The theory of Big Push was developed by a notable economist Rosenstien Rodan in his pioneering work notes on the theory of Big Push. As a strategy to emancipate to less developed countries form the clutches of vicious circle of poverty. The theory underlines the fact that in underdeveloped countries there is the chronic problem of capital formation, skill formation, lack of economic infrastructure such as means of transport, irrigation, banking and communication services etc. all this discourages entrepreneurs to undertake fresh investment.
In view of this, the theory of big push stresses the need for a big push to the system which requires simultaneous investment across different channels of growth so that one channel of growth so that one channel survives on the growth of the other. Thus, big push refers to the strategy of injecting into the system such as a Lump-sum investment that breaks the shackles (chain) of economic pessimism and offers private investors enough of investment opportunities with high rates of profits.
According to the theory of big push, their ought to be a critical minimum source of growth program so that the constraints of indivisibility and discontinuity in the system are effectively overcome and diseconomies of scale are converted into economies of scale. As he says “ launching a country into self-sustained growth is like getting an aeroplane of the ground. There is critical ground which must be passed by the craft can become air-borne. Proceeding ‘bit by bit’ will not add up in its effort to the sum total of the simple bits.”
Features of the theory of Big Push
- Massive Investment : the theory envisages massive investment at the very outset of the process of growth. Otherwise, the process of growth may not be self-sustaining.
- Investment in different sectors : the theory stresses the need for investment across different channels of growth so that each channel sustains the growth of the other by providing the necessary demand base. This points towards the balanced growth of the system.
- Planned industrialisation : the theory underlines the need for planned industrialisation of the less developed countries where agriculture happens to be the dominant sector but equally backward and faced with poverty. A big push to industrialisation is expected to place the system on stronger side by removing the uncertainties of agricultural production.
According to the theory of big push external economies can only generate waves of economic optimism in the system. The theory has stressed 3 kinds of indivisibilities which are related to the external economies. These are
- Indivisibility in the production function or in the supply of social overheads : social overhead refers to roads, bridges, power supply, communication system etc. and there are almost a pre-conditional to the establishment of consumers or capital good industries. These infrastructural facilities require lump-sum investment and generates indivisibilities that relate to (a) time process involving long gestation lag before investment actually becomes productive. (b) Heavy mechanisation involving huge expenditure over years and (c) interdependence among various types of infrastructural projects. As industrialisation spreads overheads tend to be optimally utilised thus generating economies of scale which reduces the cost of production in general and increases the rate of profitability.
- Indivisibility of demand : It is another characteristic of less developed countries. This refers to interdependence of different industries as regards the demand for their products. Each industry should get the necessary demand for products. It is therefore recommended that instead of making investment just in one industry, simultaneous investment be made across a set up industries in terms of a big push.
- Indivisibilities of supply of savings : It is argued that a critical minimum investment in terms of big push calls for a critical minimum savings potential in the system. Large savings are possible only when the size of income is large. And stimulating (enlarging) the system from a low income profile to a high income profile necessitates big push in terms of lump sum investment. Thus according to Rosenstien Roden a high minimum quantum of investment requires a high volume of saving which is difficult advice in low income underdeveloped countries. The way out of this vicious circle of poverty is first to increase income and provide mechanism which affuses that at the second stage the marginal rate of saving is much higher than the average rate of savings.
Jacob Viner, Horward and Elder are the main critics. According to them the theory suffers from the following shortcomings.
- Impractical : the theory envisages external economic as a fundamental basis of Big Push. In view of chronic shortage of capital in less developed countries, the hypothesis of Big Push seems to be impractical.
- Less increase in volume of production of industries : In the presence of externalities which tends to decrease the cost of production, there may not be proportionate increase in the volume of production of industries owing to high concentration of economic activity in the primary sector of less developed economies.
- Neglect of agriculture : The theory of Big Push does not attach any significance for the development of agriculture sector which is an area of high priority for underdeveloped countries.
- More production from less investment : Elder is of the opinion that small doses of frequent investment may prove to be more productive than a single doses of huge investment. There is no concrete evidence to prove that growth process in LDC’s is possible only a way of Big Push.
- Not a historical fact : Prof. Eli stresses the point that historical record of the growth process of LDC’s does not support the hypothesis of Big Push.
- Inflationary : If massive investment is undertaken in areas of gestation as supported by theory of Big push. There may be inflationary pressure in the system which will ultimately prove to be counter productive.