Situations that countries are in at any one point in time reflect their previous investment decisions and development.
Supporters of the unbalanced growth doctrine include Albert O. Hirschman, Hans Singer, Paul Streeten, Marcus Fleming, Prof. Rostov and J. Sheehan.
Underdeveloped countries display common characteristics: low levels of GNI per capita and slow GNI per capita growth, large income inequalities and widespread poverty, low levels of productivity, great dependence on agriculture, a backward industrial structure, a high proportion of consumption and low savings, high rates of population growth and dependency burdens, high unemployment and underemployment, technological backwardness.
With a lack of investors and entrepreneurs, cash flows cannot be directed into various sectors that influence balanced economic growth.
Balanced growth should not be the goal but rather the maintenance of existing imbalances, which can be seen from profit and losses.
One sector will always grow faster than another, so the need for unbalanced growth will continue as investments must complement existing imbalance.
Hirschman states “If the economy is to be kept moving ahead, the task of development policy is to maintain tensions, disproportions and disequilibrium”.
This is the case for such public services such as law and order, education, water and electricity that cannot reasonably be imported.
Sometimes the project undertaken creates external economies, causing private profit to fall short of what is socially desirable.
[citation needed] Social Overhead Capital (SOC) is defined as basic services without which primary, secondary and tertiary productive activities cannot function.
In the second case, SOC expands, which reduces the cost of services, inducing investment in DPA.
[clarification needed] The cost of producing any unit of output of DPA is inversely proportional to SOC.
[clarification needed] The economy's major objective is to attain increasing output of DPA.
Balanced growth of DPA and SOC is not achievable in underdeveloped countries, nor it is not a desirable policy, as it does not set up the incentives and the pressure that make for this dividend of induced investment decisions.
Any industry that has a high capital/output ratio and causes significant costs to other businesses has the potential to hurt the developing economy more than it helps it.
Such industries have many advantages, as they often require the smaller amounts of capital available in such economies and without having to rely on unreliable domestic producers.
Industrialists who have begun working with imports may not accept domestic alternative products that reduce demand for their output.
Last/first may accustom domestic consumers to imported goods, making it harder for local producers to find customers.