The term “Big Push” refers to a significant doctrine in development economics which proposes that the development of a poor country requires a coordinated and simultaneous expansion across multiple sectors. This comprehensive strategy is seen as essential for escaping low-level equilibrium traps and achieving sustainable economic growth.
Historical Context
The Big Push theory emerged during the mid-20th century, amidst efforts to understand the mechanisms of economic development in impoverished nations. It is closely associated with the work of economist Paul Rosenstein-Rodan, who highlighted the need for substantial and coordinated investments to overcome the various interdependencies and market failures typical in developing economies.
Key Events and Theoretical Development
- 1943: Paul Rosenstein-Rodan published “Problems of Industrialisation of Eastern and South-Eastern Europe”, which laid the foundational ideas of the Big Push.
- 1950s: The theory gained traction with development economists advocating for strategic government intervention.
- Post-War Era: The success of the Marshall Plan in Europe gave practical credence to the idea that substantial coordinated investment could stimulate widespread economic recovery.
Detailed Explanation
The Big Push theory posits that for a developing country to break out of its stagnant state, a large-scale, planned effort to invest in various sectors simultaneously is necessary. This is due to several critical factors:
- Indivisibilities: Investments in infrastructure or industry often require substantial upfront costs that cannot be divided into smaller, more manageable investments.
- Complementarities: The success of investment in one sector often depends on simultaneous investment in others (e.g., roads and factories).
- Network Effects: Positive spillovers from investments in one sector benefit other sectors, amplifying overall economic gains.
Mathematical Model
The basic model of Big Push can be visualized using a simplified production function. Let \( Y \) represent output and \( K \) represent capital. In the context of a Big Push, the production function might take a form that exhibits increasing returns to scale, such as:
This form reflects that beyond a certain threshold, additional capital generates proportionally greater output, highlighting the importance of large-scale investment.
Charts and Diagrams
graph TD
A[Investment in Infrastructure]
B[Industrial Growth]
C[Job Creation]
D[Income Growth]
E[Market Expansion]
A --> B
B --> C
C --> D
D --> E
E --> A
Importance and Applicability
The Big Push theory is vital in guiding policy in developing countries. It underscores the role of government and international organizations in planning and executing large-scale investments to stimulate growth. Historical examples, such as the rapid development seen in post-WWII Europe under the Marshall Plan and later in East Asian economies, are often cited as evidence of the effectiveness of coordinated investment strategies.
Examples and Considerations
Example: South Korea’s Economic Development (1960s-1980s) - The South Korean government orchestrated extensive investments in infrastructure, education, and key industries, fostering rapid economic development.
Considerations:
- Feasibility: Large-scale investments require significant financial resources, often necessitating international aid or loans.
- Implementation Risks: Poor governance or corruption can undermine efforts.
- Long-term Sustainability: Ensuring that initial investments lead to self-sustaining growth is critical.
Related Terms
- Balanced Growth: Economic strategy emphasizing equal growth across different sectors.
- Indivisibility: A situation where certain investments cannot be scaled down into smaller, separate units.
- Network Effects: Benefits that an additional user of a good or service provides to existing users.
Comparisons
- Big Push vs. Incrementalism: While the Big Push advocates for substantial and simultaneous investments, incrementalism suggests gradual, small-scale interventions.
Interesting Facts
- The success of the Marshall Plan, which infused $13 billion into European economies post-WWII, is often cited as an empirical example of the Big Push strategy.
Inspirational Story
Example: Japan’s Post-War Recovery - Through a combination of American aid and strategic government planning, Japan transitioned from a war-torn nation to an economic powerhouse in a few decades, embodying the principles of the Big Push.
Famous Quotes
“For the development of a country, the roads to be built are as important as the steps in mathematics.” - Anonymous Economist
Proverbs and Clichés
- “It takes money to make money.”
Expressions, Jargon, and Slang
- Crowding-in: When public investment stimulates additional private sector investment.
FAQs
Q: What is the key idea behind the Big Push theory? A: It suggests that significant, simultaneous investments across various sectors are necessary to stimulate economic development in poor countries.
Q: Why can’t countries develop incrementally according to the Big Push theory? A: Incremental development might not overcome the interdependencies and market failures that trap economies in low-level equilibria.
References
- Rosenstein-Rodan, P. (1943). “Problems of Industrialisation of Eastern and South-Eastern Europe”.
- Murphy, K., Shleifer, A., & Vishny, R. (1989). “Industrialization and the Big Push”.
Summary
The Big Push theory remains a cornerstone in understanding how coordinated, large-scale investments can propel economic growth in developing countries. By addressing the interdependencies and indivisibilities within an economy, the Big Push aims to overcome stagnation and pave the way for sustained development. The theory underscores the critical role of government planning and international cooperation in achieving balanced, holistic growth.
