Gunnar Myrdal’s development state theory
Gunnar Myrdal is an outstanding contemporary development theorist. His illustrious book “The Asian Drama” and another book, “Economic Theory and Undeveloped Regions” give an understanding about his argument on the caves of underdevelopment in underdeveloped countries and how the role of state is instrumental to promote institutional reforms for raising development.
The two key terms Myrdal used in his development analysis are “Cumulative Causation” and “Backwash Effects”.According to Myrdal, it is the Cumulative Causation that enables an economy to progressively move a society from the specter of underdevelopment towards development. Myrdal was of the view that most of the underdeveloped nations suffer from “dualism” of developed.
Because of this dualism in the underdeveloped regions of the underdeveloped countries, when these nations receive stimulus to growth, it is largely enjoyed and goes to the more prosperous regions of the economy. As a result, the advanced regions surge further ahead leaving the more economically deprived regions of the country lagging behind. This is what is called the “Cumulative Causation”.Another cause of the cumulative causation in the underdeveloped countries is the migration of population and movement of capital from less
developed regions towards more developed regions. When more youthful and better trained people migrate from less developed regions for better employment opportunity to more developed regions, then the less developed regions again are left with unskilled and dependent population. This further adds to their agony and underdevelopment of the regions. Besides, high fertility in the underdeveloped regions of the underdeveloped countries also reduces per capita income, enhances poverty and sustains the low level of development in the underdeveloped regions of the underdeveloped countries.
Like population, the capital also moves from the poorer regions to the prosperous regions, because capital investments in the developed regions as compared to the underdeveloped regions are more secure and the rate of return is high. In other words, the scope for better investment is more in advanced regions than those of backward regions of the underdeveloped countries; this attraction towards developed region creates capital shortage in backward regions. Myrdal(1957) observes that ‘studies in many countries have shown how the banking system, if not regulated to act differently, tends to become an instrument for siphoning off the savings from the poorer regions to richer and more progressive ones where returns to capital are high and secure”.
The cumulative movement of trained people and capital investments, which tend to economically weaken a region, were termed as “backwash effects”. Contrary to “backwash effects”, Myrdal advocated “spread effects”. Myrdal perceived that with the help of “spread effects”, industrial expansion in more developed regions of the underdeveloped countries will have positive repercussion in its less developed regions in terms of demand, market avenues and technology through the transfer of surplus capital from the more developedregions to the less developed regions. These favorable effects, which the more developed regions would produce on the socio-economic development of the less developed regions, are termed as “spread effects”. The main task before the underdeveloped countries is to ensure that the positive impact of “spread effects” will help to neutralize the negative impact of “backwash effects” to a great extent. However, according to Myrdal, the “spread effects” in the underdeveloped countries is weak and therefore would not be capable enough to balance the “backwash effects” as a result of regional imbalances in the underdeveloped countries. Myrdal was of the opinion that it is not possible to attain equilibrium between “backwash effects” and “spread effects” in the underdeveloped countries. As a result regional inequalities are much wider within various regions of the poorer countries than those of the richer countries. For which the regional inequalities are increasing in poor countries and diminishing in the rich countries. Thus according to the Myrdal development state theory, regional disparities and imbalances in terms of socio-economic development in underdeveloped countries are the outcome of ‘cumulative causation’.
According to Myrdal, a crucial difference found between the advanced countries and the poor countries, is the existence of strong state in the former and the weak (or soft) in the latter (Myrdal, 1970). With the help of strong state, advanced nations formulate and implement a coherent national policy which helps economic growth and development across the regions of the country. On the other hand, in the poor countries, the State lacks effective policies to either ensure that there is a movement toward national economic integration or to address the impact of backwash effects (Cypher and Dietz, 2006). Myrdal observed that political power is largely concentrated in the hands of top social strata in the underdeveloped countries. These elite groups through their money and muscle power accumulate all power and do not fear and even violate state power through muscle, money and political maneuvering. These people escape punishment by adopting means of political
pressure on the bureaucracy and other executive functionaries.
Myrdal advocated institutional reforms in the underdeveloped countries in order to usher economic growth and development in these countries. According to Myrdal (1984), “the institutional approach meant enlarging the study to include what in a summary way I referred to as “attitudes and institutions’.” Therefore, Myrdal emphasized that the institutional reforms are important for the development of the underdeveloped countries. Examples of some of these reforms as advocated by Myrdal are fight against corruption, land reforms, and displacement of elite from the commanding heights of state policy. He advocated that the less corrupt institution/arrangements are needed for the underdeveloped countries in order to augment their economic growth and development.