What is the Big Push Theory?

The balanced growth theory has another version called the Big Push Theory. This theory, apart from suggesting the balanced development of the consumer goods industries and the social overhead capital, underlines the importance of simultaneously undertaking investment in the capital goods industries as well.

The necessity for maintaining a balance between consumer goods industries and capital goods industries arises because of their technical complementarity. Generally, this complementarity is more pronounced in the capital goods industries which are dependent on consumer goods industries for the supply of their finished and semi-finished products, machinery and other types of capital equipment.

The “Big Push Theory” presents a comprehensive programme of economic development in which the following balances have to be maintained:

(i) A horizontal balance among the consumer goods industries according to expected emerging patterns of demand so that with the expansion in demand, the supply is increased accordingly.

(ii) A balance between the social overhead capital and productive activities so that one may not suffer in the absence of the others, and

(iii) A vertical balance between the consumer goods industries and the capital goods industries according to their degree of

Technical complementarity so that external economies can be fully reaped.

According to this theory, to take full advantage of external economies, all investments in all the interdependent industries should be made in accordance with a well chalked out plan of economic development.

This ‘balanced growth’ or simultaneous development of many industries would require mobilization of large amounts of resources at one time. According to Rosenstein Rodan and Nurkse, poor developing economies were characterized by a large surplus of labour employed at zero marginal cost in the traditional sector. Under this assumption of disguised unemployment, the labour supply would create no major bottleneck to a ‘great leap forward’ in industrialization.

The key to the success of the balanced growth strategy would, of course, be to mobilize sufficient funds for simultaneous development of many industries.