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 20
THE ROLE OF MANUFACTURING INDUSTRY
It is generally agreed that modern industry is an essential ingredient in the development of the standard of living of a country. But there is less agreement as to whether it is a cause or an effect: whether an underdeveloped economy develops because modern industry is introduced or whether industrial development follows from general social and economic development. However, what is certain is that the two are linked together in some way. The experience in the last two decades of technical assistance and aid programmes designed to inject modern industry into underdeveloped countries suggests that it may be safer to treat industrial development as an effect rather than as a cause of general development.
This will mean devoting more effort to preinvestment checks to ensure that a specific line of industrial development or a particular new factory matches the existing state of the economy and society and their projected growth. A scheme of industrial development which is viable in one country will not necessarily be appropriate in another country at a different level of industrialisation.
A country in an early stage of development relies on primary production - agriculture, forestry, fisheries and mining - as its largest source of wealth - usually about one-third to one-half of its national income - and an even larger proportion of its work force is engaged in this sector, much of which very often is mere "subsistence farming". At this stage, manufacturing industry accounts for only a small proportion of the national income - one-tenth to one-seventh. Thus a large percentage rise in manufacturing output produces only a small rise in overall national income, whereas a small percentage improvement in agricultural output will produce the same overall rise.
For instance, if agriculture supplies half the national product and is increasing by 10% a year, the GDP will rise by 5% a year, other sector outputs being unchanged. However, if manufactures supply one-tenth of the national income, a rise of 50% a year in manufactures will be needed to produce a 5% a year rise in GDP, other sectors being unchanged. This example, of course, presents an over-simplified picture since one sector of the economy cannot grow without others growing too.
There is a common but fallacious belief that if a country increases the output of its manufacturing sector, with corresponding increases in transportation, communications and other services upon which industry relies, then the output of the agricultural sector can (or will) fall. This is only true in relative terms: the proportional contribution of agriculture to the economy will undoubtedly fall but, since this smaller proportion is measured against a much larger national total, the absolute output of agriculture must rise. This can be seen readily from a glance at Graphs 1 to 3. Historically, the almost universal starting point for industrial development can be identified with a rapid development in agriculture, usually a specialisation arising from some particularly favourable circumstance. There is no reason to suppose that agriculture has yet lost its key role in economic development.
From the selfish point of view of the industrialist, a predominant primary products sector, of which agriculture usually forms a large part, has to be relied on to provide him with two essentials: (a) customers for industrial products; (b) work people for new industries. Agriculture can only do these things be means of increased productivity of labour, leading to (a) increased total earnings in agriculture which alone can provide extra purchasing power in nearly one-half of the population for manufactured goods and services; (b) increased total agricultural output from a smaller work force, which releases people for redeployment in manufacturing and other activities.
The dual role of industry is then: (a) to provide the goods and services which the agricultural population (as the majority group in the country), as well as town dwellers, will want to buy; (b) to train and employ the workers released from the land by the advance of agricultural productivity.
This suggests that the dual key to the rapid economic development of a country as a whole comprises: (a) rapid increase of productivity in agriculture; (b) rapid increase in the numbers employed in industry.
The fact that modern industry is an essential ingredient of rapid economic development has led very often to two unwarranted assumptions:
Action based on these two ideas alone can lead to unbalanced development; to the neglect of agriculture; to insufficient social development; and ultimately to massive unemployment or underemployment. In a number of countries where "modern" factories, e.g. petroleum refineries, have been established on a large scale in the last twenty years, it is now observable that this has had little impact on the standard of living of the mass of the population.
In a country below a level of development at which the output of primary production greatly exceeds the output of manufacturing industries, it will be found that there is a minimum rate of growth of the economy as a whole below which it is impossible, however must investment is made in them, for industry and the services to absorb all the labour released from the land by development of agricultural productivity and output, unless productivity of labour and average earnings are actually reduced in the industrial and service sectors. This minimum growth rate can be estimated by the methods demonstrated later.
Dr E F Schumacher set out some of the problems of developing countries in an article published in the ‘Observer Weekend Review’ on August 29th 1965:
These are effects of the "drift from the land". Unfortunately there is little evidence in many countries that this drift is a result of the very necessary reduction of the agricultural work force as productivity in agriculture rises. Agricultural production is not in general keeping pace with population increases; a reduced agricultural work force leads to lower output at the same productivity level, rather than an increase in productivity producing rural unemployment. It appears that the agricultural work force is tending to leave the land for the towns in anticipation of achieving a higher standard of living, not because of it. And since the agricultural work force is a large proportion of the total in countries at an early stage of development, stagnation in its productivity and standard of living prevents any notable rise in GDP.
"... Western technology has been devised primarily for the purpose of saving labour; it could hardly be appropriate for districts or regions troubled with a large labour surplus. Technology in Western countries has grown up over several generations along with a vast array of supporting services, like modern transport, accountancy, marketing and so forth: it could hardly be appropriate for districts or regions lacking these paraphernalia."
"This technology therefore "fits" only into those sectors which are already fairly modernised, and that means - some special cases apart - the metropolitan areas, comprising, say, 15 to 20% of the whole population."
"What then, is to become of the other 80 to 85%? Simply to assume that the "modern" sectors or localities will grow until they account for the whole is utterly unrealistic, because 80% cannot simply "hold their breath" and wait; they will migrate in their millions and thereby create chaos even in the "modern" sectors."
"The task is to establish a tolerable basis of existence for the 80% by means of an "intermediate technology" which would be vastly superior in productivity to their traditional technology (in its present state of decay) while at the same time being vastly cheaper and simpler than the highly sophisticated and enormously capital-intensive technology of the West ..."
"... But the question of what level technology in fact produces the most favourable ratio is not a question of economic theory but of applied engineering. Dogmatic pronouncements on this point are worthless; let us have design studies, and we shall see."
"... Labour-intensive methods of production may or may not produce goods at competitive prices; there are no laws of nature or man to decide the question in the abstract."
"In this matter an ounce of practice is worth a ton of theory. What is wanted is nothing more nor less than a series of humble design studies. Let us see what can be done by relatively simple means, with mainly local materials, local labour, and low-cost capital equipment - equipment which would be simple enough to be made locally."
"... The lack of entrepreneurial ability, which the central planners in developing countries so frequently deplore, is itself largely the result of their present fixation on the naive idea that what is best for the rich much also be best for the poor. Most of the ambitious planning currently undertaken leave ‘the people’ helpless and disheartened; it does not ‘fit’ into their way of life and remains outside their power of self-help."
This is a direct challenge to the industrial engineer aiming to introduce industry into non-industrial areas. He must be prepared to expand his analytical routines, even for a single factory, to include factors which in a fully industrial background can be either taken for granted or ignored: