Dependency Theory In partial completion of IR220- HRD @ the National Level Prof. ROSA MERCADO By Alfredo V. Primicias III
Jul 28, 2015
Dependency Theory
In partial completion of IR220- HRD @ the National Level
Prof. ROSA MERCADO
By Alfredo V. Primicias III
Dependency Theory
In partial completion of IR220- HRD @ the National Level
Prof. ROSA MERCADO
By Alfredo V. Primicias III
TOPICS:1. Who are Prebisch and Frank?2. Dependency Theory3. Criticisms of the Model
In partial completion of IR220- HRD @ the National Level
Prof. ROSA MERCADO
By Alfredo V. Primicias III
• Raul Prebisch (April 1901- April1986)
• Argentine Economist• Structural and Neo- Marxist
economist• Contributed the Prebisch- Singer
hypothesis (basis of dependencytheory)
Dependency Theory
• Andre Gunder Frank (Feb 1929-April 2005)
• German- American economichistorian and sociologist
• Promoted Dependency Theoryand World- Systems Theory
Sources: http://en.wikipedia.org/wiki/Ra%C3%BAl_Prebisch http://en.wikipedia.org/wiki/Andre_Gunder_Frank
In partial completion of IR220- HRD @ the National Level
Prof. ROSA MERCADO
By Alfredo V. Primicias III
Dependency TheoryIncrease in the wealth of the richer nations at the expense ofthe poorer ones.
Poor countries exported primary commodities to the richcountries who then manufactured products out of thesecommodities and sold them back to poorer countries
Fisherman
Abundant marine life
Backward ways in fishing
Sufficient supply
Businessman
Foreigner
Machines & Technology
BUSINESS RELATIONSHIP
Sells fish LOW PRICE Sells sardines 5xhigherBorrows Money to
afford sardines Lends money
In partial completion of IR220- HRD @ the National Level
Prof. ROSA MERCADO
By Alfredo V. Primicias III
Dependency Theory
SOLUTION: Poorer countries must go for IMPORTSUBSTITUTION program (not to purchase manufacturedproducts from the richer countries).
SOLUTION: Poorer countries must sell primary products on theworld market BUT foreign exchange reserves must be used todevelop their countries.
REFUTE: Internal markets of the poor countries are not largeenough to support the economies of scale used by richercountries to keep prices low.
REFUTE: Poor countries don’t have enough political will totransform their base as product producers only.
REFUTE: Poorer countries can’t control external forces whenselling products abroad.
Source: Vincent Ferraro, Development Economics Reader, London
In partial completion of IR220- HRD @ the National Level
Prof. ROSA MERCADO
By Alfredo V. Primicias III
MORE DEFINITIONS: Dependency Theory
[Dependency is…] historical condition which shapes a certain structureof the world economy such that it favors some countries to thedetriment of others and limits the development possibilities of thesubordinate economies… a situation in which the economy of a certaingroup of countries is conditioned by the development and expansion ofanother economy, to which their own is subjected.(“The Journal of Development Studies, Vol. 6, no. 1, Oct. 1969, p23”)
Theotonio dos SantosBrazilian Economist
INTERNATIONAL SYSTEM
• DOMINANT• CENTER• METROPOLITAN• Advanced industrial nations
• Dependent• Periphery• Satellite • Latin America, Asia, Africa with
low per capita GNPs MNC International Commodity
Markets Foreign Assistance Communications Technology
Dependency occurs due to theinteraction
Internationalization of capitalism
Source: Vincent Ferraro, Development Economics Reader, London
In partial completion of IR220- HRD @ the National Level
Prof. ROSA MERCADO
By Alfredo V. Primicias III
MORE DEFINITIONS: Dependency Theory
• DOMINANT• CENTER• METROPOLITAN• Advanced industrial nations
• Dependent• Periphery• Satellite • Latin America, Asia, Africa
with low per capita GNPs
cheap minerals, agriculturalproducts, and labor
Surplus capital, obsolescenttechnologies, manufacturedgoods, self-serving ECONOMICINTEREST
CA
Comparative advantage is an economiclaw that demonstrates the ways in whichprotectionism is unnecessary in freetrade. Popularized by David Ricardo,comparative advantage argues that freetrade works even if one partner in a dealholds absolute advantage in all areas ofproduction - that is, one partner makesproducts cheaper, better and faster thanits trading partner.
Source: Vincent Ferraro, Development Economics Reader, London
In partial completion of IR220- HRD @ the National Level
Prof. ROSA MERCADO
By Alfredo V. Primicias III
Central Propositions: Dependency Theory
Underdevelopment
Undevelopment Resources not being used
Resources being used for the dominant states
Underdevelopment • Latin America, Asia and Africa are NOTUNDERDEVELOPED
• Became POOR only when coercively integrated intothe European Economic system (producers of raw materials or
repositories of cheap labor)
Export Agriculture • Poor economies have high rates of malnutritiondespite being producers of food for export
Peripheral Elites • Elites maintain a dependent relationship since theirprivate interests coincide with the dominant states
Source: Vincent Ferraro, Development Economics Reader, London
In partial completion of IR220- HRD @ the National Level
Prof. ROSA MERCADO
By Alfredo V. Primicias III
Dependency Theory
POLICY IMPLICATIONS
1. The success of richer countries was contingent to their respective economichistory (exploitative colonial relationships) to which would be entirely different toother countries.
2. Dependency theory refutes the central distributive mechanism of theneoclassical model– or on how to distribute wealth– primary concern is onefficient production and assumes that the market will allocate the rewards in arational and unbiased manner.
3. Aside from GDP and GDP as measurements– use life expectancy, literacy, infantmortality, education and other social indicators as economic parameters.
Source: Vincent Ferraro, Development Economics Reader, London
In partial completion of IR220- HRD @ the National Level
Prof. ROSA MERCADO
By Alfredo V. Primicias III
RETROSPECT
INTERNATIONAL SYSTEM
DominantCenter
DependentPeriphery
Socialism
In partial completion of IR220- HRD @ the National Level
Prof. ROSA MERCADO
By Alfredo V. Primicias III
RETROSPECT: HRD @ THE NATIONAL LEVEL
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
1990 1995 2000 2005 2009
Agriculture
Industry Sector
Service Sector
Trend in Employment by Industry 1990- 2009(Prof. Cabegin IR 204)
Briones (2011) said that “since 1990, considerable headway has been made towards eradication
of poverty, reduction in child mortality, as well as improvement in household potable water and
sanitation.” Page 3. Assessing Development Strategies to Achieve MDGs in the Republic of the Philippines, Roehlano M. Briones, UN
Department for Social and Economic Affairs, 2011.
Catelo and Pabuayon (2013) explain:
“agricultural sector is important in the
Philippine economy; providing for the
food needs of the population and the
raw material requirement of industry,
creating jobs and wealth, and
generating foreign exchange.”Page 1, Overview of PH Agriculture, 1990- 2009, SalvadorCatelo and Isabelita Pabuayon, UPLB- College of Economicsand Management, 2013.
Park and Shin (2012): “GDP share of
services in 1980s @ 81.7%, 1990s @
58.3%, and 200s @ 62.8%.”Page 8, The Service Sector in Asia: Is it an Engine of Growth,Donghyun Park and Kwanho Shin, ADB, 2012.
In partial completion of IR220- HRD @ the National Level
Prof. ROSA MERCADO
By Alfredo V. Primicias III
RETROSPECT: HRD @ THE NATIONAL LEVEL
3.7
4.8
3.4
5.2
3.4
4.4
3.2
4.6
1999 2000 2001 2002
Arroyo
GNP GDP
NEDA’s Socio Economic Report 2002 positioned the Philippine economy as the “firmest
growth in the post- Asian crisis period. The growth was supported by policies that encouraged
healthy domestic and foreign demand; a low inflationary environment as induced by prudent
monetary policy.”Page 1, Chapter 1, Socio Economic Report 2002, National Economic Development Authority.
• Strong surge in OFW remittances, growing at anannual average of 19.1 percent for the period2004-2006.
• Total remittances in 2007 rose by 13.2 percent toUS$14.4 billion
• World Bank reports that GDP was worthUS$272.02B billion in 2013
http://www.tradingeconomics.com/philippines/gdp
In partial completion of IR220- HRD @ the National Level
Prof. ROSA MERCADO
By Alfredo V. Primicias III
RETROSPECT: HRD @ THE NATIONAL LEVEL
• PH economic growth decelerated to5.7% in the Q1 2014
• PH continued to outperform othercountries in the region surpassedonly by China (7.4%) and Malaysia(6.2%)
• Growth of overall investment at7.7% driven mainly by domesticinvestment
• Growth slowed down due to weak government consumption
and private construction on thedemand side
weak agricultural productionon the supply side
Source: PH Economic Update, World Bank, August 2014