Dependency Theory

A theory that argues that, due to the exploitative nature of the relationship between advanced capitalist (western) societies and the Third World, the development of the former resulted in the underdevelopment of the latter. Because of its reliance on external sources of demand and investment opportunities, Western capitalism penetrated virtually all parts of the Third World and eventually laid down the foundations of dominance-dependence relationship structures between North and South which tended to engender and perpetuate underdevelopment in the Third World. According to this theory, exchanges between the North and the South, such as trade, foreign investment, and aid, are asymmetric and tend to stifle the development of the latter and to reinforce their dependence. The theory also contends that local elites with vested interest in the structure of dominance and in monopolizing (monopoly) domestic power cooperate with international capitalist elites to perpetuate the international capitalist system.