There is no single specific theory of underdevelopment. However, there are different theories under different names that try to explain the persistent underdevelopment of the low-income countries throughout the world. Such theories are named differently as Neo-Marxist theory, dependency theory, world system theory & structural theories. The main contributors to these theories were mostly Latin American economists such as H.G. Frank, R. Prebisch, H. Singer, Dos Santos, Immanuel Wallerstein, among others.
These different theories have a common argument that the global capitalist system of the present day is the main cause of persistent under-development of the low income countries. According to these theories, the global capitalist system is such that there is a center–periphery relationship between the rich and poor countries where the few rich countries are as the center which control the global economy where the low income countries are in peripheri and they are hugely dependent with the center. Such center–peripheri relationship between the developed and under-developed countries is the reason of underdevelopment of the peripheral countries.
The proponents of these theories argue that the center is intentionally exploitative or unintentionally neglectful, which makes the efforts by the underdeveloped countries to their self-reliance and developed economies are 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 the various efforts they have made to transform their economy.
To explain the persistent under-development of the low-income countries, there are different approaches used to justify such as:
1. Neo-colonial Dependency 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 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 do not have sufficient resources, they receive technical & financial assistance from the developed countries, where experts from 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, academicians, 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 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 export low-value-added primary products & raw materials, whereas they import costly technology, 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 from underdeveloped countries more than the investment they have made through MNCs. This creates unfavorable exchange for the underdeveloped countries, making them more dependent and underdeveloped.
4. Technological Dependence Approach
For the development of technology, it requires huge investment in 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 homegrown technology.
The transfer of technology from developed countries is gradually displacing the local technology and ultimately making the underdeveloped countries fully dependent on developed countries for technology. This further increases dependency and underdevelopment.
5. Dualistic Approach
This model argues that the existing capitalist system not only creates dualism globally (center–periphery) 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 taste, 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 preference. 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:
- 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 problem.
- Promote trade, investment, and technology transfer between the underdeveloped countries based on their comparative advantage.