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Myrdal’s Cumulative Causation Model
Myrdal in 1956 argued that regional differences are the natural outcome of economic development and the inevitable result of market forces. No one region can prosper, he said, without adversely affecting the prosperity of another. Economic growth takes place initially where there are such natural advantages as a source of fuel or a supply of raw materials.
Once in existence, this region of economic development sets in motion the process of cumulative causation. In effect, centripetal forces begin to operate whereby capital and labor are attracted into the expanding area, which further stimulates its prosperity at the expense of the surrounding regions.
At the same time, by the multiplier effect, growing industries produce other, secondary industries, which are dependent on the original ones, together with improved transport facilities and social services. This chain reaction produces self-sustaining economic growth.
Myrdal called the movement of wealth from the poorer regions to the central rich region the backwash effect. It takes place because of the better facilities and opportunities offered by the growing region. To aggravate the differences further, a rich area may flood the markets of the poorer areas with cheap products, thereby preventing the latter from developing their own industries. The result is an industrially expanding region on the one hand, and stagnating, or even declining regions, on the other.
Eventually, the increased wealth in the initially developed area would percolate downwards to the less developed areas. This, Myrdal christened as the spread effect or ‘trickle down from the core’. An expanding economy may increase the demand for the raw materials and agricultural products derived from poorer regions, and will create surplus capital, which can be invested in newly developing areas.
Advanced technology might also be diffused over an ever-wider area. In these ways, the economies of the poor regions may be stimulated and the process of cumulative causation, thereby triggered off in those parts.
There are, therefore, three stages of regional differentiation: a preindustrial stage, where there are few regional inequalities; a second stage when one region is advancing faster than other regions and hence, the imbalance of wealth is at its greatest; and a third stage, when the spread effect begins to reduce spatial differences.
