Strategy of equilibrium growth

The strategy of equilibrium growth or strategy of balanced growth describes a development strategy with the help of which a complementary industrial complex is created. It is based on the classic capitalist development theories ( modernization theory ).

background

This strategy is derived from the concentration of capital and income in developing countries and the resulting market constriction. Since the broad mass of the population lives on the subsistence level , they have little purchasing power . The improvement or expansion of the production of consumer goods is consequently unprofitable for the companies, since they would not find a buyer. Breaking through this static is the goal of every classic capitalist development strategy.

Basic problem

A breakthrough would only be achieved if - as in the well-known example of Paul Rosenstein-Rodan - the employees of a newly built shoe factory would spend their entire wages on shoes. The pre-industrial shoe market would remain unaffected and the overall market would expand. In reality, however, this hypothetical case does not occur. The increased income of the employees in the shoe factory will only be reflected to a small extent in a demand for the goods they manufacture. Most of it will seep into other uses. The individual company would therefore be faced with insufficient original demand and will therefore not even be realized.

methodology

The goal of the strategy of 'balanced growth' in the 'take-off' phase is therefore the establishment of several interconnected, complementary industries which, in their entirety, produce the bundle of goods that the employees of an entire industrial complex demand . This creates an additional market that creates jobs for the unemployed and underemployed population in developing countries. As already mentioned above, the profits are continuously brought into the expansion of production. Therefore, the demand can be increased, so that new investment incentives are created for the companies. At the same time, agriculture is to be modernized through an increased use of machines so that it can produce more goods and workers are made available for the flourishing industrial companies. In other interpretative approaches, a balanced promotion of agriculture and industry is required at this point. For the success of his strategy, Ragnar Nurkse regards state planning as the rule for this strategy.

literature

• Klaus Grimm: Theories of underdevelopment and development strategies. An introduction. Opladen 1979.