The North-South divide is due to the world trading system: Dependency theory

Dependency theory Dependency theory is a body of theories based on the notion that resources flow from a "periphery" of poor and underdeveloped states to a "core" of wealthy states, enriching the latter at the expense of the former. It is a central contention of dependency theory that poor states are impoverished and rich ones enriched by the way poor states are integrated into the "world system."

The birth of dependency Latin America. Originally after independence followed free trade. Then the triple whammy. WWI, The great depression, WWII This led, over time, to a political theory (dependency theory) which gave credence to insulating the Latin American economies from the world capitalist market.

Dependency theory states that the poverty of the countries in the periphery is not because they are not integrated into the world system, or not 'fully' integrated as is often argued by free market economists, but because of how they are integrated into the system.

Comparative Advantage What is it?

So free trade will encourage countries to exploit their comparative advantage. Developing countries will therefore produce low order agricultural products.

Periphery exports ‘low order’ non-processed raw material. Low value per unit of input. Core exports ‘high order’ manufactured product. High value per unit of input. The problems of exporting low order agricultural products

Along with this, the terms of trade of low order goods such as coffee beans have fallen in comparison to other products. Terms of trade

The coffee trade The commodity chain (Who keeps the profit from making coffee) What has happened to the price of coffee over time. What are the social and economic impacts of the coffee trade.

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Therefore there is a relationship between the core and the periphery where the developing countries supplies raw materials and primary products to developed countries. The low value of these products ensures that there is a negative terms of trade

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