Economic dependency – Concept, degrees, effects and more …

We explain what is the economic dependence of a country, its effects and to what degrees it can occur. Also, its relationship with globalization.

economic dependence
Economic dependence exists in commercial and financial relations between nations.

What is economic dependency?

Economic dependence It is the anchoring situation 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 generally they are the result of old colonial relations or of political subjugation between them.

Economic dependency 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 way to development and industrialization.

According to this theory, these difficulties are the consequence of the establishment of widely unequal cultural, economic and political relations between rich and poor countries, inherited from 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 mostly benefit the former, since competition does not occur in equality of terms.

This is explained by the fact that developed nations try to sustain with the 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 stand in the way of any nation seeking independence and autonomous development.

However, it is also possible to speak of economic dependence in another context, such as globalization. In this sense, the dependency is established as a logical consequence of the volume of exchange between two nations, which does not mean that it is a fair 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 American economy than the United States on China, although that balance of forces seems to change very rapidly.

See also: Economic globalization

Effects of economic dependency

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, this income tends to become the majority of its economy, causing the growth of its production well above the rest of the items in the economy. Thus, the dependent country runs the risk of becoming a single-exporter country, and of being 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 dependent country’s economy, beating the competition and controlling the supply of said goods and / or services. Then, the country begins to depend on those items of companies whose ulterior objective is to bring wealth to the foreigner.
  • Socio-political dependence. When the economy of a country (and therefore the standard of living of its people) is strongly subjected to a foreign country, the latter obtains significant power when it comes to pressuring society to advance in one way or another, or precisely to prevent it from doing so. Thus, economic power brings with it political and cultural power, establishing a hegemony.
  • Postponement development. Although economic dependence provides short-term riches to the dependent nation, these riches do not translate into the development of the rest of the productive and social areas, but on the contrary tend to slow down development dynamics and keep the country in its own right. subaltern 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 commercial relations, given their geographic 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%.