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Established in 2006 as a Community of Reality

Welcome to the Neno's Place!

Neno's Place Established in 2006 as a Community of Reality


Neno

I can be reached by phone or text 8am-7pm cst 972-768-9772 or, once joining the board I can be reached by a (PM) Private Message.

Established in 2006 as a Community of Reality

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    A systematic view of the Big Push theory.” Rosenstein-Rodin theory

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    A systematic view of the Big Push theory.” Rosenstein-Rodin theory Empty A systematic view of the Big Push theory.” Rosenstein-Rodin theory

    Post by Rocky Sun 09 Oct 2022, 5:21 am

    A systematic view of the Big Push theory.” Rosenstein-Rodin theory

    A systematic view of the Big Push theory.” Rosenstein-Rodin theory 4869



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    Researcher in development and financial affairs, Akil Jaber Ali
      The main features of the "big thrust theory" Rosenstein-Rodin theory include:
    1) large investments (large-scale investments at the beginning of the growth process. If not enough investments are made, the process cannot be self-sufficient);
    2) investments in various sectors of the economy (the need to invest in different “growth channels” in such a way that they support the growth of each other by providing the necessary level of demand and, as a result, balanced development is ensured);
    3) Planned industrialization (the need for planned industrialization in underdeveloped countries where agriculture is the dominant sector of the economy). After the initial application of the Big Push Theory, there must be a balance between:
    1) The economic and social sector
    and 2) the means of production and consumer goods.
    We consider industries A and B: if industry A is to expand in order to overcome technical indivisibility, it will have to introduce additional internal development factors. This can lead to a lower price of Industry A products. If industry B uses the products of industry A as resources, the creation of such factors in industry A will pass on to industry B in the form of financial benefits. Hence, the profit of industry B will occur by reducing the price of the products of industry A. Investment in industry B will lead to an increase in the demand for the products of industry A from industry B. This in turn will lead to investment and expansion of the industry.
    The “big push theory” was first put forward in 1943 for the backward countries of the European space by PN Rosenstein-Rodan as a kind of synthesis of two concepts: “balanced growth theory” or in other words “continued growth” and “vicious cycle of poverty”, in other words The relationship between the shock theory or the big push, and the concept of vicious circles of poverty.
    — The essence of this theory is that there is always some kind of obstacle on the path of development, and the process of development by its nature is not smooth and continuous and consists of so-called ups and downs, which must necessarily be faced in the way of economic growth.
    Therefore, any economic development strategy based on the theory of gradual development (gradual development) will be ineffective for a long period of time. A major boost is needed to pull the economy out of the doldrums in which it is developing due to inertia. Only then can the smooth transition of the economy to higher levels of productivity and income be ensured. If there is no such big boost to investments, the economy will fail to achieve balanced and aggregate growth.
    Undoubtedly the main result of the Big Push Theory is government regulation and central planning. It is said that due to market shortage, the free price system is not dependent on economic events and, as a consequence, is unpredictable. The institutional and government structures of developing countries are not efficient enough to meet all the conditions of the “big push” theory, so government intervention may not be more effective than the established free pricing mechanism
    — Following the Big Push theory, such a mutually beneficial method of increasing and expanding production is unlikely to occur unless internal obstacles are removed. A phased approach to development will not overcome these obstacles. Thus, a “big boost” in the form of large investments is needed for the successful establishment of the economy for balanced growth
    The big push theory is mainly based on the industrial and agricultural sector, and the manufacturing sector is by its nature the best means of economic growth. However, the dominant economic sector in developing countries is agriculture and primary production. In order to achieve balanced economic growth, agriculture also requires a corresponding "big push". Hence, the theory of “big impulse” means the investment of capital in the economy of the country to get out of the state of underdevelopment. Contrary to the concept of “vicious circles of poverty”, the theory is not based on self-regulation of the market, but on investment in certain sectors of the economy in order to accelerate its growth.
    Rosenstein-Rodan PN believes that the marginal growth of investments in various non-coherent sectors of the economy will be similar to “two drops of water in the desert”, that is, insignificant, and a one-time investment can lead to significant changes.
    Contributed by the concept of views of a. Hirschmann in developing the original theory of 'big push' and later Hans Singer put forward the theory of 'unbalanced growth through unbalanced investments'. He believed that such a kind of "big push" in the industrial sector was impossible without growth in the agricultural sector. Therefore, G. Singer paid special attention to increasing the productivity of agriculture, increasing labor productivity in agricultural sectors. It relied on the need to use external resources, but they had to be found somewhere, because the possibility of using internal savings was limited. Hence the need to use external loans that played the role of investment.
    The theory of equilibrium growth, developed by R.Nurks, was based on the fact that investments in growth must be in equilibrium, i.e. there must be equality of supply and demand. Simultaneous investment in different industries will achieve self-sustainable growth. That is, it is necessary to invest in weak sectors of the economy widely separated, which will lead to a larger market, higher productivity, and even greater incentives for further investment. At the same time, it is necessary to maintain a balanced growth between the agricultural and industrial sectors in order to increase the exchange of resources between them, which is important for both sectors.
    According to R.Nurksa, the problem of underdevelopment in countries can be solved by increasing the money supply in the country. At the same time, it is necessary to take into account real income, since an increase in the money supply will lead to an increase in inflation, and therefore neither the real volume of production nor the volume of investment will grow, and the decrease in purchasing power in the state will mean a decrease in domestic demand for both consumer goods and services, and for capital. Hirschma's theory of unbalanced growth was based on the premise that it is necessary not to invest in all interrelated sectors of the economy at the same time (as in the theory of balanced growth), but only in strategic importance. Of which. The application of the “balanced growth theory” requires a lot of capital, and this resource is not available in third world countries. According to his theory, the rest of the non-priority sectors will develop themselves automatically.
    He believed that such asymmetric investment was the best growth strategy. Given the reality of resource shortages in underdeveloped countries, it is necessary to focus on strategically important sectors of the economy, using resources as efficiently as possible. It was assumed that the first investment would destroy the equilibrium and stagnation of the economy, however, this violation would have positive consequences and would become a catalyst for a new flow of investment. New investments, which correct the previous imbalance, will lead to imbalances in other sectors and in the economy as a whole.
    It is noteworthy that the concept of opinions contributed by A. Hirschmann developed the original theory of the "big boost" and later Hans Singer put forward the theory of "unbalanced growth through unbalanced investments". He believed that such a kind of "big push" in the industrial sector was impossible without growth in the agricultural sector. Therefore, G. Singer paid special attention to increasing the productivity of agriculture, increasing labor productivity in the agricultural sectors. It relied on the need to use external resources, but they had to be found somewhere, because the possibility of using internal savings was limited.
    Hence the need to make good use of external loans on solid financial and credit bases, which played the role of investment, taking into account balance and not excessive external borrowing, and on the condition of achieving real and tangible development.

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    Added 10/09/2022 - 10:25 AM
    Update 10/09/2022 - 1:18 PM


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