Dependency Theory

Dependency theory explains global inequality as caused by colonialism and neocolonialism, the dominance of former colonial powers over low-income nations. Global stratification is seen as a tool used by high-income nations to maintain their advantaged position at the expense of poorer nations. Dependency theory has neo-Marxist roots and shares many characteristics with conflict theory. World-systems theory grew out of dependency theory. Both of these theories provide a framework for understanding how the economies of different countries are connected. Sociology in the 21st century tends to use the concepts and language of world-systems theory. However, when dependency theory emerged in the 1950s it proposed useful concepts for understanding the relationships between nations. World-systems theory and dependency theory use many of the same arguments and draw similar conclusions.

In dependency theory, low-income nations are viewed as victims of exploitation. This exploitation is a result and a continuation of colonialism. In a colonialist system, a wealthy nation attempts to gain control over a poorer nation's resources and labor, often through military force. Colonialism began to disintegrate after World War I, with the process speeding up after World War II. But colonialism was replaced by neocolonialism, with powerful countries controlling weaker nations through indirect means. Neocolonialism uses economic and political power, rather than direct military power, to force a colonial relationship.

This colonial legacy has created a system in which high-income nations depend on their ability to exploit the cheap labor and natural resources of low-income nations. Neocolonialism continues this exploitation and supports the class structure of nations. While colonialism was direct exploitation by governments, in neocolonialism, governments are often replaced by multinational corporations.

According to dependency theorists, large multinational corporations take advantage of low wages and few laws protecting workers to manufacture goods cheaply. They work with weak governments to ensure access to cheap labor and natural resources, without investing in the infrastructure of the country. Governments of high-income nations are either complicit in allowing this, or they actively participate by working with governments of low-income nations to maintain the situation. An example of this relationship is the way the apparel industry works in the United States. Very few items of clothing purchased and worn by Americans are made in the United States. The American brands selling the clothing receive most of the money consumers pay, while the workers who manufacture the clothing, in factories located in low-income countries, receive only a tiny portion. Eliminating poverty, according to dependency theorists, can only be accomplished by eliminating this predatory relationship. Low-income nations will remain poor until they can turn their resources toward developing their own economic infrastructure. One way to achieve this is by nationalizing natural resources and industries and using that money for development.

However, nationalizing resources and industries has not always led to significant development in countries that took this approach. Critics say a lack of competition led to inferior goods and that corrupt governments never allowed the money to be spent on real development. They point to how India's economy grew after privatization and to the failure of Latin American governments to develop their economies after nationalizing their industries.