ENGINEERING FOR DEVELOPMENT

(First Draft)

E J Jefferies

March 1969

CONTENTS

PART 1 THE WORLD DEVELOPMENT PROGRAMME

Chapter 1 Introduction
Chapter 2 Closing the Gap
Chapter 3 Resistance to Change
Chapter 4 International Technical Assistance

PART II AN ENGINEERING APPROACH TO A PLAN FOR A COUNTRY

Chapter 5 Outline of the Approach
Chapter 6 Setting the Problem
Chapter 7 Basic, Concepts, Terms and Definitions
Chapter 8 Background Data Available
Chapter 9 The Starting Point for a Case Study
Chapter 10 Preliminary Calculations
Chapter 11 Patterns of Economic Growth
Chapter 12 Development Plan for Year 1
Chapter 13 Development Plan for Year 2
Chapter 14 Development Plan for Year 3
Chapter 15 Review of Changes During the Three Years
Chapter 16 The Control of Development
Chapter 17 Financing the Development

PART III THE IMPLICATIONS OF RAPID GROWTH

Chapter 18 Economic Growth and Technological Changes in Rural Communities
Chapter 19 The Influence of Agriculture on Industrial Development
Chapter 20 The Role of Manufacturing Industry
Chapter 21 The Contribution of Industrial Engineering to a Solution

PART IV DESIGNING FOR BALANCE IN DEVELOPMENT

Chapter 22 The Prediction of New Manufacturing Capacity Requirements by Product Group
Chapter 23 The Productivity of Labour
Chapter 24 The Growth of Productivity
Chapter 25 The Calculation of Appropriate Levels of Productivity in New Plants

CHAPTER 15

REVIEW OF CHANGES DURING THE THREE YEARS

7.1 The main changes in economic parameters during the three years can now be listed as in Table 29.

TABLE 29 National Accounts, YEARS 0-3

Highlights in Table 29 are:

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• Firstly: that the contribution of Agriculture to GDP has fallen from 30.8% to 21.2%.
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• Secondly: that the contribution of Manufacturing to GDP has risen from 15.2% to 19.6%, i.e. is now very nearly equal to that of Agriculture. This can be interpreted as showing that the country has now nearly but not quite reached the point at which it changes over from an Agriculture-based economy to an Industry-based economy.
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• Thirdly: that trade in intermediates has increased rapidly, from 7.5% of final consumption to 20%, which confirms the approach to "industrial" status of the economy.
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• Fourthly: that Services, Trade and Government together still form the most important sector at 35 to 36% of GDP.
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• Fifthly: that the increase in exports (mainly of agricultural products and derivatives including the value added generated by them in other sectors) by a factor of 1.7 is only slightly less than the increase by a factor of 1.9 in final consumption. The proportionate dependence upon exports and imports is not greatly reduced and in absolute terms the development of export markets is as important as the development of internal markets.
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• Sixthly: that formation and consumption of capital runs at a very high rate.

7.2 The main changes in socio-economic parameters can be estimated as in Table 30.

TABLE 30 Socio-Economic Change: YEARS 0-3

7.3 The highlights among the changes shown by Table 30 are:

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• Firstly: the rapid increase in the average consumption both in value and volume of goods and services other than farm produce, i.e. other than the basic food required for subsistence. This increase by a factor only just less than two is a measure of the rate of increase of the general standard of living of the people in line with the overall rate of growth of the economy. However, nothing is indicated here about the distribution of consumption among the different classes of the population, this being left to government policy to determine.
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• Secondly: the increase in total employment and the very substantial changes in the patterns of employment and earnings. The ratio of agricultural workers to non-agricultural workers has changed from 1.08 to 0.64 and the equivalent of 297,000 new jobs (full-time basis) has been created in sectors other than agriculture, an 82% increase. The new jobs are allocated by sector as follows:

They are to be manned by people originating very approximately as follows:

The essential movements in the above are: firstly to withdraw adults from active engagement in agriculture, otherwise productivity in agriculture cannot be forced to increase; and secondly to absorb enough rural adolescents reaching working age into non-agricultural work, otherwise they will dilute productivity in Agriculture. (In the table it has been assumed that half the rural adolescents reaching working age will go to work on the land, in order to provide new blood; the number of existing adult farm workers withdrawn has been increased to match.) The 137,000 formerly "unemployed" are absorbed from a pool of about 500,000 who were previously unemployed or underemployed. The figures given above will be used later as a basis for estimates of the kind and amount of rapid training and retraining which will be needed. The magnitude of the movement of adults into non-agricultural occupations - about 192,000 or some 20% of the total employed, indicates the vital need to organise occupational mobility.

7.4 There are no irreconcilable anomalies and inconsistencies in the performance figures for the three years of growth, so we are justified in concluding that a 26% per annum growth rate can be obtained at least by one route, namely:

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• An increase in productivity and earnings in Agriculture with a reduction in the labour force.
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• An increase in output in all other sectors by increased employment with restricted increases in average earnings of individuals and very small increases in prices.

The conditions which will allow this route to be followed are:

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• The allowance of large returns on new productive investment of capital.
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• Control of earnings.
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• The channeling of new investment into existing activities and into new projects which will rapidly become productive and which call for low levels of investment per job created; and into products and services for which demands already exist.

There is no indication that the following will be needed:

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• An adverse balance of foreign trade.
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• A massive injection of foreign capital.
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• A sudden and large increase in the level of industrial technology.

This route is obviously very different from the commonly accepted routes of slow economic development and will involve the formulation of unusual design criteria for new activities of all kinds and the establishment of a rapid acting system of feedback of information on actual performances.

7.5 We can discern the general directions in which development efforts and controls will have to be applied:

Agriculture

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• Measures to increase yields per unit area of land; and per unit of labour.
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• Measures to reduce losses in harvesting and storage (losses of both quantity and quality).
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• The coordination of requirements for extra industrial raw materials from Agriculture with planting programmes. (In this area, quality requirements will be at least as important as quantities.)
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• No measures to increase areas under cultivation which would involve cash expenditure.
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• No measures to increase the agricultural labour force.

Manufacturing, Transport, Storage, Communications, Mining and Service Industries

(That is, all those activities which are based on the use of machines and equipment.)

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• Increase utilisation of existing installed equipment: by extending hours of operation to two- and three-shift working; by reconditioning defective equipment; by the reduction of lost output arising from band workmanship, incorrect raw materials and losses after production.
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• Increased output from existing activities by minor extensions to equipment.
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• The production of extra good and services by establishing new activities with emphasis on design for: short gestation times; low investment per employee; rapid obsolescence; low content of imported raw materials; products and services suitable in type, quality and price for the markets foreseen during the obsolescence period only, ignoring long-term trends.

Trade

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• Increased rate of turnover of stocks, e.g. by disposal of surpluses at reduced profit margins; sales promotion measures; improved salesmanship; and market research.
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• Feedback of market information to producers.
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• Improvement of commercial methods between Trade and producers.
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• Increased specialisation in both wholesale and retail trade and the development of purchasing from manufacturers by contract in advance of production.

Banking

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• Increase in the rate of circulation of money.
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• General expansion and acceleration of banking services and the supply of money and credit.
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• The mobilisation of capital.
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• Expansion of savings associations.
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• The development of a stock market.

Education and the Dissemination of Information

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• Promotion of the understanding and acceptance of change.
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• Concentration on adult literacy; the formation of discussion groups; professional, industrial and trade associations.
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• Development of education and information via radio, television and the cinema.
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• Crash programmes of technical training.

Government

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• Improvement and simplification of public administration, especially in regard to speed of action in offices dealing with the general public.
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• Design of short-term legislation to channel and accelerate development in the required directions, especially regarding taxation; subsidies; import, production and investment controls and licensing.
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• Design of long-term legislation for the safety and health of workers; the protection of consumers and investors; land use allocation and control; housing and urban development etc.
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• Development of public relations and public information services; technical assistance services.
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• The establishment and dissemination of criteria for the planning and design of all new investment; and the establishment of a system for the collection and analysis of results from all sectors as a basis for rapid modification of these criteria and of the short-term development legislation.

7.6 The strategy for YEAR 1 includes two major provisions which are "once-for-all" actions and cannot be repeated in YEAR 2. These are:

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• The exploitation of unused installed capacity in all sectors.
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• The suppression of increased individual earnings in all sectors except Agriculture.

The first of these obviously cannot be repeated if it is successful in YEAR 1. The second may be politically acceptable for the first year since popular action takes time to develop, but it will certainly not be possible, nor even desirable, in YEAR 2 and subsequently, in a rapidly rising level of the economy as a whole.

7.7 Thus YEARS 2 and 3 will require a quite different strategy from YEAR 1 and this will condition to some extent the type of incentives and controls to be set up for YEAR 1. Complete discontinuity in these will not be possible since some of the investment decisions taken in YEARS 0 and 1 must be appropriate to the strategy of YEARS 2 and 3.

Initiation of Change

7.8 We have outlined a possible economic development course which can remain in balance while we double the level of economic activity in three years. The major social changes implicit in this are:

7.8.1 A large increase in productivity of labour in Agriculture and a smaller reduction in its work force, which together produce the needed increase in agricultural production. This implies the injection of new ideas, techniques and skills into 366,000 agricultural workers (nearly half the original working population) and is a major exercise in education and training.

7.8.2 The acceptance by 297,000 extra people of full-time regular industrial type employment. These people will have come from the original pool of under or unemployed, together with 24,000 ex-agricultural workers, none of whom is accustomed to regular work hours and factory disciplines. This also is a major exercise in education and training but is different in kind from the previous one.

7.8.3 The development of a large force of men skilled in business methods as entrepreneurs, managers, salesmen and accountants. If we assume an average of one businessman to each fifty employees, them we need 6,000 additional businessmen to control new activities. This is a third exercise in education and training, which again is different in kind from the previous two.

All of these three education and training programmes need to start extensively and to change after a few years to more intensive programmes involving smaller numbers of individuals.

7.9 It should be noted that no assumption has been made regarding the ownership of productive resources. This may take the form of state ownership; undertakings of all sizes owned and effectively managed by individuals; or public companies relying on capital from large numbers of shareholders and managed by salaried professional businessmen. In all cases the businessman/manager is essential to the operation and is the source of most of the innovation or at least is the channel through which it is implemented.

7.10 On the technological side, nothing new needs to be discovered or invented; this is to say, everything that is needed in the technologies of production, distribution, marketing and management is available within the accumulated world store of knowledge. However, a considerable effort will be needed in making known what is available, in selecting what will be appropriate in the specific conditions obtaining in the country, and in adaptation, especially to the high rates of change generated.

7.11 Some of these rates of change can usefully be highlighted here:

Control of Rate and Balance of Change

7.12 One point to note about these planned rates of increase is that not only must they be attained, but, equally important in some cases, that they must not individually be overshot, otherwise the equilibrium of the overall growth will be upset and will become unattainable. For instance, if the amount of capital in use per worker rises too fast, physical production will run ahead of consumption and the increase in net output will be reduced by falling prices. Or, if the total of earnings grows too fast, either by excessive wage rates or excessive numbers employed, demand will run ahead of supply and inflation will set in.