■THEORY OF BALANCED GROWTH
■
DEVELOPMENT ECONOMICS
■
THEORIES
OF ECONOMIC DEVELOPMENT
■
THEORY OF BALANCED GROWTH: SIMULTANEOUS
INVESTMENT IN ALL THE SECTORS
■
THEORY OF UNBALANCED GROWTH: INVESTMENT SHOULD
BE MADE IN PARTICULAR SECTOR
■
THEORY OF
BALANCED GROWTH
■
MEANING OF BALANCED GROWTH:-
■
GIVEN BY FREDRICK LIST
■
STRATEGY OF DEVELOPMENT COULD BE ACHIEVED BY
ADOPTING BALANCE AMONG AGRICULTURE,INDUSTRIES AND TRADE
■
1928 ACCORDING TO ARUTHUR YOUNG AS THE
DIFFERENT INDUSTRIES ARE MUTUALLY INTERDEPENDENT,THEY SHOULD BE DEVELOPED
SIMULTANEOUSLY.
■
IT WAS ALSO ENDORSED BY ROSENSTEIN RODAN IN HIS
ARTICLE,” PROBLEMS OF INDUSTRIALISM OF EASTERN AND SOUTH EASTERN EUROPE.”
■
PROF NURLSE,PROF LEWIS STOVASKY EXAMINED ON
DIFFERENT BASIS
■
DEFINITION
OF BALANCED FORWTH
■
REDDAWAY,”BALANCE GROWTH IMPLIES BALANCE AMONG
DIFFERENT SECTORS OF THE ECONOMY SUCH AS
•
BALANCE BETWEEN CONSUMPTION AND PRODUCTION
PATTERN
•
BALANCE BETWEEN CONSUMPTION GOOD SECTOR AND
PRODUCTION GOODS SECTOR
•
BALANCE IN PRODUCTION SYSTEM
ACCORDING TO
HIGGINS,”BALANCED GROWTH IMPLIES SIMULTANEOUS CAPITAL INVESTMENT IN A NUMBER OF
DIFFERENT INDUSTRIES.
■
BASIS OF THEORY OF BALANCED GROWTH
■
DEPENDS UPON DEMAND AND SUPPLY OF NATIONAL
INCOME
■
SUPPLY SIDE:-
•
LOW IN UN DEVELOPED COUNTRY
•
BECAUSE DUE TO LOW INCOME IN THESE COUNTRIES
•
BECAUSE OF LOW OF SAVING
•
SO LOW PRODUCTIVITY
LOW
INCOME ---- LOW SAVING ----
LOW INVESTMENT -- LOW
PRODUCTIVITY---LOW INCOME
IN ORDER TO
INCREASE SUPPLY:
■
INCREASE IN INVESTMENT PROVIDED THE
ENTREPRENEUR IS SUFFICENTLY MOTIVATED
■
NECESSARY TO SETTING UP OF MANY INDUSTRIES
SIMULTANEOUSLY
■
SUPPLY SIDE
■
DIFFERENT SECTORS SHOLD BE DEVELOPED
SIMULTANEOUSLY
■
DEMAND SIDE
■
LOW INCOME--------LOW PURCHASING
CAPACITY------LOW INVESTMENT------LOW PRODUCTIVITY-------
■
LOW DEMAND MEANS LOW INDUCED TO INVESTMENT
■
DIFFERENT INDUSTRIES SHOULD BE SET UP
SIMULTANEOUSLY SO THAT THEY SHOULD BECOME THE CUSTOMER OF ONE ANOTHER
■
EXAMPLE BY ROSENSTEIN RODAN
■
IN A SHOE FACTORY ,THE FACTORS OF PRODUCTION WILL GET THEIR RUMENERARTION BUT THEY WILL NOT SPEND ENTIRE INCOME ON THE
PURCHASE OF SHOES AND THEY WILL PURCHASES GOODS MADE BY OTHER INDUSTRIES
■
DIFFERENT OPINION ABOUT BALANCE GROWTH
■
EXPLANATION OF RODAN’S THEORY OF BALANCED
GROWTH,”
■
HE EXPRESSED HIS OPINION TO MAKE INVESTMENT ON
LARGE SCALE TO MAKE UNDER DEVELOP ECONOMIES SELF SUFFICIENT IN HIS THEORY OF BIG PUSH
■
ACCORDING TO THIS APPROACH BALANCED GROWTH
MEANS THAT IN ORDER TO TAKE BENEFIT OF VARIOUS EXTERNAL ECONOMIES OF THE
INDIVISIBILITY OF SUPPLY AND DEMAND SIDE LARGE INVESTMENT SHOULD BE MADE IN
SEVERAL ACTIVITIES.
■
BALANCED GROWTH MEANS INVESTMENT IN MUTUALLY SUPPORTING INDUSTRIES WHICH WOULD CREATE THE MARKET FOR EACH OTHER’S PRODUCTS.
■
THREE KINDS OF
■
INDIVISIBILITY IN THE PRODUCTION FUNCTION OR IN
THE SUPPLY OF SOCIAL OVERHEAD COSTS:
•
THEY ARE INDIVISIBLE IN TERMS OF TIME THAT IS
THESE REQUIRE LARGE SCALE INVESTMENT BEFORE PRODUCTION
•
THE LIFE OF THE MACHINES AND THE TECHNIQUES
USED ARE VERY LONG
•
GESTATION PERIOD IS MORE
UNDER DEVELOP
HAS TO INVEST 30-40% OF THEIR TOTAL INVESTMENT IN SOCIAL OVERHEAD
■
THREE KINDS OF INDIVISIBILITY
■
INDIVISIBILITY OF DEMAND :-INVESTMENT DECISIONS
REGARDING DIFFERENT INDUSTRIES DEPEND UPON EACH OTHER
■
FEAR OF SUPPLY NOT EQUAL TO DEMAND
■
PROF RODAN GAVE AN EXAMPLE: IN A CLOSED ECONOMY
THERE ARE 100 DISGUISED UNEMPLOYMENT WORKERS IN ORDER TO MAKE EMPLOYMENT A SHOE
FACTORY IS SET UP , THEY RECEIVE INCOME. NOT GOING TO SPEND ALL INCOME ON SHOES
THEY WILL REQUIRE OTHER THINGS ALSO.DEMAND OF SHOES WILL BE LESS THAN SUPPLY OF
SHOES SO 10 MORE INDUSTRIES HAS TO BE SET UP
■
THREE KINDS OF INDIVISIBILITY
■ INDIVISIBILITY OF SUPPLY OF SAVING:
■
AS THE LEVEL OF INCOME IS LOW
■
HUGE INVESTMENT IN FIRST STAGE
■
MARGINAL RATE OF SAVING IN SECOND STAGE
■
THIRD INDIVISIBILITY IS SAVING IS INCOME
ELASTIC
■
NURKSE’S THEORY OF BALANCED GROWTH
■
THE OBSTACLE IN UNDER DEVELOP COUNTRY IS
VICIOUS CIRCLE OF POVERTY
■
LOW INCOME---LOW SAVING---LOW INVESTMENT-LOW
OUTPUT –LOW INCOME
■
LOW INCOME DEMAND IS LOW
■
TO BREAK THE VICIOUS CIRCLE OF POVERTY TO
BALANCE BETWEEN BOTH DEMAND AND SUPPLY
•
COMPLEMENTARITY OF DEMAND
•
INTERVENTION BY THE GOVT
•
ACCELERATED RATE OF GROWTH
■
NURKSE’S THEORY OF BALANCED GROWTH
•
COMPLEMENTARITY OF DEMAND:- DEMAND CAN BE
EXTENDED BY BY BALANCED GROWTH. SEVERAL INDUSTRIES PRODUCING DIFFERENT GOODS
COULD BE SET UP SIMULTANEOUSLY SO THAT THE PEOPLE ENGAGED IN DIFFERENT
INDUSTRIES BECOMES CUSTOMER OF EACH OTHER’S GOODS. SINGLE INDUSTRY WILL NOT BE
ABLE TO CREATE DEMAND. HE CONSIDERS THE COMPLEMENTARITY AS THE BASIS OF
BALANCED GROWTH
•
INTERVENTION BY THE GOVT
•
EXTERNAL
•
ACCELERATED GROWTH:-BALANCED GROWTH IS A MEANS
OUT OF GETTING OUT OF RUT
■
EXPLANATION OF LEWIS THEORY OF BALANCED GROWTH
■
BECAUSE OF BALANCED GROWTH EQUALITY IN COMPARATIVE PRICES IN ALL THE SECTORS WILL BE MAINTAINED AND ALL THE SECTORS
WILL CONTINUE TO GROW
■
IN CASE OF BALANCED GROWTH IT IS POSSIBLE TO
INCREASE THE PRODUCTION OF THOSE GOODS WHOSE INCOME ELASTICITY OF DEMAND IS
MORE
■
IF NOT POSSIBLE TO INCREASE PRODUCTION SIMULTANEOUSLY IN AGRICULTURE AND INDUSTRIAL SECTOR THEN BALANCED STRATEGY
BETWEEN DOMESTIC AND FOREIGN TRADE
■
IN CASE INDUSTRIES ARE NOT DEVELOPING THEN
EXPORT AGRICULTURE PRODUCT AND IMPORT INDUSTRY OR VICE VERSA BUT IT MAY BE HARMFUL
■
ALL SECTORS OF THE ECONOMY SHOULD DEVELOP
SIMULTANEOUSLY SO THAT THE BALANCE IS MAINTAINED
■
PROBLEM OF BALANCE AMONG DIFFERENT SECTORS
■
BALANCE BETWEEN AGRICULTURE AND INDUSTRIES
■
BALANCE BETWEEN HUMAN AND PHYSICAL CAPITAL
■
BALANCE BETWEEN DOMESTIC TRADE AND FOREIGN
TRADE
■
ROLE OF GOVT IN THE BALANCED GROWTH
■
CRUX OF
BALANCED GROWTH
■
BALANCED DEVELOPMENT OF DIFFERENT SECTORS OF
ECONOMY TO BALANCE BETWEEN DEMAND AND SUPPLY
■
DOES NOT MEAN THAT ALL INDUSTRIES SHOULD
DEVELOP AT THE SAME RATE
■
BOTH IN AGRICULTURE AND INDUSTRIES INVESTMENT
SHOULD BE MADE
■
ADVOCATES BOTH DOMESTIC AND FOREIGN SECTORS OF
THE
■
ON DEMAND SID LAY FOCUS ON CREATION OF EFFECTIVE DEMAND
■
ON SUPPLY SIDE FOR KEEPING THE BALANCE AMONG
DIFFERENT
■
LEADS OT EXTERNAL ECONOMIES AND HENCE EXTENSION
OF THE MARKET
■
NURKSE ASSIGNED MORE IMPORTANCE TO PRIVATE
ENTERPRISES
■
OPTIMUM USE OF THE CAPITAL OR BREAKING OF
VICIOUS CIRCLE OF POVERTY
■
BENEFITS
■
LARGE SIZE OF MARKET
■
EXTERNAL ECONOMIES
■
HORIZONTAL ECONOMIES
■
VERTICAL ECONOMIES’
■
BETTER USE OF RESOURCES
■
RAPID RATE OF DEVELOPMENT
■
ENCOURAGEMENT TO PUBLIC ENTERPRISES
■
BREAKING VICIOUS CIRCLE OF POVERTY
■
CRITICISM
BY FLEMING,SINGER,HIRSCHMAN AND KURIHARA
•
IGNORES SCARCITY OF RESOURCES
•
IGNORE THE SIDE OF PLANNING
•
DEVELOPMENT FROM BEGINNING
•
NOT A THEORY OF DEVELOPMENT
•
EXTERNAL
•
INFLATION
•
UNREALISTIC ASSUMPTION
No comments:
Post a Comment