Introduction
Dependency theory tries to explain a situation where resources flow from poor and less developed states to the developed states. Through this theory, the developed countries benefit at the expense of the poor states and therefore the gap between the poor and the developed countries continues to widen (Hyman, 1994).
This theory is based mostly in capitalism whereby most property is privately owned for profit making rather than central ownership by the government. The dependency theory is a contrast of modernity theory which tries to show the efforts the developed countries put in order to help the developing and underdeveloped countries to attain sustainable development.
This is because in dependency theory, the developed countries continue to exploit the poor countries, thereby continuing accumulating wealth while the poor countries get poorer (Proyect, 2008).
Indeed, the main aim of investment from the West is to reap profits from opportunities available from developing countries; however, with no structural, infrastructural and logistical advancement in the host countries, then the West is seen as taking the advantage to exploit the host countries (Nafukho, 2003, p. 3).
According to this theory, poor nations provide cheap labor, raw materials, and market to wealthy nations. Most of the products the wealthy countries sell to these developing countries are manufactured from the raw materials gotten from the poor countries and the labor is usually from the citizens of these poor countries either when producing the raw material or in their industries (Nafukho, 2003, p.3).
At the end of the day, the developed countries sell these products to the developing countries at very high prices who actually meet the batter portion of the expenses thus exploitation coming in.
Some cases in point that worth noting include the diamond mining in Angola where the West continues to prosper from the mine while the country wrangles in civil strife.
Another example is the Africa Growth and Opportunity Act (AGOA) project that was meant to benefit the Sub-Saharan countries in their socio-economic goals but closer look reveals that US remains the main beneficiary while the eligible countries continue to wallow in poverty (Nafukho, 2003).
The wealthy nations ensure that they have ventured into the developed countries and are in control of the various development avenues in such countries. They target avenues like economics, education, culture, media, politics, finance, banking, sports, recruitment, and training of workers among others.
Dependency theory begins by development of capitalism to a complete social system. For example, during the colonial days in Africa, the Europeans used to use this kind of theory where they would ship energetic people to Europe for cheap labor in their farms and get raw materials from Africa free.
Later on, they would bring these products back to Africa at very high costs. It also happens in present day where the developed countries get raw materials such as tea and coffee at very low price from developing countries, blend them abroad, and then export them at a very high cost (Farmer, 2010).
It also happens in education where the elite go abroad to the developed countries to utilize their knowledge rather than developing their own countries since there are better packages in the developed countries, a situation normally referred to as brain drain.
This essay will identify, examine, and critically evaluate a recent development project in a developing country, specifically the AGOA project in Sub-Saharan Africa from a dependency theory perspective. It will also show the difference between dependency theory and classical economic theory.
The Development of Underdeveloped
Before looking at the AGOA project in Sub-Saharan Africa and the way it has been abused by the US, it is important to first understand the background of the dependency theory. The idea of developing underdeveloped rose after the 1988 congress of the International society for development in New Delhi.
It was noted that prior to a decade before, per capita income in Latin America had fallen over ten percent and in Africa, it had fallen with over twenty-three percent which was below the time of independence. The reason for this could have been worsening allocation of resources thus there was an urgent need for crisis management (Frank, 1996).
When putting up measures of developing underdeveloped, the party involved should be able to tell how their past history lead to the present underdevelopment. This is because most of the people give more attention to what the developed countries do rather than working from their own weaknesses. It may happen that the history of the center and the periphery countries is totally different.
It is therefore not wise to work with the same measures. It is also important to learn about the history of the metropolis and its colonies concerning the development of a capitalist system (Frank, 1996). In their effort to develop, the underdeveloped countries should put in mind that it does not appear anywhere in history that the past of the developed countries was once like their past.
Development is a gradual growth, which occurs in a succession of capitalistic stages of which the developed countries went through and the process varies from one country to the other depending on their history. Studies show that development of the underdeveloped countries will be as a result of incorporation of capital, institution, values among others from the capitalist metro poles.
The Euro centrism of Dependency Theory and the question of authenticity
This statement means that dependency theory has its origin in Europe mainly because of World War II where Europeans were dominating (Gulalp, 1998).
Taking an example of Turkey, which has always been considered as pioneer of third world independence, the Turkish national revolution took place at a time that separated the nineteenth century European nationalism and the twentieth century world anti-colonialism. This was much influenced by a writer Kadro who developed an analytical framework to interpret Turkish revolution; this served as a basis for the nationalist regime.
Considering the Europeans who were the masterminds of the dependency, many people have always raised doubts on whether they were genuine or not. Western civilization unflinched devotion to economic growth and discouraged it claiming that it is the greatest addiction. They argued that economic growth such as increasing the amount of goods produced tampered with the mind, intellect, culture and creativity (Gulalp, 1998, pg 958)
The (African Growth and Opportunity Act (AGOA) Project in Sub-Saharan Africa
The AGOA project was born the US in order to assist the eligible countries in Sub-Saharan Africa to export their products, mainly agricultural and textile to the US duty-free and at the same time access imports of manufactured goods from the US duty-free. In this case, the US was in the view that these countries needed to enhance their socio-economic growth through trade rather than relying on foreign aid.
Prior to this project and up till now, the West as well as the Bretton Woods institutions have been very aggressive in advocating for the development of the African countries through trade and deregulation of capital markets.
Primarily, Nafukho (2003) observes that the African countries, especially those in South of Sahara, have poor development records due to a myriad of problems that include but not limited to “diseases, poverty, illiteracy, ethnic strife and political upheavals” most of which have existed since the time they gained independence from their colonial masters.
From a modernization theory perspective, the AGOA project offers attractive means for the Sub-Saharan Africa countries to solve their socio-economic problems, if the rules are to be taken into account. However, a question still lingers as to why ten years after the initiation of the project, most of these countries are still poor yet the US continues to be rich.
Indeed, according to Nafukho (2003, p. 9), this is a “another false start in Africa” given that only Nigeria and South Africa have shown some signs of benefiting from the project; however, one would again argue that the reason for this is because the two nations are way ahead of other African nations in terms of infrastructural and logistical endowment.
One thing that the Sub-Saharan Africa countries need to learn is how to disentangle themselves from over-relying on the West to solve their internal problems; indeed, they need to understand how the Latin American countries restrained the exploitation by developed countries in the name of growth.
For instance, Tansey and Hyman (1994) observe that Latin America’s scholars invested a lot of their time studying Economics which gave them more knowledge on the effects of advertising by foreign firms on domestic products, and since this was a threat to their developing economy, Latin American countries came up with stiff regulations, which made it hard to continue with free advertising by foreign-based countries.
The regulations put forward by Latin Americans were on their advantage since they protected their domestic industries from the already established Foreign based multinational corporations.
The primary idea of AGOA is to promote trade and economic cooperation between the US and Sub-Saharan Africa, however, there is dilemma as to how the policy was formulated in the first place since not all countries in the region were involved or are eligible.
Despite this, the initial figures seem to justify the creation of AGOA as investment in the region skyrocketed while US emerged as the highest importer of Sub-Saharan Africa products. Moreover, putting in mind that the region is endowed with large mine fields and agricultural potential, the US was more than willing to link with these countries in order to have access to these products (Nafukho, 2003).
Despite its early progress, the project seems to have failed, mainly due to logistical problems between the two sides. For instance, the year 2002 saw the bilateral trade declining significantly due to the recession that hit the US, implying that trade alone is insufficient to alleviate poverty, while development is a matter of choice by the participating nations.
Indeed, some of the nations have failed to benefit from the project due to lack of innovation (Nafukho).
On a different dimension, most of the US companies participating in the AGOA initiative are exclusively interested in the raw materials available in Sub-Saharan Africa, paying little attention on generating internal capital and labor.
Given the resources endowment of the US, one would argue that the countries would be basking in infrastructural development as the multinationals invest in extraction of raw material and processing them internally; however, the case is different as these companies are only interested in extraction and enjoying all the benefits in expense of local community, a situation that has been labeled neo-colonialism or exploitation (Nafukho, 2003).
In this perspective, excessive dependence on external investment has persistently underdeveloped Sub-Saharan Africa; therefore, given the potential of this region, it may be worthwhile to generate wealth from within and focus on developing the region without having to keep on being exploited by the West.
Indeed, countries like Taiwan, China, and India can attest that development and economic growth can be generated from within rather from being dependent on outsiders.
In terms of trade rules, US tends to benefit more as AGOA fails to appreciate the comparative advantage of all countries, with the US having an upper hand in manufacturing, environmental control and wage allocation, the result of which is the undermining of the local entrepreneurs.
For instance, Nafukho (2003) gives an example Kenya’s conflict with Canada over the mining of Tiomin, with the former insisting that the whole process of extraction and manufacturing of final products should be carried out in the host country, a sign that developing countries are waking up to the reality of exploitation.
The Influence of Dependency Theory
Dependency theory has changed the actual development theory and politics of developing countries. For instance, in Latin America, the theory carries more weight than any other sociological theory since it has influenced the social processes; more so, it evokes emotional responses from its opponents although some claim that it is outmoded (Cueva, 1969).
It has remained a dominant perspective despite its lessening appeal in the U.S. Though opponents claim that it has dwindled, the current predicaments that have faced developing countries in the name of growth give the leaders in developing countries a reason not to ignore its continued influence.
Dependence theorists have made the following four basic claims:
- there exists a centre periphery relationship between the developing and the developed countries since the economic and political powers are not equally distributed.
- The centre represents the developed countries while the periphery represents the developing and underdeveloped countries of which the developed countries have more powers than the developing countries.
- When it comes to advertising, they expose the latter to very strict regulations of which they have to comply with due to their status.
- They claim that these regulations are meant to be policy weapons and to protect the jobs of their citizens (Farmer, 2010)
Classical economics and theory of comparative advantage do not exist.
Primarily, classical political economy dwells heavily on the side of free markets where every individual seeks his/her own monetary gain, a situation that is not possible as according to Economist report 1992, in 1980’s, most developed countries protected their domestic developing industries from foreign competition by discouraging their citizens from buying cheaper commodities from developing countries (Wilson, 1965).
Comparative advantage comes in where a country can produce goods and services at a lower opportunity cost; in other words, it tries to create value for both parties even when their amount of produce is not equal.
In the AGOA project, a case is given for double-standards applied by the US by failing to appreciate the comparative advantage of Mali in cotton production, instead forcing Africa to purchase US cotton.
Moreover, dependency theorem does not encourage export-oriented investment but calls for import substitution industrialization. Export oriented investment encourage trade linearization in developing countries, privatization of production facilities, elimination of trade deficits among others (Gillespie and Alden, 1989, cited in Okoroafo, 1997).
Import substitution industrialization puts much emphasis on the developing countries producing their own goods rather than importing from developed countries.
Latin Americans claimed that the slow development of these countries was a result of unequal center periphery exchange rather than such things as inadequate technology and capital resources. Instead of allowing for free market as per the classical economic theory, they imposed high import tariffs and emphasized on local- foreign investments (Okoroafo, 1997)
Another claim is that the party that seems to be favoring a certain trade gets inappropriate gains from it. For example, European and American countries seem to be favouring some African countries by offering a market to their agricultural products but in real sense they make a lot of revenue from them. This is because they use these products as raw materials and later on sell to them the finished goods at exaggerated prices.
Finally, in most developing countries, the unskilled citizens take a bigger population than the elite. In contrast, most of the jobs are preserved for the minority thus impeding economic development.
This continues to widen the gap between the rich and the poor since wealth is not evenly distributed. Moreover, this comes because of a situation where the developing countries do not put much emphasis on reviewing their economy but rather imitates the behaviors of the developed countries.
Conclusion
The dependency theory has generally its own advantages and disadvantages. The developed countries tend to benefit more since they are more established and are not affected much by the regulations enacted by the developing countries. It is important when it comes to protecting of the developing industries but in a way, it slows down the rate of development in a country.
Generally, dependency theory is more common in the developing countries but it has not been ruled out completely in the developed countries. For example, the cases of visas and passports while traveling to other countries are a clear indication of dependency theory all over the world.
Reference List
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