By Chidinma Blessing Igberaese
In Economics, International Dependency Model is an economic model that explains the perpetual problems facing less- developed countries rather than explain factors that determine growth in these nations.
The model explains in three major approaches, how the developed countries, by reason of what they do, indirectly try to put constraints to the development of these counties.
The Neoclassical growth model under the dependency model believed that the dependency of less developed countries can be traced as far back as during the colonial era. This era is believed to have introduced a lot of setbacks and difficulties being experienced today by the less developed countries.
It further explains that the colonial era introduced monopoly effect, importations, external borrowing, and factor based technology and brain drain effects.
An illustration of that is seen in the happenings during the colonial era in Nigeria when the multinational companies had their primary companies here and the headquarters abroad. It was believed that their information flow was not enough on organizational structures, management, business models and growth as all these hindered local people from knowing how important a competitive market structure is and how it aids the manufacturing sector which is a bedrock of a nation’s growth and development.
In addition, it is believed that such foreign dependency introduced international demonstration effect which is the behavioral pattern of the developing countries copying lifestyles of the western developed countries. This led to the high rate of importation of what they eat, wear and do, thereby discouraging local manufacturers.
Also, the neoclassical posits that the substantial external borrowing for developmental projects and inability of the less developed countries to save for capital projects are as a result of over dependence on the developed countries because they are always seen as superpowers and therefore have all that is required to fund any project, so the less developed countries put little effort towards saving goals.
Lastly, the core sectors in less-developed countries suffer lack of competent hands as a result of the brain drain effect caused by the developed countries. They offer better wage and work conditions abroad in order to attract the best of us; and this has made most of our sectors like the health sector suffer with more competent hands.
1. There is need for a competitive market structure: A favorable business environment, tax policies and enabling business environment should be enforced by the government of the less developed countries as this would improve small and medium scale enterprises, thereby creating more job opportunities in the country, improve government revenue and gross domestic product, reduction in crime rate caused by unemployment and general increased welfare of its citizens. This however would facilitate economic growth and development.
2. Export promotions and the control of importations: The continuous rise in importation of goods across almost all sectors of the economy has an adverse effect on the country’s domestic currency and it poses threats to nation’s growth and development. It causes the domestic currency of a nation to lose relevance by the constant need and high demand of foreign currencies. The law of demand and supply always plays its role. Therefore, there should be a monetary policy to starve commercial banks and agencies supplying foreign currencies. Also, another policy measure in the form of paying a fine should be imposed on any individual or business that imports similar goods being produced locally. These measures undoubtedly would reduce economic growth hindrances caused by over dependence of the less developed countries on the western developed nations.
Chidinma Blessing Igberaese writes from Lagos Nigeria. Send reactions to [email protected] Phone: 08123883953