The Doctrine of Balanced Growth has been advocated by Rosentein
Rodan, Ragnar Nurkse, and Arthur Lweis. The thoery of balanced
growth, states that there should be simulateneous and harmonious
development of different sectors of the economy so that all the
sectors grow in unison. According to Nurkse, vicious circles of
poverty are at work in underdeveloped countries which retard
economic development. If however, they are broken, economic
development will follow. The vicious circles operate both on the
supply side and demand side. On the supply side: Low savings-Low
Income- Low Productivity--Deficiency of capital--- Low capacity to
save. On the Demand side: Low Investment- Low Demand--
The Doctrine of Balanced Growth has been advocated by Ragnar
Nurkse.
The thoery of balanced growth, states that there should be
simulateneous and harmonious development of different sectors of
the economy so that all the sectors grow in unison.
According to Nurkse, vicious circles of poverty are at work in
underdeveloped countries which retard economic development. If
however, they are broken, economic development will follow. The
vicious circles operate both on the supply side and demand
side.
On the supply side: Low savings-Low Income- Low
Productivity--Deficiency of capital--- Low capacity to save.
On the Demand side: Low Investment- Low Demand-- Low level of
Income- Low capital - Small size of the market-- Limited
productivity-- Thus the Vicious Circle of Poverty.
How to Break these Vicious Circles: individual investments
cannot solve the problem. More or less synchronised aplplication of
capital to a wide range of different sectors.
Every increase of production, if distributed without
miscalculation among all kinds of produce in the proportion which
private interest would dictate, create, or rather constitutes its
own demand.
A Frontal attack of this sort a wave of capital investments in a
number of different industries--- has been called by Nurkse,
Balanced growth.
The doctrine of Balanced growth requires a balance between
different sectors of the economy during the process of economic
growth. There should be balance between investment in agriculture
and industry. Agriculture and industry are complementary. An
increase in industrial ouptut requires an expansion of agricultural
output.
Balance also requred between the domestic and foreign sector.
Export revenue is an important source for financing development:
imports rise as production and employment expand and demestic trade
itself requires increasing imports of necessary materials and
equipment.
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