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Analysis of some fundamental arguments claimed by Albert Hirschman and Gunnar Myrdal

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Introduction

Analysis of some fundamental arguments claimed by Albert Hirschman and Gunnar Myrdal The objective of this essay involves a thorough and profound analysis of some fundamental arguments claimed by Albert Hirschman and Gunnar Myrdal. Myrdal claims that "the play of forces in the market normally tends to add rather than reduce regional inequality" and Hirschman that "non-market forces may be just as automatic as market forces". In order to analyse those two statements so as to reach useful inferences some of the most essential issues, developed by Myrdal such as the principle of circular and cumulative linkages and spread and backwash effects, as well as Hirschman's trickle-down and polarisation effects, will be investigated. Regional inequality is a disparity between the standards of living applying within a nation. It is difficult to quantify the prosperity or poverty of a region, but there are two basic indicators. The first is unemployment, which has been used in Britain as a symptom since the 1920s. Most UK regional policy has concerned the alleviation of unemployment. The second indicator is per capita income, which in Britain generally falls to the north and west. ...read more.

Middle

Hirschman believed that the polarisation effects, inability to compete, loss of resources to the core, would be more than compensated for by the trickle-down effects, the natural spread of growth and investment, and the development of complementary industries. If disparities continued over an extended period of time government economic policy would be used to develop convergence. Furthermore, Myrdal's statement was that without government intervention, intra-regional disparities in income can actually increase with integration. The result depends on the spread and backwash effects from more developed areas to less developed areas. The spread effect refers to the increased demand for products from less developed regions and the transmission of technological knowledge from more developed areas to less developed areas as a result of integration. The backwash effect refers to the movement of capital and skilled labour from the less developed areas to the more developed areas, and to changes in the location pattern of industries to the detriment of the less developed areas as a result of integration. The backwash theme involves labour, capital and trade as indicators of increase regional inequality and thus, cumulative process operates advantageously for some regions and disadvantageously for others. ...read more.

Conclusion

These built-in stabilisers rarely have sufficient force to render positive corrective policies unnecessary. In conclusion, it can be understood that both Myrdal and Hirschman offer profound standpoints on the conflicting forces supporting both regional balance and imbalance. It is obvious that a balanced regional development may be generated with a lot of effort and those regional imbalances 'surrender' to the natural amendment of labour and capital. Particular attention is brought to the individual flexibility in response to price signals. Automatic stabilisers are used as adjustments to fiscal policy that occur automatically during business cycles and smooth the path of economic growth. For example, in a recession the government will pump money into the economy by paying more in unemployment benefit without a change in policy. Automatic stabilizers counterbalance the feedback effect of changes in economic activity, although in practice their effectiveness is limited. Lastly, regional transitions, such as capital reallocation may enhance the educational and even the health system of a country or a region, as well as improve resource qualifications in less developed regions. 1 Lecture notes p. 42 2 Hirschman, A. O., (1958), p.63 ?? ?? ?? ?? Vasileios Angelopoulos ASB 3305 :: Page 1 ...read more.

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