Small Is Beautiful: A Study of Economics as if People Mattered (21 page)

Second, that these workplaces must be, on average, cheap enough so that they can be created in large numbers without this calling for an unattainable level of capital formation and imports.

Third, that the production methods employed must be relatively simple, so that the demands for high skills are minimised, not only in the production process itself but also in matters of organisation, raw material supply, financing, marketing, and so forth.

Fourth, that production should be mainly from local materials and mainly for local use. These four requirements-can be met only if there is a 'regional'

approach to development and, second, if there is a conscious effort to develop and apply what might be called an 'intermediate technology'. These two conditions will now be considered in turn.

The Regional or District Approach

A given political unit is not necessarily of the right size for economic development to benefit those whose need is the greatest. In some cases it may be too small, but in the generality of cases today it is too large. Take, for example, the case of India. It is a very large political unit, and it is no doubt desirable from many points of view that this unity should be maintained. But if development policy is concerned merely - or primarily -

with 'India-as-a- whole', the natural drift of things will concentrate development mainly in a few metropolitan areas, in the modern sector. Vast areas within the country, containing eighty per cent of the population or more, will benefit little and may indeed suffer. Hence the twin evils of mass unemployment and mass migration into the metropolitan areas. The result of

'development' is that a fortunate minority have their fortunes greatly increased, while those who really need help are left more helpless than ever before. If the purpose of development is to bring help to those who need it most, each 'region' or 'district' within the country needs its own development.

This is what is meant by a 'regional' approach.

A further illustration may be drawn from Italy, a relatively wealthy country. Southern Italy and Sicily do not develop merely as a result of successful economic growth in 'Italy-as-a-whole'. Italian industry is concentrated mainly in the north of the country, and its rapid growth does not diminish but on the contrary tends to intensify, the problem of the south.

Nothing succeeds like success and, equally, nothing fails like failure.

Competition from the north destroys production in the south and drains all talented and enterprising men out of it. Conscious efforts have to be made to counteract these tendencies, for if the population of any region within a country is by-passed by development it becomes actually worse off than before, is thrown into mass unemployment, and forced into mass migration.

The evidence of this truth can be found all over the world, even in the most highly developed countries.

In this matter it is not possible to give hard and fast definitions. Much depends on geography and local circumstances. A few thousand people, no doubt, would be too few to constitute a 'district' for economic development; but a few hundred thousand people, even if fairly widely scattered, may well deserve to be treated as such. The whole of Switzerland has less than six million inhabitants: yet it is divided into more than twenty 'cantons', each of which is a kind of development district, with the result that there is a fairly even spread of population and of industry and no tendency towards the formation of excessive concentrations.

Each 'district', ideally speaking, would have some sort of inner cohesion and identity and possess at least one town to serve as a district centre. There is need for a 'cultural structure' just as there is need for an '.economic structure'; thus, while every village would have a primary school, there would be a few small market towns with secondary schools, and the district centre would be big enough to carry an institution of higher learning. The bigger the country, the greater is the need for internal 'structure' and for a decentralised approach to development. If this need is neglected, there is no hope for the poor.

The Need for an Appropriate Technology

It is obvious that this 'regional' or 'district' approach has no chance of success unless it is based on the employment of a suit- able technology. The establishment of each workplace in modern industry costs a great deal of capital - something of the order of, say, Pounds 2,000 on average. A poor country, naturally, can never afford to establish more than a very limited number of such work- places within any given period of time. A 'modern'

workplace, moreover, can be really productive only within a modern environment, and for this reason alone is unlikely to ~t into a 'district'

consisting of rural areas and a few snail towns. In every 'developing country'

one can find industrial estates set up in rural areas, where high-grade modern equipment is standing idle most of the time because of a lack of organisation finance, raw material sup- plies, transport, marketing facilities, and the like.

There are then complaints and recriminations: but they do not alter the fact that a lot of scarce capital resources - normally imports paid from scarce foreign exchange - are virtually wasted.

The distinction between 'capital-intensive' and 'labour-intensive' industries is, of course, a familiar one in development theory. Although it has an undoubted validity, it does not really make contact with the essence of the problem; for it normally induces people to accept the technology of any given line of production as given and unalterable. If it is then argued that developing countries should give preference to 'labour-intensive' rather than

'capital-intensive' industries, no intelligent action can follow, be cause the choice of industry, in practice, will be determined by quite other, much more powerful criteria, such as raw material base, markets, entrepreneurial interest, etc. The choice of industry is one thing; but the choice of technology to be employed after the choice of industry has been made, is quite another. It is therefore better to speak directly of technology, and not cloud the discussion by choosing terms like 'capital intensity' or 'labour intensity' as one's point of departure. Much the same applies to another distinction frequently made in these discussions, that between 'large-scale'

and 'small-scale' industry. It is true that modern industry is often organised in very large units. but 'large- scale' is by no means one of its essential and universal features. Whether a given industrial activity is appropriate to the conditions of a developing district does not directly depend on 'scale', but on the technology employed. A small-scale enterprise with an average cost per workplace of Pounds 2,000 is just as inappropriate as a large-scale enterprise with equally costly workplaces.

I believe, therefore, that the best way to make contact with the essential problem is by speaking of technology: economic development in poverty stricken areas can be fruitful only on the basis of what I have called

'intermediate technology'. In the end, intermediate technology will be

'labour-intensive' and will lend itself to use in small-scale establishments.

But neither 'labour- intensity' nor 'small-scale' implies 'intermediate technology',

Definition of Intermediate Technology

If we define the level of technology in terms of 'equipment cost per workplace', we can call the indigenous technology of a typical developing country - symbolically speaking - a Pounds l -technology, while that of the developed countries could be called a Pounds 1,000- technology. The gap between these two technologies is so enormous that a transition from the one to the other is simply impossible. In fact, the current attempt of the developing countries to infiltrate the Pounds 1,000-technoIogy into their economies inevitably kills off the Pounds l-technology at an alarming rate, destroying traditional workplaces much faster than modern workplaces can be created, and thus leaves the poor in a more desperate and helpless position than ever before. If effective help is to be brought to those who need it most, a technology is required which would range in some intermediate position between the Pounds 1-technology and the Pounds 1,000-technology. Let us call it - again symbolically speaking - a Pounds 100-technology,

Such an intermediate technology would be immensely more productive than the indigenous technology (which is often in a condition of decay), but it would also be immensely cheaper than the sophisticated, highly capital-intensive technology of modern industry. At such a level of capitalisation, very large numbers of workplaces could be created within a fairly short time; and the creation of such workplaces would be 'within reach' for the more enterprising minority within the district, not only in financial terms but also in terms of their education, aptitude, organising skill, and so forth.

This last point may perhaps be elucidated as follows: The average annual income per worker and the average capital per workplace in the developed countries appear at present to stand in a relationship of roughly 1:1. This implies, in general terms, that it takes one man-year to create one workplace, or that a man would have to save one month's earnings a year for twelve years to be able to own a workplace. If the relationship were 1:10, it would require ten man-years to create one workplace, and a man would have to save a month's earnings a year for 120

years before he could make himself owner of a workplace. This, of course, is an impossibility, and it follows that the Pounds 1,000- technology transplanted into a district which is stuck on the level of a Pounds 1-technology simply cannot spread by any process of normal growth. It cannot have a positive 'demonstration effect'; on the contrary. as can be observed all over the world, its 'demonstration effect' is wholly negative. The people, to whom the Pounds 1,000- technology is inaccessible, simply 'give up' and often cease doing even those things which they had done previously.

The intermediate technology would also fit much more smoothly into the relatively unsophisticated environment in which it is to be utilised. The equipment would be fairly simple and therefore understandable, suitable for maintenance and repair on the spot. Simple equipment is normally far less dependent on raw materials of great purity or exact specifications and much more adaptable to market fluctuations than highly sophisticated equipment.

Men are more easily trained: supervision, control, and organisation are simpler; and there is far less vulnerability to un- foreseen difficulties.

Objections Raised and Discussed

Since the idea of intermediate technology was first put forward, a number of objections have been raised. The most immediate objections are psychological: 'You are trying to withhold the best and make us put up with something inferior and outdated.' This is the voice of those who are not in need. who can help themselves and want to be assisted in reaching a higher standard of living at once. It is not the voice of those with whom we are here concerned, the poverty-stricken multitudes who lack any real basis of existence, whether in rural or in urban areas, who have neither 'the best' nor

'the second best' but go short of even the most essential means of subsistence. One sometimes wonders how many 'development economists'

have any real comprehension of the condition of the poor.

There are economists and econometricians who believe that development policy can be derived from certain allegedly fixed ratios, such as the capital output ratio. Their argument runs as follows: The amount of available capital is given. Now, you may concentrate it on a small number of highly capitalised workplaces, or you may spread it thinly over a large number of cheap workplaces. If you do the latter, you obtain less total output than if you do the former: you therefore fail to achieve the quickest possible rate of economic growth. Dr Kaldor, for instance, claims that 'research has shown that the most modern machinery produces much more output per unit of capital invested than less sophisticated machinery which employs more people'. Not only capital' but also 'wages goods' are held to be a given quantity, and this quantity determines 'the limits on wages employment in any country at any given time'.

'If we can employ only a limited number of people in wage labour, then let us employ them in the most productive way, so that they make the biggest possible contribution to the national output, because that will also give the quickest rate of economic growth. You should not go deliberately out of your way to reduce productivity in order to reduce the amount of capital per worker. This seems to me nonsense because you may find that by increasing capital per worker tenfold you increase the output per worker twenty fold.

There is no question from every point of view of the superiority of the latest and more capitalistic technologies.'

The first thing that might be said about these arguments is that they are evidently static in character and fail to take account of the dynamics of development. To do justice to the real situation it is necessary to consider the reactions and capabilities of people, and not confine oneself to machinery or abstract concepts. As we have seen before, it is wrong to assume that the most sophisticated equipment, transplanted into an unsophisticated environment, will be regularly worked at full capacity, and if capacity utilisation is low, then the capital / output ratio is also low. It is therefore fallacious to treat capital / output ratios as technological facts, when they are so largely dependent on quite other factors.

The question must be asked, moreover, whether there is such a law, as Dr Kaldor asserts, that the capital/output ratio grows if capital is concentrated on fewer workplaces. No-one with the slightest industrial experience would ever claim to have noticed the existence of such a 'law', nor is there any foundation for it in any science. Mechanisation and automation are introduced to increase the productivity of labour, i.e. the worker/output ratio, and their effect on the capital/output ratio may just as well be negative as it may be positive. Countless examples can be quoted where advances in technology eliminate workplaces at the cost of an additional input of capital without affecting the volume of output. It is therefore quite untrue to assert that a given amount of capital invariably and necessarily produces the biggest total output when it is concentrated on the smallest number of workplaces.