Capitalism vs. Power: The Core of Dependency in Underdevelopment

Why are some countries rich while others remain persistently poor – even decades after gaining independence? Dependency theorists have a clear answer: it is not a matter of internal failure, cultural backwardness, or lack of effort. Instead, underdevelopment is a condition that has been created and continuously reproduced by the structure of the global economy. At the center of this argument lies a fundamental debate: Is it capitalism – as an economic system – that drives this process? Or is it power, wielded by dominant nations, that is the real engine of dependency? This question sits at the heart of understanding why the gap between wealthy and poor nations has not narrowed as predicted, but in many cases, deepened.

Frank’s foundational argument: underdevelopment as a product of history
The capitalist system and the international division of labor
Metropolis and satellite: how capitalism reproduces dependency
Is it capitalism – or is it power?
Wallerstein and the world-systems perspective
Both forces at work: capitalism and power intertwined

Frank’s foundational argument: underdevelopment as a product of history

Andre Gunder Frank, one of the most influential voices in dependency theory, made a provocative and decisive claim: underdevelopment is not an original state. It is not what poor countries looked like before capitalism arrived. Rather, it is something that capitalism actively produced. In his landmark 1967 work Capitalism and Underdevelopment in Latin America, Frank argued that contemporary underdevelopment is largely the historical product of past and continuing economic relations between satellite underdeveloped nations and the now-developed metropolitan countries. These relations, he insisted, are not incidental – they are an essential part of the capitalist system operating on a world scale.

This framework broke sharply with modernization theory, which portrayed development as a linear, universal process that all countries could replicate by following the path of Western nations. Frank rejected this completely. He argued that looking at the West’s past to explain the Global South’s present leads to fundamental misunderstandings. Underdevelopment, in Frank’s view, results not from a country’s isolation from the wider world, but from its deeply unequal integration into it – through the mechanisms of colonialism, international trade, and multinational capital.

The capitalist system and the international division of labor

Central to the dependency framework is the idea that capitalism enforces a rigid international division of labor that locks peripheral nations into subordinate economic roles. Colonization restructured former colonies’ economies so that they specialized in producing raw materials, cash crops, and foodstuff for export at low prices to the colonizers’ home countries. This was not a temporary arrangement – it created structural distortions that persisted long after formal independence.

Dependency theorists, including Paul Baran, frequently spoke of the international division of labor – skilled workers concentrated in the center, unskilled in the periphery – as a defining feature of dependency. Core nations developed high-technology, capital-intensive industries, while peripheral nations remained locked into extractive, low-value production: mining, agriculture, and raw material export. The terms of trade systematically worked against the periphery, since the prices of manufactured goods imported by poor countries rose faster than the prices of the commodities they exported.

This structure, dependency theorists argued, is not accidental – it is functional for capitalism. The periphery provides cheap labor, raw materials, and export markets that fuel accumulation in the core. As dependency theory highlights, this extractive form of economic production encourages internal stratification and does not permit the accumulation of economic surplus necessary for genuine, self-sustaining development.

Metropolis and satellite: how capitalism reproduces dependency

Frank described the global economy through his metropolis-satellite model. At the top sits the global metropolis – the advanced capitalist nations. Below them are national metropoles within each country, which then dominate their own regional satellites. This chain of surplus extraction operates at every level. Wealth and modernization in core regions structurally depend on the active impoverishment of peripheral regions through unequal exchange, imperial domination, and hierarchical integration into global networks.

Frank’s concept of the “development of underdevelopment” captures this dynamic precisely. Development and underdevelopment are not two separate processes happening in isolation – they are two sides of the same global process. The prosperity of the center and the poverty of the periphery are structurally connected. Developed nations become wealthy by exploiting poorer nations and using them as a source of cheap raw materials and labor, a relationship maintained through Western domination of international trade, large multinational companies, and the dependence of less-developed countries on Western aid.

Frank also used Brazil as a case study to illustrate this dynamic. Despite periods of rapid industrialization – particularly between World War I and World War II – Brazil could not break out of the cycle of underdevelopment due to its continued reliance on more developed nations as a destination for its resource exports. Growth occurred, but within the parameters set by the global capitalist structure.

Is it capitalism – or is it power?

While Frank’s framework squarely blames capitalism as the structural engine of dependency, other theorists raise a parallel and equally important question: even if capitalism provides the economic mechanism, is it not power that makes that mechanism stick? This is where the debate becomes more nuanced.

Former Brazilian president and sociologist Fernando Henrique Cardoso offered a more politically grounded version of dependency theory. Cardoso argued that financial and technological penetration of periphery countries by developed capitalist centers produces unbalanced economic structures, limitations on self-sustained growth, and class relations that require modifications in the role of the state to guarantee the functioning of the economy. For Cardoso, power relations – including class alliances, state structures, and elite interests – shaped how dependency operated within each country, not just between them.

The concept of neocolonialism sharpens this point further. Neocolonialism refers to unequal economic and power relations that persist between former colonies and former colonizing nations – colonialism by other means, where formal political independence masks continued economic subjugation. Trade agreements, foreign debt, and the conditionalities attached to loans from institutions like the IMF and World Bank all function as tools through which core nations maintain influence over the policy choices of peripheral states. As Ghanaian leader Kwame Nkrumah observed, a state subject to neocolonialism is, in theory, independent – but in reality, its economic system and thus its political policy are directed from outside.

Dependency theorists also point to the role of local elites – often called compradores – who act as intermediaries between global capital and domestic populations. These business elites depend on the international economic order for their survival and often act as intermediaries between transnational capital and multinational corporations on one hand and domestic labor on the other. Their interests align with the core rather than with national development, reinforcing dependency from within.

Wallerstein and the world-systems perspective

Immanuel Wallerstein extended dependency theory into his world-systems analysis, introducing a tripartite division of the global economy into core, semi-periphery, and periphery. Core countries have higher-skill, capital-intensive industries, while the rest of the world has low-skill, labor-intensive industries and raw material extraction – a structure that constantly reinforces the dominance of core countries. The semi-periphery acts as a buffer zone, partially exploiting peripheral nations while itself being exploited by the core.

Wallerstein agreed that unequal exchange was at the heart of global inequality, but he shifted emphasis. For Wallerstein, unequal exchange was buttressed by political power – either through outright colonization, or through neocolonization, where peripheral states, though nominally independent, were subject to the dictates of the core. This is a crucial distinction: it suggests that power is not merely a byproduct of capitalism, but an active force that sustains and legitimizes unequal economic arrangements.

Wallerstein also differed from Frank in arguing that capitalism operates through a transnational rather than strictly international division of labor. Core states do not simply exploit poor states as a whole – rather, capitalism is organized around an inter-regional division of labor that cuts across national boundaries, exploiting workers in all zones depending on their position within global production chains.

Both forces at work: capitalism and power intertwined

The debate between capitalism and power as the root of dependency may ultimately be a false binary. The two forces are deeply intertwined. Capitalism creates the economic incentives for exploitation – the drive to expand markets, extract cheap resources, and accumulate capital. Power ensures that these arrangements are enforced and sustained – through military presence, trade policy, financial conditionalities, and the influence of transnational elites.

The legacy of colonization and exploitation continues to shape the development trajectories of countries today – the current global economic system is a continuation of the colonial era, where the wealth and progress of developed nations is built on the backs of the underdeveloped ones. Even as formal empires collapsed in the 20th century, the structures they created – export-oriented economies, weak industrial bases, debt dependence – remained. Power adapted its form; the economic hierarchy did not dissolve.

Today, financial mechanisms including structural adjustment programs, debt servicing obligations, and capital market liberalization have often intensified dependency rather than promoting development. A multinational corporation that designs products in core countries, manufactures components in semi-peripheral ones, and assembles them in the lowest-wage peripheral locations captures most of the value at the top – while workers and states at the bottom receive a fraction of what they generate. This is capitalism operating through power, in real time.

What do you think? If underdevelopment is structurally produced by global capitalism, can peripheral nations ever achieve genuine development without challenging the rules of the international economic system itself? And if power – through institutions, elites, and trade agreements – is what enforces these arrangements, what does meaningful reform actually look like?

How useful was this post?

Click on a star to rate it!

Average rating 0 / 5. Vote count: 0

No votes so far! Be the first to rate this post.

References

PDF 📄

Table of Contents

Frank’s foundational argument: underdevelopment as a product of history 🔗

The capitalist system and the international division of labor 🔗

Metropolis and satellite: how capitalism reproduces dependency 🔗

Is it capitalism – or is it power? 🔗

Wallerstein and the world-systems perspective 🔗

Both forces at work: capitalism and power intertwined 🔗