chapter  3
Testing Dependency Theory: a Case Study of Brazil's Electrical Industry
Pages 28

In one of the most insightful of recent articles on dependency theory, Theodore Moran (1978) asserts that dependency theorists have largely failed to test rigorously the hypotheses about multinational corporations (MNCs) that can be distilled from their overall model. He accepts his own challenge and presents three propositions he considers integral to dependency analysis. First, the benefits of foreign direct investment are 'unequally' or 'unfairly' distributed between MNCs and host countries in favour of the former, and so, in effect, MNCs are able to siphon off investible surplus. Second, MNCs create distortions in the local economy by squeezing out local business, using inappropriate technology, acting to worsen the distribution of income, and, fmally, distorting consumer tastes. Third, foreign investors pervert or subvert host country political processes. To analyse these dependency propositions, Moran attempts to open a 'dialogue' between dependency theorists and other social scientists. By breaking the propositions down into component hypotheses he indicates how non-dependency theories such as theories of oligopolistic competition and bilateral monopoly might be used to verify or falsify these dependency propositions.