World-systems perspective

The World-systems perspective was a research program that was dominant among sociologists and some economists in the 1970s. World-systems perspective has generated a great deal of empirical research on poverty and economic growth. World-systems theory predicts that developing nations (referred to as periphery countries by world-system analysts) have less long-term economic growth when they have extensive multinational corporate investment from core (developed) nations.


Though there is definitely variance among periphery nations, several studies by Sociologists have argued that many periphery nations that have extensive investment from the core do in fact have less long-term economic growth. It was argued that these nations are likely to have some short-term economic growth (less than 5 years), but the long-term prospects may be harmed by the kinds of outside aid and investment they have received.


However, all of these studies are at least twenty years old and rely on very weak statistical methodology. More recent research tends to point to evidence that in general foreign direct investment benefits host countries, although the effects are not universal. Depending on some other country characteristics foreign investment may simply have no effect, whether positive or negative, on development.


World system theories imply that the best policy a country can pursue is autarky or at most trade only with other developing countries. However, large countries that embarked on this policy program, such as India and China before 1980 experienced stagnant growth and increasing poverty. These trends were only finally reversed when these countries abandoned the policy prescription of Western world systems theory academics and decided to substantially open their economies in the 1980s. A number of Latin American countries which also tried to rely on import substation and inward looking development had a similar experience.