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world systems theory vs dependency theory

Posted on Dec 4, 2020 in Uncategorized

This involved two modes of accumulation, autocentric or self-generating accumulation in the centre and extraverted accumulation in the periphery. If it were the case that rates of surplus value were higher in poor countries, then one would expect capital to move from rich to poor countries, an expectation shared with orthodox theories of trade and investment, but one that does not conform to the realities of the international economy. What this means is that rates of capital accumulation involve the extraction of surplus value through long hours and low wages in poorer countries, more than it does through increasing productivity and thus lowering the social reproduction requirements of labor, as is more common in richer countries (Bettelheim 1972). These conclusions are in marked contrast to upbeat assessments of the links between liberalization policies and poverty reduction (World Bank 2002), but these have been the subject of some strong criticisms that are compatible with the claims made in this essay (Milanovic 2003; Wade 2004; Kiely 2007b). Europe overtook Asia as the latter went into economic crisis from 1750 onwards. 2009. Thus, beginning in the 1970s, theorists and practitioners heralded an export-oriented strategy as the way out of dependency. The mechanisms of how surplus is extracted are not entirely clear, but they could presumably refer to the fact that multinational companies may invest so much in a poor country, but they export more money in terms of profit repatriation. Thus, in contrast to modernization theory, which emphasized the benefits of free trade, foreign investment, and foreign aid, these theorists argued that free trade and international market relations occur in a framework of uneven relations between developed and underdeveloped countries and work to reinforce and reproduce these relations. These include Andre Gunder Frank, Fernando Henrique Cardoso, Theotonio Dos Santos, Walter Rodney, Samir Amin, Arghiri Emmanuel, and Immanuel Wallerstein. If the concepts of the world-system and of dependency retain any contemporary relevance, they must be situated in this contemporary context. However, the first and to a lesser extent the second resources listed below are important sources in outlining the main contentions of underdevelopment theory, and current research influenced by world-systems theory. Neoliberalism therefore reinforces structured inequalities in the world economy in two ways. theories, the dependency school conceptualized the linkages between the Western countries and the third world countries as a set of externally imposed, exploitative, dependent, economic relationships which was incompatible with development. Modernization theory claimed that once developing societies came into contact with western European and North American societies, they would be impelled toward modernization and, eventually, would achieve the economic, political, and social features characteristic of the nations of western Europe and the United States. In the postwar period (or in Latin America, in the 1930s), this changed as new social and political forces demanded new policies. Economic Commission for Latin America and the Caribbean. The main difference is their approach to the way history develops. But unlike his earlier underdevelopment theory, Frank more explicitly recognizes that Europe forged ahead through technological innovation while Asia fell behind. In contrast to dependency theory, however, this model recognizes the minimal benefits that are enjoyed by low status countries in the world system. World systems theory is a response to the criticisms of Dependency Theory (and for the purposes of the exam can still be treated as part of Dependency Theory). At the same time, these policies were further enabled by the compromises made after 1945, which meant a commitment to a liberal international order on the part of the hegemonic power, but a recognition that some protectionism could take place, including in the developing world. As industrialization (and now post-industrialization) has swept the globe, measured in terms of proportion of total employment, the absorption of labor forces by manufacturing has gradually declined. These differences are addressed through a more detailed examination of content in the next section. The result was unemployment in the rich world, and distorted or abnormal, and above all dependent development, in the newly industrializing countries (Hart-Landsberg 1979; Frobel et al. Both dependency theory and world systems theory suggest that resources are moved from an economic periphery to a central, First World economy. In the field of development studies, globalization tended to be regarded as something that simply existed, to which particular localities responded in ways which would enhance or hold back development. Dependency theory observes and explains the effects modernization in one region has on other parts of the world. In the context of a tendency towards free trade, upgrading is far from inevitable and indeed, faced with competition from established overseas producers, is unlikely to occur. Central to this claim is the fact that Europe had a longstanding trade deficit with Asia, and that Europe financed this by plundering gold from the Americas, which financed the import of goods from Asia. While there are certainly question marks over the reliability of figures, especially for China, the likelihood is that the fall from around 98 million to 83 million is actually an underestimation, as many workers in the state sector and town and village enterprises are effectively unemployed (Kaplinksy 2005:214–15). Drawing on themes developed in his earlier work (Arrighi 1994), Arrighi argues that an ongoing sequence of capital accumulation has historically been accompanied by the rise and fall of hegemonic powers. The critique to Modernization theories centers to its conception of linear, progressive and cumulative time. Thus, from the Italian city-states up to the era of US hegemony, via Dutch and then British hegemony, is “the same sequence of declining and emerging capitalist centers that, according to Marx, were linked to one another by a recycling of surplus capital through the international credit system. However, world systems theory emphasizes the world-system as the primary unit of social analysis. But even more problematic is his view that “inefficient” Europe had to deal with the problem of high wages, while China had low wages and high productivity. By around 1950, European and North American dominance was under strain, as the Western capital- and energy-intensive path of industrial development reached its limits, and the East Asian labor-intensive and energy-saving “industrious revolution” began to challenge Western hegemony and restore Asia’s position as the central region in the world economy. Is it the case that the USA is in decline, and a new hegemonic challenge is taking place from Asia, and specifically China? The internationalization of capital after 1945 was actually characterized by the increasing concentration of capital within the rich world, and most trade (measured in value terms) was between rich countries. In other words, capital accumulation, economic growth, and even some social development was possible, but it was somehow distorted by relations of dependency. The dependency and world-systems perspectives on development were very influential among radical development theorists from the late 1960s onwards, all of whom agreed that capitalism had to be theorized as a world-system. The logical conclusion of Frankian underdevelopment theory was that so long as a dependent country remains part of the capitalist world-system, it would stagnate as its surplus would be extracted to enrich metropolitan countries. Indeed, the richer developing countries were the ones that received significant amounts of foreign investment, and traded more with the developed world. In the developing world, where there are large amounts of surplus labor and barriers to entry, skills and wages are low. Other Marxists challenged this view. Defending the Ideas of Dependency and the World-System in Neoliberal Times, https://doi.org/10.1093/acrefore/9780190846626.013.142. Economic growth was controlled by forces outside the national economy. First of all, dependency theory is the study of world perception. But precisely because they are characterized by low barriers to entry, they do not provide the basis for upgrading to sectors with higher barriers to entry, where rents can be accrued to the most dynamic producers (Kaplinksy 2005; Kiely 2007b). Both dependency and world-systems theories were very influential among radical development theorists from the late 1960s onwards. Indeed, he explicitly acknowledged his debt to Baran and Frank (Wallerstein 1980:9) and argued that the world-system had been capitalist since at least the sixteenth century, and the basis for this was a division of the world into core, peripheral, and semi-peripheral areas (Wallerstein 1974; 1980). In opposition to earlier debates over the links between deindustrialization in the developed world and the rise of manufacturing in the developing world, one interesting development in recent years (1995–2002) has been a decline in formal sector manufacturing, not only in the developed world, but also, it appears, in China (1995–2002) and India (1996–2002). However, world-systems analysis retains considerable influence, and it developed in new ways, less as a rigid theory based on three zones in the world economy, and more as a looser frame of analysis. Crucially, however, these circuits of capital do not necessarily involve the promotion of productive capital investment, such as would be necessary for ISI to be revived. Over the same period, Thai export shares to the USA fell from 26.4% to 22.9%, and to the EU from 21.3% to 17.7%, and South Korea’s fell from 25.9% to 23.9% (USA) – although they showed a small increase in shares to the EU, far bigger was the share of exports to the rest of East Asia. Find out more. Prebsich’s relationship to dependency theory is therefore an ambiguous one: on the one hand, he suggested that there are structured inequalities in the global economy which lead to dependent subordination; on the other hand, like modernization theory, he advocated industrialization in order to catch up with the developed countries. Propelled by well organized, rationally conducted monopolistic enterprise, it seeks today to rationalize the flow of these receipts so as to be able to count on it in perpetuity.” This account of underdevelopment was closely linked to what Baran (1957:163–4) described as a stagnant, decaying, monopoly capitalism, which, “far from serving as an engine of economic expansion, of technological progress and of social change” actually represents “a framework for archaic technology, and for social backwardness.” Capital investment in the third world was wasted on luxury consumption by landlords and what Baran (1957: ch.6; also Frank 1969a:168–9) called comprador administrations, tied to and dependent on the imperialist countries. This theory undoubtedly exaggerated the mobility of productive capital, and thus over-generalized the extent to which manufacturing was relocating from the developed to the developing world, and especially to the first-tier East Asian newly industrializing countries (Jenkins 1984; Kiely 1994). This was because ISI led to new forms of dependence, be it on foreign capital, investment, technology, or export markets. Indeed, such a comparison provides strong grounds for defending the relevance of the idea of dependency, particularly in an era of neoliberal globalization. Modernization theory stresses not only the process of change but also the responses to that change. Foreign investment may lead to some profit repatriation, but this is true in all locations where multinationals invest, not just poor countries. Dependency theory is more inclusive than modernization theory. In the former, rents are generated by economies of scale (and associated high startup costs), and control over backward and forward linkages such as supplies and retailing. Wallerstein draws heavily from dependency theory, a neo-Marxist explanation of development processes, popular in the developing world, and among whose figures are Fernando Henrique Cardoso, a Barzilian. Underdevelopment theory is particularly associated with Paul Baran’s The Political Economy of Growth, and even more with the 1960s and 1970s work of Andre Gunder Frank (1969a; 1969b). Collectively, these theories contrast modernization Dependency Theory developed in the late 1950s under the guidance of the Director of the . Dependency theory has always been quite controversial: it incorporates some Marxist concepts; it addresses the sensitive issue of inequality, blaming inequality on the developed nations; and it originates in the Third World. This section cannot do justice to the wide range of subjects that have been examined, and so instead places a particular emphasis on two areas: the rise and fall of hegemonic powers and the resurgence of East Asia; and, global commodity chains analysis. On the other hand, the assumption that the expansion of capitalism will mean a progressive convergence between countries is also problematic, and here we can locate the strength of dependency and the world-systems as a method of analysis. Indeed, since 1990, the growth of China’s exports in absolute amounts has exceeded that of the rest of the top ten leading manufacturing exporters from the developing world, and since 2000, the latter nine countries’ combined export share has fallen whilst China’s has risen (Eichengreen et al. This section looks in some detail at some of the “stronger” versions of dependency, associated with underdevelopment and world-system theory. Although there are clear differences between the two (Arrighi 1999), Giovanni Arrighi (2007) also argues that the era of European–US dominance is coming to an end. This undermines the claims of underdevelopment theory, but what of the broader idea of dependency, which often accepted the view that capitalist development was possible, and indeed was happening, in the periphery (Kay 1989)? The implications for my argument should be clear. The starting point for this analysis was an acceptance that capitalism and imperialism were somehow parasitic, and that this was most clear in the case of the underdeveloped world. The division of labour among these regions determined their relationship to each other as well as their type of labour conditions and political system. But in practice, upgrading has occurred by states deliberately protecting themselves from import competition from established producers, via a process of import substitution industrialization. The ISI strategy was to produce internally manufactured goods for the national market instead of importing them from industrialized countries. Liberally borrowing from Baran’s concept of economic surplus, Frank argued that the developed countries were developed because they extracted the economic surplus produced by the poorer countries. This was reinforced by dependent elites and national capital in the third world, which showed little interest in promoting genuinely independent, national capitalist development, in opposition to imperialism. Based on a study of trade in manufacturing goods from 1970 to 1987, Sarkar and Singer (1991) have claimed that the price of manufacturing exports from developing countries fell by an average of 1% a year. Indeed it will be … In terms of the post-1945 era, Wallerstein suggests that a new semi-periphery has developed in southern Europe and East Asia, which acts as a buffer between core and periphery. This argument amounts to less an explanation and more a description of the rise of a number of countries out of peripheral status, though we will see below that a number of writers drew on world-systems theory and dependency theory to try to explain the East Asian miracle. The world systems theory can be closley linked with 3 main concepts: 'world system role, dependancy, and development' (Rossem 1996 p.508). Arrighi has himself usefully shown (Arrighi et al. Moreover, while growth rates did diverge considerably among developing countries, with East Asia doing particularly well in this period, they were still quite high throughout the developing world. Thus, from 1550 to 1800, Britain’s population tripled while the proportion of the labor force engaged in agriculture declined from 80 percent (1500) to 20 percent in 1850 (Overton 1996:8). It may be the case that the rate of extraction of absolute surplus value is greater in poorer, than in richer countries (Dore and Weeks 1979), but this is offset by higher rates of relative surplus value in richer countries. Under the terms of the licence agreement, an individual user may print out a single article for personal use (for details see Privacy Policy and Legal Notice). Dependency theory states that the poverty of the countries in the periphery is not because they are not integrated into the world system, but because of how they are integrated into the world system. More generally, in contrast to NIDL theory it could be argued that dependency reflected the concentration of capital in the already developed world, rather than its dispersal to the developing world. The result is that the ratio of advanced country prices to poor country prices is greater than the ratio of advanced country labor time to poorer country labor time, as embodied in specific commodities. John Rapley (2007) too has tried to explain that the new theories like Modernization Theory and Dependency Theory form the past try to explain the relationship existing between various countries in the world and why there exist a difference between the Third World countri… Those production processes that are contracted out and/or relocated to parts of the periphery tend to be concentrated in low cost and lower value production, so that the core recovers most of the value-added at the higher value end of production, distribution, and marketing processes, where rents are generated. At the same time, land productivity increased in China through an increase in the land under cultivation, but labor productivity did not (Elvin 1973; Allen 1992:73–4). However, both theories remain useful for understanding the current global order. By 2000, the shares were 50.6% for Malaysia, 54% for Thailand, 50.3% for Singapore, 81.8% for the Philippines, 26.7% for South Korea, and 29.8% for Taiwan. What both theories lacked was an account of specificity, and the different ways in which capitalism was developing in the third world. Dependency Theory II: Dependent Development? The critical discussion of the theories outlined in this essay suggests that we need to recognize the following. Both dependency and world-systems analysis suggest that this is not the case, and (as well as outlining further the contentions of both approaches), the rest of this essay discusses why they argue this, and why they are right to do so. The practical premises of both are the same, as one should expect given that world-systems theory is essentially building on top of and with dependency theory. As world-systems analysis has pointed out (Hopkins and Wallerstein 1986), these chains are not necessarily new, and production processes have long drawn on the supply of raw materials from overseas producers. China’s percentage of manufacturing exports to the USA increased from 9.1% in 1992 to 22.9% in 2000, and to the EU it increased from 9.5% to 16.7% for the same years. The Dependency and World-Systems Perspectives on Development - … Dependency thus arises less from the domination of foreign capital in domestic economies, and more from the subordination of these economies in an unequally structured capitalist world-system. Wages are undoubtedly lower, but this can be offset by higher productivity in the richer countries, which itself is a product of earlier rounds of capital accumulation and thus technological investment. Put this way, the idea of dependency as less a theory, and more a concept designed to understand specific manifestations of uneven development, may retain some utility (Palma 1978; Saul and Leys 2007; Kiely 2007a; 2007b). This is the subject of the final section. This essay examines the rise and apparent fall of two related “radical theories” of development, dependency and world-systems theory. Paul Baran (1957:197) argued that imperialism was based on the dominance of monopoly capital; “now directed not solely towards the rapid extraction of large sporadic gains from the objects of its domination, it is no longer content with merely assuring a more or less steady flow of those gains over a somewhat extended period. Wallerstein’s world-systems theory has spawned another approach called world-systems analysis. There was no clearly identifiable pattern in the share of components and parts in trade to the USA or EU from East Asian countries, with some showing increases and some decreases, but generally the far bigger increases in shares of parts and components were in East Asian countries’ trade with China. China’s growth in manufacturing exports must at least in part be explained through its (subordinate) role in East Asian production networks, and it essentially concentrates on exporting the lower value end of such goods.

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