Economic growth if not checked by appropriate measures has the tendency to limit itself to its original centres or regions. When a region becomes developed, it tends to make other areas appear backward and unpromising. Private enterprise easily overestimates the external economies accruing to these growing centres. They may have scavenged the opportunities that exist in the centres but are reluctant to venture out of the area to investigate possibilities elsewhere. Government policy tends to be influenced by this impressive picture of growth poles. Thus it is that in all developing countries the bulk of public investment in new plants and projects goes to centres that have already 'taken off'. Like private operators, the majority of governments in developing countries are either too timid or find it too difficult to break away from the growing centres to establish new basic industries in underdeveloped regions.
At some stage in the development of an industrial complex, maximum economies of scale are achieved and further expansion may result in 'dis-economies' which offset or more than offset the economies. There is, for example, the constant competition between various industries which increases the price of materials and other factors of production such as skilled labour, land, capital and transportation. There may be militant labour unions whose activities affect wages and attitudes towards labour. Strikes may be frequent and widespread. When the provision of services and amenities increases in cost, taxes are raised to pay for them. Costs rise as a result of congestion and the strain on existing services such as transportation, water supply and waste disposal. Rural population, attracted by employment opportunities in growing centres, migrate to these centres in quest of jobs ranging from work in trades, administration and services, to labouring jobs such as digging, carrying, loading and cleaning. The urban-industrial complexes are usually ill-prepared to receive the 'in-migrants'. The preparation of building sites, the provision of roads and services and the construction of houses cannot keep pace with the influx. Without money or possessions and willing to live at a lower standard than other residents, the newcomers crowd in with friends who have arrived earlier, become squatters and create shanty towns; in extreme cases some band together into gangs and go foraging.
The negative aspects of economic concentrations are not only localized within the concentrations themselves, but at the national level they have produced one of the most urgent problems facing the large developing countries, namely the problem of regional inequality and stranded or neglected areas. Undue emphasis has often been laid on the development of the privileged areas. Consequently, other regions, some of them very promising growth poles, may be left relatively inaccessible and virtually neglected.
Governments in developing countries are faced with serious locational maladjustments as a result of unguided population movement and an unprecedented development of urban areas. The growth of the 'primate city' has become an inevitable concomitant of economic development. With these cities have come the social and economic problems connected with excessive urban centralization and severe congestion of both population and industrial enterprises. While these urban-industrial centres exist and flourish in each country, a vast interior awaits settlement and development.
The processes by which urban concentrations grow in the early stages of development are the same in all developing countries. Many industrial processes are generally attracted to the same location and the process is cumulative. The initial attraction, for example, may have been the availability of raw material, or the presence of some source of energy, or such favourable nodal situations as a major port or a national administrative capital. Whatever the initial reason for the establishment of industrial enterprise, the very existence of industry often makes the location attractive to other industries. Some may want to use a by-product, previously wasted, and therefore available at a low cost. New industrial undertakings may also be established to furnish existing firms with various goods and services. As the nucleus grows it gradually becomes a centre of concentrated earning power and, hence, of purchasing power. It becomes an increasingly better market for the consumer goods industries, which will in turn be attracted to the already growing centre. Service industries will also grow with the expanding centre, as will the labour force, both in quantity and in the variety of its skills. This adds further to the attractiveness of the concentration for yet other processes.
Through such geographic concentration, opportunities for economizing in certain areas will increase. Just as a single industry can, up to a point, achieve internal economies as it expands its output and capacity, so can the mass of industries in a concentrated area as the industrial capacity of the area grows. As the nucleus grows, banking and insurance facilities become available, maintenance and repair services are established, journals are produced and a host of tertiary activities develop.
Enormous economic advantages can thus be derived from the concentration of economic activities within a few large centres. Consequently, the development of these concentrations is inevitable in the early stages of industrial development and their existence in developing countries is, to a large extent, justified.