Neo-Marxist Theories of Dependency:
The end of the Second World War introduced economic expansion as well as East-West polarization due to the evolution of the Cold War. Social studies at the time were encouraged to promote economic development and political stability in Third world, resulting in numerous theories on (under)development.
The Modern School of development promoted protectionist theories along with industrialization through import subsidies. The result was economic expansion in the 1950s followed by economic stagnation (unemployment, inflation, etc).
The resulting economic stagnation lead to a decline in interest in modernization school theories and have given rise to Neo-Marxist dependency theories. Two classical neo-Marxist dependency theorists are important to remember when discussing dependency theory: Paul A. Baran and Andre Gunder Frank.
Baran argued that Third world countries were characterized by small industrial sectors and large agricultural sectors, which was not immensely profitable on world a scale. He emphasized class relations and their impact on utilization of economic surplus, as well as the distribution of power as primary barriers which prevented development. He espoused that internal conditions were the source of the major problems in underdeveloped countries, and recommended state intervention to promote nationally controlled industrialization as a precondition for evolution of other industrial sectors.
Andre Gunder Frank disagreed: The cause of underdevelopment is rooted in the metaphor of metropoles and satellites, where metropoles are the large merchant capital and satellites are underdeveloped countries. The sole purpose of the satellites is for ‘feeding’ the requirements of the metropoles through the distribution of resources from the satellites to the metropoles. His solution to the problem was that Third world countries “de-link” themselves from the world market, allowing themselves the opportunity to develop instead of distributing their own resources to the metropoles. Andre Gunder Frank blamed external factors like colonialism for the existence of underdeveloped countries, whereas the modernization school assumed all causes were to be found internally – such as in the culture, state overpopulation, absence of investment or general lack of motivation. Gunder Frank also stated that as metropoles (the developed countries) expand and progress, the poverty of underdeveloped satellites will only be perpetuated.
For Falsetto and Cardoso: Dependency theory was dependent on the development of nations outside the Third world, that is, in the already developed countries: The First world may exploit the Third world and drain it of its resources. The frequent argument is that development of the First world is done at the expense of the Third world, and that the only way the Third World will develop is once the capitalist economic system of the First World is destroyed.
It is important to remember however, that Dependency theory is not one single school of thought, but a range of perspectives.