Dependency theory essentially argues that less-developed
countries will be unable to develop because the rich world uses them as the equivalent
of colonies. That is, the rich world uses the less-developed countries as sources of
raw materials and of cheap labor but never lets those countries get to where they can
have major domestic industries of their own.
To understand
this, think, for instance, of Mexico. For much of its history, Mexico was used as a
source of raw materials for the US. The US, for example, bought copper from Mexican
mines while selling finished goods to Mexico. Nowadays, Mexico is a source of cheap
labor. This is why there are so many factories, especially in border areas, all meant
to provide cheap goods for the US market. At the same time, Mexico cannot develop its
own domestic industries. If, for example, a Mexican car maker tried to get started, it
would never be able to compete with foreign car makers who could offer lower prices than
a Mexican firm could at first.
For this reason, development
theory says, less-developed countries like Mexico will tend to be unable to catch up to
the rich world.
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