economic dependence

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

Economic dependence exists in commercial and financial relations between nations.

What is economic dependency?

Economic dependence is the anchoring situation or need experienced by the economy of a country compared to another whose level of production is much higher. This relationship occurs due to the asymmetric commercial and financial links that exist between the two. nations, and that are generally 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 developing and the 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 heritage of the world. colonial of past centuries.

According to this theory, economic dependence exists in commercial and financial relations between two nations, one being developed and the other in process of development, when these mostly benefit the former, given that competition does not take place on equal 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. In addition, through military and political means (such as international sanctions) they stand in the way of any nation that seeks to gain independence and develop in a way. autonomous.

However, it is also possible to speak of economic dependence in another context, such as the globalization. In this sense, dependency 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 American economy than the United States on China, although that balance of forces seems to change very rapidly.

Effects of economic dependency

Economic dependence is expressed in the dependent country through situations such as the following:

  • Lack of productive diversification. When a powerhouse buys a single product To 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 the productive sectors. Occurs when Business from another country, especially transnationals or megacorporations, fill a sector of the dependent country's economy, beating the competition and controlling the offer of said goods and / or services. Then, the country begins to depend on those items of companies whose ulterior objective is to provide wealth abroad.
  • 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 gains significant power when it comes to pressuring the society advance one way or the other, or precisely to prevent it from doing so. Thus, the can economic power brings with it political and cultural power, establishing a hegemony.
  • Postponement of 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 midst. subaltern situation.

Degrees of economic dependence

Economic dependence is a qualitative concept, that is, it is not usually quantifiable, since it is about the functioning of the economy and its consequences in other areas.

However, specialists have tried to find indicators of the degree of dependency that exists between two countries, for which they usually use the percentage of exports from one country to the other: the higher the exports, the greater the degree of dependency will be. have from 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%.

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