DEPENDENCY PERSPECTIVE

The influence of modernization theories declined in the 1960, as the effect of ECLA’S failure to explain and improve the economic development of Latin America countries. In the early of 1960, Latin America was suffered with high inflation, unemployment, currency devaluation, declining term of trade, and other economic problems. Dependency school was emerged as the respond to ECLA’s failure and received a warm welcomed. Dependency school also response the crisis of Marxist theories and the decline of modernization theories.

The ECLA and Neo-Marxism

The dependency school concepts were influenced by the failure of ECLA programs and Neo-Marxism concepts. The ECLA (Economic Commission for Latin America) was founded in 1948 by the work of Argentine economist Raul Prebisch. He assumed that the root of developmental problem of Latin America was the schema of the international division of labor. According to Raul Prebich, Latin America should undergo the industrialization scheme to develop their countries. By using this scheme, he suggested the Import Substitutions Industrialization (ISI) sstrategies to improve Latin America economic. The other concepts, which were influenced the dependency school, were the neo-Marxist view. Neo-Marxist views are different with orthodox Marxist in many perspectives.

Frank: The Development of Underdevelopment

Frank, firstly, criticized the modernization theories because it just explained the internal factor that influenced the economic development in the third world countries, such as the tradition culture, overpopulation, little investment, and lack of achievement motivation. (Harrison: 1988) He also argued that the modernization school neglected the other factor that shaped the underdevelopment of the third world such as the colonialism of the western countries, which promoted the backwardness of third world.

He distinguished three main stages or periods that shaped the underdevelopment in the third world: the mercantilist (1500-1700), the industrial capitalist (1770-1870), and the imperialist (1870-1930). In capturing the historical experience of the degeneration of the third world, he formulates “the development of underdevelopment”. In his work, he promoted what he is called as “metropolis-satellite” model to explain how the mechanism of underdevelopment in third world countries.

Dos Santos: The Structure of Dependence

This relationship is unequal because the dependent countries have to transfer their surplus to the dominant countries. This transfer produces limitation of the development of the dependent countries. According to Santos, there are three historical form of dependence. First, colonial dependence. The commercial and financial capital of dominant countries with colonial state controlled of land, mines and human resources. Second, financial-industrial dependence. The dominant countries dominate the dependent countries in term of financial and industrial. Dependence countries only produce the raw material and agriculture products  for the dominant countries. Third, technological-industrial. As the industry sectors were emerged in developing countries, the dependency to the technology from the dominant countries also increases.

Amin: The Transition to Peripheral Capitalism

Amin promotes the theory of transition to peripheral capitalism. He stressed on the relationship between central and peripheral economic structure. This theory has several key assertions. First, transition will produced crucial decline in the third world. Second, peripheral capitalism was characterized with distortion in export activities. Third, in the third world, the development of tertiary sector produced slow industrialization, increasing unemployment, and migration from the rural area to urban areas. Fourth, the multiplier effect of investment does not work in periphery, moreover this just increase the multiplier effect in center by transferring the profit from export. Fifth, the development of the periphery is not the beginning of earlier stage of development in the center. Sixth, the peripheral should challenge the center capitalism, in order to increase economic growth. Seventh, the specific form of underdevelopment depends upon the nature of the pre-capitalist formation, and the periods in which the peripheries were integrated into the capitalist world system.

Conclution

Members of dependency school shared basic assumptions. First, generap pattern of development from the dependency school is applicable in all third world countries. Second, dependency school determines that the external factors, such as historical heritage of colonialism and the unequal international division of labor, rather than the internal factors. Third, analyzed from the economic perspective. Fourth, dependency treated as a component of regional polarization of the global economy. Fifth, dependency is seen as incompatible with development.