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G_ Myrdal. Economic Theory a,nd_Vnderdevefoped Reg'ions. (1957)

- .

CHAPTER 3

THE DRIFT TOWARDS REGIONAL

ECONOMIC INEQUALITIES IN A COUNTRYi

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A Simple Illustration

I have suggested that the principle of interlocking, circular, /

inter-dependence within a process of cumulative causation hasvalidity over the entire field of social relations. It should be the

main hypothesis when studying economic under-development and ./

development.

Suppose that in a community an accidental change occurs which

is not immediately cancelled out in the stream of events: for

example, that a factory, where a large part of the population gets

its livelihood, bums down and that it becomes clear that it would

not pay to rebuild it, at least not in that locality: The immediate

effect ofthis primary change is that the f i rm. owning it goes out of

business and its workers become unemployed. This will decrease I

incomes and demand. I,

In its turn the decreased demand will lower incomes an d cause

unemployment in all sorts of other businesses in the community .

which sold to, or served, the f i rm. and it s employees. A process of

circular causation has so been started with effects wh ic h c umu la te

in the fashion of the "vicious circle".

If there are no other exogenous changes, the ~1nmunity will be

less tempting for outside businesses andrwcrkers who had con-

. templated moving in, As the process gathers momentum, busl-

.nesses established in the community and workers living there

will increasingly f in d r ea so ns for moving out inorder to seek better

markets somewhere else, If they do, this will again decrease

incomes and- demand. Itwill usually also change the age structureof the' local population irl an ~nfavourable direction.

To throw light on the mechanism of this cumulative causal

'sequence, let us watch the behaviour of one single factor and let us

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E conom ic T heory and U nder-deoeloped R egions

in other localities or encourage lagging activity-the result of

earlier starts, which were losing momentum-to continue. A

boom will probably always increase the relative strength of the

spread effects. A depression will decrease it.·

Changes in general business conditions are traditionally dealt

with as "the business cycle problem" and this tradition has

continued long after these changes seem to have lost every appear-

ance of being cyclical. This is, of course, due to our recognition .

that there are in the system self-generating changes of the counter- :

vailing type, though not contained in the same time-space, and '

this is also my reason for referring to the problem in the present .

section. Business cycle research has been dominated by the time'

series: interest has been focused on the aggregate changes from ;

one point or period of time to another, while disregarding the !

differences in geographic space and even the changes in time of ,

these spatial differences.

I believe that mote intensive research on the changes in general

business conditions, focused more specifically on their conse- '

quences fO f economic development, would be rewarding. This;

would imply research on the differences between localities and

regions, as those differences change under the influence of the play iof forces in the market during changes in general business

conditions.

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