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The Big Push model argues that coordinated large-scale investment across many sectors simultaneously is necessary to overcome poverty traps. Individual sectoral investment fails because workers earning subsistence wages cannot afford output; simultaneous investment across sectors creates reciprocal demand. This coordination failure justifies industrial policy and large-scale coordinated development initiatives.
From your study of poverty traps, you understand how an economy can be stuck in a low-level equilibrium where low income causes low savings, which causes low investment, which perpetuates low income. The Big Push model, developed by Paul Rosenstein-Rodan in 1943, asks a specific question: why can't a single entrepreneur or a single industry break this cycle on its own? The answer is a coordination failure — profitability in one sector depends on investment happening simultaneously in many other sectors.
Imagine a country where most people are subsistence farmers. A shoe factory opens and hires workers at wages above subsistence. These workers now have disposable income and want to buy things — but there is nothing to buy because no other modern firms exist yet. The shoe factory, meanwhile, cannot sell enough shoes because the rest of the population still earns subsistence wages and cannot afford them. The factory fails, not because shoe-making is inherently unprofitable, but because it invested alone. Now imagine that a shoe factory, a textile mill, a food-processing plant, and a bicycle manufacturer all open simultaneously. Each factory's workers become customers for the other factories. The coordination creates its own demand — a self-reinforcing cycle that lifts the economy out of the trap.
This is the heart of the Big Push argument: individual investments are unprofitable, but the same investments made simultaneously are profitable because they generate reciprocal demand. The production function you studied in microeconomics helps formalize this — modern industrial technology exhibits increasing returns to scale, meaning average costs fall as output rises. But achieving that scale requires a market large enough to absorb the output, and that market only exists if other sectors are also industrializing. No single firm can capture the benefits of economy-wide demand expansion, so the market alone will not coordinate the jump.
The policy implication is direct: if the problem is coordination, the solution is a coordinating agent. Rosenstein-Rodan argued for large-scale, government-directed or internationally funded investment programs that push many sectors past their minimum efficient scale at once. Critics note that the model assumes governments can identify the right sectors, manage large investments without corruption, and that demand complementarities are strong enough to justify the costs — assumptions that have proven difficult in practice. Nevertheless, the Big Push remains foundational because it crystallized why development is not simply a matter of accumulating capital one project at a time, but a problem of strategic complementarity that markets alone may not solve.