Why poor countries remain poor

Abstract

The so-called dependency school originated from a group of primarily Latin American scholars. Their intellectual base in the 1950s was the Economic Commission for Latin America under the leadership of the Argentine economist Raúl Prébisch. The major concern of Prébisch and his colleagues, who called themselves ‘structuralists’, was the growing gap in living standards and economic development between a core of industrialized, ‘developed’ countries and the much larger periphery of poor, ‘Third World’ countries. Other influential Latin American economists from this period are Aníbal Pinto, Celso Furtado, and Osvaldo Sunkel. The unequal relationships between rich and poor countries were the focus of the analysis. Among other things, it was argued that the industrialized countries benefited from a superior bargaining position. The gains from trade were highly unevenly distributed. In Prébisch’s analysis, countries producing and exporting commodities and importing industrial goods were doomed to suffer from a secular decline in their terms of trade. The solution for the poor countries was the well-known import substitution strategy. A group of younger, and politically more radical, theorists—Theotonio Dos Santos, Ruy Mauro Marini, Andre Gunder Frank, and others—took the structuralist analysis further. Strongly influenced by neo-Marxist thinking, the new generation of dependency theorists incorporated the impact of external political and economic factors in their analyses of constraints to development in Latin America. A common position was a questioning of the entire liberal belief in the benefits of free trade and foreign direct investment. Today, import substitution and self-reliance strategies have fallen out of fashion, and dependency theory has lost the influence it once had. But issues about the asymmetric relations between rich and poor countries that the dependency theorists raised still deserve to be discussed, without the misconceptions of the Latin American dependency school.