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 7
BASIC CONCEPTS, TERMS AND DEFINITIONS
The Economy
The country, state or region considered as an economic unit in money terms.
Where necessary, an economy can be divided into several parts which can be treated separately and the results added up to give an overall picture. This may be especially applicable to a country where a large sector of the population is effectively outside the money economy. Similarly, results for individual components of a Customs Union, Common Market, Free Trade Area of other association of states can be summated.
National Income and Related Aggregates
GROSS NATIONAL PRODUCT at market prices LESS net factor income from abroad EQUALS GROSS DOMESTIC PRODUCT at market prices LESS indirect taxes net of subsidies EQUALS GROSS DOMESTIC PRODUCT at factor cost LESS depreciation (provisions for the consumption of fixed capital) EQUALS NET DOMESTIC PRODUCT at factor cost PLUS net factor income from abroad EQUALS NATIONAL INCOME.
"For comparative purposes, GDP at factor cost is considered an appropriate measure of a country’s total production of goods and services. For many countries it is the most reliable aggregate available. It should not, however, be used as a measure of National Income, since no allowance is made for (i) the consumption of capital in the production process, or (ii) net factor income payments from abroad."
(UN Yearbook of National Account Statistics)
Economic Development
The increase (a) in the National Income of a country at a rate faster than its population increase; (b) in the goods and services consumed by the people; (c) in the standard of living; and (d) in the productivity of the total work force.
An economy grows in two ways: (i) in number of inhabitants - population - by anything up to 3% a year or more; (ii) in the value of its net production. If these two grow at the same rate, there is no increase in the average spending power (per capita National Income; per capita GDP).
Standard of Living; Purchasing Power; Cost of Living
These three are linked. If the second increases faster than the third, the first will also rise. Purchasing power is a function of the total earnings of the work force, conditioned by the distribution of earnings among the total population. Cost of living is determined by market price levels for the various goods and services, conditioned by the pattern of demand for them. In turn, price levels are a reflection of costs of production, modified by government actions such as taxation and subsidies.
The Strategy and Tactics of Development
Strategy
The general strategy of planning for economic development is that the "planners" set out their general ideas of how and where the economy can best develop (e.g. an indicative five-year plan) and on what official actions are going to be needed to achieve their targets, using the normal economic weapons of taxation, tax reliefs, import duties and controls, public sector spending (investment in infrastructure, services, manufacturing and education), cheap loans, subsidies and foreign exchange control.
Tactics
Unfortunately this is not enough guidance for the tactical forces of industrial development, the industrial engineers and designers, whose detailed planning defines the future levels of output, production cost and productivity in the plants they recommend the entrepreneurs or investors. The usual Project Report on the design of a plant which will give maximum return on an investment, quick write-off, maximum output, minimum product cost, minimum risk, and so on (the normal businessman’s criteria) does not give sufficient data to enable the proposed investment to be viewed from the point of view of the development of the economy as a balanced whole, nor from the point of view of social development and employment. For this, it would be necessary for every Project Report to set out also the relevant calculations of the future levels of productivity of labour which the plant will achieve and to show that these are compatible with the overall strategic plan for development.
This paper suggests methods of calculation which can be used by technical personnel involved in industrial development, either at the economic planning level or at the factory design and operation levels, as a guide to how much industry is "not too little, not too much" and how "modern" it should be, in order the match the probable future course of development.
The methods proposed are based on information which is readily available for most countries, or at least can be estimated with reasonable accuracy by any design engineer without any profound knowledge of economic theory and methodology. Their application does not call for any complex or excessively time-consuming mathematics. Slide-rule accuracy is all that is needed or, indeed, warranted by the accuracy of the data and the uncertainties of the future.
The reader, having worked through the methods outlined later in the specific applications with which he is concerned, will find ways of extending the logic and refining the calculations to suit the precise local conditions in which he is working and the additional data which he may find available.
The Development of Manufacturing Industries
Demand for a given article is met in two ways, either by local production or by importation. A change in the balance between importation and local production - "import substitution" - depends on the availability of resources: capital, human skills, foreign exchange and raw materials - and also on the magnitude of the demand in relation to the minimum scale of production by a given technique.
The difference between the cost of the locally made article and the imported one also has its effect, but this is very often obscured by tariffs on the imported goods, levied either to produce public income or specifically to encourage local production. Where excessively high import duties are levied, local production may start before other conditions are favourable and the pattern of productivity may be distorted. This is often an irreversible process: once the pattern is distorted in this way there exists a strong pressure on government to maintain the distortion in order to avoid writing-off investments already made in production capacity.
Thus it can be seen that the patterns of demand, production and importation are interdependent in a rather complex and possibly unstable manner.
In a developing economy, manufacturing industry grows more rapidly than the economy as a whole. Much of this additional industry consists at first of local manufacture in the form of "import substitution", i.e. the local manufacture of articles previously imported. This however does not reduce the total bill for Imports; rather it tends to increase its absolute magnitude owing to the need for imports of fuels, raw materials and intermediates and machinery. Many such lines of manufacture, when carefully analysed, turn out to be mere "assembly" plants in which imported intermediate products and packages are brought together in the form required for the finished consumer goods with very little addition to their total value. "Import substitution" in the fields of intermediates and equipment needs very special attention since growth rates here are higher than for consumer goods. In addition, the increase of purchasing power opens up markets for sophisticated products which still cannot be made locally. Thus a policy of "import substitution" in a developing economy is not a path to reduction of the need for export earnings.