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date: 23 April 2024

Dependency and World-Systems Perspectives on Developmentfree

Dependency and World-Systems Perspectives on Developmentfree

  • Ray KielyRay KielySchool of Politics and International Relations, Queen Mary University of London


This essay focuses on two related “radical theories” of development, dependency and world-systems theory, and shows how they emerged as a critique partly of modernization theory and of the development strategy of import substitution industrialization. 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. These include Andre Gunder Frank, Fernando Henrique Cardoso, Theotonio Dos Santos, Walter Rodney, Samir Amin, Arghiri Emmanuel, and Immanuel Wallerstein. Some “stronger” versions of dependency, associated with underdevelopment and world-systems theory, have been introduced in recent years. In particular, A. G. Frank proposed the idea that development and underdevelopment are two sides of the same coin. A more nuanced approach to understanding dependency suggested that development and dependence were in some respects compatible. Wallerstein’s world-systems theory has spawned another approach called world-systems analysis. As theories, the ideas associated with both dependency and the world-systems are problematic, failing, for example, to adequately explain the origins of the capitalist world economy. However, both theories remain useful for understanding the current global order. In addition to recognizing that capitalism can in some respects be regarded as a world-system, the two approaches correctly assume that neoliberalism reinforces hierarchies by undermining the capacities of states to shift out of low value production into higher value sectors, as shown by historical patterns of manufacturing.


  • Development


This essay examines the rise and apparent fall of two related “radical theories” of development, dependency and world-systems theory. It shows how these theories emerged as a critique partly of modernization theory, and (more ambiguously) of the development strategy of import substitution industrialization, but equally shows that these perspectives draw on wider traditions of political economy and social theory. The essay then moves on to look at the main contentions of theories of dependency, and some of the similarities and differences among its main proponents. In discussing these theories, the essay also shows how they were challenged, both theoretically and by important changes in the international economy. In development studies, these challenges have generally been viewed as so great that the theories have effectively ceased to be of any use in the discipline – a view that this essay challenges. The essay then moves on to review and critically examine world-systems analysis, focusing on the rise and fall of hegemonic powers, and specifically the rise (or revival) of East Asia, and the utility of commodity chains analysis. The essay then reflects on the discussion and suggests that, despite some serious weaknesses, both theories remain useful for understanding the current global order. In particular, it will briefly suggested that while theories of both dependency and the world-system were full of problems and deserved a great deal of criticism, the concepts of dependency and the world-system may retain some valuable insights in their attempts to theorize concrete situations of dependency in the context of uneven development in the capitalist world-system. Indeed it will be suggested that this is even more so in the era of neoliberal globalization.

The Origins of Dependency and World-Systems Theory

Both dependency and world-systems theories were very influential among radical development theorists from the late 1960s onwards. Influential writers included Andre Gunder Frank, Fernando Henrique Cardoso, Theotonio Dos Santos, Walter Rodney, Samir Amin, Arghiri Emmanuel, and Immanuel Wallerstein. There were significant differences among these writers, but all agreed on the basic points that capitalism had to be theorized as a world-system, in which there were constituent parts or regions, some of which (cores or metropoles) served to exclude, dominate, or subordinate satellite, peripheral, or dependent regions of the world economy. This was not necessarily a new idea, and a number of third world nationalist leaders had talked about the adverse impact of colonialism and the colonial legacy in subordinating the developing world. Marx had argued in the nineteenth century that there was a close link between wage or “veiled” slavery in the developed capitalist countries and slavery in the new world, a theme developed by a number of nationalist leaders, including in the academy by the Trinidadian premier from 1956 to 1981, Eric Williams, in his PhD thesis in the 1940s (Williams 1987).

In terms of their specific development in the 1960s onwards, dependency and worldsystems theories emerged in part out of a critique of modernization theory. This theory suggested that nation-states pass through similar stages of development on their way to the end point of a mature, industrial society (Rostow 1960). Thus, just as developed societies were once backward, so backward societies in the 1960s would follow similar paths of development, and indeed their transition would be hastened through close contact with the already developed societies, who could provide technology, aid, and the diffusion of Western values of entrepreneurship and individual enterprise. Dependency writers rejected this approach, suggesting that developed and backward regions could not be divided in such a fashion, and that instead there was a close, and perhaps even a causal, relationship between development in some eras, and so-called backwardness in others. Thus, Frank argued that supposedly backward societies were not so much undeveloped as underdeveloped.

A related theory suggested one reason why this might be the case, namely that of Raul Prebisch’s theory of unequal terms of trade. Prebisch (1959; also Singer 1950) argued that trade relations between developed and developing countries were unequal, and this reflected the kinds of goods that were being produced. He suggested that there was a tendency for the terms of trade to decline as against those of manufactured goods, and argued that this was because of the intense competition that existed between many primary goods producers, as opposed to the relatively few manufactured goods producers. This was also reinforced by a low income elasticity of demand for primary goods, so that as average incomes increased, people spent a proportionately lower amount of their income on primary goods. It was also further reinforced by higher wages in the core countries, an argument further (problematically) made by theories of unequal exchange associated with Emmanuel and Amin in the 1970s. For Prebisch and Singer then, there were structured inequalities that pervaded the world economy, and modernization was a far more complex process than any simplistic modernization theory allowed.

Interestingly however, Prebisch argued that his theory provided the rationale for import substitution industrialization (ISI) policies, which ironically was not so far away from the strategic arguments made by modernization theory. ISI policies were regarded as being a means to modernize “backward” countries and reverse the colonial legacy of concentrating on primary products. 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. For dependency theory proper, the argument concerning structured inequalities was accepted, but the solution to this problem – ISI – was regarded as being part of the problem by later dependency writers.

This was because ISI led to new forms of dependence, be it on foreign capital, investment, technology, or export markets. For some versions of dependency theory, this led to the argument that development could take place, but it was somehow subordinate or dependent, while others suggested that development was impossible so long as the nation-state remained part of the capitalist-dominated world economy. These differences are addressed through a more detailed examination of content in the next section.

Dependency Theory I: Underdevelopment Theory

This section looks in some detail at some of the “stronger” versions of dependency, associated with underdevelopment and world-system theory. The content of these theories is addressed and an initial critical assessment is made, both to show the weaknesses of these theories, but also as a precursor to a partial defense of the idea of dependency, less as a theory and more as a concrete analysis of situations of uneven development. The section thus starts by outlining the broad claims of the theories, challenging them, and then showing potential responses to these problems.

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). It was further developed in the 1970s by Walter Rodney (1972), Samir Amin (1976) and Arghiri Emmanuel (1972b). 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.

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. 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.

Frank developed this theory further by particularly emphasizing the links between development and underdevelopment, which were used to explain the history of capitalism since at least the sixteenth century. The basic claim of Frank’s theory was that development and underdevelopment are two sides of the same coin. 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. Frank argued that this process of surplus extraction occurred within countries too, but it was also clear that his hierarchy of metropoles exploiting satellites could be applied more to the division between rich and poor countries. Thus, “satellites remain underdeveloped for the lack of access to their own surplus” (Frank 1969a:9), as capitalism “has at all times and in all places […] produced both development and underdevelopment” (1969a:240) For Frank, the whole world was capitalist irrespective of the relations of production that existed in a particular locality, whereas Baran argued that non-capitalist relations of production persisted, but were subordinated to the requirements of the wider capitalist-dominated international economy. Both agreed that this resulted in surplus extraction from satellite to metropolis.

Walter Rodney (1972) argued along similar lines in his How Europe Underdeveloped Africa, though this work focused mainly on the colonial era. Like Rodney, Frank developed a grand theory of underdevelopment, which argued that the international order had been capitalist since the sixteenth century. This order was based on a fundamental inequality between developed and underdeveloped regions, whereby the former developed through extracting the surplus of the latter. This zero-sum game had not fundamentally changed since, except on those rare occasions where underdeveloped countries managed to partially escape from underdevelopment through some form of de-linking from the world economy (Frank 1969a).

Immanuel Wallerstein’s world-systems theory was very similar to this approach. 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). He argued that the core areas have, since at least 1640, specialized in higher value production and appropriated a surplus from the periphery and semiperiphery (Wallerstein 1980:18–19). 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. What is clear is that, while Wallerstein added another layer to Frank’s conception of metropolis and satellite, he essentially argued that underdevelopment did indeed occur via a process of surplus transfer. Nonetheless, his argument that capitalism is a world-system remains influential and is discussed in depth below.

Perhaps the main weakness of underdevelopment theory was its failure to precisely explain both the origins and mechanisms of development and underdevelopment. It is not clear how countries and localities came to be divided into metropolis and satellite in the first place – more orthodox Marxists suggested that one first had to look at the relations of production within specific localities before moving to an analysis based on trade relations (Brenner 1977; Dore and Weeks 1979). This argument has been implicitly revived in the context of debates over the origins of the great divergence between West and East within the capitalist world-system, as we will see below.

In terms of the mechanisms that sustain a core–periphery divide, Frank failed to explain changes within the world-system, or how such a divide is maintained over time. His argument rests on the idea that a process of surplus extraction occurs through trade and investment relations between rich and poor world. 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. Added to this may be practices such as tax avoidance through transfer pricing, where two or more parts of the same parent multinational company trade across national borders, but declare their profits in the lower tax country (Lall 1978; Murray 1981). Similarly, a process of surplus extraction may occur through unequal trade, in which the benefits of such transactions accrue to the rich country.

The problem with such arguments, however, is that while such practices may indeed occur, they are not sufficient to establish as stark a dichotomy as that of development in one location, and underdevelopment in another. Foreign investment may lead to some profit repatriation, but this is true in all locations where multinationals invest, not just poor countries. Furthermore, some investment will stay in the home country, and this will have some spinoffs in terms of income generation, employment, foreign exchange in the case of exporters, and so on, even if these may be more limited. Similarly, while trade relations may be unequal, they are not so unequal that the rich location accrues all the benefits and the poor location none at all.

These problems are most clear when we actually examine the nature and direction of capital flows and trade in the postwar international order. 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. This is not to deny the importance of foreign capital or trade to poorer countries, but it is to deny the starkness of a theory which suggests that the developed world is only developed because it has underdeveloped the poor world. If this was the case, then we would expect the direction of capital to flow from rich to poor world, and most trade to take place between these two regions, in order to facilitate the process of surplus extraction that is said to lead to development and underdevelopment. Indeed, the richer developing countries were the ones that received significant amounts of foreign investment, and traded more with the developed world. This fact – and especially the rise of East Asia – was central to Marxist critiques of Frank which suggest that imperialism is the pioneer of capitalism (Warren 1973), but also neoliberal approaches briefly discussed (and challenged) below.

The work of Emmanuel (1972a; 1972b) and Amin (1976) was important in that they attempted to explain some of the mechanisms of underdevelopment that were largely absent in the work of Frank. Emmanuel argued that poorer countries lose out in relative, rather than absolute terms (Frank’s argument), due to a process of unequal exchange. For Emmanuel (1972b), wage differentials between rich and poor countries were the main cause of unequal exchange. He made a number of assumptions that challenge orthodox trade theory: capital is internationally mobile while labor is (relatively) immobile, and this led to a tendency for profit rates to equalize across countries. In this context, an unequal exchange occurs because poor countries exchange goods in which more labor time is embodied for goods which are the product of less labor time. A transfer of surplus thus occurs from the poor to the rich countries because profit rates equalize in the context of international capital mobility. 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. Like Frank, the argument is that it is therefore through exchange that a transfer of surplus takes place from poor to rich country.

Amin added to these arguments, and suggested that there was an international division between central and peripheral capitalist formations. This involved two modes of accumulation, autocentric or self-generating accumulation in the centre and extraverted accumulation in the periphery. For the latter, this meant three “distortions” from central capitalism:


a crucial distortion toward export activities, which absorb the major part of capital arriving from the center;


a distortion toward tertiary activities, which arises both from the special contradictions of peripheral capitalism and from the original structures of the peripheral formations; and


a distortion in the choices of branches of industry, toward light branches, together with the utilization of modern techniques in these branches” (Amin 1976:288).

In the postwar period, with the emergence of the multinational company and foreign investment in manufacturing, extraverted accumulation continues in new forms. These include concentration on the production of luxury goods, profit repatriation, and unequal exchange, which Amin also regarded as being caused by low wages (1976:193).

While both Emmanuel and Amin made a more rigorous attempt to explain processes of surplus extraction, their explanations were still unconvincing. Amin’s concept of autocentric accumulation in the core was inconsistent with a theory that suggests foreign capital investment is important to capital expansion in the core countries (Bernstein 1979; Smith 1980). Both theories were also problematic in their assumption that unit labor costs are lower in the poorer countries than in the richer ones. 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. In Marxist terminology, the extraction of relative surplus value can more than offset the extraction of absolute surplus value, and so workers in the rich countries can be both better off (in terms of consuming use values) and more exploited, in relative terms (Bettelheim 1972; Dore and Weeks 1979). 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. 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. 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). This critique relates back to the argument that one needs to first focus on the relations of production rather than trade relations, in order to show that the early development of capitalist social relations led to the shift from absolute to relative surplus value extraction, and thus development based on the dynamic accumulation of capital. On the other hand, this then begs the question of whether the expansion of capitalism beyond national borders leads to the progressive diffusion of a dynamic capitalism throughout the world-system. 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.

Dependency Theory II: Dependent Development?

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. However, a more nuanced approach to understanding dependency suggested that development and dependence were in some respects compatible (Cardoso and Falletto 1979; Evans 1979). In other words, capital accumulation, economic growth, and even some social development was possible, but it was somehow distorted by relations of dependency.

This could take a number of forms, including dependence on foreign technology, finance, or investment. For example, it was possible for multinational companies to promote development in the third world, but this development remained dependent on the core countries.

This argument was even be applied to the success stories in East Asia, as these were said to be the result of multinational companies relocating from first to third world, in order to “super-exploit” cheap labour in the latter countries. 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. 1980; Hart-Landsberg 1984). Third world industrialization was thus still development which ultimately reflected the interests of western (and Japanese) multinational companies, which were said to be the main agents of imperialism. 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. It was further reinforced by aid practices by the rich countries, which were often tied to strategic (Cold War) and/or commercial interests, so that for instance aid was often tied to the recipient country buying goods from the sending country. In this way, aid too was a postwar manifestation of capitalist imperialism (Hayter 1971; 1985).

Other Marxists challenged this view. Drawing on Marx’s apologies for colonialism on the grounds that this led to capitalist development in the “backward countries,” Bill Warren (1980) argued that it was clear that in the post-1945 period, imperialism was indeed the pioneer of capitalism. For Warren (1973) and others influenced by his work (Schiffer 1981; Sender and Smith 1986), all the evidence pointed to rapid capitalist development in the so-called periphery, and this was aided by foreign capital investment. Indeed, third world countries got capital investment on the cheap, as it gave them access to technology which took years of effort and expense to develop in the metropolitan countries (Warren 1973). It also led to higher per capita income, employment generation, and new skills, and indeed aided the development of political democracy as capitalism and development were “Siamese twins” (Warren 1980). To be sure, such capitalist development took place in the context of massive inequality and uneven development, but these are intrinsic features of all processes of capitalist development. The crucial point is that the fact of capitalist development is indisputable, whatever one thinks of the social consequences of such development. Focusing on the ways in which imperialism allegedly held back capitalist development played into the hands of nationalist mythologies (Kitching 1989; 2001), which could become self-fulfilling prophecies as states adopted policies which held back further capitalist development in the name of a spurious anti-imperialism.

It was true that capitalist development did take place on quite a rapid scale in the period from 1945 to the early 1970s. This “Golden Age” (Glyn et al. 1991) applied not only to the developed countries, but also to many third world countries which experienced high rates of growth. In the 1960s and 1970s, developing countries as a whole had an annual average per capita growth rate of 3 percent, higher than the averages for developed countries in the nineteenth century (Chang 2002:132). 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. African countries averaged growth rates of between 1–2 percent per capita per year in the 1960s and 1970s, which again compares favorably with the developed countries in their era of “takeoff” (Chang 2005: tables 5 and 7). Indeed, the 1960s and 1970s can be described as one where there was an industrial revolution in the third world (Chang 2002).

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 main point made by the idea of dependency was that capitalist development was taking place, but that it was somehow different from earlier phases of capitalist development in the developed countries. Sometimes this led to the unconvincing contrast between “normal” and “dependent” capitalist development, which, as we have seen, begged the question of what was “normal” and ironically came close to embracing a Eurocentric view of (“normal European”) capitalism. On the other hand, Warren’s conclusions themselves tended towards a view that there was a normal road to capitalism and, in contrast to dependency theory, suggested that this was what was occurring in the third world. Warren also tended to move from a position of recognition that such a development was occurring, to one that uncritically endorsed such development, without any examination of the social forces and struggles involved in such processes (Seers 1978; Lipietz 1982). In many ways, Warren’s view was simply an inversion, a mirror image of the crudest version of dependency theory: both constructed a norm, and then argued about whether or not third world countries were conforming to, or deviating from, that norm (Gulalp 1986). What both theories lacked was an account of specificity, and the different ways in which capitalism was developing in the third world. This in turn meant that there was a need to concretize uneven development, both internationally and within specific nation-states. In contrast to Warren, this meant recognizing that uneven development was not simply a product of the backwardness of capitalism in some places, but was intrinsic to the way that capitalism functioned throughout the globe. 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). Much the same point can be made in distinguishing between world-systems theory and world-systems analysis, as shown below.

World-Systems Theory and Analysis

As we saw earlier, world-systems theory was developed by Wallerstein in the 1970s and, initially at least, had quite similar arguments to those of Frank’s underdevelopment theory. 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. In particular, world-systems analysis takes Wallerstein’s notion of a world-system as a starting point, but then develops this to look at certain specific areas of inquiry. 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. It will also briefly be suggested that the best analysis made by the latter in some ways undermines the claims made by the former, though will do so in a way that does not detract in the least from an analysis of capitalism as a world-system. More specifically, it will be suggested that the former analysis rests on an unconvincing account of the rise of (European and US-dominated) capitalism (the chief weakness of dependency and world-systems theory), but that the latter usefully points to the unevenness of capitalist development once it is established (the great strength of dependency and world-systems analysis).

World-systems analysis has developed a broad programme for understanding the rise and fall of hegemonic powers. A recurring theme has been the demise of US hegemony (Wallerstein 2003). There is some disagreement as to whether it will be Europe (Wallerstein 2003) or (part of) Asia that will replace it, but some of the most interesting work focuses on the rise of Asia. This section will briefly examine two attempts to examine Asia’s rise, through a focus on the later work of Andre Gunder Frank and Giovanni Arrighi.

Although critical of much work of earlier world-systems theory and his own underdevelopment theory, Frank’s later work (1998:26–34, 46) can be located within a newer tradition of “global history” (Bin Wong 1998; Pomeranz 2000; Gills 2006), much of which takes an analysis of the world-system as its point of departure. Frank argues that the world-system has historically been centered on Asia, and that Europe only became the dominant power in the nineteenth century. He is therefore sympathetic to Abu-Lughold’s (1989) argument that there was an Asia-dominated world economy from 1250 to 1350, but he challenges her claim that this went into decline after this period. He also challenges the orthodoxy in world-systems theory, which claims that the world economy was one dominated by Europe from the sixteenth century onwards. Frank (1998:75) instead argues that the period from 1400 to 1800 was characterized by an Asia-dominated world economy, and that Europe remained a marginal player in this order. 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. He also claims that as late as 1800, Asia was a more efficient economic producer than Europe (1998:172–4).

Europe overtook Asia as the latter went into economic crisis from 1750 onwards. Europe benefited from an abundance of certain natural resources (especially coal), cheap food imported from the colonies, and beneficial world prices in the form of higher wages and cheap sources of capital. Frank also repeats his arguments that the extraction of surplus from the periphery was the crucial factor in financing the development of the (new, European) core (1998:294–7). But unlike his earlier underdevelopment theory, Frank more explicitly recognizes that Europe forged ahead through technological innovation while Asia fell behind. For Frank this divergence occurred because higher wages in Europe stimulated innovation, while lower wages in China made it rational for innovation not to take place. Cheaper labor existed in China because a more efficient agrarian system allowed wages to stay low (1998:307), which was further reinforced by a higher demographic/land resource ratio (1998:308).

Frank therefore argues that Europe (and the USA) being the centre of the world is historically unusual. He also suggests that the period of Euro-American dominance is coming to an end. This is also the view of another writer working in a broadly world-systems framework of analysis, Giovanni Arrighi (1994; 2007). 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. 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. In effect, the virtuous circle of capitalism, industrialism, and militarism driven by interstate competition was eroded by a crisis of legitimacy, a new Asian hybrid of industrious and industrial revolutions, nationalism in the third world, and, in the context of increased global integration, the erosion of the synergy between financial and military capabilities which had served to keep West ahead of East. US-led military attempts to overcome these problems backfired “and created unprecedented opportunities for the social and economic empowerment of the peoples of the global South” (2007:95) These opportunities varied across regions, and much of the South was constrained by a new era of indebtedness and neoliberal restructuring, which served to further “integrate” these economies into the world economy, but without promoting sustained development. In Asia, and especially East Asia, things were different, however, and this region is now set to challenge US hegemony, which is in decline, and which has further been eroded by the military adventurism of the Bush II administration.

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. 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. In both sequences, the states that became identified with capitalism […] were larger and more powerful than their predecessor” (2007:93) Arrighi thus argues that the industrial capitalism of the West came to challenge and surpass East Asia, only then to be challenged by the latter in the second half of the twentieth century.

There are problems with these accounts, however, both historically and as an assessment of current realities. Briefly, a great deal of historical evidence suggests that labor and land productivity had already undergone substantial improvements in parts of Europe (and specifically England or Britain) before 1800 (Allen 2000). In England especially, land ownership became increasingly concentrated, and capitalist farms of 100 acres or more increased from 14% of all farms in the 1600s to 52% of all farms by 1800. These farms made up 66% of all farmland by the latter date (O’Brien 1996:237). This concentration reflected the increased capitalist nature of English farming, which meant that the context of competition encouraged investment in new, productivity-enhancing methods, which was further facilitated by the concentration of farmland which arose out of the competitive process. The increase in productivity and output allowed for a movement away from the countryside and into the towns, which could be sustained by increased agricultural output. This labor force was also a necessary, but not sufficient, factor in providing supplies of labor for the industrial revolution. 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). 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). Maddison (1998:25) suggests that per capita income in China remained unchanged from 1280 to 1700.

Frank’s argument that Asian and, specifically, Chinese production was more efficient than Europe’s is thus problematic. Europe did run a trade deficit with Asia, but as Frank himself at one point suggests, Europe’s share of world trade was 69 percent, while Asia’s share stood at only 11 percent (Frank 1998:198). In other words, the trade deficit was insignificant from Europe’s point of view. 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. If this was the case, then it is not clear why China did not develop and leave Europe (further) behind. As Duchesne (2001/2) points out, the clear implication is that the peasantry were poorer in Asia than in Europe, where wages were higher, and/or that growth in Asia was achieved through increased exploitation of the peasantry in the context of diminishing returns to agriculture. This hardly paints a picture of efficient China and inefficient Europe, however. Rather it suggests that if one focuses on the social relations of production, then it is clear that the emergence of capitalist social relations in Europe were the main reason for the divergence between Europe and Asia. It is a neglect of these social relations which was one of the main weaknesses of at least some versions of dependency theory, as we have seen.

What then of the current era? Is it the case that the USA is in decline, and a new hegemonic challenge is taking place from Asia, and specifically China? Again there may be grounds for questioning this view, but this time it may be the case that the concept of dependency can be usefully employed to explain why this is the case. Arrighi has himself usefully shown (Arrighi et al. 2003) that much of the rise of manufacturing in the developing world is in low value production (see further below). Contra Arrighi, however, it can be argued that China’s rise is not so much a break from this trend, but rather is compatible with it. The shares of transnational manufacturing affiliates in China’s exports increased from 17.4% in 1990, to 55% in 2003 (Hart-Landsberg and Burkett 2005:125). 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.

This leads us on to an analysis of global commodity chains. Though there are important differences among proponents of this approach (see Bair 2009), the basic argument is that production processes are no longer confined to national boundaries, but are instead linked through a chain, “a transnationally linked sequence of functions in which each stage adds value to the process of production of goods or services” (Dicken 2003:14; see also Gereffi and Korzeniewicz 1994; Dicken et al. 2001; Henderson et al. 2002). 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. What is relatively novel, however, is that now (parts of) manufacturing production can be located in different parts of the world, so that final products can be made up of industrial components from different parts of the globe.

Gereffi (1994) has argued that there are two types of commodity chain, those that are producer driven and those that are buyer driven. 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. In the case of buyer-driven chains, barriers to entry are generated at more intangible levels, such as marketing and design (Gereffi 1994; Dicken 2003; Kaplinsky 2005). While much of the business-oriented literature focuses on the possibilities for upgrading in those localities that specialize in low value production, world-systems approaches are more concerned with showing how the globalization of production – and rise of manufacturing in the former “third world” – does not eradicate the distinction between core and periphery in the world economy (Gibbon and Ponte 2005). 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.

This has clear implications for understanding development in the current era, and this will be discussed below. First, however, the rise of global commodity chains needs to be related to the rise of China. 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. 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. With some small variations, there has been a significant increase in shares by East Asian exporters to the rest of the region, while EU and US shares (either taken together or individually) have generally fallen or stagnated (Athukorala 2003:40–1). Even more significant has been the increase in shares in parts and components rather than finished goods. Indeed, between 1992 and 2000, these accounted for 55% of the export growth of Indonesia, Thailand, Malaysia, Singapore, the Philippines, and Vietnam (2003:33). 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. 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. At the same time, parts and components in China’s share of exports to the US (4.3% to 9.1%) and to the EU (2.9% to 10.9%) increased from 1992 to 2000, but from far lower bases and the total shares remained low (Athukorala 2003:48–9). In the period from 1992 to 2003, parts and components accounted for 52% (Taiwan), 44% (Malaysia), 70% (Philippines), 59% (Singapore) and 31% (Thailand) of the total manufacturing export growth for particular countries. For China, the figure was 17% (Athukorala and Yamashita 2005:33). Taken together, these figures suggest that China has increased its role as a manufacturer of final goods produced within the East Asian region, which are exported to the EU and US (and Japanese) markets.

These data do not necessarily undermine the view that China has become a major player in the global economy. But the rise of global production networks does at least qualify notions of China’s rise, and its economic success must in part at least be located in the context of the globalization of manufacturing production. If the concepts of the world-system and of dependency retain any contemporary relevance, they must be situated in this contemporary context. This is the subject of the final section.

Defending the Ideas of Dependency and the World-System in Neoliberal Times

Development studies moved in new directions in the 1980s and 1990s. In an effort to avoid the over-generalizations associated with grand theories of development and underdevelopment, a “post-impasse” development studies became increasingly concerned with more micro-issues such as the “correct fit” between state, market, and civil society and how the three sectors should play a complementary role in the process of development. In the process, though, something was lost, not least a critical analysis of the neoliberal context of the world-system, which development studies was increasingly taking for granted by the 1990s. Ironically, the return of “big picture” analysis such as that associated with the idea of globalization did not reverse this picture, not least because that particular concept continually suffered from a lack of clarity, above all in terms of its status as an explanatory concept (Rosenberg 2005; Kiely 2005). 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. This shift to more “localized” approaches to development added weight to the view that dependency and the world-systems had ceased to be useful concepts, at least for the study of development. This section takes issue with this view and suggests that, theoretical weaknesses notwithstanding, in a time of neoliberal globalization, the utility of the concepts of dependency and the world-system is potentially greater than ever.

The critical discussion of the theories outlined in this essay suggests that we need to recognize the following. First, capitalist development has occurred in the developing world since 1945. Second, this does not necessarily mean that such development has replicated earlier processes of capitalist development in the developed countries. Third, there are mechanisms of domination and subordination that arise out of the unevenness of capital accumulation, but these need to be specified rather than read off from a general theory which has pre-conceived expectations about what these may be.

As regards the first two issues, while we need not assume that capitalist development will necessarily lead to convergence with developed countries, some comparison with the latter’s own methods of promoting capitalism is useful. Indeed, such a comparison provides strong grounds for defending the relevance of the idea of dependency, particularly in an era of neoliberal globalization. The advanced capitalist countries developed in the late nineteenth century through import-substitution policies, designed to protect their “national economies” from foreign, or British competition. These policies also occurred in the dominions (Canada, Australia, New Zealand), but were not implemented in colonies as colonial powers did not allow such policies to take place. They also did not occur in independent Latin America, where dominant classes happily imported manufactured goods and derived their wealth from ownership of land (Cardoso and Falletto 1979).

In the postwar period (or in Latin America, in the 1930s), this changed as new social and political forces demanded new policies. Both the forces and policies involved varied from country to country, but there was a general pattern of alliances across different classes, committed to national development through industrialization, justified on the grounds that living standards would improve in the long term, and through appeals to nation building. This was the domestic social basis for ISI policies in the third world, although this varied from state to state in terms of ideological justification, social cohesion, degrees of contestation, and economic effectiveness (Sandbrook 1985; Evans 1995; Chibber 2003). 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. The existence of the Soviet Union, and the capacity of states to play off one superpower against another, gave further impetus to ISI policies. However, the period from the 1970s, and especially the early 1980s, onwards, saw a period of neoliberal restructuring which radically altered the context in which capitalist development took place.

How then can the ideas of dependency and the world-system retain any validity in this context? It has been argued that dependency should be seen as a starting point for understanding concrete situations of uneven development, both within national economies and in the capitalist world-system (Buttel and McMichael 1993). The rest of this conclusion will focus on how neoliberalism fosters dependence and subordination, and by implication, actually existing globalization is based on the kind of structured inequalities that the idea of dependency tries to capture, albeit too often rather clumsily. These structured inequalities may be altered, not least by how social and political forces within national social formations respond to these inequalities, but the fact is, contra neoliberalism, they also exist. This will be illustrated by examining the relationship between the globalization of production and neoliberalism.

We can start by returning to the Prebsich–Singer thesis, but updating it to take account of new realities in the global economy. As we saw above, the basic contention of this theory was that the terms of trade tended to decline for primary goods against manufactured goods. With the rise of manufacturing exports from the developing world, this argument could be regarded as out of date, but in fact it can be fruitfully used to look at the terms of trade between different types of manufacturing exports (UNCTAD 2002:118; Kaplinksy and Santos-Paulinho 2005). 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. Other studies have supported the claim that the price of simple manufacturing exports from developing countries have tended to fall against more complex manufacturing and services from developed countries (Maizels et al. 1998). One study of Chinese exports suggests that the net barter terms of trade fell by 10% against developed countries from 1993 to 2000, but improved as against other developing countries (Zheng 2002).

The reason for these movements can be linked to the globalization of production. Essentially, as we have seen, developed countries still tend to dominate in high value sectors, based on high barriers to entry, high startup and running costs, and significant skill levels. In the developing world, where there are large amounts of surplus labor and barriers to entry, skills and wages are low. While this gives such countries considerable competitive advantages, at the same time the fact that those barriers to entry are low means that competition is particularly intense and largely determined by cost price, which also means low wages. Thus, the clothing industry, where developing countries have achieved considerable increases in world export shares in recent years, has a very low degree of market concentration. In contrast, sectors like machinery (such as non-electric engines, motors, steam engines) and transport equipment (aircraft, ships, boats, motor cars and motor bikes) have very high degrees of market concentration, and are mainly located in the developed world (UNCTAD 2002:120–3).

The neoliberal argument is that production in these labor-intensive sectors is only a starting point, allowing countries to upgrade as more developed countries shift to higher value production. However, this assumes that upgrading is a more or less inevitable process, and one that can be driven by the “natural” workings of the market. But in practice, upgrading has occurred by states deliberately protecting themselves from import competition from established producers, via a process of import substitution industrialization. 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.

Thus, with the globalization of production, manufacturing in the developing world is overwhelmingly concentrated in lower value production characterized by low barriers to entry, intense competition and diminishing returns. It is in these sectors – clothing, textiles, toys, and so on – that developing countries have a cost advantage, particularly in low wages. 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). 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. 2004).

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). 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). 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. A movement out of agriculture into manufacturing, in which the latter was characterized by increasing returns, linkages, and higher productivity, and was reinforced by the rise of organized labour as production was socialized, was a recipe for some form of progress, albeit with many social costs along the way. Later industrialization, including in contemporary China, has seen far less absorption of labor by manufacturing, and so the dynamic potential for progress has been seriously eroded (Evans and Staveteig 2006). The pattern we now see is one of urbanization without high rates of industrialization, and the development of cities of slums (Davis 2004; Bernstein 2004; Kiely 2008). Unless accompanied by radically different social policies, ISI is unlikely to alter this growing trend. This brief discussion demonstrates that later capitalist development does indeed differ from earlier periods of capitalist development, and this was one of the main issues highlighted by the idea of dependency.

The implications for my argument should be clear. Rather than promoting convergence between developed and developing countries, whereby the latter catch up or at least follow similar stages of development through upgrading, we have continued divergence based on a changing but unequal international division of labour. As Arrighi and Moore (2001:75) suggest, “the underlying contradiction of a world capitalist system that promotes the formation of a world proletariat but cannot accommodate a generalized living wage (that is, the most basic of reproduction costs), far from being solved, has become more acute than ever.” In terms of development, upgrading is a far from inevitable process, not only because of the “developmental” lead established by earlier developers, but also because neoliberal policies of trade liberalization undermine the prospects for upgrading to higher value production. Neoliberalism therefore reinforces structured inequalities in the world economy in two ways. First, neoliberal policies exaggerate the ease by which liberalization policies will lead to countries breaking into export markets, and thus ultimately converging with already rich countries. And second, neoliberalism actually undermines the prospects for such convergence because liberalization forces national economies to compete against already established producers in the developed world within their own national markets. 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.

This account owes something to the theory of the new international division of labour (NIDL), which was developed in the 1970s and which drew heavily from the insights of both dependency theory and world-systems theory. 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). The first-tier East Asian NICs, or at least South Korea and Taiwan, essentially took off through state-directed policies in alliance with national capital, a strategy which broke down in the early 1990s (prior to the financial crash of 1997). 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. But it is perhaps now the case that the theory is more valid as an explanation for later industrialization processes in the developing world, including in China, at least when applied to low value labor-intensive manufacturing.

There is one further area where the concept of dependency retains considerable utility, and this relates to the relationship between class formation and the contemporary global economy. This can be illustrated through a brief discussion of the prospects for a revival of ISI. Insofar as a revival of ISI is likely take place, this would constitute a significant challenge to neoliberal hegemony in the international economic order, as well as established policies that have operated through adjustment policies and World Trade Organization agreements. In this sense then, ISI would constitute a challenge to the neoliberal “imperialism of free trade,” which prevents developing countries “from using the tools of trade and industrial policies that they [developed countries] had themselves so effectively used in the past to promote their own economic development” (Chang 2007:77; Kiely 2009) What, then, of the prospects for a challenge to neoliberalism, based on a revival of development strategies that “guide the market” rather than promote “market friendly intervention”? In the context of the increased global integration that characterizes the current world-system, dominant economic and political actors in the developing world want access to international circuits of capital, and therefore may support neoliberal policies (Albo 2003). 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. Put simply, then, the question of the potential revival of ISI does not just involve the technical efficiency of such a policy, but whether or not there are social and political agents that are willing to carry it out. This does not mean that ISI has ended – the Chinese Communist Party is clearly committed to some version of it, and current political trends in Latin America suggest some kind of revival there. But it does mean that the globalization of circuits of capital has undermined the prospects of the emergence of a “national bourgeoisie,” committed to nationalist, productive capitalist development. Baran’s idea of the comprador nature of bourgeoisies in developing countries may have been problematic in the context of national–populist alliances around ISI, but it may have more relevance in the context of neoliberal integration. Once again, if dependency is regarded less as a dogmatic theory of underdevelopment, and more as a starting point for understanding concrete situations of uneven development, then the idea appears to retain some relevance. And these concrete situations must be situated in the context of the capitalist world-system.


This essay has suggested that as theories, the ideas associated with both dependency and the world-systems are problematic. They do not adequately explain the origins of the capitalist world economy, and at least some of the mechanisms that sustain inequality and hierarchy within the international order. 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. In particular, both approaches correctly recognize the following: (1) capitalism can in some respects be regarded as a world-system; (2) the capitalist world economy is not a level playing field, and the process of market promotion in recent years has reinforced hierarchies, not undermined them; (3) this is true despite the rise of manufacturing in the developing world associated with the globalization of production; (4) neoliberalism reinforces hierarchies by undermining the capacities of states to shift out of low value production into higher value sectors; (5) this is reinforced by historical patterns of manufacturing, which suggest that the capacity of this sector to promote dynamic spinoffs to the rest of the economy, and to generate substantial improvements in living standards for all, is increasingly being eroded. 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). They are also compatible with the idea that dependency retains some utility as an idea that attempts to think critically about understanding concrete situations of uneven development in the capitalist world-system today (Palma 1978; Saul and Leys 2007).


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Links to Digital Materials

Resources in this strongly theoretical area are, not surprisingly, quite thin. 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. The third and fourth resources are good empirical and theoretical sources, though neither is explicitly influenced by either dependency or world-systems theory, but much of the analysis in both is compatible with the conclusion to this chapter.

Róbinson Rojas’ databank. At, accessed Jul. 2009. This site contains many articles including a link to much of Andre Gunder Frank’s writing. It does, however, promote the crudest aspects of underdevelopment theory.

Journal of World-Systems Research. At, accessed Jul. 2009. This site has links to articles that, to varying degrees, are influence by world-systems analysis.

UNCTAD. At, accessed Jul. 2009. This site contains many data-led publications.

Center for Economic and Policy Research. At, accessed Jul. 2009. A good US site with critical discussion of globalization, which implicitly suggests some compatibility with the views outlined in this chapter.