Dependency Theory or Neoliberalism - Essay Example

?DEPENDENCY THEORY OR NEOLIBERALISM Introduction The end of all forms of slavery and colonization brought a new wave of global development agenda where the development of individual countries no longer became the sole responsibility of the countries involved but the collective responsibility of the world at large (Eecke, 2002). The proof of this idea is in globalization, which has become a system through which the world has now been seen to be a global village whereby each nation depends on the other for one form of development or the other. It is in the need for each nation to be its other’s keeper that brought the search for various forms of political and socio-economic theories that could best serve the interest of all sides involved, namely the developed world and the developing world. As a matter of fact, the need for nations of the world to be depending on each other has gone on any way, regardless of the fact that there still remain disparities among countries in terms of levels of development. The search and application of a workable theory of ensuring fair dependence whereby none of the parties will become worse off because of the dependency that exists has therefore become of great concern to historians and social politicians (Pantaleoni, 1898). In this essay, two of such theories namely dependency theory and neoliberalism are compared hand in hand to find which of them is convincing for the present global economic system. Overview of Dependency theory Dependency theory is not as common today as it was three decades back. This is because the practical application of the theory seems to have seized on an international level even though it is somewhat practiced intra-nationally like within various states or regions of a single country (Friedman, 1962). Dependency theory, as its name implies could be defined as “an explanation of the economic development of a state in terms of the external influences--political, economic, and cultural--on national development policies (Osvaldo, 1969). From the definition, there is a realization that there are three major components of dependency theory with the first being the fact that two major types of nations are identified. These nations are the dominant and dependent. The dominant nations could be identified as the wealthy and well to do developed countries with fatter gross domestic product while the dependent nations are the poor nations with low gross domestic products. The second component of dependency theory has to do with the fact that the dependence that exists on the dominant states from the dependent states results in a situation whereby there is the creation of external forces through which the dominant states impose their economic interests on the dependent states. Finally, the theory is made up of a component that suggests that the dependency that goes on is dynamic, changing constantly with time. As the changes go on, gap of unequal states of development becomes widened. Overview of Neoliberalism Neoliberalism has its background meaning in the structure of its name as it literally means a new liberalism. This means that neoliberalism actually evolved from the theory or concept of liberalism. Neoliberalism has been very population in the past twenty five (25) years as it continues to be practiced among most states of the world, including recognized international organizations and institutions such as the International Monetary Fund and the World Bank (Beveridge, 2004). Basically, could be defined as a form of “market transaction, conducted in competition with every other being and influencing every other transaction, with transactions occurring in an infinitely short time, and repeated at an infinitely fast rate” (Treanor, 2006).From the definition presented by Trenor (2006), there are a number of key issues that can be identified of neoliberalism. Key among these include the fact that neoliberalism identifies the urgency of an all round market system whereby the most important act for economic advancement is a repeatitive 24 hour market system that never halts for any reason. But unlike in the case of liberalism and free market, neoliberalism looks at contracts as a crucial component of marketing instead of properties. Between countries therefore, neoliberalism is seen a practice where there is the liberation of individual entrepreneurial freedom to allow individual countries to find and create their own market spaces. Rationale for support for Neoliberalism The writer is more convinced with neoliberalism as compared to dependency theory. The rationale for this selection is in the need for the promotion of a true state of freedom and independence among countries. Even though about four decades ago most countries of the world gained political independence from their colonial masters, there was still a striking lack of absolute independence as the so called periphery of poor and underdeveloped countries still had to depend on the developed states for their economic survival through dependency theory (Cros, 2000). Meanwhile, the form of dependency that existed only worsened and depleted the fortunes of the poor countries and created an avenue for political slavery to start as the developed countries re-imposed various forms of political and economic ideologies on the less privileged countries. With neoliberalism however, economic and political freedom is better consolidated in the fact that countries, no matter their economic standing have the right to make decisions on their trade partners as there is better form of liberalism and individual entrepreneurial freedom. With neoliberalism, countries are offered the opportunity to be more dynamic in their thinking and creative ideas towards economic independence. Why dependency theory is not suitable for the present world economic system Indeed, dependency theory is highly unsuitable for the present world economic system because its fundamental concept of resource depletion of poor and underdeveloped countries would make the global economic system worse off than it is today. First, it will be noted that with dependency theory, there will continue to be the widening of the gap between the rich and the poor. Whiles this happens, greater parts of the world is going to remain underdeveloped because the relative percentage of the developed world is nothing compared to those who are developing and underdeveloped. Meanwhile, the world is currently a global village, where the continual inactiveness of one state affects the larger global market badly. Invariably, the world needs a system that creates equal opportunity for all stakeholders to see and achieve true development even among the developed. What is more, dependency theory if practiced in the current world economic system would deepen the indebtedness of most countries because as McGuigan (2013) notes, dependency theory leads to a situation whereby capital is migrated to the developed world, “causing the developing nations to experience a lack of wealth, which forces them to take out larger loans from the developed nations, further indebting them.” Why neoliberalism is suitable for the present world economic system Neoliberalism on the other hand is highly suitable for the present world economic system because it promotes healthy, balanced and fair competition. Even though there has often been a criticism that neoliberalism also leads to a situation whereby the rich continues to be rich and the poor continues to be poor because the rich compete on the open market better than the poor county, there are actually realistic and empirical examples with countries like China and Brazil, who took advantage of the neoliberal system that existed in the past 25 years to find highly innovative and proactive means of being an active part of the global open market such that they are today described as one of the well to do nations of the world (Barnes, 2011). The system of balanced and fair competition alone is a means for allowing countries to be innovative and technical in their economic marketing reasoning. This means that countries are forced to be proactive and forthcoming with market strategies that will ensure that they survive the world competition. Knowing that competition is necessary for growth and development, neoliberalism could be said to be instrumental in growing the existing global market through the open competition it offers. The second reason why neoliberalism is seen as the right intervention for the current world economic system is the fact that neoliberalism works perfectly with the old market and trade system of the creation of sub-market within existing enterprises. Because of the freedom that neoliberalism offers individual countries to go into trade and market partnership, it is possible for a single country to evenly distribute its market resource among a number of partners that it finds useful doing business with. As noted by Treanor (2006), this system of creation of sub-markets allows countries to manage their economies as in a typical management of companies whereby they are offered the opportunity to “create competition among their constituent units.” It is not surprising therefore that it is in the era of the past 25 years when the world started becoming active with neoliberalism that foreign direct investment and trade have increased among most countries of the world that were hitherto only dependent on what they could produce for themselves. Conclusion The search and application of global economic theories will continue to exist as far as differences in political ideologies exists among different countries. But the present paper has revealed that despite the differences that are likely to continue existing, there will always be a single that would gain supremacy over the others at a specified time in the world. In the current global economic system, neoliberalism has been identified as the most dominant theory among most countries and global organizations such as the international monetary fund and World Bank. This form of economic theory seems to have come to replace dependency theory in a large extent though dependency theory continues to be practiced among countries on an intra-national basis. In the opinion of the writer, neoliberalism is more convincing and suitable for the current world economic system because it promotes and enhances fair trade as well as promises a fast growing world economy through foreign direct investment. The selection of neoliberalism is not just by virtue of the fact that that is what is preferred by most world leaders but because that is what has the potential to save poor countries from further depletion of their resources by the developed world (Clarke, 2005). 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