The question of why some nations develop sustained economic growth while others remain trapped in cycles of poverty has generated two of the most influential and contested theoretical frameworks in development studies: modernization theory and dependency theory, whose contrasting prescriptions continue to shape international aid policy, foreign investment debates, and academic discourse decades after their initial formulation. In this day and age the rapid development of the world and the growing assimilation of countries can hardly fail to affect the development of new theories which attempt to explain the relationship between countries and the existing inequality between developed countries and countries of the third world. Two theories which analyze the development in third world countries are the modernization theory and the dependence theory. These two theories, while being rather different, still have several similarities in their views on the modern world and relationships between developed and developing countries.
As Alvin So explained, there are three chief historical conditions that were constructive to the foundation of the modernization theory of development after the Second World War. First, the United States rose as a superpower; while other Western nations such as Great Britain, France, and Germany were weakened by World War II, the United States emerged from the war stronger than before and became a world leader through the execution of the Marshall Plan to reconstruct Western Europe. Second, the idea of communism began to move throughout the world; what was once the Soviet Union spread its influence to Eastern Europe, China, and Korea. Third, there was the breakdown of European colonial empires in Asia, Africa and Latin America, creating numerous new nation-states in the Third World. These new nation-states began searching for a form of development to support their economy and to improve their political independence. The modernization theory’s intellectual lineage has been traced back to Aristotle. Aristotle first proposed that states, just as plants, went through a natural pattern of growth. Just like Aristotle, Americans in the early Republic assumed that if societies grow in a natural manner, they must also perish. The thought that the progression of human development could be understood and controlled dates to the early nineteenth century, when France and Britain were struggling to restore their trade empires. Since then it has tended to reappear at times and places where systems of dominance required explanation and rationalization. Maucourant and Plociniczak (2021) argue that the persistent appeal of modernization logic in donor-agency frameworks reflects its ideological convenience for Western institutions seeking a principled rationale for economic conditionality.
The modernization theory looks at the internal factors of a country with the assumption that, with aid, “traditional” countries can be developed in the same way more developed countries have been. The modernization theory tries to identify the social variables which cause social growth and development of societies, and then tries to explain the social evolution. In order for a country to have a profitable, sophisticated, modern economy the country must follow a pattern of development. This is a very systematic theory: do one thing and another will follow. There need to be prerequisites for “takeoff” that will lead to mass consumption (Mahler, 45). A missing component of this theory is that modernization assumes all countries will follow the same set path to development. There are actually numerous variables that will affect a state’s ability to develop. An example is the fact that Mexico is geographically configured in a way that hampers its economy due to deserts, forests, and mountains; only 12% of the land is arable and the absence of major navigable rivers further constrains transportation, weakening the possibility of efficiently exporting and importing goods. Another problem with the modernization theory is that it assumes all states have the necessary preconditions to develop, which is not true in many cases where proper governance structures are absent. The explanation is that if a state is controlled by weak or predatory leadership, its ability to develop is fundamentally compromised. For example, Saddam Hussein’s governance model directed national wealth toward regime consolidation rather than broad-based development, a dynamic that modernization theory’s stage models cannot adequately explain.
A policy implication the modernization theory suggests is that third world countries should look to developed Western nations as models, while Western countries should transfer modern values, institutions, technology, and financial investment to Third World countries. Another implication is that in order for the third world to develop, it should follow the path that the United States has traveled and move away from communism (READING). These prescriptions have attracted sustained criticism for their implicit assumption that Western developmental trajectories are universally applicable, ignoring the extent to which historical colonial exploitation may itself have shaped the conditions of underdevelopment.
A theory opposed to the Modernization model, created largely as a response to it, is Dependency theory. Dependency theories developed in opposition to the optimistic claims of modernization theory, which saw less developed countries as capable of catching up with the West. They stressed that Western societies had a vested interest in maintaining their advantaged position relative to LDCs and had the financial and technical capacity to do so. A variety of different accounts of the relationship between advanced and less developed states evolved within the broad framework of dependency theory, ranging from the stagnationism and ‘surplus drain’ theory of Andre Gunder Frank (which predicted, erroneously, that the Third World would be unable to achieve significant levels of industrialization) to the more cautious pessimism of those who envisaged a measure of growth based on ‘associated dependent’ relations with the West.
The major contribution to dependency theory was undoubtedly that of Frank, a German economist of development who devised and popularised the phrase ‘the development of underdevelopment,’ describing what he saw as the deformed and dependent economies of the peripheral states — in his terminology the ‘satellites’ of the more advanced ‘metropolises.’ In Capitalism and Underdevelopment in Latin America (1969), he argued that the Third World was doomed to stagnation because the surplus it produced was appropriated by advanced capitalist countries through agencies such as transnational corporations. Frank himself insisted that growth could only be achieved by severing ties with capitalism and pursuing autocentric socialist development strategies. Williamson (2019) provides empirical analysis suggesting that countries which attempted strict autarky during the twentieth century tended to experience slower productivity growth than those that selectively engaged with international markets while maintaining domestic protections, complicating Frank’s prescription.
According to the dependency theory, the Global North exploits the Global South. A central reason is that the south is highly dependent on the wealth of the north and therefore unable to advance because of a self-perpetuating cycle. An example of this cycle begins with a country being very poor or economically unstable; it then allows a multinational corporation to establish operations in one of its cities. This leads to new jobs for the city, but workers are hired for very poor wages. The products that are produced are then repatriated to the Global North as profit, preventing that state’s “mass-consumption” capacity from developing, which is a generalised mechanism through which the south is exploited while the multinational corporation makes substantial profits at the expense of desperate people willing to work for minimal wages.
The dependency theory has several policy implications. First, promotion of domestic industry and manufactured goods: by imposing subsidies to protect domestic industries, poor countries can be enabled to sell their own products rather than simply exporting raw materials. Second, import limitations: by restricting the importation of luxury goods and manufactured goods that can be produced within the country, the country can reduce its loss of capital and resources. Third, forbidding foreign investment: some governments took steps to keep foreign companies and individuals from owning or operating property that draws on national resources.
In conclusion, both theories acknowledge the leadership of Western countries and their currently dominant position in the modern world, while undeveloped countries are characterised by socio-economic and political underdevelopment. At the same time, both theories agree that the cooperation between Western countries and developing countries is constantly growing and leads to their integration. However, it is necessary to underline that Modernization theory views such cooperation and integration as a conscious and voluntary act on the part of developing countries, for whom modernisation in the Western style is the only way to overcome existing backwardness; while supporters of Dependency theory argue that such cooperation and integration is imposed upon developing countries by more powerful Western nations, which simply seek to benefit from the relationship, meaning that westernisation becomes a mechanism for establishing control over and deepening the dependence of developing countries on developed ones. Regardless of these differences, both theories raise a very important problem concerning relationships between developed and developing countries and the enduring dominance of Western civilisation in the modern world.
Contemporary development scholarship has moved beyond the binary framing of modernization versus dependency, recognising that neither theory adequately captures the diversity of developmental trajectories observed since the 1980s. The rapid industrialisation of South Korea, Taiwan, China and Vietnam, for example, appears to fit neither the self-reliant autarky prescribed by Frank nor the uncritical adoption of Western liberal economics proposed by modernization theorists. What these cases suggest instead is that selective state intervention, strategic integration into global value chains, and investments in education and infrastructure may produce development outcomes that neither classical framework predicted. Students studying development theory would do well to treat both modernization and dependency theories as historically significant lenses rather than complete explanations, drawing on each where its analytical tools remain useful while remaining alert to their respective blind spots.
References
Maucourant, J., & Plociniczak, S. (2021). The institution, the economy and the market: Karl Polanyi’s institutional thought for economists. Third World Quarterly, 42(9), 2123–2140. https://doi.org/10.1080/01436597.2021.1876741
Williamson, J. G. (2019). Globalization and inequality in historical perspective. Journal of Economic History, 79(1), 1–40. https://doi.org/10.1017/S0022050719000068
Cardoso, F. H., & Faletto, E. (1979). Dependency and development in Latin America. University of California Press.
Rostow, W. W. (1960). The stages of economic growth: A non-communist manifesto. Cambridge University Press.