We explain what the economic dependence of a country is, its effects and to what degrees it can occur. Also, its relationship with globalization.
What is economic dependence?
economic dependence It is the situation of anchoring or need that the economy of one country experiences with respect to that of another whose production level is much higher. This relationship occurs due to the asymmetric commercial and financial links that exist between both nations, and that are generally the result of old colonial relations or political submission between them.
Economic dependence is part of the ideas proposed by the Dependency Theory, formulated by social scientists between the 1960s and 1970s, to explain the difficulties faced by the nations of the so-called Third World on their path towards development and industrialization.
According to this theory, these difficulties are a consequence of the establishment of cultural, economic and political relations of wide inequality between rich and poor countries, a legacy of the colonial world of past centuries.
According to this theory, economic dependence exists in the commercial and financial relations between two nations, one being developed and the other developing, when these benefit the first for the most part, given that competition does not occur in equality of terms.
This is explained because developed nations try to maintain with others an exchange of raw materials for manufactured products of higher value, in which they always win. Furthermore, through military and political means (such as international sanctions) they hinder the path of any nation that seeks to become independent and develop autonomously.
However, it is also possible to talk about economic dependence in another context, such as globalization. In this sense, the dependence It is established as a logical consequence of the volume of exchange between two nations which does not mean that it is an equitable or symmetrical process.
For example, in the trade competition between China and the United States at the beginning of the 21st century, China is even more dependent on the US economy than the United States is on China, although that balance of forces seems to change very quickly.
See also: Economic globalization
Effects of economic dependence
Economic dependence is expressed in the dependent country through situations such as the following:
- Lack of productive diversification. When a power buys a single product from a weaker nation, said income usually becomes the majority of its economy, causing the growth of its production far above the rest of the items in the economy. Thus, the dependent country runs the risk of becoming a mono-exporting country, and of finding itself at the mercy of the ups and downs of the economy of its majority buyer.
- Control of productive sectors. It occurs when companies from another country, especially transnationals or megacorporations, fill a sector of the economy of the dependent country, defeating the competition and controlling the supply of said goods and/or services. Then, the country begins to depend on these areas of companies whose ultimate objective is to provide wealth to foreigners.
- Sociopolitical dependency. When the economy of a country (and therefore the standard of living of its people) is strongly subject to a foreign country, the latter obtains important power when it comes to pressuring society to advance in one direction or another, or precisely to prevent him from doing so. Thus, economic power brings with it political and cultural power, establishing hegemony.
- Postponement of development. Although economic dependence provides short-term wealth to the dependent nation, such wealth does not translate into the development of the rest of the productive and social areas, but on the contrary tends to slow down the dynamics of development and keep the country in its place. subordinate situation.
Degrees of economic dependence
Economic dependence is a qualitative concept, that is, it is not usually quantifiable, since it deals with the functioning of the economy and its consequences in other areas.
However, specialists have tried to find indicators of the degree of dependence between two countries, for which they usually use the percentage of exports from one country to the other: The greater the exports, the greater the degree of dependence on that country.
For example, the United States and Mexico have close trade relations, given their geographical proximity. However, 74% of Mexican export products are consumed by the United States, while Mexico consumes only 13% of total US exports. This means that Mexico is more dependent on the United States, in a ratio of 74/13%.
Continue with: Macroeconomics
References
- “Dependency (political)” on Wikipedia.
- “The theory of dependency” in the Junta de Andalucía (Spain).
- “Economic dependence” by Guillermo Mayr in El Jinete Insomne.
- “What is economic dependence?” in Market Business News.
