World Economy – Dependency Theory
Unifying theory on exploitation
Exploitation theorists asked several key questions:
• Were bad policies and institutions the case for global inequality? – why were macro policy
and institutional prescriptions not helping?
• Should we view nations in isolation when assessing success/ failure? More global view needs
to be taken?
• Who suffers or benefits from the success or failure of others?
• Are countries equal players?
Exploitation Theory – Dependency Theory
• Underdevelopment a result of global capitalist exploitation
• Shift exploitation in Marxist capitalism between countries
• Key is to keep underdeveloped areas focused on resource extraction
• Dependence maintains capitalist control over labour and resources
What is the ‘Resource Curse’?
• Colonies with more natural resources do worse in growth compared with those with little
resources.
• Link to Prebisch-Singer and Dutch Disease models.
• According to Sachs and Warner (1995) resources increase prices and cause countries to miss
out on export led growth.
What explains the Resource Curse?
1) Entrepreneurs and innovation are crowded out (Gylfason 2000)
• High wages in resource sector draws in all talent and focus
• Natural resource rents concentrated and easily captured
• Resource abundance leads to increased rent seeking, decreased innovation and decreased
entrepreneurial activity, poorer govt, less growth.
2) Political system is crowded out (Auty 2001)
• Resources create easily captured rents
• Politicians in rent seeking
3) Manufactures crowded out – Dutch Disease (Sachs, Warner 2001)
• Natural resources generate high wages and prices
• Export sectors become uncompetitive
Explaining the resource curse with theory
Prebisch-Singer Hypothesis:
• Tried to explain failures of neoclassical theory of development
• Poor countries (periphery) exported primary resources – imported manufactures (core)
• Terms of trade always working against periphery over time as relative agricultural prices fall.
• Supported by Simon vs Ehrlich debate – not going to write it out. Search it up.
Exploitation Theory – World Systems Theory
• Macro scale approach to world history where world-system replaces nation state as unit of
analysis.
Unifying theory on exploitation
Exploitation theorists asked several key questions:
• Were bad policies and institutions the case for global inequality? – why were macro policy
and institutional prescriptions not helping?
• Should we view nations in isolation when assessing success/ failure? More global view needs
to be taken?
• Who suffers or benefits from the success or failure of others?
• Are countries equal players?
Exploitation Theory – Dependency Theory
• Underdevelopment a result of global capitalist exploitation
• Shift exploitation in Marxist capitalism between countries
• Key is to keep underdeveloped areas focused on resource extraction
• Dependence maintains capitalist control over labour and resources
What is the ‘Resource Curse’?
• Colonies with more natural resources do worse in growth compared with those with little
resources.
• Link to Prebisch-Singer and Dutch Disease models.
• According to Sachs and Warner (1995) resources increase prices and cause countries to miss
out on export led growth.
What explains the Resource Curse?
1) Entrepreneurs and innovation are crowded out (Gylfason 2000)
• High wages in resource sector draws in all talent and focus
• Natural resource rents concentrated and easily captured
• Resource abundance leads to increased rent seeking, decreased innovation and decreased
entrepreneurial activity, poorer govt, less growth.
2) Political system is crowded out (Auty 2001)
• Resources create easily captured rents
• Politicians in rent seeking
3) Manufactures crowded out – Dutch Disease (Sachs, Warner 2001)
• Natural resources generate high wages and prices
• Export sectors become uncompetitive
Explaining the resource curse with theory
Prebisch-Singer Hypothesis:
• Tried to explain failures of neoclassical theory of development
• Poor countries (periphery) exported primary resources – imported manufactures (core)
• Terms of trade always working against periphery over time as relative agricultural prices fall.
• Supported by Simon vs Ehrlich debate – not going to write it out. Search it up.
Exploitation Theory – World Systems Theory
• Macro scale approach to world history where world-system replaces nation state as unit of
analysis.
