Development 1 Essay Example | Topics and Well Written Essays - 1500 words

Development 1 - Essay Example 1 Balanced growth (1953) The theory of balanced growth was proposed by Ragnar Nurkse in 1953. This theory was framed on the fact that newly independent economies could not achieve faster economic development due to the rapidity in basic commodity exports. The imported industrial commodities were the only alternatives which could have expanded the destroyed economies. In other words, the balanced growth or simultaneous enlargement of all industries was the most appropriate way to stimulate the economic growth of underdeveloped economies. At the same time, this type of growth necessitated the accumulation of large resources at one time. According to Nurkse (1953), â€Å"poor developing economies were characterized by a large surplus of labour employed at zero marginal cost in the traditional sector† (cited in Hayami, Hayami and Godo, 135). Nurkse’s model failed to provide adequate alternatives for the development of newly independent economies. Take-off into sustained gro wth (1956) Rostow (1956) defines Take-off into sustained growth model as, â€Å"the interval during which the rate of investment increases in such a way that real output per capita rises† (cited in Crouzet, 153). He also proposes certain conditions for the application of this theory. Rostow says that the proportion of net investment to national income must rise from 5% to 10% in order to satisfy the terms of the theory. Although Rostow connected his theory with the events occurred in Great Britain and several other countries, the theorist could not get any support from the available quantitative data (153). Critical minimum effort thesis (1957) Harvey Leibenstein (1957 cited in Gupta, 176), in his Critical Minimum Effort thesis, says that initial stimulants to development must possess a critical minimum size in order to achieve sustained growth. He continues that change in the value of a set of variables causes the economic backwardness and it possesses a certain degree of st eadiness. Since the economy is subjected to frequent shocks, the actual value of the variables will always be different from that of equilibrium values. Although these stimulants have the capacity to raise the per capita incomes, it is not possible in economically backward regions due to the weakness of the magnitude of these stimulants. 2 The export-oriented industrialization strategy was introduced as a technique to reframe the underdeveloped economies. The essence of the theory is that large scale production and thereby exports would enhance the economic growth of the country. Hence, developing countries too much depended on the exports of a few primary products in order to bridge the wider gap with advanced economies. Dijck, Linnemann and Verbruggen (3) tells that as a result of this strategy, more and more foreign investors were attracted towards the country so that these developing nations were compelled to arrange all favorable investment situations for the foreigners. It cau sed severe challenges to governments as they faced with huge difficulties in implementing the planned budgets and other policies. In addition, the governments lost huge amounts on possible receipts as a result of unfavorable incentive schemes. Similarly, the export-oriented industrialisation caused curtailment of labor wages and it led to political oppression. This strategy influenced the developing natio