In the first of his multi-volume work, The Modern World-System I (1976 [2011]), Wallerstein explains how the world is divided into core countries (also known as the metropolis), semi-peripheral countries and peripheral countries (also known as satellites). Peripheral countries are developing countries, many of which were former colonies, that produce raw materials needed by the Core. The Core then purchases these raw materials at a low price as well as selling finished products to the peripheral countries; these peripheral countries are forced to buy expensive products from the core countries due to their own lack of infrastructure and ability to produce these finished goods. Therefore, instead of investing in their own industry, their capital goes back into the core’s economy.
This observation is supported by one of the most important concepts within dependency theory; the Prebisch-Singer hypothesis, developed by economists Prebisch and Hans Singer in the late 1940s. Here, they argue that the price of raw materials (known as primary commodities) declines in relation to manufactured goods over the long term. This, of course, economically benefits the core countries that have the infrastructure to produce more modern goods and finished products. Countries who, due to this vicious cycle of exploitation through core countries, are unable to develop as they continue to produce only raw materials. The final ‘type’ of country as defined by world-systems theory are semi-peripheral countries, such as South Korea and India. Semi-peripheral countries are those which still take advantage of the peripheral’s low-cost raw materials, but are also dependent on the core countries for finished products.
There are three main ways in which peripheral countries are kept in a state of dependency: international trade, Trans-national corporations (TNCs) and official aid:
1.) International Trade
Wallerstein dates back the capitalist exploitative conditions of international relations to the 16th-century slave trade, seeing modern trade as an extension of these relationships (Wallerstein, 2004, 23) . The Core, i.e. the West, relies upon peripheral countries for raw materials such as cocoa beans or cane sugar. These raw materials are produced in accordance with western demand, which remains high. However, the supply increases due to the Core’s ability to purchase cheap labour and materials in numerous countries. Due to the increased supply, overproduction occurs; overproduction results in lower prices. For example, Britain can purchase cocoa beans from Nigeria for a low price. This trade, however, is not guaranteed if Britain found cheaper prices in Peru, for example. Overproduction and the low export value of cocoa beans allows the core to have a great deal of choice. This keeps the peripheral nations in a state of dependence for trade with many selling raw materials for far less than they are worth and paying labourers far less than is sustainable.
2.) Trans-national corporations (TNCs)
A further reason these peripheral or developing countries are kept in a state of dependency, unable to develop, is due to the presence of TNCs. TNCs operate in more than one country and search for the cheapest countries to produce in. TNCs contribute enormously to the world’s global trade output.
These corporations abroad bring their organisations overseas to take advantage of raw materials, low costs of business and cheap labour, but often bring the benefits back to their home economies rather than enriching the economy of the exploited nation. As such, developing nations remain unable to develop and are left in a state of dependency on wealthier countries.
For example, the legal battle between oil giant Shell and the Ogoni people, regarding the devastating environmental impact of their extraction of oil in the area (see Cyril I. Obi, ‘Globalisation and local resistance: The case of the Ogoni versus Shell’, 1997).
Another further example of a lawsuit of this nature occurred in 2000 when Coca-Cola was accused of putting thousands of farmers out of work in Kerala after draining local wells (see H. Berguland, ‘Civil Society and political protest in India – the case of Coca-Cola in Kerala’, 2017; K. M. Sudheesh “Resistance from Below”: An Assessment of the Struggle against Coca Cola Company in Plachimada, Kerala’, 2009).
3.) Aid
The question of granting aid to developing nations is, when viewed with neocolonialism in mind, far from altruistic. Aid is given to developing countries for one of two reasons: to keep consumers from these countries spending money on products from industrialised, western nations and to keep these countries in a state of dependency. Aid and loans to developing states results in debt thus rendering the other nation dependent and vulnerable to exploitation. As Shafiqur Rahaman, Rawshan Yeazdani and Rashed Mahmud argue,