World-System theory of Wallerstien based on the assumption that a particular country’s internal development may only be understood with reference to the position it occupies, or the role it plays, in the modern world system as a whole. He traced the historical development of capitalism, by focusing on the insurgence and functioning of an international market comprised of three levels, the periphery, semi-periphery and the core. The core nations hold privileged position in international trade because of the historical terms under which they initially entered the world economy. This resulted in the economic stagnation of the periphery, and the continued and even widening gap between it and the core of the world economy.
The ‘Unequal Exchange’ theory of Samir Amin emphasised on the mechanisms of transfer of the surplus from the periphery to the centre of the world system. Amin traced the roots of the backwardness of Third World to the nature of the pre-colonial bourgeoisie towards the colonial rule. This is evident, when he said that the bourgeoisie as a whole stops being national, it cannot fulfil the historical function of primitive accumulation i.e. radically destroys the pre-capitalist modes, ‘saves’ the surplus value and so on. Further, it has to be reactionary (protect the pre-capitalist modes inorder to dominate them), lumpen (consume the surplus value) and dependent”. Even after their political independence, the ex-colonies, says Amin, continue to be the periphery of the capitalist world system. There is no halt to the disarticulation of their economies, to unequal exchange and to the resultant pauparisation of their peoples.
Drawing attention to the possibilities of capitalist development in the Third World, Dependency theorists broadly emphasised that the underdeveloped countries must attempt to overcome their structural dependency and underdevelopment through breaking with the worldwide monopoly network of capitalism. Without such a break, the lumpen bourgeoisie of the Third World countries continue to follow a policy of underdevelopment or lumpen development. They believed in that the transformation of the global system can start only at its periphery. Socialist revolutions in Eastern Europe have marked this initiative. But after the changes in late 1980s, Dependency theorists viewed that the former Soviet block countries have also been part of the capitalist world market.
The Dependency theory has been subjected to severe criticism during the 1970s, challenged by the rapid economic growth achieved by a number of underdeveloped countries of South East Asia such as South Korea, Malaysia, Hong Kong, Singapore, Mexico and Taiwan. With these changes, the World Bank and IMF have started the neo-liberal interpretations of the Third World underdevelopment. This also reoriented the basic concepts like development, politics, people’s participation and governance, which have been discussed in other posts.