There is no single specific theory of underdevelopment. However, there are different theories, under different names, that have tried to explain the persistent underdevelopment of low-income countries worldwide.
Such theories are known as Neo-Marxist theory, dependency theory, world-system theory, and structural theory.
The main contributors of these theories are mostly Latin American economists such as A.G. Frank, R. Prebisch. H.W. Singer. T. Dos Santos, Immanuel Wallersteir among others.
These different theories have a common argument that the global capitalist system of the present day is the main cause of the persistent underdevelopment of the low-income countries.
According to these theories, the global capitalist system is such that there is a center peripheri relationship between the rich and poor countries where the few rich countries are at the center, which control the global economy.
Where the low-income countries are in peripheri and they are hugely dependent on the center.
Such center-peripheri relationship between the developed and underdeveloped countries is the reason of underdevelopment of the peripheral countries.
The proponents (समर्थकहरु) of these theories argue that the center is intentionally exploitative or unintentionally neglectful, that make the efforts by the underdeveloped countries for their self-reliant and developed economies unsuccessful.
It means the developed countries are becoming more developed at the cost of underdeveloped countries, and so the underdeveloped countries have remained so for a long time despite various efforts they have made to transform their economy.
To explain the persistent underdevelopment of the low-income countries, there are different approaches used to justify such as
1. Neo-Colonial Dependency Model/Approach:
According to this approach, most of the underdeveloped countries were colonized by the developed, and though they are free politically, a new form of colonization is still there.
It is the economic colonization by the developed countries where the MNCs from the developed countries control the natural resources and market of the underdeveloped countries.
The multi-lateral institutions, such as the World Bank, IMF, WTO, etc., work to favour the developed countries in creating control of the underdeveloped countries’ economy directly or indirectly.
This new form of economic colonization has further increased the dependency on the center, and underdevelopment is a common phenomenon.
2. False Paradigm Model/Approach:
This model argues that the underdevelopment is due to the wrong or faulty development model or practices of the low-income countries.
Since the underdeveloped countries do not have sufficient resources, they receive technical and financial assistance from the developed countries, where experts from the developed countries develop a plan or model of development.
Since such experts are not well aware of the need, priority, and expectation of society, the development model fails to develop the economy.
Similarly, the underdeveloped countries copy the development model of the developed countries, which may not be appropriate given the different context, and fail to deliver the development outcome.
The developed countries also provide study scholarships, training, and capacity-building workshops to the bureaucrats, academics, politicians, the private sector, and civil society.
Once they return from the developed countries, they try to implement the learning from the developed countries, which may not be appropriate and fail the whole development efforts.
3. Unequal Exchange Model/Approach:
This model shows that the exchange between the developed and underdeveloped countries is not fair, where the developed countries receive more benefits from such an exchange.
The underdeveloped countries exports low value added primary products and raw material whereas they import costly technology and expensive manufacturing products.
Similarly, the underdeveloped countries export cheap labour and hire high-skilled human resources at significantly higher wage rates.
The developed countries repatriate profit (Repatriate profit means to bring back the profit earned in a foreign country to the company’s home country) from underdeveloped countries more than the investment they have made through MNCs. This creates an unfavorable exchange rate for the underdeveloped countries, making them more dependent and underdeveloped.
4. Technological Dependence Model/Approach:
For the development of technology, it requires a huge investment in Research & Development (R&D), which the underdeveloped countries cannot afford. So, they have to rely on the developed countries for the transfer of technology. The developed countries assist with physical infrastructure, but not with the development of home growth technology.
The transfer of technology from developed countries gradually displaces the local technology and ultimately makes the underdeveloped countries fully dependent on developed countries for technology. This further increases dependency and underdevelopment.
5. Dualistic Model/Approach:
This model argues that the existing capitalist system not only creates dualism globally but also the dualism within the country.
There is a rural-urban dualism where the rural economy is dependent on the urban for services such as health, education, financial services, and other markets.
The urban area is more congested with increasing population, pollution, inequality, and crimes, whereas the rural area is gradually transforming into less populated and underutilized resources.
Similarly, the MNCs have created dualism in consumers’ choice and preferences, where in the urban area, the highly sophisticated life is enjoyed by the elites with global facilities and preferences. On the other hand, there is a group of people who are struggling to preserve their taste, culture, and tradition.
Gradually, the dominance of MNCs is destroying the local products, technology, taste, and preferences. This leads to increasing dependency and underdevelopment.
Therefore, the existing global capitalist system is the main cause of the persistent underdevelopment of low-income countries. So, to overcome this problem, these theories have suggested the following tips:
- Priority on exploration and utilization of local products, technology, and resources.
- Increase the collective bargaining by the underdeveloped countries being unified.
- Exchange of ideas and experience between the underdeveloped countries to deal with the common problems.
- Promote trade, investment, and technology transfer between the underdeveloped countries based on their comparative advantage.