Growth Pole Theory By Perroux - Essay Unit 3 Theories And Models For Regional Planning PDF

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discusses the proponents, theory, its applications in the contemporary world, criticisms associated ...

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UNIT III: THEORIES AND MODELS FOR REGIONAL PLANNING: 1. GROWTH POLE MODEL BY PERROUX 2. GROWTH CENTER MODEL IN CONTEXT OF INDIA 3. MYRDAL’s CUMULATIVE CAUSATIO THEORY 4. FRIEDMAN’S CORE PERIPHERY MODEL 5. ROSTOW’s THEORY

What makes a region to grow? Economic theories talk about growth in terms of 1. increase of income (total income) and / or 2. increase of per capita income Therefore regional growth implies an increase in the total income and/or per capita income of a region. Since the growth of income is always the result of the growth of the use of factors(e.g. land, labour, capital, raw material) of production, regional growth should imply abetter use of the factors of production such as land, labour, capital etc. of the region. In addition to these factors, a region can also grow due to an increase in the level of demand for its commodities from the other regions within the country or outside the country. Thus in regional analysis, growth of a region can result either from endogenous (within) factors or from exogenous (outside) factors or both. Sometimes growth may result from a right location of industries/services. Consequently there are theories of regional growth which attempt to explain the growth of a region in terms of

1. Endogenously induced process. e.g. Sector theory, stage theory 2. Exogenously induced process e.g. Export base model 3. Spatially induced process e.g. Growth pole, Central place

GROWTH POLE MODEL BY PERROUX The “growth pole theory” originally conceived by French Political Economist Francois Perroux (1955) and later expanded by Boudeville (1966) is a regional and industrial planning model for a “set of expanding industries located in an urban area and inducing further development of economic activity throughout its zone of influence.” It is the product of agglomeration economies in a leading, dynamic industry or sector that serves as an “engine” for development, creating forward and backward linkages and promoting diversified production and consumption for a growing local urban population and also for other growth points throughout the pole’s area of influence. Perroux F. “Economic space: Theory and Application” in 1950 was his original article

This theory reflects the perception of Perroux regarding economic growth: “ growth does not appear everywhere all at once, it appears in points or development poles, with variable intensities and spreads along diverse channels and with varying terminal effects to the whole of the economy.” Key

nodes

Unbalanced Developmental impulses

(economic space)

Dev as a process

Innovation as driving

of

force of development.

structural

Other nodes

development

ASSUMPTIONS: 1. Human activities must cluster together to generate internal and external economies of scale 2. If clustering is allowed, it may entail heavy social costs in terms of congestion, diseconomies of scale and spatial imbalances in social and economic development.

3. The autonomous process, which generate clustering of human activities and thereby create spatial imbalances in economic development can directed through policy interventions to generate growth foci in areas where they do not exist. CORE IDEA OF THE THEORY: 1. Economic dev or growth is not uniform over an entire region but instead takes place around a specific pole. 2. This pole is characterised by key industry around which linked industries develop mainly through direct and indirect effects. 3. Expansion of this industry implies expansion of output, employment, related investments as well as new technologies and new industrial sectors. 4. Because of scale and agglomeration of economies near the growth pole regional dev is unbalanced. Transport terminals play a significant role here. 5. The more dependent or related an activity is to transportation the more likely & strong this relationship is. 6. At a later stage emergence of secondary growth pole is possible, mainly if a secondary industrial sector emerges with its own linked industries

Perroux defined growth pole in terms of an abstract economic space which he conceived to be of three types: 1. a homogeneous aggregate 2. an economic plan for demarcating the space 3. a field of force or influence which communicates The concept of growth poles is closely related to Perroux’s ideas of an economic space as a field of forces consisting of centres from which centrifugal forces emanate and centripetal forces are attracted. Each centre being a centre of

attraction and repulsion, has its proper filed, which is set in the field of other centres.

BASIS OF THEORY: There are two cornerstones on which Perroux based his theory: 1. Schumpeterian theory of Development: ✓ Argument heavily based on role of innovations and large- scale firms ✓ In Schumpeter’s analysis Dev occurs as a result of discontinuous spurts in a dynamic word

Discontinuous spurts caused by innovative entrepreneur whose activities generally take place in large- scale firm

these dominate there environment through reversible and influences on other economic units by reason of there dimension, economic strength and nature of operations

✓ The concept of leading and propulsive firms is an outcome of close relationships between scales of operations, dominance, and impulses to innovate.

This concept states that at the centre of growth poles are large propulsive industries which

dominate

their

economic

unit

propulsive firm

dynamic propulsive firm

1. relatively large 2. high ability to innovate 3. generates significant growth impulses into environment 4.belongs to fast growing industry

leading propulsive firm

1.highly advanced level of technology and managerial expertise 2.high income elasticity of demand 3.marked local multiplier effects 4.strong inter industry linkages with other sectors

2. THEORY OF INTER INDUSRY LINKAGES AND INDUSTRIAL INTERDEPENDENCE: 1. Backward linkages: an industry encourages investment in the earlier stages of production by expanding its demand for inputs ( which are output for industries in earlier stage of production) 2. Forward linkages: an industry encourages investment in subsequent stages of production by transmitting innovation effects forward.

innovation

decline in COP

fall in price of output

demand of this industry's output increases

implying industrial interpdependence Thus Perroux describes growth pole as firm, an industry or group of firms which occupies an economic space rather than a geographical space characterized by: a. Large size b. High degree of dominance c. High level of innovations d. Grow at faster rate than other related industries. In the France of 50s, these characteristics were typically associated these characteristics where typically associated with modern technically advanced industries, e.g., chemical, metallurgical, petrochemical industries.

ASSESSMENT OF THEORY: The scope of the Growth pole theory also widened to include the normative issues of policy intervention, and spatially targeted investments for accelerating the economic growth in developing countries. The arguments in favour of implementing a growth pole strategy as a spatial planning tool draw on the following concepts:

a. Economies of scale b. The nurturing of backward and forward supply linkages, fiscal and final demand linkages c. Economies of agglomeration associated with spatial clusters and geographic concentration of economic- activities. Thus the growth of such poles can have 2 discernible impacts:

1. BOUDEVILLE’s CONCEPT: It was Boudeville who explicitly extended the original theory to include more comprehensively the geographical dimension and a regional character. He defined regional growth pole as a “set of expanding industries located in an urban and inducing further development of economic activity throughout its zone of influence”. Location

of

Becomes pole of the region

dominant

industries

Promotes

agglomeration

tendencies

Arise

because

of

external

economies

Result in polarization of eco. activities around pole.

External economies that become available in the area constituting the growth pole of a

region

are

basically

of

following

types:

external economies

economies internal to the firm

economies external to the firm but internal to the industry

1.lower average costs of production resulting from an increased rate of output 2.such large scale productions allows technical economiesjob specialisation, marketing and financial economies

economies external to the industry but internal to the urban area

1.on account of close locational proximity of linked firms as industry expands at a particular location, cost per unit of output to a firm declines 2.advantages: large and skilled labour pool, easy interchange of products, development of specialised services available to all firms

1. urbanization economies 2.reduction in avg cost of each firm as many industries grow in one place 3.includes dev of urban labour markets, access to large markets, provision of wider range of services.

2. HIRSCHMAN’S TRICKLING DOWN AND POLARIZATION EFFECTS: a. In his theory of unbalanced growth, Albert O Hirschman emphasizes that because of external economies there is a tendency among investors to concentrate in and around the growth poles. Thus “dualism” in a nation’s economic progress develops – splitting it into developed and backward areas. b. Despite this, dev in geo growth points will set in motion certain forces:

forces

favourable forces

trickling down forces: progress is trickled down to the backward areas from growth pole

such forces work basically on: a. inter regional trade b.transfer of capital to backward regions. c. polarization effects: growth pole attracts labour from backward regions reducing population pressure there d. curbs disguised unemployment

adverse forces

geographical polarization can discourage growth in the hinterland on account of following factors: a. industries in hinterland may find it difficult to compete b.investment usually tilted towards to the growth poles due to assured profits c.draining of hinterland as it losses best of its workforces thus denuded by growth poles.

The role of growth centres in regional planning was linked by Berry to a diffusion process`

new innvovations filter down from large centres to smaller ones by process of filtering

growth centre serve as filtering enhancement devices and when keyed to an accesibility policy brings the peripheries sithin the orbit of metropolid

accessibility policy- reduces diffusion time rapid integration of nation's economic space growth centre infrareduces filtering time

growth centre dev policypromtes dev of information linkage

INADEQUACIES OF GROWTH POLE HYPOTHESIS BY MISRA, RAO AND SUNDARAM 1. Inapplicability to varied regional problems:

a. Problems of developing a frontier region, uninhabited or partially inhabited, common in a country like Brazil- requires planned dev of linkages- monetary linkage, migration linkage etc, b. In a well populated ,resourceful but culturally backward areas: exVishakapatnam port with a shipyard as a core, dominance of backwash effect, result of piecemeal planning, lack channels through which growth impulses can be diffused. c. In the densely populated and economically backward regions: ex- northern Bihar, eastern UP, Telangana- agriculture predominant, existing towns are parasitic in nature, tenuous relationship between leading industry and subsistence agriculture and also between the regional needs and industries. d. Industrially advanced mineral rich areas- growth pole became the basis of development programmes undertaken in Chittaranjan, Durgapur, Asansol, Dhanbad, Ranchi, Sindri and Jamshedpur. 2. FUNCTIONAL RIGIDITIES: Growth pole hypothesis is functionally rigid by emphasizing productive activities and economic opportunities created through dynamic propulsive industries. In third world countries this is not enough. Addition to this (i,e, productive activities), growth pole must function as (1) Central places (2) Innovative and growth promoting centers, (3) Social interaction points. It is therefore to get rid of functional rigidities, attached with the growth pole concept. 3. lack of spill over mechanism: does not deals with the processes by which people’s participation in the development project can be ensured. 4. Urban and industrial bias: Important weakness inherent in the growth pole hypothesis is its over dependence on propulsive industries in selected urban areas. It disregards other aspects of

development. To expect that any large-scale industry will be able to create the socio– economic imperatives for its own growth is unrealistic. The idea that manufacturing can aloe be propulsive and that large industrial units can only generate growth does not seem to have empirical validity because Japan’s development was rooted in strength of small enterprises and Punjab is economically the fastest growing state in India and its growth has come from innovation in agriculture and not manufacturing.

APPLICABILITY: (validity of the theory in present world) 1. Growth Pole concept has become popular because of its orientation towards ‘dynamic industry’ (i.e. dynamic propulsive firm & leading propulsive industry) ‘polarization and agglomeration’ (inter-industry linkages of external economies) and the promise of ensuring “spread effects”. 2. Thus the growth pole theory postulates that if we carefully plan the public investment programs to be concentrated or located in a small number of favourable locations then it will have maximum spread effects on a regional growth. 3. Even though it promotes structural imbalance over the whole region, it is justified that concentration of expansionary momentum at the poles will result in higher per capita income level in the region as a whole. 4. Concentration of investments and public expenditure in a few selected points will enable more effective use of resources and there would be better chance of generating enough external economies. 1. The growth pole theory should be regarded as a conditional theory of regional growth that establishes conditions under which accelerated regional economic growth may occur. 2. SEZs: designed as supply side competitiveness measures which are meant to estd. An agglomeration of firms through the provision of superior infrastructure and operating conditions as well as financial incentives not provided outside the zone. These can function as growth poles if there are adequate linkages to the domestic

economy and they are planned and implemented as a component of sub regional growth strategy. Ex- Malaysia, Thailand. 3. Spatial Development Initiative- seeks to enhance the dev potential along Development Corridors (DCs) through project linkages and provision of feeder infrastructure South Africa’s SDI Programme in 1995 was conceived as a vehicle for accelerating the economic growth and job creation etc....