Linkages

Linkages are the structural connections between economic activities that Hirschman identified in The Strategy of Economic Development (1958) as the primary mechanism through which development propagates. A backward linkage exists when an industry's demand for inputs creates incentives to develop supplying industries. A forward linkage exists when an industry's output creates incentives to develop industries that consume that output. Hirschman's contention was that development is best driven by projects with strong linkages — projects whose creation of demand for inputs or outputs induces the development of complementary industries. Against the balanced-growth orthodoxy of his time, he argued for unbalanced growth: the deliberate creation of disequilibria that would produce their own corrective responses through the linkage mechanism. The framework has surprising applicability to the AI transition, whose linkages are reshaping entire economic sectors in ways that balanced-growth thinking cannot capture.