This economic and political system of land tenure, whereby the landowner lets out land in return for service from his tenants or peasants, may arise out of dispossessing indigenous populations, and results in the pauperization and effective slavery of the latter. Where feudalism remains from the traditional social structure, development takes place at the expense of the peasants who may be used as cheap or free labour in factories and mines instead of on the land.
1. The system of political organization prevailing in Europe from the 9th to about the 15th centuries having as its basis the relation of lord to vassal with all land held in fee and as chief characteristics homage, the service of tenants under arms and in court, wardship, and forfeiture; 2: any of various political or social systems similar to medieval feudalism (Websters Dictionary).
Feudalism still exists in developing non-Communist countries, especially in Latin America and Asia.
Modernization theory is mistaken in perceiving developing countries as having a predominantly feudal social order resistant to the advance of modern or capitalist economic systems. Such apparently feudal structures should be viewed as capitalist. The stagnant and oppressive relations evident on plantations, for example, are best understood as aspects of the underdevelopment of the periphery created by capitalist development for the benefit of the industrialized centre.