Rosenstein Rodan Theory is an improvement over the traditional static equilibrium theory.
The big push theory brings out the need for a massive effort on the part of the underdeveloped countries to industrialize them self provided ‘they are really serious about economic development.
It also warns that piecemeal efforts of development would be of no avail. It is the high minimum quantum of investment that takes an underdeveloped economy towards an optimum position.
Despite the above, big push theory has been criticized on several grounds by a number of leading economists like H. Myint, Jacab Viner and H.S. Ellis etc. It has been argued that this theory creates more problems than it solves.
The main pillars of criticism are as follows:
1. Inadequacy of Resources:
This theory fails to recognize that the amount of resources in an underdeveloped country is very limited. They lack in capital, skilled labour, dynamic entrepreneurial ability, power etc. So these countries cannot adopt Big Push theory. As noted by E. Gudin, it is somewhat unreal because it presupposes not only an ample supply of capital but also of other scarce factors in underdeveloped countries.
Since otherwise, they would not be underdeveloped. An attempt at a big push would probably amount to starting more projects than the country’s resources can cope with, with the result of lengthening the period of investment unnecessarily and uneconomically. Therefore, it is very difficult for underdeveloped countries to concentrate more on building social overhead capital, because such investment is not ‘lumpy’ but also have very high capital output ratio.
2. Danger of Inflation:
Since the underdeveloped countries do not adopt Big Push theory but it envisages the investment in different industries of consumption goods, capital goods as well as other social overheads. As a result, they are likely to yield returns after a long time. This process increases the demand rapidly while slow increasing supply cannot cope up with the situation.
The gap between demand and supply is likely to persist for sometime resulting in increase in prices. This would create a pressure for the demand of consumer goods, which would generate inflation. The inflationary pressures make the task complicated in the long run period. As underdeveloped countries do not possess sufficient financial resources to provide social overheads, thus, it makes difficult to attain quick economic development for such an economy.
3. Problem of Co-ordination:
Another defect according to Prof. Hla Myint, it is very difficult to co-ordinate the various development plans in Big Push theory. Evidently, sometimes the problem of co-ordination is beyond the efficient administrative machinery of even developed countries. The government of underdeveloped country faces various difficulties in drawing and executing the various economic development plans. Thus, the problem of co-ordination is formidable at any grass root specially in underdeveloped economies.
4. Neglect of Agricultural Sector:
Big Push is a programme of comprehensive industrialization. It lays more stress on the heavy dose of investment in different industries such as capital goods industries, consumer goods industries and social overhead capital etc., but it ignores the development of agricultural sector.
Agriculture is extremely important in most of the underdeveloped countries, as it is the main occupation of the masses. To neglect the development of agricultural sector is to neglect the development of the entire economy. The structure of industrialization cannot be raised on account of backward agriculture. Thus, depressed agriculture is a serious bottleneck in the path of industrialization both in short run and long run.
5. Neglect of Importance of Techniques:
According to Celso Furtado, this theory neglects the importance of techniques in its overenthusiasm for capital formation. It is claimed by Prof. Myint that capital formation is the main vehicle of the assimilation of new techniques. Today, the development depends increasingly upon technique and less on direct capital formation in productive processes.
6. Difficulties in Mixed Economy:
The concept of Big Push ignores the difficulties faced in a mixed economy. The mixed economy, in underdeveloped countries, provides co-existence for both private and public sectors. If these are complementary in nature then it faces no constraints. But the problem becomes formidable and acute when two sectors are competitive to each other. The competition occurs when government sets up its own factory in public sector. A situation of ‘cold war’ is a common feature between these two sectors in underdeveloped countries.
7. Limited Scope for External Economies:
Prof. Rodan advocated that Big Push emphasizes that simultaneous development of industries would create external economies in the long run period in the shape of skill of labour and training. But in the opinion of Prof. Viner and E. Ellis, external economies generally result in reducing cost rather than expanding the output. In a developing country, expanding output is more significant than costs.
8. Too Much Emphasis on Indivisibilities:
The theory of Big Push laid more stress on the problem of indivisibility of both on the supply and demand sides. According to Celso Furtado, “The recognition and identification of these necessary reforms is of fundamental practical importance, both for countries which are anxious to emerge from stagnation and for those desirous of intensifying their development”.
9. Negligible Economies through Investment in Export and Import Substitutes:
The realization of extensive external economies is done by big push in investment on infrastructure of the economy. However, Prof. Jacob Viner points out, “Underdeveloped economies realize greater economies from world trade independently of home investment”. But in reality, Rodan has made no headway in this regard but is silent over the reality that in newly developing countries investment for export and marginal import substitutes occupy a larger portion of total investment.
10. Neglects the Role of International Trade:
Rodan was of the view that international trade will create external economies which in turn will promote development in a country. But according to Prof. Viner & Ellis, it loses its justification because in the case of underdeveloped countries, there is negligible chance of such activities as they are already foreign trade oriented. In this way, big push neglects the role of international forces in a true sense.
11. Institutional and Administrative Difficulties:
The theory of big push cannot be adopted without active state participation, guidance and control. But in underdeveloped countries, the government administration is very much inefficient, inexperienced and lethargic to handle. Furthermore, underdeveloped countries lack in statistical knowledge, technical knowledge, trained personnel and co-ordination between various departments. These hamper the smooth working of big push.
12. Large Increase in Output Results in Low Investment. J.H:
Adler’s statistical analysis of economic development for world depicts that “A relatively low level of investment pays off well in the form of additional output”. This low capital output ratios in many Asian and Latin American countries could result in higher output in the initial stages of development. But Prof. Rodan failed to explore the possibilities of small push of investment which can work as a powerful force to sole development. On this ground, this concept is not comprehensive.
13. Other factors Ignored:
Prof. J.H. Ellis is of the view that big push is very important for development as it gives stress on investment but this single factor is not sufficient to attain development in a country. On the contrary, there are many other factors which also greatly influence the development. They are honest and efficient administration, control in inflation, development of agriculture, development of technology, human capital, institutional and structural changes etc. Moreover, it also needs congenial atmosphere at home and abroad.
14. Not supported by History:
Prof. Higging argues that economic histories of various countries do not prove empirically that countries have developed with the help of Big Push. As noted by Furtado, it is not confirmed by historical facts. He gives the example of Bolivia where large investments were spent on social overheads. Yet the economy of this country remained stationary and per capita income low. Thus, no country in the world got development due to massive industrialization programmes as advocated by big push theory. In this regard, the concept of big push remained untested for meeting with the crux of problems of underdeveloped countries.
15. Problem of Co-ordination:
According to H. Myint, it is very difficult to co-ordinate various development plans in big push theory. Interestingly, sometimes the problem of co-ordination is beyond the efficient administrative machinery yen of developed countries. The governments of underdeveloped countries face the difficulty not only in the initial drawing of the economic development plans, but also in the execution of various development projects according to a planned time table.
In executing the various development projects, there are possibilities of revision of original plans, delays and departures from the original time table. Thus, the problem of co-ordination has been one of the weakest points of big push theory.