Is Dependency Theory Relevant in the Twenty-First Century?

Within the final decade, the talk over the relevance of the dependency concept in explaining modern worldwide political financial system has re-emerged in educational discourse. The dependency concept emerged within the Sixties as a response to the modernisation concept and trickle-down financial concept. Whereas the modernisation concept assumes a unilinear and progressive growth of societies by holding industrialisation as a prerequisite for growth (Regmi, 2018), the trickle-down concept contends that fast financial development routinely reduces inequality as wealth trickles down from the wealthy to the poor (Arndt, 1983). As a critique of each theories, the dependency concept argues that growth is neither unidirectional nor financial development in developed nations routinely interprets to the event of much less developed ones. As a substitute, underdevelopment outcomes from obstacles created by ‘centre nations’ by means of the mixing of ‘peripheries’ into the world capitalist system, resulting in the financial reliance of the periphery on centre nations. Though the dependency concept was a dominant explanatory framework between the Sixties and Nineteen Eighties, it declined within the mid-Nineteen Eighties because of the rise of neoclassical economics and its incapability to elucidate some adjustments within the worldwide political financial system construction, significantly the financial success of the Newly Industrializing Asian nations (Kvangraven, 2021). Nonetheless, the persistence of uneven growth and growing poverty developments has led to the re-emergence of educational discourse relating to the relevance of dependency concept in explaining in the present day’s world inequalities.

This essay argues that regardless of the adjustments within the worldwide financial order, which led to a decline within the recognition of the dependency concept, the idea stays related in explaining financial and energy relations between states within the twenty-first century globalised financial system. The manifestation of the unequal and exploitative relationships between the World North and World South nations could be seen in lots of spheres, together with financial, political, army, and beliefs (Galtung, 1971). Nonetheless, this essay will deal with the position of international support by the Worldwide Financial Fund in perpetuating the dependence of World South nations. In addition to growing the debt profile of World South nations, the circumstances connected to worldwide support by western monetary establishments are detrimental to the financial system of the peripheries because it limits the decision-making functionality of support recipient nations. Consequently, this has led to the lack of the worldwide south nations to take possession of their nationwide growth schemes. The resultant impact is financial and political dependencies, which has additional widened the developmental hole between the developed industrialised nations and the third world nations. 

Nigeria, the world’s eighth-largest recipient of international support and second in Africa, is used as a case research as a result of over forty per cent of the nation’s inhabitants live beneath the poverty line, in line with the Nigerian Nationwide Bureau of Statistics (Aderounmu et al., 2021). Moreover, the determine is estimated to extend to forty-five per cent within the yr 2022 by the World Financial institution (Irwin et al., 2021). The essay is structured into 4 elements. After the introduction, the underlying assumptions of the dependency concept have been mentioned. The third half explains the modern relevance of the idea utilizing IMF-Nigeria relations as a case research. The ultimate half offers the conclusion.

Theoretical Background

Dependency concept was developed as a framework for understanding the explanations for the divergence within the growth degree between wealthier and poorer nations. Traditionally, the idea was first used to elucidate the underdevelopment of Latin America and is related to students akin to Paul Prebisch and Hans Singer. Prebisch, in 1949 had argued that Latin America is underdeveloped as a result of it relied on the exportation of main commodities, which resulted in unequal commerce phrases between Latin American nations and developed western nations. Nonetheless, a number of variants of the dependency concept have been used to elucidate underdevelopment in different world areas, akin to Africa (Rodney, 1972; Amin, 1974) and Asia (Ohno, 1998). Dos Santos (1970:231) defines dependency as ‘a scenario during which the financial system of sure nations is conditioned by’ the event processes of different nations. The principle argument of the dependency concept is that the incorporation of the ‘satellites’ into the world capitalist system dominated and managed by the ‘metropolis’ has resulted in an unbalanced relationship that retains the satellite tv for pc nations depending on the economies of the metropolis. The central assumptions of the idea embrace: (a) Underdevelopment, which is totally different from un-development, offers with the lively extraction of sources from periphery nations for the good thing about the core nations (b) the world is polarised into two: the extremely industrialised rich core nations and fewer industrialised poor peripheries (c) The periphery nations are poor as a result of they’re forcefully built-in into the worldwide division of labour the place they functioned as producers and suppliers of uncooked supplies or repositories of low cost labour (d) Useful resource diversion is maintained by means of lively collaborations of native elites and dominant states who share frequent pursuits (Namkoong, 1999).

The dependency concept has been subjected to a number of criticisms. Kvangraven (2021) argues that many of the criticisms of dependency concept are based mostly on a superficial, incorrect, and incomplete understanding of the idea’s core assumptions. Nonetheless, the critiques centre on its emphasis on exterior components as causes of underdevelopment (Sanchez, 2003), financial reductionism (Grosfoguel, 2000), tautology and lack of precision (Lall, 1975). Kvangraven (2021) states that whereas some criticism, akin to tautology, is legitimate in some circumstances, others signify minority views inside the dependency custom. Moreover, Amsden (2003) criticised the dependency concept for suggesting the impossibility of attaining growth inside the worldwide capitalist framework and failing to account for the event of some conventional periphery nations. Critics posit that the rise of Hong Kong, Taiwan, South Korea, and Singapore’s economies signifies the potential for attaining financial progress beneath the built-in world financial system (Sanchez, 2003). Nonetheless, Kvangraven (2021) maintains that the financial transformation of those nations doesn’t contradict the fundamental assumption of the dependency concept. As shall be argued on this essay, the dependency concept nonetheless presents an important explanatory energy in explaining in the present day’s world inequalities regardless of its relegation within the subject of growth research.

The Worldwide Financial Fund and Dependency Idea within the 21^st Century 

The Worldwide Financial Fund (IMF) was established on the Bretton Woods Convention in 1944 to handle the worldwide financial system after the Nice Melancholy of the Thirties and the Second World Struggle (Igwe, 2018). The preliminary perform of the IMF was to take care of trade fee stability by offering loans to nations experiencing momentary stability of cost crises (Ahmed, 2018). Nonetheless, the position of the IMF has developed to incorporate structural reforms, home monetary system stability, debt disaster administration and pandemic response (Yoon, 2005). The monetary support of the IMF is tied to the implementation of sure financial coverage circumstances, which incorporates commerce and monetary liberalisation, deregulation, privatisation, foreign money devaluation and different market-liberalising reforms. These neo-liberal reforms, often called the Structural Adjustment Programme (SAP), intention to facilitate the enlargement of capitalism and the mixing of growing nations into the world capitalist financial system. Whereas the imposition of SAP as a precondition for acquiring monetary help by the IMF has lengthy been a topic of criticism, the logic behind these circumstances and their modern results conforms with the fundamental assumptions of the dependency concept. Whereas Nigeria adopted SAP in 1986, the IMF mortgage conditionalities have developed within the twenty first century to mirror the rising involvement of the IMF in low-income nations experiencing structural issues. The connection between Nigeria and the IMF as a lender of final resort is exploitative, favouring the latter on the expense of the previous. This has introduced untold hardship to the Nigerian populace and has additional widened the inequality hole between Nigeria and developed nations of the West.

The dependency concept can be utilized to elucidate Nigeria’s reliance on international support from the IMF. The motive behind support issuance aligns with the dependency concept assumption of a polarised world between the ‘Centre’ and ‘Periphery’. Though the IMF contains 190 member states, the establishment is managed by industrialised western powers, as noticed in its governing construction. For example, the members of the IMF are hierarchically positioned in line with the quota assigned to them based mostly on their relative financial place on this planet’s financial system. The IMF quota system considers every nation’s Gross Home Product, openness, financial variability, and worldwide reserves (Jha and Saggar, 2000). Equally, the establishment’s decision-making process is by weighted voting, and the load of every nation’s voting proper displays its quota (Mayer and Napel, 2020). This means that choices of the board primarily mirror the pursuits of economically developed nations that dominate world commerce. Nigeria is a daily recipient of IMF financing and is at the moment among the many closely indebted nations in sub-Sahara Africa. A latest statistic by the Debt Administration Workplace in Nigeria exhibits that the nation owes the IMF $3.45 billion as of September 2020 (Ugbodaga, 2021). Nigeria’s excessive dependence on loans from the IMF has worsened its debt disaster because it has resulted in a debt burden that has distorted the nation’s growth. Because of the sources directed towards debt servicing, the debt disaster has restricted the nation’s capability to put money into vital growth-sustaining infrastructure (Yusuf and Mohd, 2021). Consequently, Nigeria has discovered itself in a really “tightrope debt lure” with unsustainable exterior debt. From the dependency concept’s perspective, the IMF’s loans could be seen as a mechanism utilized by extremely industrialised nations to take care of the dependence of the Periphery on their economies beneath the pretense of helping in attaining financial growth.

The IMF mortgage conditionalities and their results have additional made the dependency concept related within the Twenty-First Century. In addition to decreasing financial development in Nigeria, the mortgage conditionalities infringe on the nation’s nationwide sovereignty and have restricted the Nigerian authorities’s capability to handle the nation’s inside financial affairs. It is because the predetermined financial insurance policies beneath the IMF packages have led to the failure of the Nigerian authority to manipulate its financial system. Whereas the IMF usually claims that the insurance policies intention to facilitate financial growth, these insurance policies are imposed with little or no session with the Nigerian authorities and with out regard for the nation’s financial circumstances (Eberlein, 2006). Furthermore, the IMF fails to think about the distinctive causes of Nigeria’s financial challenges by imposing the Structural Adjustment Programme (SAP), which is seen as a ‘one-size-fits-all’ strategy. As an support recipient, Nigeria lacks the ability to independently determine what to do with the loans obtained from the IMF with out enter from the worldwide monetary establishment, because the donor’s curiosity stays paramount. Ikejiaku (2008) argues that whereas growing nations demand loans to enhance their financial scenario, the circumstances connected to the loans usually worsen the scenario. For example, the continuous adoption of the SAP and different financial liberalisation insurance policies in Nigeria as preconditions for assessing IMF loans has worsened its debt disaster and has resulted in socio-economic and political crises in Nigeria. Consequently, the nation’s debt repayments could be seen as an instrument of neo-imperialism because it erodes the Nigerian authorities’s energy to satisfy its residents’ wants and make financial choices that enhance the welfare of its residents (Dantani, 2019). Nigeria continues to undertake the IMF-imposed liberalisation packages regardless of limiting its potential to make essential financial choices that swimsuit its native peculiarities. 

Via its mortgage conditionalities and high-interest charges, the IMF has stored Nigeria in a vicious cycle of endless debt dependency. Every time a rustic makes an attempt to interrupt away from this exploitative relationship, the IMF withdraws or delays mortgage disbursements till the circumstances are fully accepted. An instance is the disbursement delay of the Second largest IMF COVID-19 emergency fund for Nigeria because of the disagreement between Nigeria and the IMF over the circumstances connected (Amuno, 2020). The saying “he who pays the piper dictates the tunes” explains why the IMF have an unlimited affect on the Nigerian financial system. Nigeria is left with little or no alternative however to simply accept the stringent mortgage circumstances because the nation is politically and economically weak in a world characterised by energy. The adoption of the Structural Adjustment Programme has had opposed results on Nigeria’s growth. The commerce liberalisation coverage, for example, has inspired the expansion of international firms in Nigeria and has opened the Nigerian financial system to superior over-priced international merchandise (Adenikinju and Chete, 2002). The costs of regionally produced Nigerian items are intentionally stored low and subjected to the forces of demand and provide. This has led to the lack of native industries to compete with their international counterparts resulting in the eventual closure of most native industries. The scenario has left Nigeria’s financial system on the mercy of transnational firms who act as brokers of Western nations to take advantage of human and pure sources. Particularly, multinational firms akin to Shell Petroleum Improvement Firm (SPDC) within the Niger-Delta area of Nigeria have been a clog within the wheel of Nigeria’s growth. The actions of SPDC within the Niger Delta area have led to developmental challenges akin to poverty, political instability, unemployment, civil unrest, and environmental degradation (Oluwaniyi, 2019). Moreover, the participation of Nigeria within the World Worth Chains, ‘the place the totally different phases of the manufacturing course of are situated throughout totally different nations’, has additional given extra room to multinational firms, thereby reinforcing the core vs periphery sample (Trienekens, 2012).

One other offshoot of the IMF-imposed Structural Adjustment Programme in Nigeria is the privatisation coverage, with financial liberalisation as its main focus. Privatisation entails the partial or outright gross sales of public enterprises to personal people to make them extra environment friendly and efficient (Asaolu et al., 2005). The coverage goals to cut back authorities spending to generate income obtainable for debt servicing and put Nigeria in a greater place for extra mortgage procurement (Ojo and Fajemisin, 2010). Privatisation has led to the sale of big utilities in Nigeria, such because the Nationwide Electrical Energy Authority (NEPA), the Nigerian Telecommunication (NITEL), and the Nigerian Port Authority. Whereas the privatisation coverage has not resolved the issues dealing with public enterprises in Nigeria, the coverage has worsened growth challenges in Nigeria with opposed social results akin to inflation, unemployment, and corruption (Orji et al., 2014). The coverage has contributed to the present inflation fee in Nigeria, which is about 15.63 per cent and its unemployment fee of about 33.3 per cent (Nwokoma, 2021; Izuaka, 2022). In addition to, Eke et al. (2017) argue that the privatisation coverage has led to the return of international expatriates, who had initially relinquished the businesses to the Nigerian authorities after colonialism, as govt administrators of the privatised corporations. Consequently, this has compromised Nigeria’s financial sovereignty and reasserted the dominance of the nation’s financial system by foreigners because of the predominance of international traders within the privatised corporations (Excellence-Oluye et al., 2019). This has perpetuated Nigeria’s dependency on western-controlled international transnational firms because of the incapability of the Nigerian authorities to manage and management the actions of international industries, such because the Shell Petroleum Improvement Firm (Nwozor, 2020). Consequently, adopting the privatisation coverage in Nigeria has promoted international capitalist pursuits and supplied alternatives for human and materials sources exploitation (Odukoya, 2007).

This exploitation is usually made doable by means of the collaboration of Nigerian elites and the transnational firms representing western pursuits in Nigeria. The Nigerian governing elites use state energy to advance the pursuits of international capital since these pursuits coincide with their very own. An instance is an allegation by the African Fee on Human and Peoples’ Rights of SPDC utilizing its relationship with the Nigerian authorities to take advantage of the oil-rich Niger Delta (Ryerson, 2018). Regardless of the proof of exploitation and unlawful actions in opposition to SPDC resulting in the underdevelopment of the Niger-Delta space, the Nigerian authorities continues to deploy state energy to guard SPDC’s financial pursuits. The resultant impact is the lowering independence of the Nigerian financial system and the growing autonomy of transnational firms in Nigeria. This additional aligns with the dependency concept’s assumption of the reciprocal relationship between political and financial elites in periphery and centre nations.

Conclusion

This essay has examined the relevance of the dependency concept in explaining in the present day’s international imbalances. Regardless of the decline within the recognition of the dependency concept, it may be used to elucidate the modern relationship between Nigeria and the IMF, which has bolstered the Nigerian financial system’s dependence on western nations. Via its mortgage conditionalities, the IMF has stored Nigeria in a debt cycle resulting in the lack of Nigeria to manipulate its financial system. This has stored Nigeria’s financial system underdeveloped and widened the inequality hole between Nigeria and Western International locations. To interrupt away from this exploitative relationship, Nigeria should embrace industrialisation with out exterior dependence.

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