Marxist economists such as Dos Santos, Cardoso, Sunkel and Faletto, non-
Marxist Latin American economists such as Furtado and Prebisch, and North
American neo-Marxists such as Bodenheimer, Petras, Magdoff and A. G. Frank
(Ray, 1973, p. 6; O’Brien, 1975, p. 11; Higgott, 1978, p. 32). It originated in the
analysis of Latin American countries where independence had been achieved in
the early or mid-nineteenth century but where problems of foreign economic
exploitation persisted, similar to those found in countries that were still colonies
or had only recently achieved independence.
Dependency theory adds the idea of peripherality or satellite status to the
concept of neo-colonialism. This was achieved in two phases. The first was
concerned with dependency as a function of primary production, a very
similar concern to that of theorists who saw a form of colonialism continu-
ing after independence, with poor countries depending on a small number of
primary products for their export earnings. The second phase developed the
idea of ‘peripherality’. Dependency theory began as a critique of interna-
tional trade theory and an explanation of why import substitution was
needed. It then explained the failure of this strategy by reference to the
structures introduced by industrialization (Philip, 1990, p. 486).
Continuing dependency and dislocation could be avoided, it was argued,
by a strategy of import substitution. The manufacture of formerly imported
goods would reduce dependency on the highly volatile markets for primary
products. Industrialization would, where possible, be installed behind pro-
tective barriers, and if necessary with a high degree of state intervention and
planning the state would ensure that capital would be directed towards man-
ufacturing industry (Hirschman, 1961, pp. 12–20; Dos Santos, 1973;
Hoogvelt, 1982, pp. 167–8).
This strategy had political dimensions, in addition to reducing depend-
ence on foreign trade and creating a locally controlled economy. It was
intended that greater economic sovereignty would follow. Secondly (and
here there are echoes of modernization theory), it was predicted that indus-
trialization would weaken traditional society. Manufacturing activities need
different pattern variables to traditional societies. In Latin America this
would mean that the status and power of the traditional landed oligarchy
would be undermined. If this almost feudalistic stratum could be weakened
the way to greater democracy would be paved. Thirdly, industrialization
would start to make a real impact on the extreme inequalities found in Latin
American societies. It would also contribute to the integration of the rural
masses into the main activities of society. New occupational opportunities
would be created. The problem of landlessness would be overcome by
economic development in sectors other than agriculture. The rural masses,
86 Understanding Third World Politics