The International-Dependence Revolution

When the existing theories of development largely failed to bring any changes in the lives of the developing
country people, the growing discontent among the developing country economists led to the emergence of
new theories of development. These theories which became popular among the developing country
economists in the 70s, came to be identified as the International-ependence !evolution.
The principal idea behind the International-ependence !evolution is that the third world countries are
caught up in a dependence and dominance relationship with the rich countries, and the rich countries either
intentionally or unintentionally contributes so that this relationship perpetuates and the status "uo is
maintained. The ideas that developed under the broad heading of International-ependence !evolution
#more commonly $nown as the ependence Theories%, can be further classified in to the following three sub
groups.
&. The Neocolonial Dependence Model: This is an indirect outgrowth of 'arxist thin$ing. (eople who
believe in this theory are more radical than the people who belong to the other two sub-groups.
)ccording to this doctrine, third world underdevelopment is viewed as the result of highly une"ual
international capitalist system or rich country-poor country relationships. It is viewed that the rich
countries through their intentionally exploitative or unintentionally neglectful policies hurt the
developing countries. The rich countries and a small elite ruling class in the developing countries,
who serve as the agent of the rich countries, are responsible for the perpetuation of
underdevelopment in the developing countries. *nli$e the +tage Theories or the +tructural ,hange
'odels, which considered underdevelopment as a result of internal constraints such as insufficient
savings, investment or lac$ of infrastructure, s$ill or education, the proponents of the -eocolonial
ependence model saw underdevelopment as an externally induced phenomenon. The remedy,
according to those who preached these ideas, was to initiate revolutionary struggles to topple the
existing elite of the developing countries and the restructuring of the world capitalist system to free
the third world nations from the direct and indirect control of their first world and domestic
oppressors.
.. The False Paradigm Model: The people who are behind this theory are less radical in nature. They
believe that although the developed countries have good intentions of helping the developing
countries, their policy advises are simply inappropriate in the context of developing countries mainly
because they fail to incorporate the uni"ue social, cultural and institutional characteristics of the
developing countries. )s a result those policies do not produce any end results.
/. The Dualistic-Development Thesis: This is an extension of the dualism concept widely discussed in
development economics. In simple words it says that the relationship between the rich and the poor
countries is 0ust a global version of the dualism that we see in every aspect of life. The interrelations
between the superior and inferior elements are such, be it in a global sense or in a local sense, that
the superior elements does little or nothing to pull up the inferior element. In fact it may actually
serve to push it down.

Major Weaknesses of the Dependence Theories:
The ependence theories suffer from two ma0or wea$nesses. These are1
First: These theories are mainly focussed to find out why the underdeveloped countries
remain underdeveloped. They lac$ any concrete ideas as to how a country should initiate and
sustain development. In short, if you believe in these explanation you would perhaps
understand what is causing the underdeveloped countries to remain underdeveloped but you
would have no clue regarding how the country should come out of such a situation.
Second: 2arge scale failure of countries which followed the more radical approach and too$
the revolutionary path. These countries overthrew their existing elite and pursued
revolutionary campaign of industrial nationali3ation but at the end failed to attain any
significant improvement in the condition of its people.
The Neoclassical Counterrevolution:
)fter the initial tremor created by the ependence Theories subsided and when those theories failed to bring
any significant improvement in the lives of the poor, the neoclassical economists bounced bac$ with another
set of theories which became $nown as the neoclassical counterrevolution.
The neoclassical counterrevolution emphasi3ed three things. These are1
&. +upply +ide 'acroeconomic (olicy.
.. !ational 4xpectation Theories.
/. (rivati3ation of (ublic ,orporations.
*nli$e the people behind the dependence theories, who believed that underdevelopment was an externally
induced phenomenon, the people behind the neoclassical counterrevolution believed that underdevelopment
is an internally induced phenomenon. 5The central argument of the neoclassical counterrevolution is that
underdevelopment results from poor resource allocation due to incorrect pricing policies and too much state
intervention by overly active Third World governments.5 --- 5The third world is underdeveloped not because
of the predatory activities of the 6irst World and the international agencies that it controls but rather because
of the heavy hand of the state and the corruption, inefficiency, and lac$ of economic incentives that permeate
the economies of developing nations.5 )ccording to this theory what is needed is the promotion of free
mar$ets and laisse3-faire economics within the context of permissive governments that allow the 5magic of
the mar$etplace5 and the 5invisible hand5 of mar$et prices to guide resource allocation and stimulate
economic development.
Three sub group of the neoclassical ,ounterrevolution was discussed in class. These are1 ! Free-"arket
#pproach$ %! &u'lic Choice (or new political economy) approach$ and *! Market-friendl+ #pproach!
#-ote1 +tudy the difference between these three approaches.%