🗓️ Session 6: Marxist and Dependency Theories of Development

Author
Affiliation

Claudius Gräbner-Radkowitsch

EUF and JKU

Published

06 11 2026

Modified

22 06 2026

Abstract

This session explores development through Marxist and dependency theory perspectives, offering a critical alternative to mainstream growth models and institutional economics. We examine how Marxist analysis reframes the “development puzzle” not as a question of why some countries lag behind, but why development and underdevelopment are connected processes within a global capitalist system.

The session progresses through three main analytical movements: First, we explore the historical transition from pre-capitalist to capitalist modes of production, emphasizing primitive accumulation and the violent transformation of social relations. Second, we analyze uneven development within capitalism, examining how core-periphery dynamics, unequal exchange, and world-systems structure create persistent global inequality. Finally, we engage with dependency theory’s policy implications and contemporary relevance, connecting these debates to issues of trade, technology, and ecological sustainability that we’ll explore in subsequent sessions.

Unlike Sessions 4 (growth models) and 5 (institutional economics), which largely assume countries develop independently through similar processes, Marxist perspectives insist that development in some places is intrinsically linked to underdevelopment in others. This fundamentally challenges both the convergence predictions of neoclassical models and the “global standard institutions” approach of New Institutional Economics.

🎯 Learning Objectives

By the end of this session, you should be able to:

Conceptual Understanding:

  • Explain core Marxist concepts relevant to development: modes of production, primitive accumulation, class relations, and capital accumulation dynamics
  • Distinguish between the transition to capitalism (pre-capitalist \(\rightarrow\) capitalist) and uneven development within capitalism (core-periphery dynamics)
  • Understand world-systems theory’s triadic structure and how it differs from methodological nationalism
  • Articulate dependency theory’s key arguments about the “development of underdevelopment” and dependent development

Critical Analysis:

  • Compare Marxist perspectives with New Institutional Economics on the role of institutions in development
  • Evaluate how different theoretical frameworks ask different questions about the same development puzzles
  • Assess the strengths and limitations of dependency theory using historical and contemporary evidence

📊 The Development Puzzle Revisited

Interactive Element 1: Paired Country Comparisons

Individual reflection (3 min): Consider the North Korea/South Korea development gap we discussed in Session 5. Write down:

  1. How did Acemoglu, Johnson & Robinson (NIE perspective) explain this difference?
  2. What questions does their explanation leave unanswered?
  3. Who benefits from the current institutional arrangements in each country?

Pair discussion (5 min): Share your answers with a neighbor. Together, identify:

  • What power relations might NIE analysis overlook?
  • How might global context (Cold War, trade relations, military alliances) matter?

Class sharing (2 min): Volunteers share key insights

Reframing the Question

New Institutional Economics (Session 5) asks:

  • Why do some countries have “good” institutions (property rights, rule of law) and others “bad” institutions (extractive, corrupt)?
  • How can we help countries adopt “global standard institutions”?
  • What historical accidents (settler mortality, colonial origins) explain institutional differences?

Marxist development theory asks:

  • Why do some countries have institutions that facilitate capital accumulation for local elites while others have institutions that facilitate extraction by foreign capital?
  • Who benefits from particular institutional arrangements?
  • How are “development” in some places and “underdevelopment” in others connected within a global system?
  • What power structures perpetuate these relationships?

The fundamental difference: NIE sees countries as independent units that can all potentially develop through institutional reform. Marxist analysis sees development as a relational process within a global capitalist system.

🏛️ Part 1: Marxism 101 - Core Concepts for Development

1.1 Historical Materialism and Modes of Production

Central idea: The way societies organize production and distribution of goods fundamentally shapes everything else in society - politics, culture, ideas, power structures.

TipWhat is a “Mode of Production”? A Simple Explanation

Think of a mode of production as the economic system that defines how a society works at its most basic level. It has two main components:

1. FORCES OF PRODUCTION = The stuff you use to make things - Technology and tools (plows vs. tractors vs. robots) - Natural resources (land, minerals, water) - Human knowledge and skills - Labor power (people’s ability to work)

2. RELATIONS OF PRODUCTION = The rules about who owns what and who gets what - Who owns the tools, land, factories? (property relations) - Who does the actual work? - Who controls the surplus (the extra stuff produced beyond bare survival)? - How is that surplus extracted? (force? wages? rent?)

Together, these create the basic “operating system” of society.

Three key modes relevant for development:

flowchart LR
    A[Pre-Capitalist<br/>Feudalism, Slavery] -->|Primitive<br/>Accumulation| B[Capitalism<br/>Wage Labor]
    B -->|Internal<br/>Contradictions| C[Post-Capitalist<br/>Socialism?]
    
    style A fill:#e8f4f8
    style B fill:#fff4e6
    style C fill:#f0f0f0

ImportantKey Difference from Rostow’s Stages (Session 1)

Rostow’s stages: Linear, universal path all societies follow (traditional → take-off → maturity → mass consumption)

Marx’s modes:

  • Dialectical: Each mode contains internal contradictions that drive change
  • Not universal: Different societies may skip stages or combine modes
  • Not inevitable progress: Transitions involve conflict, violence, regression possible
  • Qualitative transformation: Not just more production but different social relations

FORCES OF PRODUCTION:

  • Simple technology: Wooden plows, hand tools, watermills
  • Animal power (horses, oxen) for farming
  • Mostly human labor, very little machinery
  • Knowledge passed down through guilds, limited literacy

RELATIONS OF PRODUCTION:

  • Who owns? Lords own land; peasants have customary rights to use it
  • Who works? Peasants farm the land
  • Who gets surplus? Lords extract surplus through:
    • Rent (portion of harvest)
    • Forced labor (peasants must work lord’s fields X days/week)
    • Taxes and fees (use of mill, legal fees)
  • How extracted? Extra-economic coercion = Legal obligations, backed by force
    • Peasants legally bound to land (serfdom)
    • Lords have military power, courts, prisons

The result: A hierarchical society where:

  • Social class determined by birth
  • Peasants can’t leave without permission
  • Church and nobility justify system ideologically (“divine order”)
  • Limited markets, mostly local self-sufficiency

FORCES OF PRODUCTION:

  • Advanced technology: Factories, computers, automation, AI
  • Fossil fuels and electricity power machines
  • Complex division of labor, specialized skills
  • Constant technological innovation (competitive necessity)

RELATIONS OF PRODUCTION:

  • Who owns? Capitalists own means of production (factories, patents, capital)
  • Who works? Workers own nothing but their labor power
  • Who gets surplus? Capitalists appropriate surplus value as profit
  • How extracted? Through the wage relation (appears voluntary):
    • Workers “free” to sell labor power (no legal bondage)
    • But must work to survive (separated from means of production)
    • Capitalist pays wage < value of what workers produce
    • Difference = surplus value (profit)

The result: A market society where:

  • Labor power is a commodity (bought/sold like any other)
  • Production for profit, not for use
  • Competitive compulsion drives innovation
  • Appears voluntary/free (no visible coercion) but worker has no real choice
  • Capital accumulation becomes the driving force

FEUDAL SHOEMAKER (15th century):

Forces of production:

  • Hand tools (awls, needles, knives)
  • Small workshop in home
  • Leather bought from tanner
  • Craft knowledge learned through apprenticeship

Relations of production:

  • Master shoemaker OWNS his tools and workshop
  • Works with 1-2 apprentices
  • Makes shoes to order for customers
  • Keeps all profit after paying guild fees and taxes to lord
  • Controls his own work process and pace

Surplus extraction:

  • Lord/king extracts through taxes (20% of income)
  • Guild extracts membership fees
  • But shoemaker controls most of surplus he produces

CAPITALIST SHOE FACTORY (19th century):

Forces of production:

  • Sewing machines, cutting machines
  • Large factory with 100 workers
  • Assembly line division of labor
  • Each worker does one repetitive task

Relations of production:

  • Factory owner OWNS machines, building, raw materials
  • Workers own NOTHING but their ability to work
  • Workers paid daily wage (say, $2/day)
  • Each worker might produce 10 pairs of shoes per day
  • Those shoes sell for $30 total
  • Owner’s profit = $30 - $2 (wage) - $10 (materials) = $18/worker/day

Surplus extraction:

  • Through wage relation: Worker paid $2, produces $30 value
  • Appears fair (“a day’s wage for a day’s work”)
  • But workers have no choice - can’t access tools/materials without capitalist
  • Surplus ($18) goes to owner as profit

Why This Matters for Development:

Different modes ask different questions:

  • Feudalism asks: How can lords extract more from peasants? How to maintain social hierarchy?
  • Capitalism asks: How to maximize profit? How to compete with other capitalists? How to expand markets?

For development economics:

  • Understanding modes helps us see that “development” = transformation of social relations, not just “getting richer”
  • Pre-capitalist → Capitalist transition required violent upheaval (enclosures, colonialism)
  • Can’t understand contemporary development without understanding which mode dominates
  • Different modes generate different class conflicts, different political struggles

Q: Is “mode of production” just another word for “economy”?

A: No! It’s more fundamental. Two countries with market economies might have different modes:

  • USA 1850: Capitalist in North, slave-based in South (different modes)
  • Modern economy might combine multiple modes (capitalist factories + peasant farming + informal sector)

Q: Do modes always follow a sequence: feudalism → capitalism → socialism?

A: No! This is NOT a universal ladder:

  • Some societies skipped feudalism (Africa, parts of Asia)
  • Capitalism didn’t emerge everywhere the same way
  • Many societies combine elements of different modes
  • The future is open, not predetermined

Q: Are we still in “capitalist mode” even though we have the welfare state, regulations, etc.?

A: Yes, as long as:

  • Means of production primarily privately owned
  • Labor power bought/sold as commodity
  • Production for profit dominates
  • Wage relation is primary form of surplus extraction

Reforms and regulations happen WITHIN capitalism but don’t change the fundamental mode.

1.2 Class and Surplus Appropriation

Fundamental question: Who produces the surplus, and who controls it?

Pre-capitalist societies:

  • Direct producers (peasants, artisans) control their means of production
  • Surplus extracted through extra-economic coercion (taxes, rents, forced labor)
  • Example: Feudal lord extracts surplus from peasants through legal obligations, not market mechanisms

Capitalist societies:

  • Separation of producers from means of production
  • Workers sell labor power as a commodity
  • Surplus extracted through wage relation (appears voluntary, contractual)
  • Capitalist buys labor power, sells commodities produced, retains surplus value
TipInteractive Element 2: Surplus Extraction Exercise (15 minutes)

Scenario: A shoe workshop in 19th century vs. modern shoe factory

19th century artisan workshop:

  • Artisan owns tools, workshop, raw materials
  • Produces shoes, sells directly to customers
  • Controls entire surplus after costs

Modern factory:

  • Worker owns only labor power
  • Sells 8 hours of work for daily wage
  • Produces shoes worth more than daily wage
  • Capitalist controls surplus

Questions for discussion:

  1. In which system does the direct producer have more control over the surplus?
  2. Which system appears more “free” contractually? Which offers more actual control?
  3. How does this relate to “institutional quality” as measured in Session 5?
  4. Can you think of contemporary examples where these relations are contested? (Gig economy? Platform cooperatives?)

Breakout groups (10 min): Discuss in groups of 4-5

Report back (5 min): Key insights to class

1.3 Capital Accumulation Dynamics

The circuit of capital: M - C - M’

  • M: Money capital
  • C: Commodities (labor power + means of production)
  • M’: More money (original + surplus value)

Key characteristics:

  1. No natural limit: Unlike pre-capitalist production for use, capitalist production for exchange has no inherent endpoint
  2. Competitive compulsion: Individual capitalist must reinvest surplus or be outcompeted
  3. Constant revolutionizing: Technology, organization, markets constantly disrupted
  4. Spatial expansion: When profitable opportunities exhausted locally, capital seeks new territories

Contrast with Solow model (Session 4):

Solow Model Marxist Analysis
Assumes stable steady state Inherent dynamism, crisis tendency
Diminishing returns → convergence Uneven development, no convergence
Exogenous technology Technology endogenous to class struggle
Harmonious factors Contradictory class interests
Individual country focus Global system analysis

1.4 Contradictions of Capitalism

Four key contradictions relevant for development:

  1. Tendency for profit rate to fall:
    • Rising productivity requires more machinery (constant capital) relative to labor (variable capital, source of surplus value)
    • Profit rate = surplus value / total capital
    • More capital needed per unit output → falling rate of profit
    • Drives spatial expansion (imperialism) seeking higher profit rates
  2. Overproduction crises:
    • Workers’ wages < value of output produced
    • Realization problem: Who buys the commodities?
    • Periodic crises of overproduction
    • Export markets become crucial (links to imperialism)
  3. Class conflict:
    • Wage share vs. profit share zero-sum within capitalism
    • Conflicts over: working conditions, wages, control of production
    • Institutional outcomes reflect class power (not just “efficiency”)
  4. Spatial fixes:
    • When accumulation opportunities exhausted domestically
    • Capital flows to new territories
    • Creates uneven geographical development
    • Links to imperialism and core-periphery dynamics
NoteConnection to Session 5: Institutions and Power

NIE perspective (Acemoglu et al.):

  • Institutions are relatively stable rules that reduce transaction costs
  • “Good” institutions protect property rights and encourage investment
  • Institutional quality determines development

Marxist perspective:

  • Institutions embody class power relations
  • “Good for whom?” - Property rights protect capital accumulation, may harm workers
  • Class struggle shapes institutional evolution
  • No universal “good” institutions - depends on class perspective and development stage

Example: Labor regulations

  • NIE might see strict labor laws as “bad” institutions (increase costs, reduce flexibility)
  • Marxist analysis: Labor laws reflect working-class power, protect against exploitation
  • Developmental question: Which class interests does institution serve?

🌍 Part 2: The Transition to Capitalism - Historical Development

2.1 The Fundamental Question

How did capitalism emerge? This is not just historical curiosity but shapes our understanding of contemporary development possibilities.

Mainstream narrative (Smith, NIE):

  • Gradual emergence through market exchange
  • “Original accumulation” through saving and investment
  • Better institutions (property rights) enabled growth
  • Process replicable by “developing” countries today

Marxist narrative (Marx, historical materialism):

  • Violent dispossession (“primitive accumulation”)
  • Separation of producers from means of production
  • Creation of wage labor and capital simultaneously
  • Historical specificity - may not be replicable

2.2 Primitive Accumulation in Europe

Marx’s analysis (Capital Vol. 1, Chapters 26-33):

Pre-capitalist England:

  • Peasants had customary access to common lands
  • Produced own subsistence
  • Artisans owned tools, controlled production
  • Limited wage labor, limited commodity production

Enclosure movements (15th-18th centuries):

  • Parliamentary acts privatized common lands
  • Peasants expelled from land (sheep farming more profitable)
  • “Bloody legislation” criminalized vagrancy, forced work
  • State violence enforced property transformations

Results:

  • Mass of landless workers with nothing to sell but labor power
  • Concentration of land ownership (means of production)
  • Accumulation of money capital (from trade, colonies, slavery)
  • Proletarianization: creation of working class

Colonial dimensions:

  • Plunder of Americas (gold, silver)
  • Atlantic slave trade (accumulation + labor force)
  • Indian textile industry destroyed (protecting British manufacturers)
  • Colonial markets for European goods

Mainstream story: Thrifty individuals saved, invested, gradually accumulated capital.

Marx’s evidence: Violence, theft, state coercion, colonialism were central to capital accumulation.

Implications for development:

  • Can peripheral countries replicate this process?
  • Who would play the role of colonies for today’s “developing” countries?
  • Is peaceful, gradual accumulation sufficient?

2.3 From Pre-Capitalist to Capitalist Relations

Key transformations:

Dimension Pre-Capitalist (Feudal) Capitalist
Ownership Peasants control means of production Separation: capitalists own, workers sell labor
Surplus extraction Extra-economic coercion (legal obligations) Economic compulsion (wage relation)
Production goal Use value (direct consumption or prescribed obligations) Exchange value (profit through market)
Labor relation Tied to land, unfree “Free” wage labor (double sense: free to sell labor, free of means of production)
Market Limited, peripheral Generalized commodity production
State role Maintains feudal hierarchy Protects property, enforces contracts

2.4 Implications for “Development”

Part A: Historical examples (Group 1)

Research one historical case of primitive accumulation:

  • British enclosures (1500s-1700s)
  • Spanish conquest of Americas (1500s-1600s)
  • Highland clearances in Scotland (1700s-1800s)
  • Indian textile industry destruction (1700s-1800s)

Part B: Contemporary examples (Group 2)

Research one contemporary case that might constitute “accumulation by dispossession”:

  • African land grabs (2000s-2020s)
  • Privatization of water/services (1990s-2020s)
  • Displacement for mining/dams (ongoing)
  • Fisheries access agreements (ongoing)

Questions for both groups:

  1. Who lost access to means of subsistence/production?
  2. Who gained control of resources/capital?
  3. What role did the state play?
  4. What forms of resistance occurred?
  5. How was this justified ideologically?

Gallery walk (10 min): Groups create posters, circulate to view others

Class discussion (10 min):

  • Similarities between historical and contemporary cases?
  • Is primitive accumulation ongoing or historically completed?
  • Implications: Can countries develop through similar processes today?

Development as capitalist transformation:

  1. Not just growth: Qualitative transformation of social relations, not quantitative increase
  2. Creative destruction: Generates wealth AND dispossession, winners AND losers
  3. Urbanization & proletarianization: Disruption of rural communities, creation of urban working class
  4. Different from “modernization theory”: Not smooth, beneficial progress for all

Critical questions this raises:

  • If European development required colonies and primitive accumulation, can peripheral countries develop without such opportunities?
  • Does “catch-up development” require different mechanisms than original development?
  • What role does violence, coercion, and dispossession play in contemporary development?

🔄 Part 3: Uneven Development Within Capitalism

3.1 From Historical Transition to Ongoing Dynamics

Crucial distinction:

  • Part 2: Transition FROM pre-capitalist TO capitalist mode of production
    • Historical process (15th-19th centuries in Europe)
    • Creation of wage labor and capital
    • One-time transformation (though ongoing in some places)
  • Part 3: Uneven development WITHIN capitalism
    • Ongoing process (16th century to present)
    • Why some capitalist countries develop, others don’t
    • Core-periphery relations in integrated world economy

“Underdeveloped” countries are NOT “pre-capitalist” waiting to transition (like Europe in 1500s)

Rather: They are part of capitalist world system but in subordinate position (periphery)

The mechanisms keeping them peripheral are different from the historical transition to capitalism.

3.2 Classical Imperialism Theory

Lenin’s analysis (1916):

Five features of imperialism as highest stage of capitalism:

  1. Concentration of production: Monopolies replace competition
  2. Finance capital: Merging of bank and industrial capital
  3. Capital export: Predominates over commodity export
  4. International cartels: Divide world markets
  5. Territorial division: Great powers divide world into colonies

Why imperialism?

  • Falling profit rates in core countries
  • Search for new markets, raw materials, investment opportunities
  • Export surplus capital to periphery
  • Unequal exchange: Import cheap raw materials, export expensive manufactures

Implications:

  • Core-periphery hierarchy is structural, not accidental
  • Development in core requires underdevelopment in periphery
  • Capitalism becomes global system, not collection of national economies

3.3 Mechanisms of Uneven Development

3.3.1 Unequal Exchange

Emmanuel and Amin’s argument:

Different productivity levels + labor immobility → unequal exchange

Mechanism:

  1. Core countries: High productivity, high wages, capital-intensive
  2. Periphery countries: Low productivity, low wages, labor-intensive
  3. International trade: Prices equalize, but value doesn’t
  4. Result: Transfer of value from periphery to core

Example (simplified):

  • Periphery exports: 1000 hours of labor embodied in coffee = $100
  • Core exports: 100 hours of labor embodied in machinery = $100
  • Equal prices, unequal labor time
  • Net transfer: 900 hours of labor from periphery to core

Contemporary relevance:

  • Still debated: Empirical measurement difficult
  • Related to “terms of trade” (Prebisch-Singer hypothesis)
  • Links to global value chains (discussed below)

Economic Complexity Index (ECI) from Session 4:

  • Measures sophistication of export basket
  • High ECI correlates with high income

Marxist interpretation:

  • Complexity reflects position in international division of labor
  • Core: Complex products (high value-added)
  • Periphery: Simple products (low value-added)
  • Not just technological difference but structural position
  • Hard to “jump” because system requires both positions

Question: Can all countries simultaneously move to high-complexity production? Or does system require hierarchical division of labor?

3.3.2 Structural Heterogeneity

Key concept from structuralism (Prebisch, Furtado):

Core economies:

  • Relatively homogeneous productivity across sectors
  • Technology diffuses broadly
  • Labor can move between sectors with similar productivity
  • Result: Balanced, internally-integrated development

Peripheral economies:

  • Dual structure: Advanced export enclaves + backward domestic sectors
  • Technology concentrated in enclaves (often foreign-owned)
  • Labor surplus in backward sectors
  • Result: Distorted, externally-dependent development

Example: Latin American export economies (19th-20th centuries):

  • Advanced sector: Mining, plantation agriculture (foreign capital, modern technology)
  • Backward sector: Subsistence peasants, informal urban economy
  • Surplus from advanced sector extracted (repatriated profits, unequal exchange)
  • Little linkage between sectors
  • Contrast: European industrial development with forward/backward linkages

Policy implications:

  • Import substitution industrialization (ISI) to create linkages
  • Reduce dependence on primary exports
  • Build integrated industrial structure

3.3.3 Technological Dependence

Argument (Prebisch, Amin, dependency theorists):

Core countries:

  • Centers of innovation
  • Generate new technologies
  • Capture “technology rents” (temporary monopoly profits)
  • Move to new products as old ones mature

Peripheral countries:

  • Technology consumers/adapters
  • Produce mature products with standardized technology
  • Low profit margins (competitive)
  • Always behind technological frontier

Mechanisms reinforcing this:

  1. Intellectual property: Patents, licensing fees, royalties
  2. Brain drain: Educated workers migrate to core
  3. R&D concentration: Research facilities in core countries
  4. Education systems: Peripheral systems train for existing technology, not innovation

Example: Pharmaceutical industry

  • Core: Drug discovery, clinical trials, patents (high value-added)
  • Periphery: Generic production (low value-added)
  • Even if peripheral countries have production capacity, captured by patents

Links to contemporary debates:

  • Technology transfer for climate change mitigation
  • COVID vaccine patents and TRIPS waiver
  • Industrial policy and infant industry protection (Session 7)

Activity: Analyzing the iPhone value chain

Materials: Provide students with data on iPhone production and value capture:

  • Design/software: California (Apple)
  • Components: Various (memory from South Korea, screen from South Korea/Japan, chips from Taiwan/USA)
  • Assembly: China (Foxconn)
  • Marketing/retail: Global (Apple)

Value capture breakdown (example, 2016 iPhone):

  • Retail price: $650
  • Apple profit: ~$300
  • Component costs: ~$225
  • Assembly cost (China): ~$10
  • Other: ~$115

Questions for group analysis:

  1. Which countries capture most value? Which activities generate highest returns?
  2. What explains this distribution? Technology? Branding? Market power?
  3. Can China “move up the value chain”? What would that require? Who might resist?
  4. How does this relate to unequal exchange? Is labor time equal to value captured?
  5. Apply Economic Complexity logic: Why doesn’t assembling complex products make you complex?

Extension: Compare iPhone value chain with coffee value chain:

  • Growing (Ethiopia, Colombia, etc.)
  • Processing/roasting (often core countries)
  • Branding/retail (Starbucks, etc.)

Report out (10 min): Groups present findings with visual diagrams

Class synthesis (5 min):

  • Common patterns across value chains?
  • Implications for development strategy?
  • Links to dependency theory recommendations?

3.3.4 Terms of Trade Deterioration

Prebisch-Singer hypothesis (1950s):

Over the long run, prices of primary commodities decline relative to manufactures.

Mechanisms:

  1. Income elasticity: As income rises, proportion spent on food/raw materials falls
  2. Technological change: Substitutes for raw materials (synthetics, efficiency gains)
  3. Market structure: Competitive primary producers vs. oligopolistic manufacturers
  4. Labor organization: Stronger unions in manufacturing pass productivity gains to wages; weaker in agriculture

Result: Countries specializing in primary exports face declining terms of trade

Example data (1900-2000):

  • Real price of primary commodities relative to manufactures declined ~40-60%
  • Means: Peripheral countries must export more to import same quantity of manufactures
  • “Treadmill effect:” Running faster to stay in place

Empirical debates:

  • Strong evidence for secular decline 1900-1980
  • Less clear 1980-present (globalization, China’s rise)
  • Commodity-specific variation (oil different from coffee)

Policy implication:

  • Don’t rely on primary exports for development
  • Industrialize to escape declining terms of trade
  • Import substitution or export-oriented industrialization?

3.4 World-Systems Theory (Wallerstein)

Key innovation: Abandons methodological nationalism - unit of analysis is world-system, not countries

Historical capitalism as singular system:

  • Begins 16th century with European expansion
  • Integrated global division of labor
  • Unequal exchange as organizing principle
  • Single system with differentiated zones

Triadic structure:

flowchart TB
    subgraph System[World-System Structure]
        Core[CORE<br/>High-skill, high-wage<br/>Capital-intensive<br/>Strong states]
        SemiPer[SEMI-PERIPHERY<br/>Mixed production<br/>Intermediate wages<br/>Potential mobility]
        Periphery[PERIPHERY<br/>Low-skill, low-wage<br/>Labor-intensive<br/>Weak states]
    end
    
    Core -->|Unequal<br/>exchange| SemiPer
    Core -->|Unequal<br/>exchange| Periphery
    SemiPer -->|Unequal<br/>exchange| Periphery
    
    style Core fill:#4a90e2
    style SemiPer fill:#f5a623
    style Periphery fill:#d0021b

Core characteristics:

  • Advanced technology, capital-intensive production
  • High wages, strong labor movements
  • Powerful states, military dominance
  • Financial centers
  • Examples: USA, Western Europe, Japan

Periphery characteristics:

  • Simple technology, labor-intensive production
  • Low wages, weak labor movements
  • Weak states, often authoritarian
  • Raw material/agricultural exports
  • Examples: Sub-Saharan Africa, parts of Latin America and Asia

Semi-periphery characteristics:

  • Mixed: Some advanced, some backward sectors
  • Intermediate wages and state strength
  • Can move up or down in hierarchy
  • Important for system stability (buffer)
  • Examples: Brazil, Mexico, Turkey, South Korea (moved to core?)

Hegemonic cycles:

  • Succession of hegemons: Dutch (17th c.) → British (19th c.) → American (20th c.)
  • Hegemonic transitions create opportunities for mobility
  • But system structure persists despite changing leadership

Global Standard Institutions (GSI) approach:

  • Universal institutional template (property rights, rule of law, democracy)
  • All countries should/can adopt same institutions
  • Development = institutional convergence
  • Ahistorical: Institutions work the same everywhere

World-Systems Theory:

  • Different rules for different positions in system
  • Core can use protectionism, industrial policy to develop
  • Periphery told to liberalize, specialize in comparative advantage
  • “Kicking away the ladder” (Ha-Joon Chang)
  • Historical: Development strategies must adapt to global position

Example: 19th century Britain vs. 20th century Africa

  • Britain: High tariffs during industrialization, free trade once dominant
  • British Africa: Forced to specialize in raw materials, prohibited from manufacturing
  • Different institutional arrangements for different system positions
  • Colonial institutions designed to facilitate extraction, not development

Mobility in world-system:

  • East Asian NICs: South Korea, Taiwan, Singapore moved to core?
    • Specific Cold War context: US support, land reform, education, strategic industries
    • Can model be replicated without Cold War geopolitics?
    • China’s rise: Moving to core or redefining semi-periphery?
  • Deindustrialization in core: USA, UK manufacturing decline
    • Financialization: Shift to services, finance
    • Outsourcing to lower-wage countries
    • Does this signal hegemonic decline?
  • “Middle-income trap”: Many countries stuck in semi-periphery
    • Can compete with periphery on wages OR core on technology, but not both
    • World Bank 2024 report on middle-income trap (Session 4 reading)
    • World-systems perspective: Trap built into system structure

Question for discussion: Is the world-system structure permanent, or can collective action of peripheral countries transform it? (Preview dependency theory policy debates)

📉 Part 4: Dependency Theory - From Analysis to Policy

4.1 Context and Origins

Latin American experience (1950s-1970s):

  • Post-WWII independence, industrialization attempts
  • ECLA (Economic Commission for Latin America): Structuralist economics
  • Import-substitution industrialization (ISI) policies
  • Growing frustration with persistent dependency
  • Cuban Revolution (1959): Alternative development path?

Key institutions and thinkers:

  • ECLA (Raúl Prebisch, Celso Furtado)
  • Dependency school (Andre Gunder Frank, Fernando Henrique Cardoso, Enzo Faletto)
  • African variants (Samir Amin, Walter Rodney)

Relationship to Marxism:

  • Marxist-influenced but heterogeneous
  • Some orthodox Marxist (Frank’s early work)
  • Some reformist (Cardoso’s later work)
  • Shared: Focus on external constraints, power relations, class analysis

4.2 Core Dependency Arguments

4.2.1 Frank’s “Development of Underdevelopment”

Central thesis: Underdevelopment is not original/traditional state but actively produced by capitalism

Argument:

  1. Metropolis-satellite chains: Extraction of surplus through multiple levels
    • World metropolis (London, New York) extracts from
    • National metropolis (São Paulo, Buenos Aires) which extracts from
    • Regional centers which extract from
    • Rural hinterlands
  2. Even “feudal” relations serve capitalism:
    • Latin American latifundia (large estates) look feudal
    • But integrated into world market through export
    • Backward methods maintained because: (a) Cheap labor maximizes extraction, (b) Elite has no incentive to modernize
  3. Satellite development only when metropolis weakened:
    • Brazilian industrialization during WWII (metropolis distracted)
    • Generally, tight integration = underdevelopment
    • Isolation = better development prospects

Radical implication: Must break from world capitalist system to develop

Criticisms:

  • Overstates inevitability of underdevelopment
  • Underestimates agency within periphery
  • Some countries DID develop while integrated (East Asia)
  • Neglects class dynamics within periphery (nation too homogeneous)

4.2.2 Cardoso & Faletto’s “Associated-Dependent Development”

More nuanced position: Development possible but distorted

Key argument:

Development can occur in periphery through alliance of:

  • International capital (foreign corporations)
  • Local bourgeoisie (domestic capitalists)
  • State (developmental apparatus)

Example: Brazilian “miracle” (1968-1973)

  • Rapid industrial growth (~10% annual GDP growth)
  • Foreign investment in automotive, electronics
  • State investment in infrastructure
  • BUT: Extremely unequal, repressive military dictatorship, environmental damage

Characteristics of associated-dependent development:

  1. Externally-oriented: Production for export or elite consumption
  2. Technologically dependent: Foreign technology, patents
  3. Highly unequal: Benefits concentrated among elites
  4. Authoritarian: Requires repression of popular demands
  5. Ecologically destructive: Amazon deforestation for expansion

Implication: Development under these conditions perpetuates dependency and inequality

Difference from Frank:

  • Frank: Underdevelopment inevitable within capitalism
  • Cardoso: Development possible but distorted, dependent
  • Frank: Break from system
  • Cardoso: Reform from within (later became neoliberal president of Brazil - controversial!)

4.2.3 Amin’s “Autocentric vs. Extraverted” Development

Distinction:

Autocentric development (core countries):

  • Internal market drives accumulation
  • Consumption goods sector → Capital goods sector linkages
  • Wages rise with productivity (mass consumption)
  • Self-sustaining growth

Extraverted development (peripheral countries):

  • External demand (exports) drives accumulation
  • Luxury consumption sector → Capital goods imports
  • Wages disconnected from productivity (surplus extracted/exported)
  • Dependent on core demand

Mechanism of extraversion:

flowchart LR
    A[Export sector<br/>High productivity] --> B[Surplus generated]
    B --> C[Repatriated profits]
    B --> D[Luxury imports<br/>for elites]
    B --> E[Capital goods imports]
    E --> A
    
    F[Domestic economy<br/>Low productivity] -.Surplus extracted.-> A
    
    style A fill:#4a90e2
    style F fill:#d0021b

Result: No internal dynamic of accumulation

Policy implication:

  • Reorient economy toward internal market
  • Income redistribution to create domestic demand
  • Reduce import dependence
  • Build capital goods sector domestically

Example: South Korea as partial exception

  • Started as extraverted (export-oriented)
  • But: Land reform created domestic market
  • State directed surplus to strategic industries
  • Gradual building of capital goods sector
  • Eventually more autocentric (but still export-dependent)

4.3 Policy Experiments - Import Substitution Industrialization

Logic of ISI:

  1. Problem: Declining terms of trade, technological dependence
  2. Solution: Replace imports with domestic production
  3. Method: Tariffs, quotas, exchange controls, subsidies
  4. Goal: Create integrated industrial structure

Typical stages:

  1. Easy ISI: Consumer non-durables (textiles, food processing)
  2. Difficult ISI: Consumer durables, intermediate goods (steel, chemicals)
  3. Capital goods ISI: Machinery, technology production

Historical implementation:

  • Latin America: 1930s-1970s (forced by Great Depression, WWII)
  • India: 1950s-1990s (Nehruvian socialism)
  • Africa: 1960s-1980s (post-independence developmentalism)

Initial successes:

  • Industrialization: Brazil, Mexico, Argentina built manufacturing sectors
  • Reduced import dependence for consumer goods
  • Created industrial working class, technical expertise
  • High growth rates in some periods

Problems emerged (1970s-1980s):

  1. Inefficiency: Protected industries lacked competitive pressure
  2. Capital goods dependence: Still imported machinery, technology
  3. Foreign exchange crises: Need dollars for capital imports but exports declined
  4. Elite capture: Benefits concentrated, subsidies to wealthy industrialists
  5. Debt crises: Borrowed to finance imports → 1980s debt crisis
  6. Inequality: Urban bias, neglect of agriculture, informal sector

Neoliberal critique (1980s-1990s):

  • ISI “failed” → must liberalize, export, integrate into world economy
  • Washington Consensus: Privatize, deregulate, free trade
  • IMF structural adjustment programs

ISI didn’t fail, it was abandoned prematurely:

  1. Takes time: Core countries protected industries for decades (Hamilton, List)
  2. Need to continue to capital goods stage: Stopped at intermediate stage
  3. Political economy: Elite opposed land reform, income redistribution needed for internal market
  4. External pressure: Debt crisis used to force liberalization
  5. East Asia succeeded with similar policies: But had different political economy (land reform, education, strong state)

Debate continues: Was ISI inherently flawed or badly implemented?

4.4 The East Asian “Exception”

Puzzle for dependency theory:

South Korea, Taiwan, Singapore industrialized rapidly while integrated into world economy

Dependency theory predictions seemed wrong:

  • Tight integration should prevent development
  • Export-orientation should perpetuate dependency
  • Foreign investment should extract surplus

What actually happened:

  • Rapid industrial upgrading
  • Technological capability development
  • Rising wages, reduced inequality
  • Moved from periphery to core (or near-core)

Dependency theorists’ explanations:

  1. Cold War geopolitics:
    • US support (aid, market access, technology transfer)
    • Counterweight to communism
    • Not replicable for countries outside Cold War frontline
  2. Land reform:
    • Destroyed traditional landed elite
    • Created internal market for industrial goods
    • Contrast: Latin America’s failure to do land reform
  3. Strong developmental state:
    • Not just free market (contra neoliberal narrative)
    • Strategic industrial policy, directed credit
    • Performance requirements for firms
  4. Specific historical conditions:
    • Japanese colonial legacy (infrastructure, education)
    • External security threat (North Korea)
    • Small size (easier to coordinate)

Contemporary debates:

  • Can model be replicated?
    • Cold War over, less US support
    • China blocks space for other manufacturing exporters?
    • Climate constraints prevent industrial path?
  • Was it really an exception?
    • Still dependent on US market, technology
    • Recent stagnation (middle-income trap)
    • Social costs (overwork, inequality, environmental)

Setup: Class debate on development strategies

Motion: “Import-substitution industrialization was a failed development strategy that should not be attempted again”

Preparation (15 min):

Divide class into four groups:

  1. PRO team (ISI failed): Research neoliberal critiques of ISI
    • Inefficiency, rent-seeking, debt crises
    • Contrast with East Asian export success
    • Evidence from Latin American stagnation 1980s-90s
  2. CON team (ISI not inherently failed): Research dependency theorist defenses
    • ISI abandoned prematurely
    • External constraints (debt crisis, IMF pressure)
    • East Asia used similar policies (industrial policy)
    • Alternative interpretation: Implementation failures, not strategy failure
  3. Judges (Group 3): Develop evaluation criteria
    • What evidence would prove ISI “failed”?
    • What would prove it “succeeded”?
    • How to account for external context?
  4. Moderators (Group 4): Develop questions
    • How define “success” or “failure”?
    • Counterfactuals: What would have happened without ISI?
    • Context: Can we compare across decades, continents?

Debate structure (15 min):

  • Opening statements: PRO (2 min), CON (2 min)
  • Rebuttals: PRO (2 min), CON (2 min)
  • Questions from moderators: (4 min)
  • Closing statements: PRO (1 min), CON (1 min)
  • Judges’ verdict with reasoning: (4 min)

Key learning:

  • Dependency theory challenges simple “success/failure” narratives
  • Context matters: Political economy, geopolitics, timing
  • Development strategies are political choices with winners/losers
  • No consensus among scholars - legitimate debate continues

4.5 Delinking Debates

Radical dependency position (Amin, Frank’s early work):

Must “delink” from world capitalist system to develop autonomously

Arguments for delinking:

  1. Impossible to develop within system: Core-periphery structure prevents it
  2. Need autonomous development: Define own priorities, not dictated by world market
  3. South-South cooperation: Trade among peripheral countries
  4. Socialist alternative: Plan economy for needs, not profits

Arguments against delinking:

  1. Opportunity costs: Miss benefits of trade, technology access
  2. Scale: Many countries too small for autonomous development
  3. Power: Core countries can blockade, sanction, destabilize
  4. Historical evidence: Socialist experiments faced severe problems (Cuba, Tanzania)

Historical experiments:

  • Tanzania (Ujamaa): Self-reliance, rural socialism, pan-Africanism
    • Initial enthusiasm, some social gains (literacy, health)
    • Economic stagnation, external pressure, abandoned 1980s
  • Cuba: Survived through Soviet support, resilience after 1991
    • Social achievements (health, education)
    • Economic difficulties, embargo effects debated
  • Nicaragua (Sandinistas): Attempted autonomous development
    • External destabilization (Contra war, US economic warfare)
    • Defeated electorally after economic crisis

Contemporary forms:

  • Not complete delinking but selective disengagement
  • South-South trade (BRICS, regional integration)
  • Protection of strategic sectors
  • Capital controls, industrial policy
  • “Alter-globalization” not anti-globalization

🔍 Part 5: Critical Assessment and Contemporary Relevance

5.1 Evaluating Dependency Theory

Individual work (5 min): Create a two-column list:

Strengths of dependency theory: - What does it explain well? - What insights does it offer that mainstream theory misses?

Weaknesses of dependency theory: - What phenomena does it struggle to explain? - What limitations or blind spots does it have?

Pair-share (5 min): Compare with neighbor, synthesize insights

Class synthesis (5 min): Create collective list on board

Strengths:

  1. Highlights global power structures:
    • Makes visible the international context mainstream ignores
    • Explains persistence of inequality (convergence theory can’t)
    • Takes history seriously (colonialism, imperialism matter)
  2. Political economy analysis:
    • Who benefits? Class and national interests
    • Institutions serve powerful actors, not just “efficiency”
    • Development involves conflict, not just coordination problems
  3. Alternative policy framework:
    • Justifies industrial policy, protection, strategic sectors
    • Questions free trade orthodoxy
    • Influenced successful development strategies (East Asia aspects)
  4. Links micro and macro:
    • Connects individual country development to global system
    • Explains why “good policies” may not work everywhere
    • Context-dependent strategies, not universal template

Weaknesses:

  1. Determinism concerns:
    • Early versions overly pessimistic about development possibilities
    • Underestimates agency within periphery
    • East Asian success cases challenge predictions
  2. Class analysis sometimes underdeveloped:
    • Nation as unit of analysis risks hiding internal class conflicts
    • “Peripheral bourgeoisie” not always comprador
    • Workers in core vs. periphery: Contradiction or common interest?
  3. Teleological tendencies:
    • Assumes capitalism must eventually fail
    • Underestimates capitalism’s adaptability
    • Socialist alternative not well-theorized in many versions
  4. Empirical debates:
    • Unequal exchange: Difficult to measure rigorously
    • Terms of trade: Trends vary by period, commodity
    • Development success cases: How many exceptions before theory invalid?
  5. Policy difficulties:
    • ISI problems: Were they inherent or implementation failures?
    • Delinking: Power constraints, scale issues
    • Alternative not always clearly specified

5.2 Contemporary Relevance - Marxist Development Theory Today

The 1990s challenge:

  • “End of history” (Fukuyama): Liberal capitalism triumphant
  • Soviet collapse: Socialism discredited?
  • Neoliberal globalization: Washington Consensus imposed
  • Dependency theory marginalized in mainstream

The 2000s revival:

  • 2008 financial crisis: Capitalism’s instability evident
  • Rising inequality: Piketty’s Capital in 21st Century
  • China’s rise: Alternative development model?
  • Climate crisis: Capitalism and planetary boundaries
  • New imperialism debates

5.2.1 Accumulation by Dispossession (Harvey)

Argument: Primitive accumulation not just historical origin but ongoing process

Contemporary forms:

  1. Privatization: Public assets transferred to private capital
    • Water, electricity, pensions, education, health
    • Often through debt crises, IMF conditions
    • Example: Greek crisis, forced privatization of ports, airports
  2. Financialization: Assets become financial instruments
    • Housing as investment vehicle → housing crises
    • Land grabs for speculation
    • Debt as control mechanism
  3. Intellectual property: Enclosure of knowledge commons
    • Patent regimes (TRIPS agreement)
    • Seed patents (Monsanto, agrochemical giants)
    • Software, genetic material
  4. Land grabs:
    • Large-scale land acquisitions in Africa, Asia, Latin America
    • Foreign governments, corporations, investors
    • Displace smallholders, indigenous communities
    • For agrofuels, food exports, speculation

Example: African land grabs (2000s-2010s)

  • Over 200 million hectares (area of Western Europe)
  • By foreign governments (China, Gulf States), corporations, investors
  • Often presented as “development” (investment, technology)
  • Smallholders lose access, food insecurity increases
  • Resistance movements: Via Campesina, land rights organizations

Link to Session 5: NIE sees property rights as neutral efficiency mechanism. Harvey: Property rights about power, who has rights to exclude whom?

5.2.2 Global Value Chains

New international division of labor:

  • Production fragmented across countries
  • Each stage in different location (labor costs, regulations, skills)
  • Coordinated by lead firms (Apple, Nike, H&M)
  • “Smile curve”: Value concentrated at design and retail ends

Example: Garment industry

  • Design: New York, Milan, Paris (high value-added)
  • Fabric: Turkey, China, South Korea (medium)
  • Sewing: Bangladesh, Vietnam, Cambodia (low value-added)
  • Retail: Brand capture (H&M, Zara)

Rana Plaza collapse (Bangladesh, 2013):

  • Factory building collapsed, 1,134 workers killed
  • Producing for Western brands
  • Highlights: Low wages, unsafe conditions, limited upgrading opportunities
  • Supply chain pressures drive down costs → safety corners cut

Value chain analysis:

  • Who captures value at each node?
  • Power relations between lead firms and suppliers
  • Barriers to upgrading (lead firms’ strategic control)
  • Race to bottom in labor standards?

Dependency theory lens:

  • Updated form of unequal exchange
  • Periphery: Low value-added activities (assembly)
  • Core: High value-added activities (design, branding, technology)
  • Upgrading difficult: Lead firms control access to consumers, technology

Contrast with mainstream GVC literature:

  • Mainstream: GVCs as opportunity for development (participation → upgrading)
  • Dependency: GVCs as mechanism of extraction (value captured by core lead firms)
  • Different policy implications: Join GVCs vs. develop autonomous capabilities

5.2.3 Technology and Premature Deindustrialization

Rodrik’s puzzle (2016): Developing countries deindustrializing at lower income levels than historical developers

Mechanism:

  • Automation, AI, robotics reduce labor content of manufacturing
  • Manufacturing employment peaks earlier in development process
  • “Premature deindustrialization”

Example:

  • Britain: Peaked at 35% manufacturing employment (1960s), $14,000 GDP per capita
  • Brazil: Peaked at 15% manufacturing employment (1980s), $10,000 GDP per capita
  • India: May peak at <10% manufacturing, even lower GDP per capita

Implications for development:

  • Traditional “manufacturing-led development” path closing?
  • Services can substitute? (Debate: Productivity growth lower in services)
  • East Asian model unreplicable?

Technology dependence reinforced:

  • AI, robotics developed in core countries
  • Ownership (patents), skills (training) concentrated in core
  • Periphery: Technology consumers, dependent on core innovation

Marxist analysis:

  • Technological change is not neutral (Session 4 assumption)
  • Serves capital accumulation in core
  • Destroys employment opportunities in periphery
  • Reinforces global hierarchy

Policy debates:

  • Should periphery try to leapfrog? (Services, technology sectors)
  • Or protect manufacturing despite efficiency losses?
  • Industrial policy for technology generation, not just adoption?

5.2.4 Financialization of Development

Neoliberal era (1980s-present):

  • Trade liberalization, capital account opening
  • Financial flows dwarf real economy flows
  • Debt as development constraint

Mechanisms of control:

  1. Debt crises:
    • Latin America (1980s), Asia (1997), Argentina (2001), Greece (2010s)
    • IMF structural adjustment: Austerity, privatization, liberalization
    • Debt service > development spending
  2. Capital flows volatility:
    • Hot money flows in → Asset bubbles, exchange rate appreciation
    • Sudden stops/reversals → Crisis, capital flight
    • Peripheral countries’ policy autonomy constrained
  3. Offshore financial centers:
    • Capital flight from periphery to tax havens
    • Estimated trillions hidden offshore
    • Reduces tax base, development resources

Example: Argentina’s crisis (2001)

  • Convertibility plan (1991): Peso pegged to dollar
  • Foreign investment flows in → Growth, privatization
  • Debt accumulates, exports uncompetitive
  • 2001: Default, social explosion
  • IMF conditions: Austerity perpetuates crisis

Contemporary examples:

  • African debt (2010s-2020s): Chinese lending, commodity price collapse
  • Lebanon (2019-2020): Financial collapse, currency crisis
  • Sri Lanka (2022): Debt default, political crisis

Dependency theory lens:

  • Finance as tool of core dominance
  • Debt as disciplining mechanism (prevents autonomous policy)
  • “Debt trap diplomacy” debates (China’s BRI)

Alternative proposals:

  • Debt jubilee movements
  • Capital controls (Tobin tax, transaction taxes)
  • South-South financial institutions (BRICS bank)
  • Cryptocurrency? (Debates about whether progressive)

5.2.5 Ecological Crisis and Accumulation

Capitalism’s growth imperative:

  • M-C-M’ circuit requires endless expansion
  • 3% growth = doubling every 23 years
  • But: Planetary boundaries (climate, biodiversity, resources)

Ecologically unequal exchange:

  • Core countries: Net importers of embodied resources, emissions
  • Periphery: Net exporters of resources, pollution
  • Climate change: Peripheral countries disproportionately affected despite lower emissions

Example: Amazon deforestation

  • Brazil: Cleared for soy, cattle (export to Europe, China)
  • Profits to landowners, agribusiness corporations
  • Costs: Indigenous dispossession, climate change, biodiversity loss
  • Global externality, unequal distribution of costs

Extractivism in Latin America:

  • Mining, oil, agro-exports drive GDP
  • “Resource curse”: Dutch disease, volatility, corruption
  • Environmental destruction, indigenous rights conflicts
  • Even progressive governments (Bolivia, Ecuador) struggle to break dependence

Marxist ecological theory:

  • Metabolic rift (Marx): Capitalism disrupts nature-society metabolism
  • Accumulation and ecology incompatible: Growth imperative vs. finite planet
  • Uneven ecological exchange: Peripheral countries bear costs of core consumption

Links to Session 8 (Sustainability, Degrowth):

  • Degrowth in core necessary for global justice?
  • Can periphery develop within planetary boundaries?
  • “Sustainable development” oxymoron under capitalism?

🔗 Part 6: Connections and Synthesis

6.1 Dialogues with Other Course Perspectives

Complementarities:

  • Both critique GDP fetishism (Session 1)
  • Both emphasize multidimensional development
  • Sen’s “freedoms” and Marx’s “liberation from wage labor” resonate

Differences:

  • Agency: Sen emphasizes individual agency; Marx emphasizes collective class agency
  • Power: Capabilities approach undertheorizes power relations
  • System: Sen’s approach compatible with capitalism; Marx insists transformation necessary

Integration:

  • Capabilities without class analysis: Who has power to determine which capabilities count?
  • Example: Education as capability valuable, but education for what labor market? Whose interests?
  • Class and capability deprivation: Exploitation as systematic capability denial

Example: Garment workers’ capabilities

  • Sen would focus: Literacy, health, political voice
  • Marx would add: Control over labor process, surplus appropriation, collective organization
  • Both relevant: Multidimensional framework including power relations

Original Institutional Economics (OIE) - Close Affinities

Shared theoretical commitments:

  • Power and conflict: Both reject harmonious equilibrium; institutions embody power relations
  • Evolutionary analysis: Historical, processual understanding (not equilibrium states)
  • Methodological holism: Skeptical of methodological individualism; social structures matter
  • Social embeddedness: Economic activity embedded in social relations
  • Critique of mainstream: Both challenge neoclassical assumptions

Historical connections:

  • Veblen influenced by Marx’s historical materialism
  • Commons engaged with class conflict (labor relations research)
  • Both traditions marginalized in Cold War era economics
  • Partial revival in heterodox economics today

Key convergences for development:

  • Cumulative causation (Myrdal): Development/underdevelopment self-reinforcing
    • Similar to dependency theory’s vicious circles
    • No automatic convergence mechanism
  • Ceremonial vs. instrumental institutions (Veblen, Bush):
    • Ceremonial: Serve status, power, invidious distinctions
    • Instrumental: Serve life process, technological efficiency
    • Parallel to Marx: Institutions serve accumulation vs. human needs
  • Institutional change: Both see change through conflict, power struggles
    • OIE: Between ceremonial and instrumental
    • Marxism: Between classes

Veblen’s Critique of Marx

Despite affinities, Veblen offered important criticisms that highlight differences:

1. Teleology and Historical Inevitability

  • Veblen’s critique: Marx assumes capitalism will inevitably collapse, socialism will emerge
  • Problem: Historical materialism becomes deterministic, denies human agency
  • Veblen’s alternative: Evolutionary change is open-ended, not predetermined
  • Contemporary relevance: Capitalism has proven more adaptable than Marx expected

2. Labor Theory of Value

  • Veblen’s critique: Labor theory of value is metaphysical, not scientific
  • Problem: Value not reducible to labor time; institutional context matters
  • Veblen’s alternative: Value is socially constructed through institutions
  • For development: Both can agree exploitation exists without needing labor theory

3. Class Reductionism

  • Veblen’s critique: Marx reduces all conflicts to class struggle
  • Problem: Other dimensions (gender, race, nationalism) also matter
  • Veblen’s emphasis: Multiple status hierarchies, conspicuous consumption
  • Contemporary relevance: Intersectionality debates; identity politics

4. Industrial vs. Pecuniary Employment

  • Veblen’s distinction:
    • Industrial: Making goods (engineers, workers)
    • Pecuniary: Making money (financiers, absentee owners)
  • Contrast with Marx: Not capital vs. labor but makers vs. takers
  • For development: Both traditions critique financialization, but different frameworks

5. Technological Determinism

  • Veblen: Technology shapes institutions (“machine process”)
  • Marx: Technology is not neutral; shaped by class relations
  • Debate continues: Is technology driving force or shaped by social relations?

Synthesis for Development Theory

What OIE adds to Marxism:

  1. Institutional variety: Not all capitalist institutions identical
  2. Cultural factors: “Habits of thought” shape economic behavior
  3. Non-class dimensions: Gender, race, status hierarchies
  4. Reform possibilities: Institutional change without revolution

What Marxism adds to OIE:

  1. Systematic theory: Coherent analysis of capitalist dynamics
  2. Global perspective: Imperialism, world-system analysis
  3. Class power: Central mechanism of exploitation, inequality
  4. Transformative vision: Alternative to capitalism specified

Implications for development policy:

  • OIE emphasizes: Institutional reform, ceremonial/instrumental distinction
  • Marxism emphasizes: Power structures, systemic transformation
  • Both useful: Complementary lenses on development challenges
  • Contemporary heterodox economics: Often combines insights from both

New Institutional Economics (NIE) contrasts:

Dimension NIE (Acemoglu et al.) Marxist/Dependency
Institutions Reduce transaction costs Embody class power
Development Universal path with good institutions Context-dependent, relational
Property rights Neutral efficiency Whose property? Class interests
Global Standard Institutions Applicable everywhere Core interests, inappropriate for periphery
Policy Adopt core institutions Challenge global hierarchy
History Colonial mortality accidents Imperialism, extraction, ongoing

AJR’s extractive vs. inclusive institutions:

  • NIE narrative: Colonies with extractive institutions stayed poor
  • Marxist addition: Why did colonizers create extractive institutions? To extract! (Tautology?)
  • Dependency addition: Post-colonial extractive institutions perpetuate extraction for global capital
  • Key difference: NIE sees institutions as primary cause; Marxism sees institutions as expression of class/imperial power

Example: Botswana “success story”

  • NIE: Good institutions (property rights, democracy) → diamonds managed well → development
  • Dependency critique:
    • Good institutions for whom? Diamond exports, elite capture
    • Diamonds discovered after independence (luck), not institutions
    • Still dependent on single commodity, price volatility
    • Contrast: DRC has diamonds, bad outcomes (NIE: bad institutions; Dependency: different colonial legacy, Cold War interventions, but also externally-driven conflict)

Solow model assumptions challenged:

Solow Assumption Marxist Critique
Diminishing returns → convergence Uneven development, no convergence tendency
Closed economy Global system with core-periphery hierarchy
Exogenous technology Technology endogenous to class struggle, power
Stable steady state Inherent dynamism, crisis tendency
Factor payments = marginal products Exploitation, unequal exchange
Countries develop independently Development/underdevelopment co-constituted

Empirical evidence:

  • Session 4 exercise: Absolute convergence failed globally, only within OECD
  • Marxist interpretation: Convergence within core (similar position), but not core-periphery convergence
  • World-systems: System requires hierarchy, so universal convergence impossible

Alternative growth theory:

  • Marx’s schemas of reproduction (Capital Vol. 2)
  • Growth not smooth but cyclical (booms, crises)
  • Distribution between wages/profits affects growth dynamics
  • Kaleckian/Post-Keynesian models closer to Marxist insights

6.2 Previewing Upcoming Sessions

Session 9: Technology Gaps, Innovation Systems, and Economic Complexity

Marxist/dependency perspectives will inform:

  • Trade theory: Mutual gains assumption (Ricardian comparative advantage) vs. unequal exchange
  • Technology transfer: Innovation as power resource, not neutral diffusion
  • Industrial policy: Infant industry protection justified (List, Hamilton) vs. free trade orthodoxy
  • Export-led vs. ISI: Debates we’ve encountered here continue

Questions to consider:

  • Can trade be mutually beneficial under conditions of unequal power?
  • What policies can peripheral countries use to enhance technological capabilities?
  • How do global value chains affect development prospects?

Session 8: Sustainable Development, Environmental Limits, Degrowth

Marxist ecology informs:

  • Accumulation imperative: Capitalism requires endless growth (M-C-M’)
  • Metabolic rift: Capitalism disrupts nature-society relations
  • Unequal ecological exchange: Periphery bears costs of core consumption
  • Climate justice: Historical responsibility, differential impacts

Questions to consider:

  • Can capitalism be made ecologically sustainable?
  • Is degrowth necessary? If so, in core only or universally?
  • What alternative to capitalist development within planetary boundaries?
  • How connect class struggle and ecological sustainability?

📚 Summary and Key Takeaways

Main Arguments

  1. Development as relational process:
    • Not individual countries moving along universal path
    • Development in some places connected to underdevelopment in others
    • Core-periphery hierarchy structural feature of capitalism
  2. Two transitions distinguished:
    • FROM pre-capitalist TO capitalist (historical, via primitive accumulation)
    • WITHIN capitalism, core-periphery uneven development (ongoing mechanisms)
  3. Mechanisms of uneven development:
    • Unequal exchange, technological dependence
    • Structural heterogeneity, terms of trade
    • Value chain power dynamics
  4. World-systems framework:
    • Global capitalism as singular integrated system
    • Triadic structure (core, semi-periphery, periphery)
    • Different rules for different positions
    • Challenges methodological nationalism, “global standard institutions”
  5. Dependency theory’s policy implications:
    • ISI, selective delinking, South-South cooperation
    • Mixed historical record, debates continue
    • East Asian “exception” shows alternative possible but difficult
  6. Contemporary relevance:
    • Accumulation by dispossession ongoing
    • Global value chains as updated unequal exchange
    • Premature deindustrialization challenges development path
    • Financialization constrains policy autonomy
    • Ecological crisis and accumulation contradiction

Critical Reflections

Strengths of Marxist/dependency perspectives:

  • Makes visible global power structures
  • Explains persistent inequality (mainstream can’t)
  • Serious historical analysis
  • Political economy: Who benefits?
  • Alternative policy frameworks

Limitations:

  • Determinism risks (early versions)
  • Class analysis sometimes national, not transnational
  • Empirical debates (unequal exchange measurement)
  • Socialist alternative underspecified
  • Agency within periphery sometimes understated

Why study this?

Even if you don’t become a Marxist, these perspectives:

  • Ask questions mainstream doesn’t
  • Reveal assumptions in mainstream theories
  • Provide tools for critical policy analysis
  • Connect to global justice movements
  • Essential for understanding development debates

📖 Mandatory Reading

  • Frank, A.G. (1966) “The Development of Underdevelopment”
    • Classic statement of dependency theory
    • Accessible, influential, controversial
    • Focus on metropolis-satellite extraction chains
  • Tutorial on analyzing global value chains (to be provided)
    • Practical application of unequal exchange concepts
    • Contemporary case studies
    • Data sources and methods

🏆 Further Readings

Classic Texts

  • Marx, K. (1867) Capital Vol. 1, Chapters 26-33 (primitive accumulation)
    • Historical detail on English enclosures
    • Theoretical foundations for accumulation by dispossession
  • Lenin, V.I. (1917) Imperialism, the Highest Stage of Capitalism
    • Short pamphlet, very influential
    • Five characteristics of imperialism
    • Links capitalism’s development to imperialism
  • Wallerstein, I. (1974) The Modern World-System Vol. 1, Introduction + Chapter 1
    • Foundational text for world-systems analysis
    • Historical origins of capitalist world-economy
    • Methodological nationalism critique

Dependency Theory

  • Cardoso, F.H. & Faletto, E. (1979) Dependency and Development in Latin America, Introduction
    • Nuanced “associated-dependent development” argument
    • Historical specificity of Latin America
  • Amin, S. (1976) Unequal Development, Chapter 3
    • Autocentric vs. extraverted development
    • Mechanisms of unequal exchange
    • Policy implications for periphery
  • Rodney, W. (1972) How Europe Underdeveloped Africa
    • African perspective on dependency
    • Historical extraction, colonial impact
    • Accessible, passionate, influential

Contemporary

  • Harvey, D. (2003) The New Imperialism, Chapter 4
    • Accumulation by dispossession concept
    • Contemporary forms of primitive accumulation
    • Spatial fix theory
  • Smith, J. (2016) Imperialism in the Twenty-First Century, Introduction
    • Global value chains as imperialism
    • Empirical measurement of value transfers
    • Contemporary labor arbitrage
  • Hickel, J. (2017) The Divide: Global Inequality from Conquest to Free Markets
    • Accessible overview for general audience
    • Historical and contemporary evidence
    • Links to ecological crisis

Critiques and Debates

  • Brenner, R. (1977) “The Origins of Capitalist Development: A Critique of Neo-Smithian Marxism”
    • Critique of Wallerstein from Marxist perspective
    • Focus on class relations, not trade
  • Warren, B. (1980) Imperialism: Pioneer of Capitalism
    • Controversial argument: Imperialism facilitates development
    • Provoked major debates within Marxism

✍️ Assessment and Exercises

Tutorial Exercise: Contemporary Dependency Analysis

Choose one of the following contemporary cases:

  1. African land grabs (2000s-2020s)
  2. Latin American lithium extraction (Bolivia, Chile, Argentina) for electric vehicles
  3. Bangladeshi garment industry and global value chains
  4. Pacific island nations and climate change vulnerability
  5. Digital colonialism (data extraction, platform capitalism)

Analysis tasks (1000 words):

  1. Describe the case: What is happening? Who are the actors?
  2. Apply dependency theory concepts:
    • Which mechanisms of uneven development are visible?
    • Who benefits? Who loses?
    • What power relations structure the case?
  3. Compare with mainstream (NIE) explanation:
    • How would Acemoglu et al. explain this?
    • What does dependency theory reveal that NIE misses?
  4. Policy implications:
    • What would dependency theory recommend?
    • What obstacles to such policies?
    • Historical parallels?

Essay Questions (Optional Practice)

  1. “Dependency theory predicted that countries integrated into the global economy would remain underdeveloped. The success of East Asian NICs proves dependency theory wrong.” Discuss. (1000 words)

    Hint: Define “success,” consider historical context, evaluate whether East Asia is exception or confirms modified dependency theory

  2. “New Institutional Economics (Acemoglu et al.) and Marxist development theory both emphasize institutions but offer fundamentally different explanations for underdevelopment. Compare and evaluate these perspectives.” (1000 words)

    Hint: Core concepts of each, what questions each asks, empirical evidence, normative implications

  3. “Import-substitution industrialization failed in Latin America but similar policies succeeded in East Asia. What explains this difference?” (1000 words)

    Hint: Define failure/success, compare political economy (land reform, state capacity, class structure), external context (Cold War), implementation details

  4. “Contemporary global value chains represent an updated form of the core-periphery hierarchy described by dependency theory.” Assess this claim. (1000 words)

    Hint: Define GVCs and core-periphery, apply unequal exchange concepts, use empirical examples, consider counter-arguments

In-Class Debate Topics

  1. “The global economy is structured to benefit core countries at the expense of peripheral countries.”

  2. “Marxist development theory is no longer relevant after the collapse of the Soviet Union and China’s market reforms.”

  3. “Developing countries should delink from the global economy to achieve autonomous development.”

🔗 Additional Resources

  • Developing Economics Blog: https://developingeconomics.org/
    • Critical commentary on development from heterodox perspectives
    • Contemporary applications of dependency theory
  • Monthly Review: https://monthlyreview.org/
    • Socialist magazine with development focus
    • Contemporary imperialism debates
  • Third World Network: https://www.twn.my/
    • Global South perspective on trade, development
    • Policy-oriented research
  • GRAIN: https://grain.org/
    • Land grabs, food sovereignty
    • Contemporary primitive accumulation documentation
  • World Inequality Database: https://wid.world/
    • Data on global inequality trends
    • Tests convergence/divergence empirically

Next Session Preview:

Session 7 will explore technology, innovation, and trade-led development. We’ll examine how mainstream trade theory’s assumptions about mutual gains are challenged by the unequal exchange and power dynamics we’ve discussed today. We’ll also investigate industrial policy debates - when is infant industry protection justified? The tensions between free trade orthodoxy and actual development history will be central, building on the dependency theory critiques introduced here.

Last updated: 22 06 2026