Economic growth provides benefits and advantages. It has a positive impact on nearby areas if jobs, population and wealth extend to those communities. Alternatively, it could have an adverse effect on nearby areas if growth in the core region attracts large numbers of people to undertake economic activities, as they move away from their home regions. Spread refers to a situation where the positive impact on the immediate locality and the labor market outweighs the negative impact. Backwash occurs when adverse effects predominate and the level of economic activity in the periphery community declines. That is the definition of the backwash effect.
Backwash Effect based on Experts
The idea of backwash originated from international trade theory in a book by Gunner Myrdal (1957). Myrdal notes that increasing exports from a region can stimulate the flow of capital and labor into the region to the detriment of the region from which the resource originates. Thomas Vietorisz and Bennett Harrison (1973) then proposed that feedback dispersion and backwash between labor markets contribute to differences in technology levels, labor productivity, and wages in these markets. Gary Gaile (1980) used the concept of backwash to describe the potential negative effects of urban growth on suburban areas.
New interest in the backwash effect was stimulated by the “new economic growth theory. Among these:
Enhanced role for innovative activities and increasing returns to scale in economic development
Increasing the competitive advantage of larger urban areas as locations for economic activity
This growth in urban (core) areas can lead to a decrease in rural population (peripheral) and employment (backwash effect) if the flow of rural people to cities weakens the rural economy. Five types of flow contribute to backwash:
This growth in urban (core) areas can lead to a decrease in rural population (peripheral) and employment (backwash effect) if the flow of rural people to cities weakens the rural economy. Five types of flow contribute to backwash:
Rural funds are invested in urban areas to take advantage of entrepreneurial activity and relatively fast-growing markets for goods and services.
Spending in rural trade and services markets decreased due to increased competition from urban businesses.
Rural residents are moving to developing urban areas to improve access to jobs and urban facilities.
Rural companies in the innovative stages of their life cycles are moving to urban areas to benefit from proximity to specialized services, skilled labor, and growing markets.
And finally, political influence and government spending can shift to faster-growing core areas.
The policy implication of backwash is that areas far from urban growth centers are likely to be affected by regional economic development policies that focus on innovation and entrepreneurship development in urban areas. So my suggestion is that these remote areas need to develop economic development programs that emphasize competitive advantages specifically for their own economies, so that there is no backwash.
In a broad sense, the backwash effect is the negative impact of the growth of the core area on the surrounding area, which tends to be worse.
An example of the backwash effect that exists in Indonesia is the existence of factories in Cikarang, for example, factories in the area take a lot of workers from areas outside Cikarang for various reasons such as dedication and work ethic that is different from the human resources around the factory. or around the Cikarang area. So this creates a detrimental effect for local residents because it is difficult to find jobs, even though there are many factories in their area. Another effect that arises with the number of unemployed will affect the economic conditions of the indigenous people of the area around the factory.
The adverse rural-to-urban flows coincided with the spillover of people, jobs, and funds from the growing core to the periphery (spreading effect). The size and geographic extent of the favorable and unfavorable forces in rural areas depend on the characteristics of the rural and urban areas and the nature of the rural-urban relationship. In general, beneficial forces are stronger for rural areas near the urban core, while adverse flows dominate in areas that are more periphery to growing urban areas. Thus, backwashing is more likely to occur in rural areas outside the zone of rural to urban routes.
The policy implication of backwash is that areas far from urban growth centers are likely to be affected by regional economic development policies that focus on innovation and entrepreneurship development in urban areas. These remote areas need to develop economic development programs that emphasize specific competitive advantages for their economies.
Gary Gaile (1980) only explains the backwash effect from the negative side, the potential negative effect of urban growth and the surrounding area.
Thomas Vietorisz and Bennet Harrison (1979) explain how this backwash effect is responsible for the spread of the labor market, which will result in a chain effect to a more diversified technology area, a more productive workforce with high skills so that it eventually touches on rising wages.
A new branch of science called The New Economic Growth Theory, explains that there are at least 5 types of displacement that contribute to the backwash effect.
1. Financial Sector. Money from the periphery moves to urban areas to be invested and profit from entrepreneurial activity and the growing demand for goods and services.
2. Population Sector. People move to urban areas to gain access to better jobs and higher wages.
3. Corporate Sector. Companies are moving to urban areas with the aim of finding a more skilled workforce, growing their business and achieving higher profit margins.
4. Political Sector. The political situation will be hotter, ruling in urban areas will improve self-image more than in the periphery.
5. Government Sector. To support services to the community, the government will create service offices in urban areas so that they are more easily accessible from all corners of place
Investments also tend to find their way into core areas as in the case of Mezzogioro in Southern Italy losing labour, investment and development to developed Northern Italy. Industry in the South is missing from Industry in the North in high-tech goods and information.
The same theory can be applied on a much larger scale between MEDCs and LEDCs where money tends to find its way back to western banks from LEDCs either through corruption or payment oh debt with interest. It is this debt that is holding back many LEDCs from further development.
