Development Theories and

Practices
(GaDS 2061)
Bayush Mekonen
2014 Academic year
 What is Development
• Development implies an overall positive change in the physical qual-
ity of life.

• This positive change for the better encompasses economic growth as

well as social aspects. Therefore, development not only calls for
economic

• but also the equitable distribution of the gains made from economic
growth. In other words, development implies growth with justice.

• It means an improvement in the quality of life through better health,

education, housing and overall material and social welfare.
 What is Development

•
Development

• Development’ as a long-term process of structural societal transfor-

mation (1950’s and 60’s)
 Major societal shifts: Ex. from agriculture based rural economy
to urban and industrial based economy = modernization
• Involves changes to socio-economic structures – including own-
ership, the organization of production, technology, the institu-
tional structure and laws.
What is Development

• “ Development’ as a short- to medium-term outcome of de-

sirable targets”
• Focus on set of goals or outcomes – which can be mea-
sured and compared with targets
• For example poverty or income levels
• Technocratic and usually assumes the elites know what is
good and desirable
• Tends to separates the conception of development from
socio-economic structures, social relations and politics
What is development

• “Development’ as a dominant ‘discourse’ of Western

modernity”
• emerged as a reaction to the deliberate efforts at
progress made in the name of development since
World War II and
• Development is a social constructs that do not ex-
ist in an objective sense outside of the discourse
• Entails the imposition of Western ethnocentric no-
tions of development upon the Third World
 Economic Growth
• A measurement of change in the countries national out-
put or Gross Domestic Product(GDP) or Gross National in-
come (NGI).
• Economic growth doesn’t tell very much about the wel-
fare of people in a country.
Economic Development
• Is a measure if welfare , measure of well being of a coun-
try.
• It is usual to measure development not just in monetary
terms as GDP but also in terms of other indicators like
education , health and social indicators
 Basic Element's of Development
• Removal of inequality and poverty
• Increase in material welfare of the people
• Increase in social well-being (education, health, hous-
ing
• An equitable distribution of the gains of development
among different groups of people in a region or coun-
try
• An enhancement in technology and the capacity to
produce a wider range of goods and services in the
economy leading to a better quality of life.
• Building institutional structures which permit partici-
pation in decision-making at all levels, equalization of
opportunities for development and removal of dispar-
ities.
 characteristics of underdevelopments

• Mass poverty-The poverty levels are very striking in the develop-

ing countries.
• Low levels of income and concentration of incomes in a few
hands- Low levels of income for large sections of the masses and
high inequalities in the distribution of income are very apparent in
the developing countries
• Low levels of productivity and backward technology are the
other problems of the developing countries.
• High levels of unemployment and underemployment are charac-
teristics of developing countries. Since the level of industrialization
is low and the agricultural sector cannot absorb the entire work-
force, the problem of unemployment and underemployment contin-
ues to grow
Con..
• Poor health, nutrition, illiteracy and poor housing are also
characteristic features of developing countries.
• Lower status of women- In underdeveloped countries, women
are much more vulnerable than their counterparts in the devel-
oped countries.
Indicators of Developments
 GDP is the total value of final good and services produced in a year
by a country’s borders,
 GNP measures the value of good and services produced with in
country’s residents GDP is the most commonly used by global
economies

 Traditionally, growth was taken as the most, if not the only, indica-
tor of development. The use of Gross National Product (GNP) or
the Gross Domestic Product (GDP) as the indicator of develop-
ment has been criticized on several accounts.
Development can be viewed in terms of progress in
 (i) Output and income
 (ii) Conditions of production
 (iii) level of living (nutrition, health, housing and education, etc.)
 (iv) attitude to work
 (v) proliferation of sound institutions and policies.

• GNP as an average level of income (per capita) ignores the inequal-

ity in the distribution of national income;
 It also ignores the availability and utilization of goods and services
and has nothing to say on availability or otherwise of a whole range
of basic needs such as health, education, water, shelter, etc.
 A. GNP
• One of the methods to measure development is in terms
of an increase in the economy’s real national income over
a long period of time.
• But this is not a satisfactory definition due to the follow-
ing reasons:
–This measure fails to take into account changes in
population growth.
–The GNP figure does not reveal the costs to society of
environmental pollution or deterioration,
–It gives no information about the distribution of in-
come in the country
B. Social Indicators
• Dissatisfied with GNP as the measure of economic devel-
opment some economists have tried to measure it in
terms of social indicators.
• Economists include a wide variety of items in social indi-
cators: some are;
• Inputs, such as nutritional standards or number of hospi-
tal beds or doctor per head of population, while others,
• Resorted to alternative indicators: outputs, correspond-
ing to these inputs, such as improvements in health in
terms of infant mortality rates, sickness rates, etc
• Social indicators are often referred to as the basic needs
for development.
• Basic needs focus on alleviation of poverty by providing
basic needs to the poor.
• The direct provision of such basic needs as
–health,
–education,
–Food and water,
–sanitation and
–housing services
• Which are believed to have a positive contribution to-
wards improving productivity and income of the poor au-
tomatically over the long human.
• The merit of social indicators is that they are concerned with
ends, the end being human development,

• Economic development is a means to these ends,

• Social indicators tell us how different countries prefer to al-

locate their GNP among alternative uses: education vs.
health

• Moreover, they give an idea about the presence, absence or

deficiency of certain basic needs
Limitation of social indicators
• There is no consensus among economists as to the
number and type of items to be included in such an in-
dex.
• E.g., infant mortality, literacy, life expectancy etc or a
combination of either of these items,

• Social indicators are concerned with current welfare

and are not related to the future,

• –The majority of indicators are inputs, and not outputs,

such as education, health etc.,
alternative contending indicators of development

• Human Development Index (HDI)social scientists

• is a recently developed index to measure development in-
volving both economic and social key indicators.
• It measures the average achievements in a country in three
basic dimensions of human development.
• A long and healthy life, as measured by life expectancy
at birth;
• Knowledge, as measured by the adult literacy rate and
the combined primary, secondary and tertiary gross en-
rollment ratio; and
• A decent standard of living as measured by GDP per
capita in PPP (purchasing Power Parity) $ USD.
There are other common socio-economic indicators of develop-
ment used by many organizations including UN organizations

• Expectation of life at birth;

• Consumption of animal protein per capita per day;
• Combined primary and secondary school enrolment;
• Average number of persons per room;
• Newspaper circulation per 1000 population;
• Agricultural production per male agricultural worker;
• Percent of adult men labor in agriculture;
• Percent of economically active population in service sector (gas, elec-
tricity, water etc);
• Percent of GDP derived from manufacturing;
• Electric consumption, kWh. Per capita;
• Steel consumption per capita;
• Percent of population in localities of 20, 000 and over, cities (urban-
ization level)
 Values and Objectives of Development
Values of development
 Values are desired conditions in a society (e.g. health, fame,
long life, high income.
There are three core values of development
 Sustenance: The Ability to Meet Basic Needs
 All people have certain basic needs without which life would be
impossible.
These, life sustaining, basic human needs include food, shelter,
health and protection. When any of these is absent or in criti-
cally short supply, a condition of “absolute underdevelopment”
exists
 Self-esteem: To be a person
A second universal component of the good life is self-esteem. Self
esteem is an inherent value of human beings. Self-esteem fea-
tures a sense of worth and self respect, of not being used as a
tool by others for their own ends.
 Freedom from servitude: To be Abel to Choose

• A third and final universal value that constitute the meaning of

development is the concept of human freedom.

• Freedom here is to be understood in the sense of emancipation

from alienating material conditions of life and from social servi-
tude to nature, ignorance, other men, misery institutions and
dogmatic and harmful beliefs.

• Freedom involves an expanded range of choices for societies

and their members together with a minimization of external
constraints in the pursuit of some social goal we call develop-
ment.
 Objectives of Development
• Increasing availability and widening the distribution of ba-
sic life sustaining goods and services to members of soci-
ety;
• Improved family income of an adequate level for subsis-
tence package of food, shelter, clothing, footwear and
other expenditure;
• Providing of more jobs (employment). Job or employment
in addition to its role of distribution of income to assure
consumption, it plays an important role in developing per-
sonality of individuals;
• Improved conditions of production and work
• Improving access to education that also serves not only to
enhance material well being, but also to generate greater
individual and national self-esteem;
• Improving social and economic equality;
• Providing or opening opportunities to the people to
participate in governance at all and grassroots level;
• Promoting cultural and humanistic values and social
discipline (positive attitude to work)
• Expanding the range of economic and social choice
of individuals and nations by freeing them from
servitude and dependence not only in relation to
other people and nation but also to forces of igno-
rance and human misery.
• Keeping-up national independence, consolidation and
sovereignty without interference from other foreign govern-
ments.
 Major issues in development
Growth – versus – Distribution

•For a long time it was assumed that economic growth would be an

engine that will lead naturally towards development.
•Consequently, little or no attention was paid to the question of dis-
tributive justice.
•One of the major outcomes of this situation was the ‘trickle down’
theory, which stated that if there was sufficient growth everybody
would benefit from it.
•However, growth by itself doesn’t guarantee an improvement in the
quality of life for the vast number of people.
 Agricultural Versus Industrial Development
•This has been one of the most important issues at
stake in the debate on development
• If the agricultural sector doesn’t grow there may be
sharp increase in the prices of food-grains that will af-
fect the poor.
•On the other hand, industrial stagnation will mean
that surplus labor from the agricultural sector can’t be
usefully employed.
•Therefore, both agriculture and industry will have to
grow so that the pace of development is fast enough to
improve the living conditions of the people.
Capital versus Labor Intensive Technology and De-
velopment
• Technology is a means by which goods are manufactured in an econ-
omy.
• Any goods, however crude or sophisticated, can actually be manu-
factured by several means.
• The development in technology is the process by which the manufac-
ture of goods is made cheaper, faster and more efficient.
• like tractors, harvesters, etc. are being used on a wider scale now
than a couple of decade’s age.
• They are now used to perform many of the agricultural operations,
which were hitherto performed manually using ploughs and other
equipment's; this change may be termed a technological change.
• we may have a number of technologies to choose from in order to
produce the same goods. Cloth can be woven on traditional looms in
your village or town, or it can be manufactured in the factories lo-
cated in bigger cities.
• The end product is more or less the same, but the process of making
it is different.
•
• An improvement in technology calls for investment to make this
change feasible.
• Sophisticated technology, when it uses less labor, is termed “labor
displacing technology”.
• On the other hand, an improvement in technology can also be
made without displacing labor and also less expensively.
• This is called “labor intensive technology”. Capital intensive and
labor displacing technologies are often expensive and call for large
investments.
• Labor intensive technologies on the other hand have the advantage
of being able to absorb the surplus labor in a developing country.
• During the 196os and the early 1970s, a new trend of thinking on
technology suitable to developing societies became popular.
• The question raised was that of “Appropriate Technology”.
It was said that developing countries should adopt technologies that are
suitable for their own specific needs, situations and socio-cultural
framework rather than copy the western technologies blindly.
• Thus it was suggested that countries like Ethiopia should use tech-
nologies that have evolved over many decades and adapt them to
make the best use of their cost-effectiveness.
• The choice between these types of technology, however, is not easy
for a developing country.
• On the one hand, rapid increase in output is necessary to solve the
problems of the people and, on the other;
• the problem of unemployment (thus created) accentuates the prob-
lem of poverty.
• A balance is, therefore, required so that both technology and living
conditions of the people improve.
 Centralization versus Decentralization

• This has been another major issue in the debate on development.

Generally, it is agreed that development is a long-term phenome-
non and therefore, needs to be planned.

• While a certain degree of centralization is necessary to coordinate

the efforts towards development,
• too much of centralization in the case of decision making powers
can weaken the process of popular participation.

• It is hoped that decentralization of the development process would

also lead to greater accountability to those who are actually in-
volved in the decision making process.
• Devolution of power is very vital for development. This ensures
that the administration is brought closer to the people. Conse-
quently, there is greater accountability of planners towards those
whom programs and policies are meant to reach.
Urban versus Rural Development
• The vast majority of the population in Ethiopia and other develop-
ing countries live in rural areas.
• There is a continuing influx of people into the cities looking for
jobs as the rural economy is not been able to provide employment
to them.
• It needs to be pointed out that the problem of poverty, poor health
and illiteracy is widespread in both rural as well as urban areas of
developing countries.
• The problem of rural poverty and unemployment is the main of the
problem, without solving it, there can not be genuine development.
Hence, rural development has come to acquire critical importance.
• Sustained improvement in the quality of life in rural areas
is likely to reduce the pace of large-scale migration of vil-
lagers to cities in search of jobs.
Respective roles of the State and the Market
•One of the most contentious issues in Economics has
been the scope and extent of government intervention
in the economy of the country.
•During the immediate post WWII era, there was a
near consensus among economists, for a variety of rea-
sons, such as
•important developments in economic theory around
the idea of ‘market failure’ (which had several dimen-
sions) that governments have to play major roles in the
economic sphere.
MODELS/STRATEGIES OF ECONOMIC GROWTH
Balanced Growth Model/Strategy
The Essence of Balanced Growth Model/strategy
•Balanced growth may mean investment in the depressed
sector of the economy, while in other context it may im-
ply harmonious development of different sectors.

•Planning with balanced growth indicates that all sectors

of the economy will expand in the same proportion so
that consumption, investment and income will grow at
the same rates.

•The development process in underdeveloped countries

is very much hindered by vicious circles of poverty.
• According to Nurkse, vicious circle of poverty adversely
affects the accumulation of capital.
• The forces responsible for deficiency of capital are small
capacity to save, low level of income and low productiv-
ity.
• Deficiency of capital leads to the small capacity to save
and vise-versa. Thus, the vicious circle is complete.
This can be addressed through a series of capital invest-
ment in various industries/ sectors. That is through bal-
anced growth strategy.

This growth strategy recognizes the significance of eco-

nomic interdependence.
• The growth and development of various sectors is not pos-
sible in isolation.

• This strategy aims at doing something everywhere (i.e. in

every firm/sector/region).
• Resources will be thinly distributed among the different
sectors of the economy.
• The approach is economy wide growth. It also advocates
capital widening.
• All sectors firms/regions will get more or less the same
amount of resources.
• This is done to maximize equity and social welfare and
minimize social costs.
• The balanced growth strategy suggests investment in diversified
feeds.
• To the extent possible, this investment should be inclusive so as
to increase the scope of economic activities.
• It suggests labour intensive techniques of production. This is be-
lieved to create employment and social productivity.
• The strategy imagines that different firms/sectors/regions grow at
different rates, but in a union and in complementary way.

• The balanced growth strategy also suggests regional or spatial

planning for the depressed regions, and ethnic and economic
groups. To this end, the strategy recommends that there should be
social accountability for production, consumption and distribution.

• The Government is responsible for increasing production, con-

sumption and distribution.
 Determinates of balanced growth stratage
•The implication of balanced growth strategy is generally de-
termined by a variety of factors such as
availability of resources,
level of technology,
degree of balance prevailing among the different sec-
tors,
 socio-economic objectives of development accepted by
the people and other institutional factors.
In one situation, balanced growth may imply correction of
sectoral imbalances.
• This would create external economies which would pro-
vide incentive to other productive activities.
• The chain of continuous investment would ultimately bring
out transformation in the economy.
• Growth in one sector generates external economies for
other sectors, with the result that sectors will become
complementary.
• But it should be remembered that the selection of a grow-
ing sector is not an easy task. It is difficult to decide
whether agriculture or industry, human capital or material
capital, internal trade or external trade should be given
priority in investment allocation.
• Complementarity is an essential and vital feature of bal-
anced development
How agriculture support the development of industry?
• Agriculture provides necessary raw material for manu-
facturing sector.
• It provides food for the growing urban population.
Agricultural surpluses can be mobilized for investment in
non-agricultural sectors.
• The rising income of the rural population expands demand
for manufactured and durable goods. All these bring
about structural transformation in rural economy.
• The developing rural economy becomes capable of ex-
porting farm products and earns foreign exchange to meet
the initial requirement of industrialization.
• Domestic market expands; new methods of production,
new skills, new investment opportunities and new organi-
zational abilities develop.
• All these create a favorable climate for industrial expansion.
• This is how the prosperous agriculture supports and sustains the ex-
panding industrial activities.
• In other words, development of agricultural sector is an essential
pre-requisite for industrial growth.
how can the industrial sector help the development of agriculture?
• It is well-known that underdeveloped countries are overpopulated
and this phenomenon creates a tremendous burden on agricul-
ture.
• Growth of industrial activities helps in reducing this burden by ab-
sorbing surplus rural population.
• Employment opportunities expand and income rises which raises the
living standard of rural population.
• Moreover, the manufacturing sector supplies various agricultural in-
puts like pumping sets, harvesters, fertilizer and agricultural machin-
ery which help in development of agriculture.
• agricultural improvements are possible through industrial develop-
ment, technical base and essential infrastructure.
• Hence, simultaneous development of agriculture and industry is an
essential pre-requisite for balanced growth. This development
should be ensured by development planning.
How to ensure balance between agriculture and industry?
 Agriculture and industry should be considered as integrated parts of
an economy.
 And hence, development planners should ensure the balance be-
tween agriculture and industry.
 It might be difficult to suggest a uniform pattern for balance be-
tween agriculture and industry for all underdeveloped countries.
Yet, the following guidelines could serve as the basis for
ensuring balance between the two.
a. The planners should not concentrate resources on the
development of one particular sector.
b. While drawing up the patterns of priorities, planners
should take into account the local conditions such as
availability of resources, level of technological develop-
ment, institutional factors, level of development already
attained and other similar factors.
c. It is generally observed that underdeveloped countries
have surplus rural population. The transference of this
surplus rural labor to the urban sector would help in the
development of manufacturing industries. Similar con-
sideration should be made by development planners to
ensure balance between other sectors of the economy .
 Essential Conditions for Balanced Growth
State Intervention- The logic of balanced growth cannot be given a
practical shape without state intervention. The state can enforce and
maintain law and order. It can mobilize necessary funds through taxes,
borrowing, and deficit financing to meet financial requirements of
balanced growth. State can encourage and stimulate domestic private
investment.
Formulation and Implementation of plans- Formulation and im-
plementation of development plans is another pre-requisite for achiev-
ing and maintaining consistency and harmony among the different sec-
tors. Planning is an instrument of realizing socio-economic objectives
of balanced growth.
Coordination among different departments of the government-
-Planning only suggests the way for implementing the various development pro-
grams. but the actual execution is done by the different government depart-
ments.
Balanced growth requires integration of different development policies
Public cooperation- People should be made partners in development.
Generally, the strategy of balanced growth aims at a direct attack on poverty
through societal support.
In view of this, agriculture and rural development receive high priority in order to
benefit the largest section of the society.
This implies that balanced growth is impossible without government interven-
tion.
Proponents of Balanced Growth
•Ranger Nurkse: He believes that if countries adopt a strategy of balanced growth
and if all people participate in the growth process, the following benefits can be
achieved.
•Total savings and capital accumulation rise
•No gluts (excess supply) and no shortage of goods and services exist in the econ-
omy.
•Backward and forward linkages are fostered.
•Balanced growth can be managed with less resource. It heavily depends on the
mobilization of local resources.
• Balanced growth strategy breaks the vicious circle of
poverty; because it aims at benefiting the largest section
of society.
• Development finance is fairly distributed across sectors and
regions. This can lead to widespread employment and
spread of the fruits of development.
François Perronx: For him, the following benefits can be
achieved in the balanced growth strategy.
• Society is able to generate maximum real output per
capita.
• There will be reduction in the disproportion of per capita
income between sectors/firms/regions.
• There will be diminution of tensions between sectors,
groups, cities and rural areas.
 Advantages of Balanced Growth Strategy
• Balanced regional development: The doctrine of balanced growth implies
that all sectors of the economy should grow simultaneously and no sector should be
discriminated in the matter of resource allocation.
• Wide extent of market: Simultaneous development of different sectors would
help in the production of various goods, which in turn would lead to the expansion
of demand and the enlargement of market.
 Environment of competition would prevail which would result in the production of
quality output.
• Division of labor: The strategy of simultaneous investment widens the extent of
market. Wide extent of market leads to a greater division of labor, higher output and
quality product. Division of labor leads to specialization which is essential for pro-
moting export and earning foreign exchange.
• External economies: Balanced growth helps in the creation of exter-
nal economies, which are considered essential for rapid economic de-
velopment.
• External economies arise due to interdependence of industries.
Creation of social over-head capital: When different industries develop
simultaneously, the governments of less developed countries would be required to
provide basic facilities (transport, credit, electricity, etc…) to encourage the process
of industrialization.
Innovations and researches: Balanced growth strategy encourages innova-
tions and researches in different sectors of the economy. When different industries
develop simultaneously, competition arises.
Criticisms against Balanced Growth Doctrine

1.The simultaneous development of different sectors requires the un-

evenness of capital and it is difficult for less developed countries to
mobilize necessary capital investment in the early stages of develop-
ment because of low savings, unfavorable balance of payment, market
imperfections,
2.Not only capital is deficient, but the supply of other resources is also
inadequate for the implementation of balanced growth.
3.The doctrine of balanced growth ignores the cost reduction aspect.
In the development process, the minimization of costs is as important
as the maximization of output.
4. It tends to create inflation in the initial stages of devel-
opment. When simultaneous development of different
sectors is launched, capital investment expands and
quantity of money increases.
5. Balanced growth has a wrong assumption that the doc-
trine creates complementarities between industries. But
in reality, when new industries get going, the demand for
the products of the old industries would shrink, as the
result instead of complementarity, competition between
the new and old industries would start.
6. Lacks historical sense
The process of economic growth in almost all the countries
was intended through the development of few sectors
 Unbalanced Growth Model/Strategy
Aspects of Unbalanced Growth Model

• The strategy of unbalanced growth aims at doing every-

thing somewhere in a concentrated manner.
• This approach is selective. It also advocates capital deep-
ening, i.e. it advocates using resources in a concentrated
and selective manner according to comparative advan-
tage.
• Furthermore, it advocates maximizing profits and gains on
the principle of comparative advantage. Resources will be
concentrated in those firms/sectors/regions where there is
a maximum return.
• This particular growth strategy suggests that there is a need
to invest in leading industries /firms /sectors and locations
so as to increase the scale of economic activities.
• It also suggests capital intensive techniques of produc-
tive.
• Employment is not an issue that it should take care of it-
self.
• The driving force is higher profit. The strategy also en-
visages that different firms/sectors/regions grow at differ-
ent rates in a competitive way with the dictates of market.

• Investors should have an option to invest in those sec-

tors/firms/regions where the return in higher.
• The concern here is that increasing production, con-
sumption and distribution will take care of themselves
in accordance with the laws of the market.
• Generally, the strategy of unbalanced growth aims at cre-
ating a self-financing development. To that end, individu-
als and communities should finance themselves.
• It is the profit that should go to re-investment. Resource
allocation will be effected through market forces, where
profits are higher.
Arguments for Unbalanced Growth Strategy
• Many economists argue that for achieving rapid economic
development, the planners should concentrate on focal
areas which could have the promise of rapid growth.
• planners should make the selection of those sectors
which are most productive. The sectors like power, fuel,
transportation, communication, education, etc…, could
generate external economies and facilitate the develop-
ment process. Such sectors should be given a priority in
the matter of investment allocations.
• The classical economists implicitly advocated for unbal-
anced growth strategy, because economic decisions have to be
based on market forces.
• This strategy should ultimately lead to balanced growth. This strat-
egy is based on the following arguments:
• It is based on comparative advantage, i.e. the return per unit
cost is higher. The approach promotes efficiency.
• It is within the means, i.e. real and monetary resources will be
the basis for decision. In other words, decisions will be made
within the limits of a resource capacity. It is achievable.
• If we pursue this strategy, we are investing in leading firms/sec-
tors with the greatest location and cost advantage, i.e. average
cost is lower. It enables the societies to be competitive on the
domestic and international market.
• If decisions are made on the basis of market forces, real linkages
between sectors and industries will be fostered
• In addition to the above arguments, there are proponents of this strat-
egy. Hirschman, W. W. Rostow, and Hans Singer are the most promi-
nent, among others.
Hirschman
• He advocated the theory of unbalanced growth as continua-
tion to balanced growth theory.
• He’s opinion that the best way to accelerate economic de-
velopment is to create deliberate imbalances in the econ-
omy.
• He believed that underdeveloped countries are not capa-
ble of developing different sectors simultaneously owing to
scarcity of resources and necessary infrastructure.
• He argues for unbalanced growth strategy, therefore for the
simple reason that resources are scarce. There is serious
shortage of resources, shortage of skilled manpower, in-
frastructure.
• Hirschman argues that investment should be made in
strategic and leading sectors.
• The pattern of investment would create more investment
opportunities, and pave the way for further economic de-
velopment.
• He points out that the development of industrialized coun-
tries has been on the pattern unbalanced growth. Devel-
opment is the result of a series of investment.
• The divergent series of investments are influenced by the
social profitability and such investments are undertaken
by the public agencies.
 • W.W. Rostow's

• Rostow's wants growth through leading sectors and industries in

specific locations. This will lead to the emergence of growth poles.
• Certain area will be concentrated with industries. Once these
growth poles emerge, it will spread out to other areas.
• Growth will benefit the surrounding areas. If we construct an in-
frastructure connecting two growth poles, other areas will benefit.
With the emergence of several growth poles, supplementary and
complementary investments as well as competitive investments will
take place within and outside growth poles.
• This ultimately leads to balanced growth in the long run. The de-
velopment of micro, small and medium enterprises and the provision
of services are instrumental to complement the development of poles
so that these growth poles will have a propelling effect.
• Furthermore, Rostow argues that the productive invest-
ment must be made for the development of the leading
sectors of the economy.
• The development of the leading sectors would ensure a
higher level of output and profit.
• According to Rostow, if we focus on big industries/sector
in certain locations, this promotes backward and for-
ward linkages.
• For him, it big industries/sectors develop, intermediate
industries/sectors will emerge by way of using the out-
put of the big industries/sectors or producing inputs for
the big industries/sectors.
• This will lead to the emergence of consumer industries.
Profitability is the driving force in the whole process.
 Hans Singer
• Unbalanced growth is a better strategy to concentrate available re-
sources on types of investment which help to make the economic
system more elastic, more capable of expansion under the stimulus of
expanded market and expanding demand.
• He supports the strategy of unbalanced growth for the following rea-
sons.
1.This strategy respects market principles. It enables one to invest in
areas where there are profits and re-investable funds and in areas
where economic activities are elastic (responsive).
2.Singer appreciates the principle of comparative advantages. But he
recommends that developing countries should import capital inten-
sive goods at the early stage of their development and should start
profit earning industries.
They should also focus on producing exportable items. In relation to
this, he believes that capital intensive techniques of production can
also be used in the competitive international market.
 Advantages of Unbalanced Growth Model
• Creation of external economies- The strategy of unbalanced growth
helps in the creation of external economies. This pattern of develop-
ment stresses on the expansion of capital-goods industries and com-
plementarities between them.
• Self-reliance- The aim of development planning in underdeveloped
countries is to achieve self-reliance in the short run. This development
goal can be realized through the expansion of leading sectors and high
rate of capital investment. Both these conditions are met by the strategy
of unbalanced growth.
• Generation of economic surplus- This strategy aims at the establish-
ment of capital-goods industries and such industries help in the devel-
opment of subsidiary industries.
• This way a chain of investment takes place and this expand income,
output and employment which result in higher economic surplus..
• Skill Formation- The strategy of unbalanced growth aims at rapid
development through the expansion of investment. Such an invest-
ment helps in creating basic facilities like elementary and techni-
cal education, roads, communication, housing, public health,
etc…This facilities promote skill formation, and improve the quality
of manpower.
• Short-term strategy- Unbalanced growth is a short-term strategy of
development. The advantage of this approach is that people in un-
derdeveloped countries get the fruits of their labor and effort in short
period.
• Practical policy- The strategy of unbalanced growth suggests prag-
matic approach of rapid development. This strategy stresses the set-
ting up of those industries, which have the promise of maximum to-
tal linkage.
 Limitations of Unbalanced Growth
• This growth model does not discuss the degree of imbalance among
the various sectors.
• The theory of unbalanced growth suggests the setting up of capital
goods industries for achieving goals of development. But the starting
of capital goods industries in the initial stages of development may
not be an easy task for underdeveloped countries and it might create
economic, social and structural obstacles. The theory does not suggest
the way out.
• The implementation of unbalanced growth required the availability of
certain basic facilities like raw materials, expertise, power, developed
means of transport and communication, wide extent of markets,
• It is generally observed that heavy industries have a tendency to con-
centrate at one place due to availability of external economies. This
creates slums, over-crowding, health problems, and pollutes the at-
mosphere of surrounding localities
 Comparing Balanced and Unbalanced Growth Models
• Balanced growth aims at simultaneous development of all the sectors
of the economy, whereas unbalanced growth suggests the develop-
ment of only leading and growing sectors of the economy.
• Balanced growth aims at harmony, consistency and balances in the
growth rates of various sectors, whereas unbalanced growth suggests
the creation of disharmony, inconsistency and imbalance in the
growth rates of development parameters.
• The implementation of balanced growth requires huge capital in-
vestment for simultaneous development of various sectors. The im-
plementation of unbalanced growth requires comparatively less capi-
tal as only leading sectors are developed in the first instance.
• Balanced growth is a long term strategy as the development of different sectors is
possible in the long period. The objectives of balanced growth are difficult to be
realized in the short period because of stress and strain in the early stages of de-
velopment. The unbalanced growth is a short term strategy, as the development
of leading sectors is possible in the short period.
• The balanced growth strategy assumes that all sectors generate ex-
ternal economies, whereas unbalanced growth assumes that some
sectors generate external economies than others.