The idea suggests 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. This core-periphery dynamic perpetuates underdevelopment because less developed countries become dependent on more developed nations for capital and are integrated into the world economy as suppliers of raw materials and cheap labor. A historical example is seen in colonial relationships, where colonizing nations extracted resources from colonies, hindering the colonies’ industrial development and locking them into an unequal exchange.
Understanding this framework is crucial for analyzing global economic patterns and power dynamics. It highlights how historical relationships and contemporary trade agreements can contribute to global inequalities. Recognizing this theory’s principles helps to evaluate the consequences of globalization, assess the impact of international trade, and formulate strategies for sustainable development. Furthermore, it provides a lens through which to examine geopolitical relationships and assess the legacy of colonialism on contemporary global structures.
