Is Dependency Concept Related within the Twenty-First Century?

Within the final decade, the controversy over the relevance of the dependency idea in explaining up to date worldwide political financial system has re-emerged in tutorial discourse. The dependency idea emerged within the Sixties as a response to the modernisation idea and trickle-down financial idea. Whereas the modernisation idea assumes a unilinear and progressive growth of societies by holding industrialisation as a prerequisite for growth (Regmi, 2018), the trickle-down idea contends that fast financial development robotically reduces inequality as wealth trickles down from the wealthy to the poor (Arndt, 1983). As a critique of each theories, the dependency idea argues that growth is neither unidirectional nor financial development in developed nations robotically interprets to the event of much less developed ones. As an alternative, underdevelopment outcomes from obstacles created by ‘centre nations’ by way of the combination of ‘peripheries’ into the world capitalist system, resulting in the financial reliance of the periphery on centre nations. Though the dependency idea was a dominant explanatory framework between the Sixties and Nineteen Eighties, it declined within the mid-Nineteen Eighties because of the rise of neoclassical economics and its lack of ability to clarify some modifications within the worldwide political financial system construction, notably the financial success of the Newly Industrializing Asian nations (Kvangraven, 2021). Nonetheless, the persistence of uneven growth and rising poverty traits has led to the re-emergence of educational discourse relating to the relevance of dependency idea in explaining at the moment’s world inequalities.

This essay argues that regardless of the modifications within the worldwide financial order, which led to a decline within the reputation of the dependency idea, the speculation stays related in explaining financial and energy relations between states within the twenty-first century globalised financial system. The manifestation of the unequal and exploitative relationships between the International North and International South nations might be seen in lots of spheres, together with financial, political, army, and beliefs (Galtung, 1971). Nonetheless, this essay will deal with the function of overseas assist by the Worldwide Financial Fund in perpetuating the dependence of International South nations. Apart from rising the debt profile of International South nations, the circumstances connected to worldwide assist by western monetary establishments are detrimental to the financial system of the peripheries because it limits the decision-making functionality of assist recipient nations. Consequently, this has led to the lack of the worldwide south nations to take possession of their nationwide growth schemes. The resultant impact is financial and political dependencies, which has additional widened the developmental hole between the developed industrialised nations and the third world nations. 

Nigeria, the world’s eighth-largest recipient of overseas assist and second in Africa, is used as a case examine as a result of over forty per cent of the nation’s inhabitants live under the poverty line, in response to the Nigerian Nationwide Bureau of Statistics (Aderounmu et al., 2021). Moreover, the determine is estimated to extend to forty-five per cent within the 12 months 2022 by the World Financial institution (Irwin et al., 2021). The essay is structured into 4 components. After the introduction, the underlying assumptions of the dependency idea had been mentioned. The third half explains the up to date relevance of the speculation utilizing IMF-Nigeria relations as a case examine. The ultimate half provides the conclusion.

Theoretical Background

Dependency idea was developed as a framework for understanding the explanations for the divergence within the growth degree between wealthier and poorer nations. Traditionally, the speculation was first used to clarify the underdevelopment of Latin America and is related to students comparable to Paul Prebisch and Hans Singer. Prebisch, in 1949 had argued that Latin America is underdeveloped as a result of it relied on the exportation of main commodities, which resulted in unequal commerce phrases between Latin American nations and developed western nations. Nonetheless, a number of variants of the dependency idea have been used to clarify underdevelopment in different world areas, comparable to Africa (Rodney, 1972; Amin, 1974) and Asia (Ohno, 1998). Dos Santos (1970:231) defines dependency as ‘a state of affairs wherein the financial system of sure nations is conditioned by’ the event processes of different nations. The principle argument of the dependency idea is that the incorporation of the ‘satellites’ into the world capitalist system dominated and managed by the ‘metropolis’ has resulted in an unbalanced relationship that retains the satellite tv for pc nations depending on the economies of the metropolis. The central assumptions of the speculation embrace: (a) Underdevelopment, which is totally different from un-development, offers with the lively extraction of assets from periphery nations for the advantage of the core nations (b) the world is polarised into two: the extremely industrialised rich core nations and fewer industrialised poor peripheries (c) The periphery nations are poor as a result of they’re forcefully built-in into the worldwide division of labour the place they functioned as producers and suppliers of uncooked supplies or repositories of low-cost labour (d) Useful resource diversion is maintained by way of lively collaborations of native elites and dominant states who share frequent pursuits (Namkoong, 1999).

The dependency idea has been subjected to a number of criticisms. Kvangraven (2021) argues that many of the criticisms of dependency idea are primarily based on a superficial, incorrect, and incomplete understanding of the speculation’s core assumptions. Nonetheless, the critiques centre on its emphasis on exterior components as causes of underdevelopment (Sanchez, 2003), financial reductionism (Grosfoguel, 2000), tautology and lack of precision (Lall, 1975). Kvangraven (2021) states that whereas some criticism, comparable to tautology, is legitimate in some instances, others signify minority views inside the dependency custom. Moreover, Amsden (2003) criticised the dependency idea for suggesting the impossibility of reaching growth inside the worldwide capitalist framework and failing to account for the event of some conventional periphery nations. Critics posit that the rise of Hong Kong, Taiwan, South Korea, and Singapore’s economies signifies the potential for attaining financial progress beneath the built-in world financial system (Sanchez, 2003). Nonetheless, Kvangraven (2021) maintains that the financial transformation of those nations doesn’t contradict the essential assumption of the dependency idea. As shall be argued on this essay, the dependency idea nonetheless presents an important explanatory energy in explaining at the moment’s world inequalities regardless of its relegation within the area of growth research.

The Worldwide Financial Fund and Dependency Concept within the 21^st Century 

The Worldwide Financial Fund (IMF) was established on the Bretton Woods Convention in 1944 to handle the worldwide financial system after the Nice Despair of the Nineteen Thirties and the Second World Struggle (Igwe, 2018). The preliminary perform of the IMF was to keep up trade fee stability by offering loans to nations experiencing non permanent stability of cost crises (Ahmed, 2018). Nonetheless, the function of the IMF has advanced to incorporate structural reforms, home monetary system stability, debt disaster administration and pandemic response (Yoon, 2005). The monetary assist of the IMF is tied to the implementation of sure financial coverage circumstances, which incorporates commerce and monetary liberalisation, deregulation, privatisation, forex devaluation and different market-liberalising reforms. These neo-liberal reforms, generally known as the Structural Adjustment Programme (SAP), intention to facilitate the growth of capitalism and the combination of creating nations into the world capitalist financial system. Whereas the imposition of SAP as a precondition for acquiring monetary help by the IMF has lengthy been a topic of criticism, the logic behind these circumstances and their up to date results conforms with the essential assumptions of the dependency idea. Whereas Nigeria adopted SAP in 1986, the IMF mortgage conditionalities have advanced within the twenty first century to mirror the rising involvement of the IMF in low-income nations experiencing structural issues. The connection between Nigeria and the IMF as a lender of final resort is exploitative, favouring the latter on the expense of the previous. This has introduced untold hardship to the Nigerian populace and has additional widened the inequality hole between Nigeria and developed nations of the West.

The dependency idea can be utilized to clarify Nigeria’s reliance on overseas assist from the IMF. The motive behind assist issuance aligns with the dependency idea assumption of a polarised world between the ‘Centre’ and ‘Periphery’. Though the IMF includes 190 member states, the establishment is managed by industrialised western powers, as noticed in its governing construction. As an example, the members of the IMF are hierarchically positioned in response to the quota assigned to them primarily based on their relative financial place on the earth’s financial system. The IMF quota system considers every nation’s Gross Home Product, openness, financial variability, and worldwide reserves (Jha and Saggar, 2000). Equally, the establishment’s decision-making process is by weighted voting, and the load of every nation’s voting proper displays its quota (Mayer and Napel, 2020). This means that choices of the board primarily mirror the pursuits of economically developed nations that dominate world commerce. Nigeria is an everyday recipient of IMF financing and is at present among the many closely indebted nations in sub-Sahara Africa. A current statistic by the Debt Administration Workplace in Nigeria reveals that the nation owes the IMF $3.45 billion as of September 2020 (Ugbodaga, 2021). Nigeria’s excessive dependence on loans from the IMF has worsened its debt disaster because it has resulted in a debt burden that has distorted the nation’s growth. Because of the assets directed towards debt servicing, the debt disaster has restricted the nation’s capability to spend money on vital growth-sustaining infrastructure (Yusuf and Mohd, 2021). Consequently, Nigeria has discovered itself in a really “tightrope debt lure” with unsustainable exterior debt. From the dependency idea’s perspective, the IMF’s loans might be seen as a mechanism utilized by extremely industrialised nations to keep up the dependence of the Periphery on their economies beneath the pretense of helping in reaching financial growth.

The IMF mortgage conditionalities and their results have additional made the dependency idea related within the Twenty-First Century. Apart from lowering financial development in Nigeria, the mortgage conditionalities infringe on the nation’s nationwide sovereignty and have restricted the Nigerian authorities’s capability to handle the nation’s inner financial affairs. It’s because the predetermined financial insurance policies beneath the IMF packages have led to the failure of the Nigerian authority to control its financial system. Whereas the IMF typically claims that the insurance policies intention to facilitate financial growth, these insurance policies are imposed with little or no session with the Nigerian authorities and with out regard for the nation’s financial circumstances (Eberlein, 2006). Furthermore, the IMF fails to contemplate the distinctive causes of Nigeria’s financial challenges by imposing the Structural Adjustment Programme (SAP), which is seen as a ‘one-size-fits-all’ method. As an assist recipient, Nigeria lacks the facility to independently resolve what to do with the loans obtained from the IMF with out enter from the worldwide monetary establishment, because the donor’s curiosity stays paramount. Ikejiaku (2008) argues that whereas creating nations demand loans to enhance their financial state of affairs, the circumstances connected to the loans typically worsen the state of affairs. As an example, the continuous adoption of the SAP and different financial liberalisation insurance policies in Nigeria as preconditions for assessing IMF loans has worsened its debt disaster and has resulted in socio-economic and political crises in Nigeria. Consequently, the nation’s debt repayments might be seen as an instrument of neo-imperialism because it erodes the Nigerian authorities’s energy to satisfy its residents’ wants and make financial choices that enhance the welfare of its residents (Dantani, 2019). Nigeria continues to undertake the IMF-imposed liberalisation packages regardless of limiting its capability to make essential financial choices that go well with its native peculiarities. 

Via its mortgage conditionalities and high-interest charges, the IMF has saved Nigeria in a vicious cycle of never-ending debt dependency. Each time a rustic makes an attempt to interrupt away from this exploitative relationship, the IMF withdraws or delays mortgage disbursements till the circumstances are completely accepted. An instance is the disbursement delay of the Second largest IMF COVID-19 emergency fund for Nigeria because of the disagreement between Nigeria and the IMF over the circumstances connected (Amuno, 2020). The saying “he who pays the piper dictates the tunes” explains why the IMF have an unlimited affect on the Nigerian financial system. Nigeria is left with little or no selection however to just accept the stringent mortgage circumstances because the nation is politically and economically weak in a world characterised by energy. The adoption of the Structural Adjustment Programme has had hostile results on Nigeria’s growth. The commerce liberalisation coverage, as an illustration, has inspired the expansion of overseas firms in Nigeria and has opened the Nigerian financial system to superior over-priced overseas merchandise (Adenikinju and Chete, 2002). The costs of regionally produced Nigerian items are intentionally saved low and subjected to the forces of demand and provide. This has led to the lack of native industries to compete with their overseas counterparts resulting in the eventual closure of most native industries. The state of affairs has left Nigeria’s financial system on the mercy of transnational firms who act as brokers of Western nations to take advantage of human and pure assets. Particularly, multinational firms comparable to Shell Petroleum Growth Firm (SPDC) within the Niger-Delta area of Nigeria have been a clog within the wheel of Nigeria’s growth. The actions of SPDC within the Niger Delta area have led to developmental challenges comparable to poverty, political instability, unemployment, civil unrest, and environmental degradation (Oluwaniyi, 2019). Moreover, the participation of Nigeria within the International Worth Chains, ‘the place the totally different levels of the manufacturing course of are positioned throughout totally different nations’, has additional given extra room to multinational firms, thereby reinforcing the core vs periphery sample (Trienekens, 2012).

One other offshoot of the IMF-imposed Structural Adjustment Programme in Nigeria is the privatisation coverage, with financial liberalisation as its main focus. Privatisation entails the partial or outright gross sales of public enterprises to non-public people to make them extra environment friendly and efficient (Asaolu et al., 2005). The coverage goals to scale back authorities spending to generate income accessible for debt servicing and put Nigeria in a greater place for extra mortgage procurement (Ojo and Fajemisin, 2010). Privatisation has led to the sale of big utilities in Nigeria, such because the Nationwide Electrical Energy Authority (NEPA), the Nigerian Telecommunication (NITEL), and the Nigerian Port Authority. Whereas the privatisation coverage has not resolved the issues going through public enterprises in Nigeria, the coverage has worsened growth challenges in Nigeria with hostile social results comparable to inflation, unemployment, and corruption (Orji et al., 2014). The coverage has contributed to the present inflation fee in Nigeria, which is about 15.63 per cent and its unemployment fee of about 33.3 per cent (Nwokoma, 2021; Izuaka, 2022). Apart from, Eke et al. (2017) argue that the privatisation coverage has led to the return of overseas expatriates, who had initially relinquished the businesses to the Nigerian authorities after colonialism, as government administrators of the privatised corporations. Consequently, this has compromised Nigeria’s financial sovereignty and reasserted the dominance of the nation’s financial system by foreigners because of the predominance of overseas traders within the privatised corporations (Excellence-Oluye et al., 2019). This has perpetuated Nigeria’s dependency on western-controlled overseas transnational firms because of the lack of ability of the Nigerian authorities to manage and management the actions of overseas industries, such because the Shell Petroleum Growth Firm (Nwozor, 2020). Consequently, adopting the privatisation coverage in Nigeria has promoted overseas capitalist pursuits and supplied alternatives for human and materials assets exploitation (Odukoya, 2007).

This exploitation is typically made potential by way of the collaboration of Nigerian elites and the transnational firms representing western pursuits in Nigeria. The Nigerian governing elites use state energy to advance the pursuits of overseas capital since these pursuits coincide with their very own. An instance is an allegation by the African Fee on Human and Peoples’ Rights of SPDC utilizing its relationship with the Nigerian authorities to take advantage of the oil-rich Niger Delta (Ryerson, 2018). Regardless of the proof of exploitation and unlawful actions in opposition to SPDC resulting in the underdevelopment of the Niger-Delta space, the Nigerian authorities continues to deploy state energy to guard SPDC’s financial pursuits. The resultant impact is the lowering independence of the Nigerian financial system and the rising autonomy of transnational firms in Nigeria. This additional aligns with the dependency idea’s assumption of the reciprocal relationship between political and financial elites in periphery and centre nations.

Conclusion

This essay has examined the relevance of the dependency idea in explaining at the moment’s world imbalances. Regardless of the decline within the reputation of the dependency idea, it may be used to clarify the up to date relationship between Nigeria and the IMF, which has bolstered the Nigerian financial system’s dependence on western nations. Via its mortgage conditionalities, the IMF has saved Nigeria in a debt cycle resulting in the lack of Nigeria to control its financial system. This has saved Nigeria’s financial system underdeveloped and widened the inequality hole between Nigeria and Western International locations. To interrupt away from this exploitative relationship, Nigeria should embrace industrialisation with out exterior dependence.

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