Underdevelopment and unequal exchange: an examination of dependency theory with a focus on Latin America

Throughout the first seventy years of the twentieth century, which have been characterised by the acceleration of historical events, the world’s division into “developed” and “underdeveloped” countries has not decreased; on the contrary, the gap continues to widen and has already caused the first crises in the world system. This thesis will examine in-depth theories that attempt to offer a coherent explanation of the development process in order to provide the theoretical framework necessary for the economic policy actions that must be implemented in order to promote development and close the gaps that exist between nations. These include theories such as modernisation and growth, dependency and world systems theories. One theory in particular will be the subject of the study: dependency theory, which emerged in response to modernisation theory. The original idea behind modernisation theory was that interaction with societies in Western Europe and North America would push developing countries toward modernisation and eventually lead to the acquisition of social, political, and economic traits common to Western countries. However, by the 1960s, it became evident that the Third World was not progressing through a phase of underdevelopment, as envisioned by modernisation theory, but rather remaining underdeveloped. A counterargument emerged, asserting that developing countries were structurally distinct from advanced nations and would need to follow unique paths to development. This perspective gave rise to dependency theory, which rejects the narrow national focus of modernisation theory and underscores the importance of comprehending the complexity of imperialism and its role in shaping postcolonial states. Dependency theory posits that the periphery of the international economy is economically exploited by the center. Dependency theorists argued that colonialism shaped Third World economies into highly specialised export-oriented structures, resulting in fundamental and interconnected structural distortions that hampered development. Once this reshaping occurred, market forces worked to sustain the relationship of dominance and exploitation between the center and the periphery. The following research will be divided in three chapters: the first one will clarify the nowadays Noth-South dichotomy and the concept of Third World/Global South. Moreover it will introduce development theories, in particular the modernisation theory, the dependency theories and the world-systems theory. The dependency theory will be thoroughly examined and the various expert viewpoints will be presented in the second chapter. A case study featuring Latin America as an example of a developing nation will be showcased in the third one. Lastly, references and conclusions will be included.