Modernization is a technological, economic, and cultural transition through which a nation "evolves" from a pre-industrial or underdeveloped status to modern society by adopting the prescriptions of More Developed Countries (MDCs) such as Western Europe and North American countries. It is assumed that in order for Less Developed Countries (LDCs) to progress, they must abandon tradition-oriented cultures, which are seen as backward by modernization theorists as hindering the process of modernization. The modernization theory holds that poor countries are poor because they are yet to develop into modern economies and that their failure to do so is largely because of internal factors such as the countries resistance to free-market principles or the absence of western values (adapted from the Western countries) that drive material success.

While the Dependency theory focuses on the causes and consequences of underdevelopment. According to the theory, all modern economies are united into a single capitalist world economic structure. They also argue that Third World countries are poor because they have been and continue to be exploited by First World countries, which evolved from colonialism. Dependence occurs when certain countries (the dominant ones) grow at the expense of the less dominant ones.