Small Is Beautiful: A Study of Economics as if People Mattered (25 page)

there cannot possibly be enough leadership and enough communication of know-how to solve this problem of unemployment or unproductive employment in the half million villages of India. It is a matter of 500 million people. For helping people to help themselves you need at ]east two persons to look after 100 and that means an obligation to raise ten million helpers, that is, the whole educated population of India. Now you may say this is impossible, but if it is, it is not so because of any laws of the universe, but because of a certain inbred, ingrained selfishness on the part of the people who are quite prepared to receive and not prepared to give. As a matter of fact, there is evidence that this problem is not insoluble; but it can be solved only at the political level.

Now let me turn to the third factor, after motivation and after, know-how, the factor I have called capital, which is of course closely related to the matter of know-how. According to my estimates there is in India an immediate need for something like fifty million new jobs. If we agree that people cannot do productive work unless they have some capital - in the form of equipment and also of working capital - the question arises: how much capital can you afford to establish one new job? If it costs Pounds 10

to establish a job you need Pounds 500 million for fifty million jobs. If it costs Pounds 100 to establish a job you need Pounds 5,000 million, and if it cost Pounds 5,000 per job, which is what it might cost in Britain and the USA, to set up fifty million jobs you require Pounds 250,000 million.

The national income of the country we are talking about, of India, is about f15.000 million a year, So the first question is how much can we offer for each job, and the second question, how much time have we to do it in. Let us say we want fifty million jobs in ten years. What proportion of national income (which I identify as about Pounds 15,000 million) can one reasonably expect to be available for the establishment of this capital fund for job creation? I would say, without going into any details, you are lucky if you can make it five per cent. Therefore, if you have five per cent of Pounds 15,000 million for ten years you have a total of Pounds 7,5000

million for the establishment of jobs. If you want fifty million jobs in those ten years, you can afford to spend an average of Pounds 150 per workplace.

At that level of capital investment per workplace, in other words, you could afford to set up five million workplaces a year. Let us assume, however, that you say: 'No. Pounds 150 is too mean; it will not buy more than a set of tools; we want Pounds 1,500 per workplace', then you cannot have five million new jobs a year but only half a million. And if you say: 'Only the best is good enough; we want all to be little Americans right away, and that means Pounds 5,000 per workplace', then you cannot have half a million new jobs a year, let alone five million, but only about 170,000. Now, you have no doubt noticed already that I have simplified this matter very much because, in the ten years with investment in jobs, you would have an increase in the national income; but I have also left out the increase in the population, and I would suggest that these two factors cancel one another in their effect on my calculation.

It follows, I suggest, that the biggest single collective decision that any country in the position of India has to take is the choice of technology. I am not laying down the law of what ought to be. I am simply saying that these are the hard facts of life. A lot of things you can argue against, but you cannot argue against arithmetic. So you can have a few jobs at a high level of capitalisation or you can have many jobs at a relatively low level of capitalisation.

Now, all this of course links up with the other factors I have mentioned, with education, motivation, and know-how. In India there are about fifty million pupils in primary schools; almost fifteen million in secondary schools: and roughly one and a half million in institutions of higher learning.

To maintain an educational machine on this kind of scale would of course be pointless unless at the end of the pipeline there was something for them to do. with a chance to apply their knowledge. If there is not, the whole thing is nothing but a ghastly burden. This rough picture of the educational effort suffices to show that one really does have to think in terms of five million new jobs a year and not in terms of a few hundred thousand jobs.

Now, until quite recently, that is to say, some fifty to seventy years ago, the way we did things was, by present standards, quite primitive. In this connection, I should like to refer to Chapter II of John Kenneth Galbraith's
The New Industrial Estate
.' It contains a fascinating report on the Ford Motor Company. The Ford Motor Company was set up on 16 June 1903, with an authorised capital of $150,000 of which $100,000 were issued but only $28,500 were paid for in cash, So the total cash which went into this enterprise was of the order of $30,000. They set up in June 1903 and the first car to reach the market appeared in October 1903, that is to say, after four months. The employment in 1903, of course, was small - 125 people, and the capital investment per workplace was somewhat below $100. That was in 1903. If we now move sixty years forward, to 1963, we find that the Ford Motor Company decided to produce a new model, the Mustang. The preparation required three and a half years. Engineering and styling costs were $9 million: the costs of tooling up for this new model were $50 million.

Meanwhile the assets employed by the Company were $6.000 million which works out at almost Pounds l0,000 per person employed, about a hundred times as much as sixty years earlier.

Galbraith draws certain conclusions from all this which are worth studying. They describe what happened over these sixty years. The first is that a vastly increased span of time now separates the beginning of an enterprise from the completion of the job. The first Ford car, from the beginning of the work to its appearance on the market, took four months, while a mere change of model now takes four years. Second, a vast increase in capital committed to production. investment per unit of output in the original Ford factory was infinitesimal; material and parts were there only brie8y; no expensive specialists gave them attention; only elementary machines were used to assemble them into a car; it helped that the frame of the car could be lifted by only two men. Third, in those sixty years, a vast increase of inflexibility. Galbraith comments: 'Had Ford and his associates (in 1903) decided at any point to shift from gasoline to steam power, the machine shop could have accommodated itself to the change in a few hours.'

If they now try to change even one screw, it takes that many months. Fourth, increasingly specialised manpower, not only on the machinery, but also on the planning, the foreseeing of the future in the uttermost detail. Fifth, a vastly different type of organisation to integrate all these numerous specialists, none of whom can do anything more than just one small task inside the complicated whole. 'So complex, indeed. will be the job for organising specialists that there will be specialists of organisation. More even than machinery, massive and complex business organisations are being tangible manifestations of advanced technology.' Finally, the necessity for long-range planning, which. I can assure you, is a highly sophisticated job, and also highly frustrating. Galbraith comments: 'In the early days of Ford, the future was very near at hand. Only days elapsed between the commitment of machinery and materials to production and their appearance as a car. If the future is near at hand, it can be assumed to be very much like the present', and the planning and forecasting is not very difficult; Now what is the upshot of ah this? The upshot is that the more sophisticated the technology, the greater in general will be the foregoing requirements. When the simple things of life, which is all I am concerned with, are produced by ever more sophisticated processes, then the need to meet these six requirements moves ever more beyond the capacity of any poor society. As far as simple products are concerned - food, clothing, shelter and culture - the greatest danger is that people should automatically assume that only the 1963 model is relevant and not the 1903 model; because the 1963 way of doing things is inaccessible to the poor, as it presupposes great wealth. Now, without wishing to be rude to my academic friends, I should say that this point is almost universally overlooked by them. The question of how much you can afford for each workplace when you need millions of them is hardly ever raised. To fulfil the requirements that have arisen over the last fifty or sixty years in fact involves a quantum jump, Everything was quite continuous in human history till about the beginning of this century; but in the last half-century there has been a quantum jump, the sort of jump as with the capitalisation of Ford, from $30,000 to $6,000 million,

In a developing country it is difficult enough to get Henry Fords, at the 1903 level. To get Henry super-Fords, to move from practically nowhere on to the 1963 level, is virtually impossible. No-one can start at this level. This means that no-one can do anything at this level unless he is already established, is already operating at that level. This is absolutely crucial for our understanding of the modem world. At this level no creations are possible, only extensions, and this means that the poor are more dependent on the rich than ever before in human history, if they are wedded to that level. They can only be gap-fillers for the rich, for instance, where low wages enable them to produce cheaply this and that trifle. People ferret around and say: 'Here, in this or that poor country, wages are so low that we can get some part of a watch. or of a carburettor, produced more cheaply than in Britain. So let it be produced in Hong Kong or in Taiwan or wherever it might be.' The role of the poor is to be gap-fillers in the requirements of the rich. It follows that at this level of technology it is impossible to attain either full employment or independence. The choice of technology is the most important of all choices.

It is a strange fact that some people say that there are no technological choices. I read an article by a well-known economist from the USA who asserts that there is only one way of producing any particular commodity: the way of 1971. Had these commodities never been produced before? The basic things of life have been needed and produced since Adam left Paradise. He says that the only machinery that can be procured is the very latest. Now that is a different point and it may well be that the only machinery that can be procured easily is the latest. It is true that at any one time there is only one kind of machinery that tends to dominate the market and this creates the impression as if we had no choice and as if the amount of capital in a society determined the amount of employment it could have.

Of course this is absurd. The author whom I am quoting also knows that it is absurd, and he then corrects himself and points to examples of Japan, Korea, Taiwan, etc., where people achieve a high level of employment and production with very modest capital equipment.

The importance of technological choice is gradually entering the consciousness of economists and development planners. There are four stages. The first stage has been laughter and scornful rejection of anyone who talked about this. The second stage has now been reached and people give lip service to it, but no action follows and the drift continues. The third stage would be active work in the mobilisation of the knowledge of this technological choice; and the fourth stage will then be the practical application. It is a long road but I do not wish to hide the fact that there are political possibilities of going straight to the fourth stage. If there is a political ideology that sees development as being about people, then one can immediately employ the ingenuity of hundreds of millions of people and go straight to the fourth stage. There are indeed some countries which are going straight to the fourth stage.

However, it is not for me to talk politics. If it is now being increasingly understood that this technological choice is of absolutely pivotal importance, how can we get from stage two to stage three, namely from just giving lip service to actually doing work? To my knowledge this work is being done systematically only by one organisation, the Intermediate Technology Development Group (ITDG). I do not deny that some work is also being done on a commercial basis, but not systematically. ITDG set itself the task to find out what are the technological choices. I will only give one example out of the many activities of this purely private group. Take foundry work and woodworking, metal and wood being the two basic raw materials of industry. Now, what are the alternative technologies that can be employed, arranged in the order of capital intensity from the most primitive, when people work with the simplest tools, to the most complicated? This is shown in what we call an industrial profile, and these industrial profiles are supported by instruction manuals at each level of technology and by a directory of equipment with addresses where it can be obtained, The only criticism that can be levelled against this activity is that it is too little and too late. It is not good enough that in this crucial matter one should be satisfied with one little group of private enthusiasts doing this work.

There ought to be dozens of solid, well-endowed organisations in the world doing it. The task is so great that even some overlapping would not matter.

In any case, I should hope that this work will be taken up on a really substantial scale in India, and I am delighted to see that already some beginnings have been made.

I shall now turn to the fourth factor, namely markets. There is, of course, a very real problem here, because poverty means that markets are small and there is very little free purchasing power. All the purchasing power that exists already, is, as it were, be- spoken, and if I start a new production of, say, sandals or shoes in a poor area, my fellow-sufferers in the area will not have any money to buy the shoes when I have made them. Production is sometimes easier to start than it is to find markets, and then, of course, we get very quickly the advice to produce for export, because exports are mainly for the rich countries and their purchasing power is plentiful But if I start from nothing in a rural area, how could E hope to be competitive in the world market?