Can Unbalanced Growth Affect Economy?

Studies show that unbalanced growth is a way of economic development. The previous investment decisions of countries reflect the developmental pace. In fact the packages of unbalanced investment can also aid for the welfare at some point of time. The requirement of compensating investments arises if any kind of imbalance investment is made. It is hereby proved that growth should not be taken place in a balanced route. Hans Singer, Paul Streeten, Marcus Fleming, Albert. O. Hirschman is the famous supporters of theory of unbalanced growth. There are many philosophizes and economists who oppose the same theory.

The strategy was mainly propounded by Hirschman. He firstly applied the theory on underdeveloped countries. There were many reasons in these countries which led them to scarcity of resources. It includes low savings, income inequalities, poverty, low productivity, high population, and burden of dependency, underemployment and many more issues. Since there exists the lack of investors and business people the flow of cash could not be directed to various sectors of economy which made the balanced growth possible. In this scenario, Hirschman suggested that the imbalanced growth is the best possible method of development. If disproportions and tension is maintained by application of right strategies the economy can be easily kept moving ahead. The development should not be done equally in all the sectors. This is the main strategy to be followed.

The three stages of unbalanced growth are:

  1. Complementary
  2. Induced investment
  3. External economies

The theory was made purely focusing on the backward countries which cannot afford economical development. Hirschman suggested that it is not because of scarcity of resources, but because the lacking of ability to employ the resources lead to adversities. The motivations given to the investor groups and business people can also make gradual changes in the growth since the cash flow can be channelized properly.

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