Top 14 Drawbacks of Unbalanced Growth Theory

The doctrine of unbalanced growth suffers from a number of inconsistencies and drawbacks.

They are as under:

1. Lacks Basic Facilities:

The success of unbalanced growth lies in availability of basic facilities like raw-material, power supply, transportation, communication etc.

But underdeveloped countries lack such facilities at the initial stages of development. Lack of such facilities are a major constraint for the successful implementation of the strategy.

2. Danger of Inflation:

This theory generates inflation in the country as strategy lays emphasis on capital goods industries and neglects consumption goods industries. This, in turn, creates scarcity of consumption goods resulting in inflation. Moreover, in less developed countries, the monetary and fiscal policies are not effective in curbing inflation because of structural impediments. Thus, unbalanced growth adds more problems rather than it solves.

3. Neglect of Resistances:

Paul Streeten points out that, “The theory concentrates on stimulus to expansion and tends to neglect or minimize resistances caused by unbalanced growth.” The supporters of unbalanced growth argued in favour of setting capital goods industries. But to start such industries is not an easy affair and is beyond the capacity of underdeveloped countries. The process of development based on capital goods industries creates economic, social and structural obstacles. The theory under these circumstances fails to suggest any way out.

4. Disadvantages of Location:

The experience of different countries is the evidence that there is tendency of concentration of the heavy industries at one place which restricts the mobility of factors of production. In turn, it creates the other problems like slums, overcrowding and health problems and the atmosphere of surrounding localities are polluted. Some critics have rightly pointed out, “It is not wise to keep all your eggs in one basket.”

5. Linkage Effects not Based on Empirical Data:

Prof. Hirschman has advocated to start only those industries which have maximum total linkage effect. But these effects are not based on statistical data pertaining to less developed countries, where social overhead facilities are much developed for a generation or so. The study of such effects requires the mutual dependence of industries and such a dependence lacks in the initial stages of economic development.

6. Too Much Emphasis on Investment Decisions:

Prof. Hirschman’s thesis of Unbalanced Growth gives maximum stress on investment decisions. No doubt, decision making plays an important role in economic development but underdeveloped countries do not require only investment decisions but at the same time administrative, management and policy decisions are equally essential for the promotion of economic development.

7. Not Suitable to Democratic Countries:

Many critics have pointed out that the concept of unbalanced growth is not suitable to democratic socialistic countries while it has only applicability in totalitarian countries like Russia and China. This principle suggests leaving of the consumption while it is not a sound proposition because less developed countries have already very low standard of living and there is further no scope for its depressing. It is with this reason, that it loses its validity in democratic countries.

8. Lack of Factor Mobility:

Moreover, unbalanced growth doctrine lacks factor mobility. Inducement mechanism is practicable where there is internal flexibility of resources. In underdeveloped countries, it is impossible to transfer resources from one sector to another.

9. Neglects Consumer Goods Industries:

From the consumer’s point of view, Prof. Hirschman’s doctrine of unbalanced growth is a failure because it gives undue emphasis on setting up of capital goods industries at the expense of consumer goods industries.

10. Wastage of Resources:

According to many critics, the method of unbalanced growth involves a considerable wastage of resources. Some sectors in the economy will grow at a faster rate while others remains neglected. To achieve the balanced growth, every sector should grow simultaneously and there should be no scope of wastage of resources.

11. Lack of Flexibility:

Inducement mechanism is practicable where there is internal flexibility of resources but in underdeveloped countries, it is difficult, if not impossible, to shift resources from one sector to another.

12. Neglect of the Degree of Imbalance:

According to Paul Streeten the theory does not explain the degree of imbalance among the various sectors. While criticizing the unbalanced growth theory, he asks, “The crucial question is not whether to create imbalance, but what is the optimum degree of imbalance where to imbalance and how much in order to accelerate growth which are the growing points, where should the spearhead be thrust, or which slope of snowballs grows into avalanches.” These questions are of great importance for development which remain unanswered in the theory of unbalanced growth.

13. Neglect of Agriculture Sector:

According to critics, the theory of unbalanced growth fails to pay due attention to agriculture which is the backbone of the economy of less developed countries. It is an open secret that in over populated and agriculture based under-developed countries neglect of agriculture could be suicidal. Further, shortage of agricultural goods, such as raw material, can emerge as a. serious constraint to the industrialisation programme of a country.

14. Neglect of Advancement in Knowledge:

According to Prof. S.K. Nath, “The theory of unbalanced growth is doing nothing about shortages, bottlenecks and obstacles to development, till there are complaints about them and group pressure on public authorities can make sense only if we believe that these shortages, bottlenecks and obstacles to development, once they are felt, can be removed instantaneously for if it does take sometime to remove them, then while the process of removing them is under way, development is hindered.”