According to dependency theory, governance of the global economy has been marked by asymmetry and skewed in favour of developed countries and multinational corporations while developing countries survive “at the margins”. This essay will seek to examine the basis for this point by extracting examples from the real world and comparing the theory with the neoliberal theory in providing a more accurate view of the global economy.
In defining the global economy, there are a few key ideas that one could adopt including dependency theory and neoliberal theory. In the age of globalization, the global economy is conditioned by the innovation and production of manufactured goods. One of the backwashes of capitalism is the birth of a global culture – an identical culture shared among citizens of the world including the global consumption of Mc Donald’s, Coca Cola, Marks & Spencer, and Apple products among many.
Dependency theory, drawing from Marxist insights, informs the global economy that the global production and consumption of these manufactured, capitalist products has led to the inequitable nature of trade and production discriminatory towards developing states because of its greater import expenditure as compared to income from its exports. Marxist theory regenerates the theory of conflict between classes, in the case of global economy, the core states and the peripheral states. The core states are industrial, advanced states comprising of developed, First World states also known as the Global North, for example, United States and its Western counterparts; whereas the peripheral states are states in the outskirts mostly comprising of developing, Third World states, the Global South such as countries of South East Asia and Latin America. Key authors of the dependency theory include Andre Gunder Frank, Raul Prebisch and the United Nations’ Economic Commission of Latin America (ECLA).
As aforementioned, the import expenditure of developing countries is significantly greater than the income from its exports. Dependency theorists believed that the unfair nature of trade to be ‘detrimental since the falling of prices of raw materials therefore resulting in international exploitation’ (Kirby, 2000: 460). Both core and peripheral states are dependent on each other – the former depends on the peripheries for raw materials and its low cost labour whereas the latter depends on the cores for manufactured capitalist goods and technological advancement. It is logical to presume that the price of manufactured goods and technological advancements are obviously higher than the price of raw materials thus resulting in peripheries bearing a higher cost in its imports as compared to core states’ imports of raw materials. Prices for the export of raw materials are still significantly modest because of the low global market price of these commodities. The core of global capitalism lies in the search of cheaper resources for profit maximization ultimately...