Model Answer
0 min readIntroduction
Gunnar Myrdal, a Nobel laureate, proposed the Cumulative Causation Theory in his seminal work, *Economic Theory and Under-Developed Regions* (1944). This theory attempts to explain the persistence of regional disparities and the process of development, particularly in the context of developing economies. Unlike traditional economic theories that assume equilibrium, Myrdal argued that development is not a smooth, linear process but rather a self-reinforcing cycle where initial advantages or disadvantages tend to get magnified over time. The theory posits that development in one sector or region creates conditions that further stimulate development in related sectors and regions, leading to a ‘cumulative’ effect.
Understanding Cumulative Causation
Myrdal’s theory centers around the idea of ‘circular and cumulative causation’. This means that changes in one variable lead to changes in other variables, which in turn reinforce the initial change, creating a self-sustaining process. This process can be either virtuous (leading to development) or vicious (leading to underdevelopment).
The Mechanism of Cumulative Causation
- Initial Impact: A change occurs in one sector (e.g., investment in infrastructure).
- Spread Effects: This change creates ‘spread effects’ – increased demand for goods and services in other sectors (e.g., construction materials, labor).
- Backwash Effects: Simultaneously, ‘backwash effects’ occur – resources are drawn away from other sectors or regions towards the expanding sector, potentially hindering their development.
- Reinforcing Cycle: The spread effects and backwash effects interact, creating a cumulative cycle. Successful sectors attract more investment and skilled labor, further accelerating their growth, while lagging sectors fall further behind.
Types of Causation
Myrdal identified two main types of causation:
- Spread Effects: These are positive externalities that benefit other sectors and regions. Examples include increased demand for local goods, improved infrastructure, and the diffusion of technology.
- Backwash Effects: These are negative externalities that harm other sectors and regions. Examples include the drain of capital and skilled labor, increased competition, and the decline of local industries.
Application to Development
Myrdal applied this theory to explain regional disparities and the challenges faced by developing countries. He argued that initial disadvantages in a region (e.g., lack of infrastructure, low levels of education) create a vicious cycle of underdevelopment. The backwash effects dominate, preventing the region from benefiting from the spread effects. This leads to a widening gap between developed and underdeveloped regions.
Example: Industrialization in India
Post-independence India’s focus on heavy industries in certain regions (like the public sector units in the Bhilai, Rourkela, and Durgapur steel plants) led to concentrated development. This created spread effects in those regions – growth of ancillary industries, improved infrastructure, and increased employment. However, it also resulted in backwash effects – the diversion of resources from agriculture and other sectors, and regional imbalances. The Green Revolution, while successful in some states like Punjab and Haryana, also created regional disparities due to uneven adoption and access to resources.
Criticisms of the Theory
- Lack of Empirical Support: Some critics argue that the theory lacks strong empirical evidence and is difficult to test rigorously.
- Oversimplification: The theory is seen as an oversimplification of complex development processes, neglecting factors like political institutions, social structures, and cultural norms.
- Static View: The theory is criticized for being somewhat static, failing to adequately account for dynamic changes in the global economy.
- Neglect of External Factors: It doesn’t fully consider the role of external factors like international trade, foreign investment, and global economic conditions.
Despite these criticisms, Myrdal’s Cumulative Causation Theory remains a valuable framework for understanding the dynamics of development and regional disparities. It highlights the importance of addressing initial disadvantages and promoting policies that generate positive spread effects while mitigating negative backwash effects.
Conclusion
Myrdal’s Cumulative Causation Theory provides a nuanced understanding of development as a non-linear, self-reinforcing process. While acknowledging its limitations, the theory’s emphasis on circular interactions and the importance of addressing initial disadvantages remains relevant for policymakers seeking to promote equitable and sustainable development. Effective regional planning and targeted interventions are crucial to break the vicious cycles of underdevelopment and foster inclusive growth, ensuring that spread effects outweigh backwash effects.
Answer Length
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