But it will not be economical to install a big machine to make a cloth of a special design, because owing to its high price and low incomes of the people, there will not be sufficient demand for this type of cloth, i.e., the market will be too small. The level of investment depends not on the need for capital but on the inducement to invest in the form of attraction to earn profit from the capital invested. It offers much hope to the developing nations in as much as they can adopt the more productive technologies of advanced nations. The small size of the market or the low level of demand for the products concerned discourages the entrepreneurs from investment in industries. The Economy can be improving with methods like manage resources properly, focusing on production to avoid buying from other countries or how to put people in financial positions. Equitable distribution of wealth cannot happen in an economy unless and until it becomes self sufficient. Mere more people without having purchasing power will not create real demand. Export-led strategy forces firms to look for the best ways of produ­cing. Rather than importing steel, automobiles, TV sets, computers, and other such products, a country should produce them itself in order to develop the skills necessary for moderni­sation. Many countries are called developing countries, these countries should found solutions for situations that don’t allow full development. It should produce, in other words, all the goods it had previously imported from the indus­trialised countries; this is the road to development that most of the larger developing countries, including India, China and Brazil undertook in the post-Second World War period.

They contend that what is needed is not balanced growth, but a strategy of judiciously-planned unbalanced growth. Disclaimer: This work has been submitted by a university student. �M�H�dE:@�W@B�&H6H�� ��L�,?�,F����~ ` ��m At times these countries have undertaken import substitution to extremes, insisting. Adam Smith said, “Division of labour is limited by the size of the market.” Nurkse says in the same manner that inducement to invest depends on the size of the market, that is, on the level of demand. The strategy of unbalanced growth has come in for severe criticism. They are often given increased access to credit, often at subsidised rates. To remove these deficiencies and obstacles, further investment will be stimulated.

Crisis States Research Centre working papers series 1 (31). If they are not to be imported from abroad, they will have to be produced in the country and for that purpose investment will have to be made in their production. We've received widespread press coverage since 2003, Your UKEssays purchase is secure and we're rated 4.4/5 on reviews.co.uk. 12.5 CDM AND BIOENERGY OPTIONS. But mere expansion of money supply and thus putting more money into people’s pockets demand for goods increases which will result in inflation or higher prices, but not increase in the real effective demand and expansion in the capacity to produce goods. Before publishing your Articles on this site, please read the following pages: 1. This website includes study notes, research papers, essays, articles and other allied information submitted by visitors like YOU. Hirschman’s unbalanced growth strategy has also been criticised on the ground that it will generate inflationary pressures in the economy.

There may come into existence monopolies which have vested interests in restricting expansion in output. Registered Data Controller No: Z1821391. All Rights Reserved. According to Marcus Fleming, “Whereas the balanced growth doctrine assumes that the relationship between industries is for the most part complementary, the limitation of factor supply assures that the relationship is for the most part competitive.” Singer adds – “The resources required for carrying out the policy of balanced growth are of such an order of magnitude that a country disposing of such resources would in fact not be underdeveloped.”. The policy package presupposes a choice of allocating limited supplies and in response to certain stimuli the most important uses combined with inducements to make decisions of all kinds (not only investment decisions).”. Paul Streeten rightly writes, “The contrast drawn by unbalanced growth doctrine between scarcity of resources and scarcity of decision-making can be misleading. The whole world is virtually its market. Looking for a flexible role? No single theory can explain how development works best or offer a strategy that is most efficient in every case. Hence the productive use of land with appropriate conservation, fertilizers and tillage will go- far in increasing a poor nation’s output. With this, inducement to invest will increase. And thus the DPA cost of producing an amount of output is pushed up. The governments have to think in these lines if their economy is based on agricultural activity: Rates of productive capital formation are low in developing countries because of deprived income; little can be saved for the future. This reluctance can be understood in the historical context of unequal development, national development priorities, capital shortages for new investments, and imbalances … A situation of higher productivity, the greater employment and incomes and high purchasing power of the people will provide a profitable field for investment. In an advanced country, during depression, “industries, machines, managers and workers as well as the consumption habits” are all present, while in poor developing countries this obviously not so. But serious doubts arise about the saving capacity of developing countries to follow the balanced growth path. The building of it by the government will lead to a spurt of investment and production in a variety of fields both in the stages before and after this industry. We have explained above how Say’s Law cannot be helpful in developing countries if investment is made only in one industry. Economics, Economic Development, Economic Development in Developing Countries. Economic planners in developing countries lay great emphasis on the following strategies of development with regard to human capital: Literate people are knowledgeable and resourceful; their analytical skills help them to weigh the pros and cons of specific social situations that affect their standards of living. When one industry benefits from the growth of another industry, then we say that external economies are available from one industry to another.

To consider a developed country, the needs of the inhabitants must be met and they must have a good quality of life. At the top are mathematics and languages, then the humanities, and at the bottom are the arts” (Robinson, K, nd). Market forces will be too weak or powerless to bring about required adjustments and unless coordinated planning of much more than investment is called out, the investment projects will turn out to be wasteful and will be abandoned.”.

The second path, i.e., ‘development via shortage of SOC, lacks this attribute since it may take some time for the political pressure to be generated so that the adjustment in SOC is delayed. In a poor country, the size of the market for goods is small so that sufficient opportunities for profitable investment in industries are lacking. While the former group of experts out on missions advocate high taxation in order to “set resources free”, the latter recommends low taxation in order to “encourage enterprise.”, Another important shortcoming of Hirschman’s unbalanced growth doctrine, like Nurkse’s balanced growth doctrine, is that planning is required to implement his strategy.

It is the expectations of profits which is a fundamental factor influencing the amount of investment in a country at a given time. Throughout history, we can see how the use of technology has facilitated the lives of humans, for example, the discovery of electricity permitted a great advance in the world, thanks to this invention we have light every day, Can use all the electronic devices and this allows to develop new discoveries day by day.

If sufficient investment in agriculture and other consumer goods industries is not made, it will cause rise in prices as was actually witnessed in India during the Second and Third Five Year Plans. Keywords: developing country, Technology, Education, Economy, solve problems, relation. One of the aspects that must be changed is knowing how to use their own resources for production, since most of these countries depend on the production of developed countries. This website includes study notes, research papers, essays, articles and other allied information submitted by visitors like YOU. Share Your Word File He took the fact initiative and became a hero to his people thanks to that he was innovative and used his creativity and his desire to get ahead to build something new. The financing of growth in poor countries has always been an unstable link in the productive mechanism.

Manufacturing cars in a less developed country (LDC) might be profitable if the company could purchase steel at international prices. In unbalanced growth strategy planning is required “as much at restricting supplies in certain directions as at expanding them in others. For the sake of analytical simplicity, the curves have been drawn in such a way that their optimal points lie on the 45° line.

%%EOF If the purchasing power of the people is low because of their extreme poverty, the demand for goods in that country will be small or the size of the market will be small even though the country is big in size or its population is large. “It is interesting to note,” says Hirschman. Asian countries like India and China with exploding population figures are in a situation to invest their human capital for productive purposes.

As Nurkse puts it, “An increase in production over a wide range of consumables, so proportioned as to correspond with the pattern of consumer s preferences, does create its own demand.”. Further reading Belloc, M and M Di Maio (2011), “Survey of the literature on successful strategies and practices for export promotion by developing countries”, IGC Working Paper 11/0248. Only as a result of increase in productivity, there is increase in income and increase in purchasing power which will increase demand and enlarge the size of the market. Another way in which technology contributes to development is communication, thanks to the technology has been able to have a communication between all the countries of the world of instantaneous way.

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