Backwardness
Encyclopedia
An economically backward economy is defined as one which makes less progress than normal. USSR leader Gorbachev once said “If you don’t move forward, sooner or later you begin to move backward.” The backwardness model is a theory of economic growth
Economic growth
In economics, economic growth is defined as the increasing capacity of the economy to satisfy the wants of goods and services of the members of society. Economic growth is enabled by increases in productivity, which lowers the inputs for a given amount of output. Lowered costs increase demand...

 created by Alexander Gerschenkron
Alexander Gerschenkron
Alexander Gerschenkron was a Russian-born American Jewish economic historian and professor in Harvard, trained in the Austrian School of economics.Gerschenkron kept to his roots - in his economics, history and as a critic of Russian literature...

. The model postulates that the more backward an economy is at the outset of economic development, the more likely certain conditions are to occur.

The more backward the economy:
  • The more likely intervention by special institutions will be necessary to properly channel physical capital
    Physical capital
    In economics, physical capital or just 'capital' refers to any already-manufactured asset that is applied in production, such as machinery, buildings, or vehicles. In economic theory, physical capital is one of the three primary factors of production, also known as inputs in the production function...

     and human capital
    Human capital
    Human capitalis the stock of competencies, knowledge and personality attributes embodied in the ability to perform labor so as to produce economic value. It is the attributes gained by a worker through education and experience...

     to industries. Special institutions include banks, as in the moderately-backward Germany
    Germany
    Germany , officially the Federal Republic of Germany , is a federal parliamentary republic in Europe. The country consists of 16 states while the capital and largest city is Berlin. Germany covers an area of 357,021 km2 and has a largely temperate seasonal climate...

    , or the state, as in the severely-backward Russia
    Russia
    Russia or , officially known as both Russia and the Russian Federation , is a country in northern Eurasia. It is a federal semi-presidential republic, comprising 83 federal subjects...

    .

  • The greater the emphasis on the production of producer goods than consumer goods.

  • The greater the emphasis on capital-intensive production rather than labor-intensive production.

  • The greater the scale of production and enterprise.

  • The greater the reliance on borrowed rather than indigenous technologies.

  • The smaller the role of the agricultural sector as a market for new industries.

  • The greater the reliance on productivity growth.


Gerschenkron adamantly refused to define how backwardness could be measured, but alluded to its existence along a northwest-to-southeast axis in Europe
Europe
Europe is, by convention, one of the world's seven continents. Comprising the westernmost peninsula of Eurasia, Europe is generally 'divided' from Asia to its east by the watershed divides of the Ural and Caucasus Mountains, the Ural River, the Caspian and Black Seas, and the waterways connecting...

 during its history, with the United Kingdom
United Kingdom
The United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...

 at one extreme, being the least backward country at the outset of its economic development, and the Balkan countries and Russia
Russia
Russia or , officially known as both Russia and the Russian Federation , is a country in northern Eurasia. It is a federal semi-presidential republic, comprising 83 federal subjects...

 at the other extreme, being the most backward country at the outset of its economic development, and Germany
Germany
Germany , officially the Federal Republic of Germany , is a federal parliamentary republic in Europe. The country consists of 16 states while the capital and largest city is Berlin. Germany covers an area of 357,021 km2 and has a largely temperate seasonal climate...

 lying somewhere between the two.

Thorstein Veblen
Thorstein Veblen
Thorstein Bunde Veblen, born Torsten Bunde Veblen was an American economist and sociologist, and a leader of the so-called institutional economics movement...

's 1915 Imperial Germany and the Industrial Revolution is an extended essay comparing the United Kingdom
United Kingdom
The United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...

 and Germany
Germany
Germany , officially the Federal Republic of Germany , is a federal parliamentary republic in Europe. The country consists of 16 states while the capital and largest city is Berlin. Germany covers an area of 357,021 km2 and has a largely temperate seasonal climate...

, and concluding that the slowing of growth in Britain, and the rapid advances in the latter, were due to the "penalty of taking the lead." British industry worked out, in a context of small competing firms, the best ways to produce efficiently. Germany's backwardness gave it an advantage in that the best practice could be adopted in large scale firms.

The backwardness model is often contrasted with the Rostovian take-off model
Rostovian take-off model
The Rostow's Stages of Growth model is one of the major historical models of economic growth. It was developed by W. W. Rostow...

 developed by W.W. Rostow, which presents a more linear and structuralist model of economic growth, planning it out in defined stages. The two models are not mutually exclusive, however, and many countries appear to follow both models rather adequately.
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