The Big Push theory of economic development suggests that a developing country needs a significant, coordinated investment in various sectors to achieve rapid economic growth. This theory argues that individual firms in a developing economy may not be able to succeed in a market that is underdeveloped and lacks complementary industries.
The Core Concepts of the Big Push Theory:
- Market failures: The Big Push theory emphasizes the presence of market failures in developing economies, such as imperfect competition, externalities, and coordination problems. These failures hinder individual firms from achieving profitability and scaling up.
- Complementarities: The theory highlights the importance of complementarities between industries. This means that the success of one industry often depends on the existence and growth of other related industries. For example, a successful manufacturing sector requires a robust transportation infrastructure, a skilled workforce, and reliable suppliers of raw materials.
- Coordination problems: The Big Push theory recognizes that achieving economic growth requires a coordinated effort across different sectors. Without coordination, individual firms may be hesitant to invest due to uncertainty about the success of other industries.
- The need for a "big push": To overcome these market failures and coordination problems, the Big Push theory argues that a large-scale, government-led investment is necessary. This investment can take the form of infrastructure development, education and training programs, or support for specific industries.
Examples of the Big Push in Action:
- South Korea's economic development: In the 1960s and 1970s, South Korea implemented a series of government-led industrial policies, including investments in infrastructure, education, and specific industries like shipbuilding and electronics. This "big push" strategy helped propel South Korea into becoming a major economic power.
- China's economic reforms: China's economic reforms since the 1980s have also been influenced by the Big Push theory. The government has invested heavily in infrastructure, education, and special economic zones, leading to rapid economic growth.
Criticisms of the Big Push Theory:
- Government intervention: Critics argue that government intervention can be inefficient and lead to corruption.
- Limited resources: Developing countries often face limited resources, making it difficult to finance a large-scale investment program.
- Lack of coordination: Coordinating investments across different sectors can be challenging, especially in countries with weak governance.
Conclusion:
The Big Push theory provides a framework for understanding the challenges of economic development and the importance of coordinated investment. It highlights the role of government in overcoming market failures and promoting industrial growth. However, the theory also faces criticism regarding the potential for government inefficiency and the difficulties in coordinating investments.
