Question

One Grade 11 student asked you about what is dependency theory is. Explain in your own words and make it understandable for a grade 11 student.

Answer 1

Dependency Theory was popularized by the Raul Prebisch. Theory argues that developing countries are dependent on developed countries for finance, technologies and so on. It has created dependencies of developing countries on developed ones. Hence, these developing countries or peripheral economies do not have sufficient capabilities to accomplish higher level of growth.

Dependencies theory argues that developing countries must impose restrictions on free trade and should actively pursue the policy of trade restrictions. In this way, exploitative practices of developing countries can be checked in.

Though, dependency theory was widely acclaimed by economists of developing countries, it is no longer relevant after collapse of Communism in Soviet Russia. Excessive involvement of government in economic activities, leads to the rise in inefficiencies and corruption.