A critique of the Dependency Theory and evaluating its applicability to Egypt’s Industrialisation post World War I.

In International Political Economy, there are opposing theoretical viewpoints on the issue of global disparities and the North-South split. Dependency theory, which originated in the 1950s in response to modernization theory, is one of these conflicting theoretical views. Given the complexities of the contemporary world order conditioned by the emergence of neoliberal globalisation, the paper focuses on the notion of “dependence” and what it entails. Theotonio Dos Santos, one of the founders of dependency theory, describes dependence as “a situation in which the economy of certain countries is conditioned by the development and expansion of another economy to which the former is subjected” (Dos Santos 1970).

Egypt as a country was quickly absorbed into the capitalist system as it was rich in raw materials, specifically cotton. The easy availability of the same allowed the industries in developed nations to produce finished goods, ready for consumption. However, multiple decisions and characteristics of the events that occurred through the first half of the 20th century, all contributed to the differentiation of Egypt from other ‘peripheral’ or ‘satellite’ countries, putting an obstacle to the applicability of the dependency theory.

 Having introduced the dependency theory and how it came about in academic discourse, the paper has been structured to encompass all facets of the discussion. Existing literature on the theory will be briefly mentioned before they are used in arguments. A number of books, papers and articles based on and around the dependency theory will be discussed at length and using the literature to structure arguments that critique the Dependency theory in its entirety. The paper concludes with showcasing how the dependency theorists and their model do not apply to the Egyptian Industrialisation process around and during the two World Wars.
Friendmann & Wayne (1977) discusses a general critique of the dependency theory based on four salient characteristics as brought forth by Marxist scholars. Petras (1981) adds to this including the idea of class forces and the importance of the same. Tignor (1980) and Clawson (1978) both write extensively on Egypt as a primary example to critique and re-evaluate the validity of the dependency theory and use the existing discourse as data to make their arguments upon, owing to the lack of statistical evidence.

The impact of international capitalism on African, Asian, and Latin American societies has sparked vigorous debate among Marxists. Latin American “dependence” theorists such as A.G. Frank, C. Furtade, and T. Dos Santos are among the most famous schools of thought. They have contended that integration into the global market turned Latin American society into a capitalist society, that the “metropolis” has stifled the development of “peripheral” industry, and that the “periphery’s” economic development is dictated by the “metropolis”. Through this paper, the critique on the dependency theory will be briefly explored before diving into the example of Egypt as a venue for capitalism. The applicability of the dependency theory to Egyptian industrial development from the post-World War I uprisings of 1919 to the Free Officers’ coup in 1952 will be evaluated as well. The need to carry out this evaluation is to reiterate the possible shortcomings of the model applied to Latin American countries during this period of ‘neo-dependency’ primarily to certain African nations.

A general critique of the dependency theory is well brought out by Friedmann & Wayne (1977). They write that while dependency theory is a good starting point for studying structural changes within an underdeveloped nation or region, its limitations become obvious once one advances beyond the historically observable repercussions of the dependence relation within individual satellites or dependencies. A.G. Frank (along with many other theorists) set out to analyse the global system of relations in order to comprehend the reasons and patterns of underdevelopment. Only a comprehensive, holistic examination, as Frank contends, will provide an adequate guide to understanding exploitative, underdeveloped relationships among national economies. They write that dependency theorists have faced severe challenges in their attempts to build an acceptable model of the world’s social and economic structure, starting with assumptions and data based on dyadic ties between nations. The world system is viewed as (1) a collection of bilateral relationships between nations, (2) a hierarchically ordered set of roles, (3) a jumbled product of relationships that are partly geographical and partly social, and (4) a product of exchange relations rather than production relations in the dependency perspective. The bilateral relation point loses validity through the example of Chile which has been a satellite to multiple nations. They critique the existence of a hierarchy by arguing that if the analyst selects a group of two nations, one of which exploits the other, when a second similar set is added, then a third, and so on until all nations are represented, the picture becomes a disorganised jumble of sets rather than a logical structure.

Petras (1981) critiques the dependency theory by arguing that while a global capitalism system can be understood analytically, in historical experience, it is made up of individual imperial and revolutionary societies that compete for their existence. Herein lies the contradictory phenomenon: anti-capitalistic societies that simultaneously participate in and fight against the forces that shape the capitalist market. The organisation and consciousness of the classes inside the anti-capitalistic society determine the shape and result of that conflict. The growth of class forces within the country and the multiplication of revolutionary forces in other civilizations will determine how the basic contradiction (between anti-capitalist social formations and the capitalist world market) is resolved. As a result, the capitalist international market must be dismantled from a set of static institutions and defined essentially for what it is: a set of class relationships anchored and instrumented in imperialist states.

The applicability of the Dependency Theory in Latin America is a widespread and acknowledged notion. This discourse, which was formerly limited to Latin America, had broken out of its geographical confines and was having a global impact. They were the focus back then, in the 1970-1980 period with regard to African studies.  Africa has a plethora of dependency scholars who founded The Review of African Political Economy. The Egyptian economic history from 1920 to 1950 provides an opportunity to examine how effectively underdevelopment principles apply in a specific situation. Egypt was fully incorporated into the global capitalist system during this time. Tignor (1980) further writes that, at the outset, Egypt appears to be the obvious choice for proving dependency ideas. Since the mid-nineteenth century, its economy has been gradually influenced by, and then dominated by, European capitalism. Foreign banks, most of which were branches of larger banking firms, were well-established in the country. In 1914, the capital of joint stock companies operating in Egypt was estimated to have Europeans controlling just over 90% of the capital.  Egypt was a classical one-crop export economy, with raw cotton and cottonseed accounting for about 90% of total export value.

Clawson (1978) argues that the dependency theory ignores the possibility of a pre-capitalist society producing commodities for a capitalist market because it assumes that production for a capitalist market is fundamentally capitalist. Another view is that capitalism reoriented these civilizations toward commodity production, but that the relationships among persons involved in the production process remained pre capitalist. This was the cheapest and most convenient method of obtaining the commodities required by capitalism. He acknowledges the existence of two theories that needed to be compared and contrasted. The “dependency” school, as advocated by Amin, claims that industrialised countries stifle backward countries’ “progress,” particularly industrial development. The other interpretation is that advanced economies base their expectations on the needs of the capital accumulation process in developing countries. As advanced countries’ accumulation progresses, the necessities of accumulation vary, as do the demands placed on backward countries. At one time, advanced capitalist economies hindered backward countries from becoming industrialised; at another time, imperialist capital was the driving force behind local industries. Egypt’s incorporation into the capitalist international market was partly facilitated by cotton exports, which soared in popularity from the mid-nineteenth century until World War I. European industries could produce goods at much lower costs than the local players in Egypt. As a result, Egyptian commodity manufacturing was limited to items in which Egypt had a “natural” advantage over sophisticated capitalist countries, such as cotton. A pool of prospective wage-labourers is one of capitalism’s preconditions: people who have been deprived of all control over the means of production and are forced to sell their labour power to exist. Just as the generalisation of commodity production was prevented, the internationalisation of commodity trade also prevented the formation of a proletariat.

The Egyptian direct producers’ dispossession was slowed by their connections to the world economy, which included income from cotton production and loans from foreign money lenders. This hampered the transition to capitalism. By World War I, the main feature of the world economy shifted from commodity trade to export of capital. Finance capital was the product of decades of capital accumulation, concentration and centralization. It was invested in whatever firm, industry, or country that could offer the highest rate of return. Previously, capitalists had not been inclined to invest in backward areas as they focused on accumulating capital within their own firms. But, the straying away from the internationalised commodity trade allowed them to look for areas where their investment would provide fruitful returns. In the immediate aftermath of the first World War, the value of cotton soared. Egyptian locals were able to accumulate stocks and bonds in British government securities. This crisis in the 1920s and 1930s, the advanced capitalist countries provided a significant boost to the internationalisation of money capital. As they could only make a small profit at home, British and French businessmen were more prepared to invest in Egypt. The Egyptian nationalist movement called for the establishment of Egyptian industry, with the aid of the government. Public boycotts of European banks, stores and products were common during this period.  In 1925, the 8% excise duty on domestically manufactured textiles was lifted.

As Egypt gained authority over tariff policy in the early 1930s, tariffs on manufactured goods grew exponentially. Instead of letting the Egyptian-owned Bank Misr go bankrupt in 1926, Parliament entrusted it with public deposits. Bank Misr was initially opposed to any collaboration with foreign capital, but other nationalist groups were more open to it. Bank Misr had changed its mind by the 1930s, when the major industrial boom began. It was pushed to seek foreign technologies and accept international partners who threatened to build up local production to compete with Bank Misr. Textile mills, printing presses, button factories, and linen-spinning mills were all held by Bank Misr. It dominated the Egyptian economy until 1960, until it was nationalised. Clawson (1978) further writes that the changing attitude of local landowners and merchants, who were more eager to amass capital through industrial output, aided the expansion of Egyptian industry. At the same time

that it was flowing into industries, foreign capital was leaving the cotton economy. Locals played a minor role in day-to-day operations of these industries. It was frequently asserted that foreign controlling interests maintain the substance of power while Egyptians are marginalised. In conclusion, Egyptian industry was largely controlled and managed by foreigners, and there is insufficient data to support that foreign capital was averse to industrialisation. The key players in the formation of local Egyptian industry were the foreign citizens residing in Egypt. Import-substituting industrialization made significant progress. Egyptian industry supplied 100% of local consumption of sugar, alcohol, salt, and cigarettes by the onset of World War II; 90% of shoes, cement, and soap; 80% of furniture and matches; and 40% of textiles. Even before World War II boosted local manufacturing, Egypt was generally self-sufficient in consumer products. While there are no exact figures, the broad picture shows a significant increase of industry from 1930 to 1945. Despite the fact that political power was in the hands of the big landlords, the state provided enormous aid to the local industries. This illustrates the unity of the ruling class’s two sections, the industrial bourgeoisie and the landholding aristocracy, who were never so much sections in conflict as steps in a process. According to Samir Amin, the Egyptian bourgeoisie is indistinguishable from the aristocracy. The landlords’ power and influence prevented capitalist relations from dominating agriculture. It slowed industrialization by easing the demand on landowners to invest in industry and preventing agricultural petty commodity producers from becoming proletarianized. The small bourgeoisie, which stood to lose the most from a capital accumulation standoff (owing to the threat of proletarianization), led aggressive movements to overthrow the landlords and their mentors, the British. This nationalist struggle helped to pave the way for Nasser’s ascension to power in the 1952 “July Revolution.”

 As we have seen in the arguments above, the experiences within Egypt’s industrialisation do not correspond to what dependency theorists like Samir Amin anticipate. Foreign capital, according to dependency theory, retards industry, only reluctantly per? mitting industrialization when compelled to by the national bourgeoisie. Foreign money, however, was the driving force behind Egyptian manufacturing from 1919 to 1952. There was no ‘national bourgeoisie’ compelling foreign money to allow industry; rather, foreign capital was the catalyst that allowed great landowners to become industrial bourgeoisie. Moreover, using Marxist preconditions for the requirement of a proletariat class, or a group of people that have no option but to sell their labour for survival, as an evaluation tool further shows that the dependency theory has considerable shortcomings as we can see in the case of Egypt. Patrick Clawson addresses a plethora of avenues to trace the events in Egypt to accurately respond to the dependency theory including the shift to finance-related capitalism from trading commodities. This shift included the change from requiring raw materials to becoming a platform for investment with promising returns, perfectly fitting into the narrative of Egyptian industrialization and the foreign capital that it required to prosper.

REFERENCES:

Clawson, P. (1978). Egypt’s Industrialization: A Critique of Dependency Theory. MERIP Reports, 72, 17–23. https://doi.org/10.2307/3011099

Dos Santos, T. (1970) “The Structure of Dependence,” The American Economic Review, 60:2, pp. 231-236.

Friedmann, H., & Wayne, J. (1977). Dependency Theory: A Critique. The Canadian Journal of Sociology / Cahiers Canadiens de Sociologie, 2(4), 399–416. https://doi.org/10.2307/3340297

Petras, J. (1981). Dependency and World System Theory: A Critique and New Directions. Latin American Perspectives, 8(3/4), 148–155. http://www.jstor.org/stable/2633477

Tignor, R. L. (1980). Dependency Theory and Egyptian Capitalism, 1920 to 1950. African Economic History, 9, 101–118. https://doi.org/10.2307/3601390