Question

Explain Theory of Big Push and Unbalanced growth theory with assumptions , criticisms and example of countries.

Answer 1

Theory of big push Theory of big push was developed by Rosenstein Rodan. The theory highlights that the need for tremendous effort which are required to pull least developed nations out of stagnation and vicious circle of poverty. Bangladesh is a least developed nation. According to Rodan , for the process of economic development ,it requires a 'big push' to break the vicious circle of underdevelopment in Bangladesh economy. Big push is actually related with the concept of external economies. Rodan explains three types of indivisibilities and their impact on development i. Indivisibilities in production function : These indivisibilities lead to increasing returns , higher output ,higher income, higher employment and lower capital output ratio ii. Indivisibilities of demand : It implies the expansion of market in Bangladesh economy through high quantum investment that leads to higher investment ,higher productivity and higher external economies. Thereby Bangladesh can achieve economic development. iii. Indivisibilities in supply of savings : To generate savings, Bangladesh economy should be created a the gap between income and expenditure and savings should be raised . The theory failed to recognize that the amount of resources in underdeveloped nations is very limited . They lack in capital , skilled labor ,entrepreneurial ability etc Unbalanced growth theory Unbalanced growth theory is developed by Hirschman . He believes that deliberate unbalancing of economy should be needed according to pre -designed strategy is the best way to accelerate economic development in under developed nations. Let us take an example of Afghanistan economy. The theory states that expansion of basic services through investments in social overhead capital is an essential conditions for encouraging and stimulating investments in direct productive activities in least developed nations like Afghanistan. Both sequences could create inducements and pressures conducive to economic development in Afghanistan The theory fails to pay due attention to agriculture which is backbone of economy of less developed nations