THEORY OF BIG PUSH (ROSENSTEIN RODAN’S THESIS OF BIG PUSH) : DEVELOPMENT ECONOMICS

 

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  THEORY OF BIG PUSH
  ROSENSTEIN RODAN’S THESIS OF BIG PUSH
• DEVELOPMENT ECONOMICS
• DR SHASHI AGGARWAL
• NET ECONOMICS
• THEORY OF BIG PUSH

1. GIVEN BY  ROSENSTEIN RODAN IN HIS PIONEER WORK “ NOTES ON THEORY OF BIG PUSH” AS A STRATEGY TO EMANCIPATE THE LESS DEVELOPED COUNTRIES FROM THE CLUTCHES OF VICIOUS CIRCLE OF POVERTY.
2. FURTHER CONTRIBUTION WERE MADE LATER ON MURPHY,SHLEIFER AND ROBERT W VISHNY IN 1989
3. THE THEORY OF MODEL EMPHASIZES THAT UNDERDEVELOP COUNTRIES REQUIRE LARGE AMOUNT OF INVESTMENTS TO EMBARK ON THE PATH OF ECONOMIC DEVELOPMENT FROM THEIR PRESENT STATE OF BACKWARDNESS

 

4. UNDERDEVELOP COUNTRIES THERE IS CHRONIC PROBLEM OF CAPTIAL FORMATION,SKILL FORMATION,BACKWARD ECONOMIC INFRASTRUCTURE IN TERMS OF MEANS OF IRRIGATION,TRASNPORT BANKING AND COMMUNICATION SERVICES AND LIKE
5. ALL THIS DISCOURAGES THE ENTERPRENEUR TO STRIVE FOR FRESH INVESTMENTS IN THE LIMITED CHANNLES OF ECONOMIC ACTIVITIES
6. THEORY OF BIG PUSH STRESSES THE NEED FOR BIG PUSH STRESSES THE NEED FOR A BIG PUSH TO THE SYSTEM WITH SIMULTANEOUS INVESTMENT ACROSS DIFFERENT CHANNELS OF GROWTH SO THAT WITH CHANNEL SURVIVES ON THE GROWTH OF OTHER.
7. THE BIG PUSH OBVIOUSLY IS TO BY THE STATE AS PRIVATE ENTERPRENEUR DO NOT HAVE THE NECESSARY INDUCEMENT TO INVEST.
8. PROVISION OF SOCIAL OVERHEADS AS WELL AS THE GROWTH OF VARIOUS  COMPLEMENTARY INDUSTRIES SIMULTANEOUSLY ARE EXPECTED TO BREAK THE VICIOUS CIRCLE OF LOW PROFITABILITY AND LOW INVESTMENT
9. ULTIMATELY,PRIVATE ENTREPRENUR WOULD COME FORWARD TO TAP THE POTENTIAL OF PROFITABILITY AND EXTERNALITIES AND THE SYSTEM WOULD BECOME STRONG ENOUGH FOR SELF SUSTAINED GROWTH OVER TIME
10. BIG PUSH  REFERS TO THE STRATEGY OF INJECTING INTO THE SYSTEM SUCH A DOSE OF LUMP SUM INVESTMENTS THAT BREAKS THE SHACKLES OF ECONOMIC PASSIMISM AND OFFERS PRIVATE INVESTORS ENOUGH OF INVESTMENT OPPORTUNITIES WITH HIGH RATES OF PROFIT.
11. OWING TO INDIVISIBILITIES RECURRING DOSE OF SMALL INVESTMENTS MAY NOT PROVE TO BE AS USEFUL AS  A SINGLE DOSE OF INVESTMENT.

• THEORY OF BIG PUSH
• PROF ROSENSTEIN RODAN,” THERE IS MINIMUM LEVEL OF RESOURCES THAT MUST BE DEVOTED TO A DEVELOPMENT PROGRAMME IF IT IS TO HAVE ANY CHANCES OF SUCCESS. LAUNCHING A COUNTRY INTO SELF SUSTAINED GROWTH IS LIKE GETTING AN AEROPLANE OFF THE GROUND, THERE IS CRITICAL GROUND WHICH MUST BE PASSED BEFORE THE CRAFT CAN BECOME AIR BORNE.
• THERE OUGHT TO BE A CRITICAL MINIMUM SIZE OF GROWTH PROGRAMME SO THAT THE CONSTRAINTS OF INDIVISIBILITIES AND DISCONTNUITIES IN THE SYSTEM ARE EFFECTIVELY OVER COME AND DISECONOMIES OF SCALE ARE CONVERTED INTO THE ECONOMIES OF SCALE. SMALL INVESTMENT WOULD NOT WORK.
• FEATURES OF BIG PUSH THEORY
• MASSIVE INVESTMENT : MASSIVE INVESTMENT AT THE VERY OUTSET OF THE PROCESS OF GROWTH. OTHERWISE THE PROCESS OF GROWTH MAY NOT BE SELF SUSTAINING.
• INVESTMENT IN DIFFERENT SECTORS : NEED FOR INVESTMENT ACROSS DIFFERENT CHANNELS OF GROWTH SO THAT EACH CHANNEL SUSTAINS GROWTH OF OTHER BY PROVIDING THE NECESSARY DEMAND BASE. POINTS TOWARD THE BALANCED GROWTH OF THE SYSTEM
• PLANNED INDUSTRIALISATION :NEED FOR PLANNED INDUSTRIALIZATION OF LESS DEVELOPED COUNTRIES WHERE AGRICULTURE HAPPEN TO BE THE DOMINANT SECTOR BUT EQUALLY BACKWARD AND RIDDLED WITH POVERTY. A BIG PUSH IS NEEDED.
• BASIS OF BIG PUSH THEORY

1. EXTERNAL ECONOMIES ARE THE PRINCIPAL BASIS OF THEORY
2. PROF RODAN STATES THAT STRESSING THE EXTERNALITIES IS WHAT SEPARATES THE THEORY OF GROWTH FROM A STATIC
3. USES THE CONCEPT OF EXTERNAL ECONOMIES IN VERY SPECIFIC SENSE. THOSE ECONOMIES WHICH ARE AVIALABEL TO ALL PRODUCING UNITS BECAUSE OF THE OVER ALL GROWTH OF ECONOMIC ACTIVITY IN THE SYSTEM
4. EXTERNAL ECONOMIES ACT AS A SATALYTIC AGENT IN THE PROCESS OF GROWTH. BUT ONLY AVIALABLE WHEN BIG PUSH IS GIVEN TO THE SYSTEM AS WHOLE

• NEED OF BIG PUSH
• CONDITIONED BY EXTERNAL ECONOMIES AND INDIVISIBILITIES
• INDIVIDIABILITY IN THE PRODUCTION FUNCTION OR IN THE SUPPLY OF SOCIAL OVERHEAD COSTS :REFERS TO THE INDIVISIBILITIES OF I NPUT,OUTPUT AND PROCESS LEAD TO INCREASING RETURN AND LOWER CAPITAL OUTPUT RATION.
• SOCIAL OVERHEADS IN TERMS OF ROADS,BRIDGES,POWER , SUPPLY COMMUNCIATION SYSTEM AND LIKE ARE THE PRECONDITION OF ESTABLISHING INDUSTRIES. OVERHEAD INFRASTRUCTURAL PROJECT GENERATES INDIVISIBILITIES : LONG GESTATION,HEAVY MECHANISATION AND INTERDEPENENCE BETWEEN VARIOUS PROJECTS
• INDIVISIBILITY OF DEMAND :INTERDEPENDENCE BETWEEN DIFFERENT INDUSTRIES. SO INTERDEPENDENCE OF DEMAND CAUSE INTERDEPENDENCE OF INVESTMENT DECISIONS.
• CLOSED ECONOMY. HAVING DISGUISED UNEMPLOYMENT.
• SHOE FACTORY ---OFFERING EMPLOYMENT TO 100  WORKERS
• GENERATE WAGE INCOME
• A PART OF IT MAY GO TO PURCHASE OF SHOES,THE REST BEING ALLOCATED TO THE PURCAHASE OF VARIOUS NECESSITIES AND COMFORTS OF LIFE. IF SHOE MAKING INDUSTRY IS JUST DEPENDED ON DEMAND OF THE ITS WORKERS IT WILL NOT SURVIVE. IF MORE 1000 UNEMPLOYED GET EMPLOYMENT . EACH WILL SERVE AS THE DEMAND BASE.

 

• INDIVISIBILITY OF SUPPLY OF SAVING : CRITICAL MINIMUM INVESTMENT IN TERMS OF BIG PUSH CALLS FOR CRITICAL MINIMUM SAVING POTENTIAL IN THE SYSTEM. LARGE SAVING ARE POSSIBLE ONLY WHEN THE SIZE OF THE INCOME IS LARGE AND STIMULATING THE SYSTEM FROM A LOW INCOME PROFILE TO HIGH INCOME PROFILE NECESSIATED BIG PUSH IN TERMS OF INVESMENT.

 

• IMPLICATIONS
• ACCORDING TO PROF ROSENTEIN RODAN : THREE TYPE OF INDIVISBILITIES IN LESS DEVELOPED COUNTRIES A BIG PUSH IS NEEDED
• A LUMP SUM INVESTMENT IN VARIOUS COMPLENENATRIES INDUSTRIES AS WELL AS OVERHEADS GENERATING VARIOUS KINDS OF EXTERNAL ECONOMIES AND ALL ROUND ECONOMIC OPTIMISM
• EXTERNALITIES RESULT IN INCREASING RETURN AND BALANCED GROWTH,
• CRITICISM
• IMPRACTICAL : EXTERNALITIES MAY BE REALISED BY WAY OF BIG PUSH. LESS DEVELOPED COUNTRIES FACE SHORTAGE OF FUNDS
• LESS INCREASE IN PRODUCTION: MAY REDUCE THE COST BUT NOT PROPORTIONATE GROWTH IN SECONDARY SECTOR
• NEGLECT OF AGRICULTURE
• EDLER IS THE OPINION SMALL DOES OF INVESTMENT FREQUENT MAY PROVE USEFUL
• NOT A HISTORICAL FACT
• INFLATIONERY PRESSURE