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Strategies of Economic Development: Balanced Vs. Unbalanced Growth

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Currently, there are among the development economists two major schools of thought regarding the strategy of growth which should be adopted.

On the one side, there are economists, like Ragnar Nurkse and Rosenstein-Rodan, who are of the view that the pattern of investment should be so designed as to ensure a balanced development of the various sectors of the economy.

Economists like H.W. Dinger and A.O. Hirschman on the other hand, believe that rapid economic growth follows concentration of investment in certain strategic industries rather than an even distribution of investment among the various industries.

Case for Balanced Growth:

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According to Say’s Law production, supply creates its own demand. If, in the under-developed countries, investment is made simultaneously in a large number of industries, incomes of a large number of workers engaged in these industries will increase. This will create demand for goods produced by one another and production will increase.

Also, it will provide work for a large number of people producing diverse commodities. It will increase their income and they will be in a position to buy for consumption the goods made by one another. Thus, the expansion of one industry helps in the expansion of others and there is all round growth. This wave of capital investment in a number of different industries is called by Nurkse ‘balanced growth’.

But when investment is to be made in all such sectors and industries, then, in order to bring about balanced economic growth, large quantities of resources will be required. It is doubtful if the under developed countries have the means to mobilise resources in such large quantities.

Case for Unbalanced Growth:

Prof. Hans Singer and Albert Hirschman’ eminent American economists, have criticised Nurkse’s doctrine of balanced growth. They contend that what is needed is not balanced growth, but a strategy of judiciously-planned unba­lanced growth.

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According to Singer, balanced growth cannot solve the problem of the under-developed countries, nor do they have sufficient resources to achieve balanced growth. In the under-developed countries, not only are the resources and the capabilities to bring about balanced growth lacking but, according to Hirsch­man, balanced growth is not even desirable. His view is that if economic growth is to be accelerated, it will have to be brought about by unbalanced growth.

Hirschman contends that deliberate unbalancing of economy, in accor­dance with a pre-determined strategy, is the best way to achieve economic growth. He prescribes big push in strategically selected industries or sectors of the economy.

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