not join the
imperialist club.
<https://thenextrecession.wordpress.com/2021/09/30/iippe-2021-imperialism-china-and-finance/>

Yet Katz wants to preserve the Marini concept: /“In this context,
intermediate formations occupy a significant place that breaks the
strict parallel between sub-imperial powers and economic semi-
peripheries, as the geopolitical weight of some countries differs from
the inte­gration into globalized production achieved by others.
Dependency theory is very useful for understanding that variety of
situations. It explains the logic of the underdevelopment and
marginalization of the periphery without limiting its analysis to global
polarities, and also analyzes the bifurcations and differences between
distinct intermediate formations/.”  I am not sure that it does.

What Katz’s comprehensive survey of 50 years of dependency theory does
show is that Marx’s value theory of /“productive globalization based on
the exploitation of workers remodels the cleavages between center and
periphery through transfers of surplus value.”/ And it is /“the omission
of that mechanism prevents the critics of dependency from understanding
the logic of underdevelopment.”  /

So/“reintegrating the theory of value into the explanation of dependency
is also vital for uncovering the hidden skeleton of present-day
capitalism. There is no invisible hand that is guiding markets, nor is
there a wise state institution steering the economy. The foundation of
the system is competition for profits arising from exploitation,
multiplying the wealth of minorities and the suffering of the
majorities. The same indignation and rebelliousness that drove the study
of underdevelopment in the past orients that inquiry in the present.”/

Em
Michael Roberts blog
https://thenextrecession.wordpress.com/2023/11/04/50-years-of-dependency-theory/
4/11/2023