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BIG PUSH THEORY

The big push theory is a variant of balanced growth strategy. Paul.N. Rosestein Rodan was the
forerunner in the development of big push theory. This theory is based on the principle that a
"big push' or large comprehensive Programne is needed in the form of high minimum
amount of investment to overcome the obstacles to development. Launching a country into
self-sustaining growth is little like an aero plane off the ground. There is a critical ground speed
which must be passed before the craft become airborne. This theory states that proceeding bit by
bit will not launch the economy successfully on the development path. What we need is a big
push in the form of a large quantum of investment in technically interdependent industries. An
investment of small doses could not break the vicious circles of poverty. In short, for launching
economic development in an economy certain internal and external economies of minimum

quantum of investment are a necessary condition.

Kodan explained the importance of indivisibilities. He expressed that major
hurdle in the process of industrialization was the small size of the market. To overcome this

hurdle, he explained the role of indivisibilities. Three kinds of indivisibilities have been
discussed by Rodan to explain the implications of big push theory, they are

1.Indivisibilitiesin production function

Indivisibilities in production function refer to indivisibilities of input output or
He regards social over head capital as the most important
process lead to increasing return.
social over head capital creates
instance of indivisibility. The main reason is that expansion of
the level of investment.
investment opportunities in various industries which help in raising
The utilization of these
Investment in social over head capital creates excess capacity.
frontier. So the main
opportunities could take the underdeveloped countries higher production
on

creation and expansion of social over

poínt is that sustained economic development requires
The social
head capital and it requires large amount of investment called lumpiness of capital.
overheads like power, transport and communication are indirectly productive and have a long

gestation period. They càn't be imported and their initig! installation needs a sizable investment.
High level of initial investment in social overhead capital is necessary to pave the way for quick

yielding directly productive investment.

2.Indivisibilities in demand
The indivisibility or complementarities of demand requires simultaneous setting up of
interdependent industries in underdeveloped countries. The central+dea of Rodan's argument in
thisregard is that smallsize of the market in under developed countries created by low per capita
income and purchasing power of the general mass of people. The small markets limit the
investment opportunities and obstruct the development process. He argues that a single factory
even if it uses modern efficient methods of production is likely to fail because of the smallness of
the market. That means investment in any single project might involve risk and uncertainty as the
 whether the product finds a market or not. Thercfore indivisibility demand
investment. A big push is essential to en requires simultaneous
large the size of the market and to ensure that output
does not go unsold.

Rodan cites the e.g. of a shoe fcctory to

explain the point. Let us assume a closed
economy. Suppose that hundred disguisedly unemployed workers, whose
marginal productivity
is zero, are employed in a shoe factory. If these
newly employed workers spend all their income
for the purchase of shoes they
produce, the shoe factory will find a market and will succeed.
Considering the workers have diverse demands and do not spend their entire additional income
on shoe, hence the shoe factory may face the prcilem of less demand for shoes and small market
for its product. The small size of the market would reduce the incentive to invest and the result
would be the closure of the factory. This way the investment in a single project would fail to
widen the size of the market.

Now suppose that ten thousand workers are employed in hundred industries and
they produce consumer goods. The newly employed workers spend their wage for the purchase
of these goods. That is the workers in a firm wonld become the buyers of the products produced
by. others. This will enlarge the extent of demand and size of the market. It is clear here that the
complementary system of industries reduce the risk associated with small market and opens up
opportunities for fresh investment. Thus indivisibilities in demand thus require a huge quantum
of investment in complementary industries. Rodan's example can be explained with the help of
diagram

P MC
Fig. AC

P.

P1
D4
EL
MR4
Di
MR1
O Q4 Q

AC and MC represent the cost

of plant which is little smaller than the optimum size plant.
D. and MR, are the demand and
marginal revenue curve i the shoe factory when investment is made
 only on it. It produces OQi shoes and sells at P price which docs not cover ATC. So the factory incurring
a loss of 'Cabp1, When simultaneous investment is nake in number ofindustries the market demand for
shoesespands to D so that the qty of shoes become 004. Now the shoe factory earns profit equal to
P4RST. Similarly all other industries also earn
profit.
3.Indivisibility in the supply of savings
In under developed countries the level of savings is low because of low level of national income.
To generate saving it is imperative that a gap between income and expenditure should be created. At the
same time suitable mechanism is devised to channelize the
savings in the developmental activities. A high
enough level of saving is needed for substantial invesiiient in a number of industries at one and the same
time. The desired objectives of growth and prosperity can be realized when savings are invested in
productive pursuits, which promote development and employment.

Govt intervention
The theory of big push assigns a crucial role to the govt for carrying the task of planned development. In
fact, the amount and scale of development is beyond the limit of pvt enterprise. Therefore it is the duty of
govt to take up such projects. More over the motive bohind all pvt investment is profit therefore they will
invest only on directly productive and speedy recovering investments. On the other hand to overcome the
problem of LDCs we need investment in social overheads which is not
directly productive and have long
gestation period. Thus, it is only the govt can invest in these fields.

Criticismns
The theory of big push has been criticized by Ellis and Jacob Viner on the plea that this theory creates
more problems than it solves

1. Prof. Myint has argued that this

theory stresses the need for big effort and large quantum of
but it neglect the problem of investment,
shortages. For large investment LDC needs dynamic entrepreneurs, skilled
labours, domestic capita but all these are having its own
shortage in LDC. 2. The big push theory
envisages the simultaneous devt of complementary industries, which in turn could increase
the volume of
employment and expansion of effective demand. Suech a strategy of industrialization
could lead to a
greater demand for money which could ultimately generate inflation
3. There could be a
possibility that in short each firm might pay
run
higher wages to scarce and skilled
labour and thus creates external
diseconomies for each other
4. this
theory emphasis the importance of a high !vel of
goods, investment in all types of industries
goods industries and social over head capital etc
consumer capital
development of agriculture sector is cqual to neglect the except agriculture. To neglect the
LDCs are tied with development of entire since economy most of the
agriculture.
5. The theory of big push explains the cost reduction aspect of output
6.
exparnsion
Big push stresses lumpiness of
honest and efficient capital which is important for
administration, control of inflauion, re development. But other factors such as
technology, creation of human capital, stability at home and organization of agriculture,
development of
peace abroad are equally
important