Theories of Regional Development – Geography – UGC NET – Notes

Albert O. Hirschman

• According to Hirschman, “Development is a chain of disequilibria that must be kept alive rather than eliminate the disequilibrium of which profits and losses are symptoms in a competitive economy.
• If economy is to keep moving ahead, the task of development policy is to maintain, tension, disproportions and disequilibria.”
• “Unbalanced growth is a better development strategy to concentrate available resources on types of investment, which help to make the economic system more elastic, more capable of expansion under the stimulus of expanded market and expanding demand” -H.W.Singer.
• According to Alak Ghosh, “Planning with unbalanced growth emphasizes the fact that during the planning period investment will grow at a higher rate than income and income at a higher rate than consumption.”
• It explains the unbalanced growth in terms of the growth rates of investment, income and consumption. If ΔΙ/Ι, ΔY/Y and AC/C denote the rate of investment, income and consumption, then unbalanced growth implies

ΔΙ/Ι > ΔΥ/Υ > ΔΕ/C

i.e., the growth rates are not uniform.

• According to Benjamin Higgin, “Deliberate unbalancing of the economy, in accordance with a pre-designed strategy is the best way to achieve the economic growth.”
• According to H.W.Singer, “Unbalanced growth is a better development strategy to concentrate available resources on types of investment, which help to make the economic system more elastic, more capable of expansion under the stimulus of expanded market and expanding demand.”
• Meier and Baldwin are also of the opinion that “Planners should concentrate on certain focal points, so as to achieve the goal of rapid economic development. The priorities should be given to those projects which ensure external economies to the existing firms, and those which could create demand for supplementary goods and services.”

Explanation of the Theory

• Albert O. Hirschman in his strategy of economic development goes a step further from Singer when he says that for accelerating the pace of economic development in the underdeveloped countries, it is advisable to create imbalances deliberately. He also recognized the inter-relatedness of different economic activities as done by Ragnar Nurkse. But he asserts that investment in selected industries or sectors would accelerate the pace of economic development.
• He regarded, “Development is a chain disequilibria that must keep alive rather than eliminate the disequilibria, of which profits and losses are symptoms in a competitive economy”. There would be ‘seasaw advancement’ as we move from one disequilibrium to another new disequilibrium situation.
• Thus Hirschman argued that, “To create deliberate imbalances in the economy, according to a pre-designed strategy, is the best way to accelerate economic development.” Hirschman is of the confirmed view that underdeveloped countries should not develop all the sectors simultaneously rather one or two strategic sectors or industries should be developed by making huge investment. In other words, capital goods industries should be preferred over consumer goods industries.
• It is because capital goods industries accelerate the development of the economy, where development of consumer goods industries is the natural outcome. Hirschman has stated that, “If the economy is to be kept moving ahead, the task of development policy is to maintain tensions, disproportions and disequilibria.”

Process of Unbalanced Growth

• The strategy of unbalanced growth is most suitable in breaking the vicious circle of poverty in underdeveloped countries. The poor countries are in a state of equilibrium at a low level of income.
• Production, consumption, saving and investment are so adjusted to each other at an extremely low level that the state of equilibrium itself becomes an obstacle to growth. The only strategy of economic development in such a country is to break this low level equilibrium by deliberately planned unbalanced growth.
• Prof. Hirschman is of the opinion that shortages created by unbalanced growth offer considerable incentives for inventions and innovations. Imbalances give incentive for intense economic activity and push economic progress.