Approaches to Economic Development Approaches to Economic Development Four closely connected and also related to underdevelopment, these are we can broadly say, theories of underdevelopment. We call it: •Backwash and Spread Effects •Critical Minimum Effort Thesis •Low Level Equilibrium Trap •Big Push Theory, and other aspects of underdevelopment Approaches to Economic Development These are the problem faced by third world countries. And there is Rodan who gives a way out for the problem or escaping the problem or this problem. Let us note beginning of this model. Rodan says that third world countries, the people who are there they are lethargic. They have inertia. They are stagnant, they don’t have willingness enthusiasm to take risk they are averse against taking any risk. Entrepreneur or enterprising is lacking why, what Rodan answered is difficult. Rodan’s answer is in these countries, because people are remaining uneducated or less educated because they lacked various types of facilities ‘basic infrastructure facilities’. Therefore, they are unable to come out of that hence, he suggests these countries require Big-Push, a big through, a big heavy kick without this big push or heavy kick these countries cannot think of enterprises cannot think of taking risk, you can understand all these efforts of big-push by considering certain examples we all know, when scooter is unable to start by battery system or by giving kick. What we do we know, we push either alone or somebody, of course you can say by moving it very quick But consider a loaded lorry. With ten tons battery fails. What you will do? Everybody knows it requires a big-push unless five people ten people come unless these ten people in a coordinated manner in a simultaneous manner gives a jerk/ given a big throw and moves the lorry at least five to ten yards the battery will not start that means lorry is lethargic, its systems fails it is inertia it is sleeping it is doses of sleeping such sleeping fellow can only be awakened only by means of big-push we also know in the case of aero plane whenever aero plane lands at immediately like car or scooter. We cannot moved we all know that a new aeroplane once it wants to start even if you take a coal engine it will not start, if we want to take coal engine for 30 mints to one hour, you have to burn coal. Unless minimum heat is built up coal engine, old type of coal engine will not drag, will not take away carriage or wagon. Now in the case of aeroplane, even minimum of 20 minutes high speed diesel oil HSD oil or burnt on the ground every aeroplane before it takes off, flies of moves on the ground with slow speed to high speed 10kms to 20 kms it runs on the ground at least for half km to 1 km than only then only it takes up it is big-push. Just like aeroplane or lorry which is under inertia is driven similar type of things are to be given Rodan also gives the example which he quoted some of you might be remembered under Nurkse modern shoe factory, in Modern Shoe factory, he says mass production chapals or Shoe or Scandals are production in hundred and thousands per day. Now the question is it is an isolated factory who should purchase to purchase Nurkse very beautiful says, Shoe are needed at the same time people also need eatable clothing, housing, medicines, educated, transportation, these should be produced in Big-Push theory also same thing will be there you should note whether it Nelson, whether Harvey Leibenstein, whether you are considering P.N. Rosenstein Rodan all those are balanced growth champions. We discussed in another lesson balanced and unbalanced growth theory a review but here sufficient for us to note all these economists including Myrdal. These economist as popularly known as economists who championed, supported, who gave support for application of growth in a balanced manner. Nurkse while quoting the example of Rodan Shoe factory says isolated Shoe factory will not work you have to establish in large number sets of dozens of factories have to be established where complimentary goods are produced so that when you are producing different types of goods employing hundreds of people one factory labour will become consumer of another factory. Another factory labour will become consumer of other factory. Thus, the problem of deficiency in demand will be solved. Equilibrium trap is similar to that of Lebeinstein critical minimum effort thesis. Both deal with population and income. Both accept that mild increase in population, caused by mild increase will not increase living standards will not improve so to escape from the trap third world countries must make higher dose of investments, this he says is only method. Nelson in order to explain this higher dose of investment, establishes, or uses three equations: Nelson Equation: 1.Income-Population Equation 2.Saving-Investment Equation 3.Methods: Traditional Vs Modern Capitalistic Method. With the help of three equations, he says in underdeveloped countries, because these countries are able to produce at a lower level, they must make efforts to raise growth of income, then only population problem can be solved total fertility can be decreased along with reduction in infant mortality rate. With this we take up closely related. But, terminology is difficult the phrase is different, the explanation is different. And that is popular known as Big-Push Theory. Pushing bigger, throwing by hit/click just like this goes to economist in brief: Paul N Rosenstein Rodan. He postulated this theory, around first I 1940’s then the revised version, he gave notes on Big-Push theory at later date. Let us understand Big-Push Theory, the need for Big-Push, the details of Big-Push. According to Rodan, underdeveloped countries such as India or most of Asian nation, perhaps Singapore, Japan or one or two more. They are facing dozen of problems. Population is one problem and Dualism in another problem. 1. Technological Backwardness 2. Low Level Education 3. High Illiteracy 4. Organizational Infrastructure. These are the problem faced by third world countries. And there is Rodan who gives a way out for the problem or escaping the problem or this problem. Let us note beginning of this model. Rodan says that third world countries, the people who are there they are lethargic. They have inertia. They are stagnant, they don’t have willingness enthusiasm to take risk they are averse against taking any risk. Entrepreneur or enterprising is lacking why, what Rodan answered is difficult. Rodan’s answer is in these countries, because people are remaining uneducated or less educated because they lacked various types of facilities ‘basic infrastructure facilities’. Therefore, they are unable to come out of that hence, he suggests these countries require Big-Push, a big through, a big heavy kick without this big push or heavy kick these countries cannot think of enterprises cannot think of taking risk, you can understand all these efforts of big-push by considering certain examples we all know, when scooter is unable to start by battery system or by giving kick. What we do we know, we push either alone or somebody, of course you can say by moving it very quick But consider a loaded lorry. With ten tons battery fails. What you will do? Everybody knows it requires a big-push unless five people ten people come unless these ten people in a coordinated manner in a simultaneous manner gives a jerk/ given a big throw and moves the lorry at least five to ten yards the battery will not start that means lorry is lethargic, its systems fails it is inertia it is sleeping it is doses of sleeping such sleeping fellow can only be awakened only by means of big-push we also know in the case of aero plane whenever aero plane lands at immediately like car or scooter. We cannot moved we all know that a new aeroplane once it wants to start even if you take a coal engine it will not start, if we want to take coal engine for 30 mints to one hour, you have to burn coal. Unless minimum heat is built up coal engine, old type of coal engine will not drag, will not take away carriage or wagon. Now in the case of aeroplane, even minimum of 20 minutes high speed diesel oil HSD oil or burnt on the ground every aeroplane before it takes off, flies of moves on the ground with slow speed to high speed 10kms to 20 kms it runs on the ground at least for half km to 1 km than only then only it takes up it is big-push. Just like aeroplane or lorry which is under inertia is driven similar type of things are to be given Rodan also gives the example which he quoted some of you might be remembered under Nurkse modern shoe factory, in Modern Shoe factory, he says mass production chapals or Shoe or Scandals are production in hundred and thousands per day. Now the question is it is an isolated factory who should purchase to purchase Nurkse very beautiful says, Shoe are needed at the same time people also need eatable clothing, housing, medicines, educated, transportation, these should be produced in Big-Push theory also same thing will be there you should note whether it Nelson, whether Harvey Leibenstein, whether you are considering P.N. Rosenstein Rodan all those are balanced growth champions. We discussed in another lesson balanced and unbalanced growth theory a review but here sufficient for us to note all these economists including Myrdal. These economist as popularly known as economists who championed, supported, who gave support for application of growth in a balanced manner. Nurkse while quoting the example of Rodan Shoe factory says isolated Shoe factory will not work you have to establish in large number sets of dozens of factories have to be established where complimentary goods are produced so that when you are producing different types of goods employing hundreds of people one factory labour will become consumer of another factory. Another factory labour will become consumer of other factory. Thus, the problem of deficiency in demand will be solved. Rodan also supports the same. He also says you have to invest not in tits and bits. You have to invest in large quantity in higher capacity. If you say sorry I am a poor fellow, my country you will continue to remain like this only you can never progress. This could be understood from history; from historical background. In history never a capitalistic country developed continuously. The development of American economy European economy. The development of America economy, Australian economy full of jumps, full of jerks full of big-push never continuously smoothly in a small manner one percent to half percent growth that is not there capitalistic countries are susceptible to peaks and troughs. They sometimes, collapse 3 % to 2%. But, at the same time, they also capable of raising at a high level Rodan beautifully analyses indivisibilities, externalities, discontinuities since every investment is of minimum size to make use of that minimum size Rodan suggests that complementary nature of investment is needed in a big manner investment should be made otherwise, inertia risk aversion cannot be solved. Now sum up, whatever we discussed so far we took up closely related aspects of under development. There are the champions of supporters of balanced growth, one supporter we considered today Gunner Myrdal. His backwash and spread effects, another balanced growth strategist, maybe we have noted Harvey Leibenstein a third one we have noted Richard Nelson. There people used different terminologies he noted Richard Nelson low level equilibrium effort thesis both deal with same problems both gave their theories at the same time But terminology is different the types of analysis they conducted are different essence is same. Similarly Harvey Leibenstein called Critical Minimum Effort, Rodan called Big-Push the terminology is different but both are emphasizing the same thing. Rodan improved his theory based on well known external economies. But, the greatness of Rodan is that concept of external economies used in case of individuals and capitalistic economies, he applies to development economies. Thus, around late 1940’s and early 1950’s dozens of economists took interest in problem of underdeveloped economies. They stayed in these countries studied thoroughly the problems, lived with the people and they put their experiences, in the shape of books models and concepts and notable among them we noted Myrdal Backwash and Spread effects highly useful for developed nations. We know the example of Bihar and Hyderabad in Telangana of A.P. Similarly, other area in North-eastern states and also in Marthawada area of Maharashtra. These theories we say all is not good, all are not positive points. They suffer from weakness, but what is the duty of ours whatever merit is there that we have to consider and whatever limitations are there that we have to omit or ignore with the combination of all these concepts and theories, third world countries can learn a lot, infact government of India, Chinese government may use of theories Gunnar Myrdal per concept increase used at the same time, Nurkse and Rodan are popularly used. Rodan also supports the same. He also says you have to invest not in tits and bits. You have to invest in large quantity in higher capacity. If you say sorry I am a poor fellow, my country you will continue to remain like this only you can never progress. This could be understood from history; from historical background. In history never a capitalistic country developed continuously. The development of American economy European economy. The development of America economy, Australian economy full of jumps, full of jerks full of big-push never continuously smoothly in a small manner one percent to half percent growth that is not there capitalistic countries are susceptible to peaks and troughs. They sometimes, collapse 3 % to 2%. But, at the same time, they also capable of raising at a high level Rodan beautifully analyses indivisibilities, externalities, discontinuities since every investment is of minimum size to make use of that minimum size Rodan suggests that complementary nature of investment is needed in a big manner investment should be made otherwise, inertia risk aversion cannot be solved. Now sum up, whatever we discussed so far we took up closely related aspects of under development. There are the champions of supporters of balanced growth, one supporter we considered today Gunner Myrdal. His backwash and spread effects, another balanced growth strategist, maybe we have noted Harvey Leibenstein a third one we have noted Richard Nelson. There people used different terminologies he noted Richard Nelson low level equilibrium effort thesis both deal with same problems both gave their theories at the same time But terminology is different the types of analysis they conducted are different essence is same. Similarly Harvey Leibenstein called Critical Minimum Effort, Rodan called Big-Push the terminology is different but both are emphasizing the same thing. Rodan improved his theory based on well known external economies. But, the greatness of Rodan is that concept of external economies used in case of individuals and capitalistic economies, he applies to development economies. Thus, around late 1940’s and early 1950’s dozens of economists took interest in problem of underdeveloped economies. They stayed in these countries studied thoroughly the problems, lived with the people and they put their experiences, in the shape of books models and concepts and notable among them we noted Myrdal Backwash and Spread effects highly useful for developed nations. We know the example of Bihar and Hyderabad in Telangana of A.P. Similarly, other area in North-eastern states and also in Marthawada area of Maharashtra. These theories we say all is not good, all are not positive points. They suffer from weakness, but what is the duty of ours whatever merit is there that we have to consider and whatever limitations are there that we have to omit or ignore with the combination of all these concepts and theories, third world countries can learn a lot, infact government of India, Chinese government may use of theories Gunnar Myrdal per concept increase used at the same time, Nurkse and Rodan are popularly used.
Posted on: Fri, 21 Mar 2014 23:29:15 +0000