Economic Development Theories by Celso Furtado

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Questions and Answers

What is the primary assertion of the Big Push Theory?

A minimum level of collective investment is essential for success. (correct)

Economic development can be achieved without external economies.

Private investments always yield better results than public investments.

Incremental investment is sufficient for economic growth.

Why does the Big Push Theory emphasize interdependence among industries?

It ensures that all investments yield immediate benefits.

It reduces competition among firms.

It leads to a more efficient allocation of resources. (correct)

It encourages technological advancements in isolated sectors.

What is a key characteristic of investments according to the Big Push Theory?

They require government intervention to succeed.

They need to be of a large magnitude to be effective. (correct)

They should be made by individuals rather than in a collective manner.

They must focus solely on technological advancements.

Which situation does the Big Push Theory primarily address?

Underdeveloped countries with limited investment options. Signup and view all the answers

Which of the following best describes the consequence of insufficient investment in underdeveloped countries?

It hampers the simultaneous establishment of industries. Signup and view all the answers

In the context of the Big Push Theory, how are indivisibilities related to economic growth?

They necessitate collective investments to maximize benefits. Signup and view all the answers

How does the Big Push Theory view the role of separate private investments?

They are often insufficient for significant economic outcomes. Signup and view all the answers

What does the Big Push Theory imply about the significance of government policies in underdeveloped countries?

They need to facilitate large-scale, coordinated investments. Signup and view all the answers

What primarily hampers the implementation of the Big Push theory in underdeveloped countries?

Weak and inefficient governmental machinery Signup and view all the answers

Which historical example does Furtado use to challenge the Big Push theory?

Bolivia Signup and view all the answers

How does the Big Push theory address the mixed economy in underdeveloped countries?

It fails to account for competition between private and public sectors. Signup and view all the answers

In what way does the Big Push theory neglect pivotal economic factors?

By disregarding the need for a conducive investment environment Signup and view all the answers

What is a significant challenge to capital formation as highlighted by Furtado?

Corruption and bureaucratic delays within government Signup and view all the answers

Which of the following statements reflects a common issue faced by underdeveloped countries regarding state and market interactions?

Conflicts arise due to secrecy and competition between sectors. Signup and view all the answers

Which of the following conditions must be met to effectively implement the Big Push theory?

A stable and transparent governmental framework Signup and view all the answers

What does Furtado indicate about the correlation between advanced countries’ progress and the Big Push theory?

It shows no relation to the success of the Big Push. Signup and view all the answers

What does indivisibility in the supply of savings refer to in the context of the Big Push Theory?

The requirement of high savings for substantial investments. Signup and view all the answers

According to Rosenstein Rodan, what should the marginal rate of savings be compared to the average rate of savings in underdeveloped countries?

Very much higher than the average rate of savings. Signup and view all the answers

What is suggested as a solution to the low income and savings in underdeveloped countries?

Initiate a big push or a minimum quantum of investment. Signup and view all the answers

What is a primary criticism against the Big Push Theory?

It may inadvertently create more economic issues. Signup and view all the answers

Why is a high minimum quantum of investment critical according to Rosenstein Rodan?

It is necessary to achieve a high volume of savings. Signup and view all the answers

How do critics view the emphasis on indivisibilities in the Big Push Theory?

As overly simplistic and not reflective of reality. Signup and view all the answers

What is considered essential for initiating growth in underdeveloped countries?

A significant rise in income and savings. Signup and view all the answers

What does Rosenstein Rodan suggest about the alternating stages of income and savings?

Increased income should lead to higher marginal savings afterward. Signup and view all the answers

Study Notes

Big Push Theory Overview

Proposed by Celso Furtado, emphasizes necessary reforms for emerging from stagnation and promoting development.
States that large-scale capital formation can initiate economic growth but lacks historical support.

Historical Limitations

Historical evidence contradicts the big push theory; countries like Bolivia made significant investments but remained stagnant.
The progress of advanced countries does not validate the effectiveness of the big push approach.

Institutional and Administrative Challenges

Effective implementation of the big push theory requires robust state participation, which is often lacking in underdeveloped countries.
Weak government institutions, lack of technical knowledge, and widespread corruption hinder the execution of development initiatives.

Mixed Economy Considerations

The theory overlooks challenges in mixed economies where both private and public sectors coexist, leading to competition rather than collaboration.
Government secrecy about plans and regulations can inhibit private enterprise, exacerbating uncertainties for investors.

Neglect of Investment Promotion

Focus on increasing planned investments neglects the essential environment needed for further investment growth.
A comprehensive strategy is required to create a favorable climate for ongoing investment.

Indivisibility of Savings

High income elasticity of savings requires significant investment to establish interdependent industries, but low income limits savings in underdeveloped nations.
To close the gap between income and savings, investments must be increased alongside coordinated savings efforts.

Criticism of Big Push Theory

Critically viewed by economists such as H.Myint, Jacab Viner, and H.S. Ellis for creating more issues than solutions.
Emphasizes indivisibilities of demand and supply excessively, contributing to economic inequalities.

Gini Coefficient Insights

The Gini Coefficient measures income equality, ranging from 0 (perfect equality) to 1 (perfect inequality).
Useful in evaluating the impact of government policies on wealth distribution; higher coefficients indicate policies benefiting the rich disproportionately.

Economic Development Strategies

Argues for simultaneous investment in interdependent industries to catalyze broader economic development.
Advocates that isolated and incremental investment is inadequate for triggering sustained growth; collective investment efforts are essential for success.

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Description

Explore the insights of Celso Furtado on necessary reforms for economic development. This quiz delves into the implications of the big push theory and critiques regarding historical support in capital formation. Test your understanding of Furtado's perspectives on stagnation and development.