Like the majority of its Latin American neighbors, Panama has shown a long history of dependency on foreign powers. From colonial times of Spanish rule, to the recent US control of the Panama Canal, Panama’s economy has been intricately intertwined with that of various world powers. It is this economic reliance that is outlined as one of the principle theories for the underdevelopment of the nation of Panama today, as well as the majority of Latin America. This theory, known as dependency theory, claims foreign investments within Latin America have only succeeded in extracting wealth from the area and hindering internal development. Supporters favor a bottom up solution to the problem of poverty in Latin America and point to internal developments, such as industrialization as key to these country's developments. Historical support for such a solution can be taken from the period of the 1930s, during the Great Depression. As the economic giants of the period were in financial crisis, economies of Latin America were actually developing. The countries that had been reliant on import for manufactured goods no longer had enough capital from their export based economies to be able to import manufactured products. As a result Latin American countries filled their own need for manufactured goods, which helped to develop their economies and industrialize the region. (Chasteen) This import-substitution industrialization supports the dependency theory and the ideas explored by Galeano: one person wins and one loses – in the game between Latin America and other nations like the United States and those in Europe, Latin America always loses, but it can not lose in a game with itself.
Dependency theory provides a way to see the relationship between First World and developing countries. “Dependency theory: A set of theories which maintained that the failure of Third World states to achieve adequate and sustainable levels of development resulted from their dependence on the advanced capitalist world" (Gordon). The theory is based around the idea that economic gain in more industrialized countries makes prosperity impossible for poorer countries. It is said that 'poor people inhabit rich lands,' an expression which refers to the pattern of outside development in otherwise undeveloped lands, for the purpose of resource extraction. Resources from the land become important commodities for export purposes, with the hope that they will bring money into the host country. Although they are providing a valuable good, no matter how rich in resources it is, the poor country rarely benefits financially from their own land. Due to outside ownership of internal development, most commerce passes through the country, rather than being invested there. Since all the resources and money go into the export of the good, the people who actually inhabit the land never see that money. The poorer country exports the good, then that good is used to make another product. Then, the first country who exported the good to make the product has to pay to import the product. There is never money for the people of the poor country. As an example, Potosi contained a silver mine in Peru which provided mining jobs and wealth. Potosi depended upon the interest and money from the more developed countries, Spain in particular, and it ended up being its demise. When the sliver was gone from the country, the Spanish colonization of Peru left as well. Today Peru ranks 115th (of 228 countries) in terms of per-capita Gross Domestic Product (GDP; Central Intelligence Agency).
While dependency theory accounts for much of Panama’s current state, it is essential to look at other influences and theories. Jan Knippers Black provides three suppositions, dependency theory included, to account for Latin America’s poverty which may then be related to Panama’s own history. Black names corporatism, modernization theory, and dependency theory. All of these theories interact with each other in a way that accounts for Panama’s dependent economy.
Black's theory of corporatism blames the Iberians. When the Iberians conquered Latin America, they instilled their “rigid sense of social, political, and cultural hierarchy” (Black) that was found in medieval times and otherwise nonexistent in Latin America. Many of the smaller civilizations were egalitarian, but this new transplanted hierarchy brought with it “elitism, authoritarianism, and militarism” (Black). Examples of this may be found throughout Panama’s own history of cuadillos such as Torrijos, authoritarian governments such as Noriega’s, and a long history of military conflict. The government led by Noriega is an extreme example of the exclusive hierarchy created by authoritarian governments, consisting of close friends and supporters. Black points out the vertical organization (as opposed to horizontal organization) of political groups in Latin America. This vertical organization, with a dictator in charge, led to Torrijo’s relentless, uncontested borrowing from the United States, further worsening Panama’s dependency.
The second theory Black provides, modernization theory, blames Latin America. In modernization theory, the social change and industrialization of first world countries paves the way for third world countries to become more modernized. The blame for Latin America’s lack of industrialization settles on the shoulders of those experiencing its harsh consequences. For example, when the United States occupied the Canal Zone, Panama experienced a boom in their economy from American consumers, which suffered with the Canal’s turnover. In accordance to this theory, the occupation and installment of American business should have jump-started a modernization trend in Panama. However, low wages and lack of consumer demand have left Panama generally unaffected. This may be related to dependency model in that the modernization of Panama has historically been a direct effect of the United States, with the construction of the railroad and the Panama Canal creating jobs and bringing in tourists.
Panama has not been without its own examples of dependency. Throughout the countries existence its resources, people and financial status have depended on outside powers such as the United States. Through colonization of the Spanish in the 1500's, to the final turnover of all Panama Canal operations on December 31, 1999, Panama has experienced 500 years of dependency. Through these time periods, numerous examples demonstrate how Panama is another country subjected to satellite status by other worldly powers.