Dependency Theory or �dependencia theory- Lenin

Dependency Theory or �dependencia theory- Lenin

1. Dependency Theory or dependencia theory Originated in the Third World As a Critique of Eurocentric Modernisation Theory

2. Development of a Discourse As a Critique of Modernisation Theory: Indiginisation of Development thinking led to the emergence of this theory It included production of ideas that relate to, the conditions that emanate in the Third World. According to Slater (1992, 1992a) the Core can learn from the Periphery and it does need to learn. Dependencia or dependency school took up this theme as a rebuttal of the modernisation paradigm .

3. What is Dependency Theory? It is a body of social science theories predicated on the notion that resources flow from a "periphery" of poor and underdeveloped states to a "core" of wealthy states, enriching the latter at the expense of the former. It is a central contention of dependency theory that poor states are impoverished and rich ones enriched by the way poor states are integrated into the "world system .“ According to Amin (1976, 1992), it is essentially a critique of the development paths, policies and strategies followed in Latin america and elsewhere in Periphery.. Initial theorisation was a structuralist perspective by economists, who were associated with the United Nations Commission on Latin America (ECLA) This, however, was soon transformed, and informed by more critical dependency notions and the spread of Marxist and Neo-Marxist critiques of imperialism.

4. Origins of Dependency Theory Origins of the theory can be traced back in the Classical theories of imperialism ( Hilferding , Bukharin, Lenin, Rosa Luxemburg) which addressed relations of domination and subjection between nations. But the classical Marxist theories of imperialism had in the main focused on the question of what it was about the capitalist system that drove it to extend itself beyond its own borders and to expand geographically in an ever-widening cir­cumference. These emphasised on the causes of imperialism but did not bother much about the effects of imperialism over­seas. These theories generally took it for granted that export of capital was the same as export of capitalist relations of production, and that therefore Capitalism overseas would work up the same social tensions and class conflicts (between bourgeoisie and proletariat) as were already evident in the home country.

5. Lenin’s Theory: Imperialism, the Highest Stage of Capitalism Lenin developed his theory of imperialism amid an intensification of European engagement with the periphery. Though colonial policy existed before the phase of imperialism defined by Lenin as the latest and the highest stage of capitalism , it was not so much characterised by the domination of the monopolist associations of big employers. Monopolies are firmly established when all the sources of raw material are captured by one group or corporation , which at times may be protected by establishing a state monopoly. The more capitalism is developed, the more strongly the shortage of raw materials is felt, the more intense the competition and the hunt for sources for raw materials throughout the world, the more desperate the struggle for colonies…. As the evidences indicate, this intensification had begun during the second half of the 19th century. Domestically, capital was concentrating into large monopolistic corporations integrated with and led by a few large financial oligarchies.

6. Imperialism and the Role of Finance Capital Finance capital is interested not only in the already discovered sources of raw material but also in potential sources…. It can facilitate control over these raw material sources through huge investments in expeditions, R&D for efficient methods of extraction and processing of raw material, developing new products, etc. To ensure fulfillment of such goals, control on finance through banks complemented with territorial expansion of the colonies becomes crucial. Hence, the finance capital inevitably strives for enlargement of its sphere of influence and even its actual territory. The interest pursued in exporting capital also give an impetus to the conquest of colonies, for in the colonial market it is easier to eliminate competition, to ensure supplies, to secure the necessary connections, etc. The non-economic superstructure, which grows up on the basis of finance capital, its politics and its ideology, stimulates the striving for colonial conquest. As Hilferding substantiates, ‘Finance capital does not want Liberty, it wants Domination”.

7. Seizure of the Unoccupied Territory of the World and Complete Partitioning Among Colonia l Powers Region 1876 1900 % Increase or Decrease Africa 10.8 90.4 + 79.6 Polynesia 56.8 98.9 + 42.1 Asia 51.5 56.6 + 5.1 Australia 100.0 100.0 - --- America 27.5 27.2 --- 0.3 According to Lenin, the period from 1860 to 1880 and beyond is characterised by an enormous expansion of colonial conquests by the European countries The struggle for the territorial division of the world became extraordinarily sharp. This period witnessed end of the industrial capitalism……..or pre-monopoly capitalism in which free competition was predominant. Capitalism’s transition to the stage of monopoly capitalism , to finance capital, is connected with the intensification of the struggle for the partitioning of the world. According to Hobson, for e.g., the years 1884-1900 have been the epoch of intensified “ expansion” of the chief European states. U.K. added 3.7 million sq. miles with 5.7 crores of people , France 3.6 million sq. miles and 3.65 crores people; Germany 1 million sq. miles and 1.47 crores population; Belgium 9lakh sq. miles and 3 crores people; Portugal 8 lakh sq. mile with 9 million people Percentage of Territory Belonging to the European Colonial Powers (Including the United States)

8. Epoch of Capitalist Imperialism and Rise of Transitional Forms of State Dependence During the epoch of Capitalist Imperialism, colonial policy is characterised by the struggle of the great powers for the economic and political division of the world,. That gave rise to a number of transitional forms of state dependence. Not only there exist two group of countries, thse owning colonies and the colonies themselves, but also the diverse forms of dependent countries which, politically, are formally independent, but in fact, are enmeshed in the net of financial and diplomatic dependence, typical of this epoch. A semi colony is one such form. A commercial colony is another, as illtusrated by the case of Argentina, in the first decade of the 20 th century. As Schulze- Gavernitz observed (1906) in his work on British imperialism, ‘South America and especially Argentina is so dependent, financially on London that it ought to be described as almost a British commercial colony…….’.

9. IMPERIALISM, AS A SPECIAL STAGE OF CAPITALISM Lenin summarises the characteristics of Imperialism as follows: According to him imperialism emerged as the development and direct continuation of the fundamental characteristics of capitalism in general. But capitalism only became capitalist imperialism at a definite and very high stage in its development, when certain of its fundamental characteristics began to change into their opposites, when the features of the epoch of transition from capitalism to a higher social and economic system had taken shape and revealed themselves in all spheres. Economically, the main thing in this process is the displacement of capitalist free competition by capitalist monopoly. Free competition is the basic feature of capitalism, and of commodity production generally; Whereas imperialism contradicts with this and emerges as a special case. It becomes the monopoly stage of capitalism. Such a definition would include what is most important, for, on the one hand, finance capital is the bank capital of a few very big monopolist banks, merged with the capital of the monopolist associations of industrialists; It also implies replacement of the colonial policy which has extended without hindrance to territories unseized by any capitalist power, to a colonial policy of monopolist possession of the territory of the world, which has been completely divided up....

10. Characteristics of Imperialism According to Lenin’s theory a definition of imperialism will include the following five of its basic features: (1) The concentration of production and capital has developed to such a high stage that it has created monopolies which play a decisive role in economic life; (2) the merging of bank capital with industrial capital, and the creation, on the basis of this "finance capital," of a financial oligarch)'; (3) the export of capital as distinguished from the export of commodities acquires exceptional importance; (4) the formation of international monopolist capitalist associations which share the world among powers (5) the territorial division of the whole world among the biggest capitalist powers is completed. Thus, as conceived by Lenin Imperialism is capitalism at that stage of development at which the dominance of monopolies and finance capital is established; In which the export of capital has acquired pronounced importance; In which the division of the world among the international trusts has begun, In which the division of all territories of the globe among the biggest capitalist powers has been completed....

11. Territorial Expansion, Exercising Monopolistic Control through State Power in conjunction with the Monopolistic Control of Finance Capital Thus, Lenin theorized that these two developments were intrinsically linked. The concentration of capital created inequality: Finance capital and the trusts do not diminish but increase the differences in the rate of growth of the various parts of the world economy.... Further, imperialism is an immense accumulation of money capital in a few countries, amounting, as it could be seen to 100,000-150,000 million francs in securities. Hence the extraordinary growth of a class, or rather, a stratum of rentiers , i.e , people who live by "clipping coupons," who take no part in any enterprise, whatever, whose profession is idleness. The export of capital, one of the most essential economic bases of imperialism, still more completely isolates the rentiers from production and sets the seal of parasitism on the whole country that lives by exploiting the labour of several overseas countries and colonies.... For that reason the term " rentier state" ... or usurer state, is coming into common use in the economic literature that deals with imperialism.

12. Imperialism leads to emergence of Rentier and Parasitic State As Lenin further corroborated , ‘ The world has become divided into a handful of usurer states and a vast majority of debtor states. "At the top of the list of foreign investments," says Schulze- Gaevernitz , "are those placed in politically dependent or allied countries: Great Britain grants loans to Egypt, Japan, China and South America. Her navy plays here the part of the bailiff in case of necessity. Great Britain's political power protects her from the indignation of her debtors....“ "Great Britain," says Schulze- Gaevernitz [1906], "is gradually becoming transformed from an industrial into a creditor state. Notwithstanding the absolute increase in industrial output and the export of manufactured goods, there is an increase in the relative importance of income from interest and dividends, issues of securities, commissions and speculation in the whole of the national economy. In my opinion it is precisely this that forms the economic basis of imperialist ascendancy. The creditor is more firmly attached to the debtor than the seller is to the buyer...." The description of "British imperialism" in Schulze- Gaevernitz's book reveals the same parasitical traits. The national income of Great Britain approximately doubled from 1865 to 1898, while the income "from abroad" increased ninefold in the same period....

13. Statement of the Theory.. Contd. 1 Inequality in the core constrained aggregate demand levels. The general population could not absorb the mass of commodities achieved by higher levels of productive capacity. Insufficient demand created continual realization crises. The price of raw materials threatened profits further. The falling rate of profit required economic expansion to open up new regions for investment, sources of raw materials, and new consumer markets.

14. Statement of the theory Contd. 2 The overall effect was that the core pumped wealth out of the periphery. The wealth flowing into the domestic economies of the core stifled the fall in the rate of profit. Lenin called this set of circumstances "imperialism.“ Several specific consequences followed; two are notable: 1. One, surpluses permitted the development of a "labor aristocracy," a stratum of well-paid workers loyal to the capitalist class. 2. It led to nation-state rivalry in the imperial system intensified nationalist sentiments among the working class and this deflected class struggle. Both of these effects functioned to strengthen the bourgeoisie over against the proletariat. From the premise that the capitalist class controls the state politically, Lenin theorized that finance-capital, the dominant form of capital, used the state machinery to colonize the periphery. In the periphery, capitalists would (1) use oppressed peripheral labor to produce primary commodities and raw materials cheaply; (2) create an affluent strata (a peripheral elite) to consume expensive commodities imported from the core; and (3) undermine indigenous industry, making the colonies dependent on core investment.

15. Statement of the Theory contd. 4 Although this strategy would work in the short-term, Lenin argued, in the longer term it would undermine first imperialism and then capitalism in the core. Nation-state rivalry would lead to inter-imperial wars. The costs (financial drain) and devastation (destruction of productive capacity) of these wars would weaken core nation-states, not only because the losers would find themselves in an unfavorable position and with a diminished capacity to exploit the periphery, but because nationalist movements in the periphery and anti-colonial wars would undermine the capacity of even victorious core nations to exploit the periphery. Once the core lost control over its colonies the imperium would stagnate domestically. Domestic economic stagnation would raise the level of antagonisms between the bourgeoisie and the proletariat leading to a social revolution in the core.

16. Criticism of the theory There are at least two criticisms of the theory. 1. The theory neglects the fundamental exploitative capitalist relations between core and periphery that existed for several hundred years before the "imperialist" phase, calling into question the claim that Lenin is describing something truly unique. What Lenin sees as the wave of colonization is actually an intensification in colonialism. It therefore appears, contrary to Lenin, that "imperialism" is a continuation of the same fundamental system of colonial domination not a new phase of capitalist development. 2. Second, while some of what Lenin predicted happened, capitalism was not undermined in the period that most closely approximates the conditions he claimed would cause the core socialist revolution.

17. Criticism by Magdoff : Distinction between Colonialism and Imperialism The problem facing the ex-colonial powers in the aftermath of the first wave of decolonizations immediately after WW deuce was how to maintain economic dominance of the decolonized countries [control of raw materials, cheap labor supply, market for industrial goods] without having to resort to colonialist style occupation and governance all while giving them a semblance of economic and political independence. Magdoff is highly sympathetic to Lenin's account but warns against turning into a rigid formula that can be applied to all periods and situations. [ cf Imperialism: From the Colonial Age to the Present p95ff]. Magdoff argues that Imperialism is the result of the process of capital accumulation. In Lenin's theory the central aspect is the export of capital. Yet today, taking into consideration debt repayment, many peripheral countries are net exporters of capital [cf. Michael Hudson Trade, Development and Foreign Debt].

18. Magdoff lays down 5 conditions for a satisfactory theory of imperialism: 1) "Restless expansion--the accumulation of capital-- is the driving force and the very essence of capitalism. The desire and need to utilize resources of other nations for this accumulation process are present in all stages of capitalist development... 2) "The origin of capitalism as a world system determined its structure and strongly influenced its entire course of development... 3) "The more powerful capitalist nations grafted their mode of production on the rest of the world... 4)" The world capitalist system... had two historically new features a) the institution of an international division of labor between manufacturing nations and those that provided raw materials and food and b) the creation of a hierarchy in which the overwhelming majority were dependent on a few centers of industry and banking... 5)" the laws and institutions of capitalism constantly reproduce the international division of labor and the hierarchy of economic and financial dependency." Ibid p 98.

19. Territorial Expansion, Exercising Monopolistic Control through State Power in conjunction with the Monopolistic Control of Finance Capital Lenin theorized that these two developments were intrinsically linked. The concentration of capital created inequality. Inequality in the core constrained aggregate demand levels. The general population could not absorb the mass of commodities achieved by higher levels of productive capacity. Insufficient demand created continual realization crises. The price of raw materials threatened profits further. The falling rate of profit required economic expansion to open up new regions for investment, sources of raw materials, and new consumer markets.

20. Conclusion Lenin’s theory is also complemented by few others. One exception among classical Marxists, for e.g. was Leon Trotsky, who in the 1920s formulated the 'unity' of the world system in his Law of Combined and Uneven Development. 12 Trotsky argued that, with the development of capitalism as a world system through the internationalization of capital, world history would become a contradictory but concrete totality. In this totality, countries would develop at an uneven pace in relation to one another, and even inside the backward nations themselves, advanced and primitive features of economy and society would coexist. This would constitute a unique historical situation, ripe for socialist revolution. This more complex view of history enabled Trotsky to transcend the evolutionist conception of history as a succession of rigidly predetermined stages which was the received Soviet interpretation of Marx's theory of history, just as it was the liberal Western model of social evolution.