ENGINEERING FOR DEVELOPMENT

2.5 To discuss changes which may take place (or be made to take place) in the future, it is necessary to know first where we stand now. Since this is not to be a programme for an actual country, we will first invent a country and define it in broad outlines, taking care to ascribe to it characteristics which are "probable" rather than merely "possible". We shall then estimate what it is likely to be like after a sudden doubling of the economic activities and then study the difficulties and imbalances which may arise and seek means to avoid them. For the purposes of this case study, we are interested in four years only: the present year, during which the planning and preparation must be done for the immediate future; and the three subsequent years of the crash programme during which our target is to double the overall level of economic activity. We will number these years for reference:

2.6 The population is 3,000,000 people, half male and half female. The age group distribution and the general level of health in the country are such that at full economic mobilisation 1,500,000 people above the age of fourteen could be "economically active" on a full-time basis. At present 1,000,000 people are reported to be in employment, but making allowances for seasonal unemployment and for general under-employment arising from lack of motivation and other causes it is estimated that this figure should be reduced to 750,000 to represent the number of effectively employed.

2.7 The rate of growth of the population is about 2% per annum. This is small compared with the 26% per annum target for growth of economic activity.

2.8 The educational standard of the people as a whole is rather low. Illiteracy is reported as 50% overall. Development of education at all levels has been intensified during the last fifteen years. This includes university training and technical schools, whose output has been rather high. Under-employment of technologists and technicians has recently developed, due to the slow growth of the economy. Some of these people have emigrated but can be expected to return when opportunities improve at home.

2.9 Tribal structure is not a very predominant feature of the social organisation. Racial differences exist but have not been sufficiently prominent to develop prejudice against "foreigners".

2.10 The drift of population from the countryside into towns and cities has already been evident for some years and has led to some problems in urban unemployment and housing.

2.11 The total area of the country is such that the average population density is moderate at about fifty per square mile. Arable land is not yet fully exploited; an expansion of 25% in its total area could be made.

2.12 Forest reserves are adequate. Potential grazing resources and fishing areas can be expanded. Mineral resources are "average". Coal, iron, bauxite, salt and gypsum deposits are known, but large oil fields, gold deposits and other minerals exportable on a large scale are improbable. Quarriable deposits of sand, clay, building stone and cement rock await exploitation.

2.13 Rainfall is adequate for most agricultural needs. Some hydro-electric potential and some irrigation has already been developed.

2.14 A network of main roads has recently been completed with sufficient long distance truck and bus services for present needs. Little difficulty exists in travel and transport throughout the country at any time of year.

2.16 Limited postal, telegraph and telephone systems serve all large and small towns.

2.17 There are a number of newspapers available throughout the country and a government operated radio and television network broadcasts news.

2.18 There are adequate systems of law, justice and law enforcement. Representative government is working satisfactorily and no class or region feels that it suffers from undue oppression. The armed forces are small but efficient: there is no obvious threat from abroad.

2.19 Taxation is spread fairly and progressively. The collection system is moderately efficient and tax evasion is estimated not to exceed about 30%.

2.20 In year 0, the Gross Domestic Product was equivalent to US $600 millions at a correctly valued rate of exchange (i.e. $200 per annum per capita).

2.22 The pattern of origin of GDP was shown in Table 1, which also shows the pattern of employment between sectors of the economy.

	1	2	3	4
	Net Product		Employment
	Value: US $ m	%	Equivalent number in full employment	%
Agriculture	185	31	390,000	52
Services, Trade and Government	210	35	180,000	24
Manufactures (including Handicrafts)	91	15	75,000	10
Miscellaneous	50	8.4	49,000	6.5
Transport, Storage and Communications	33	5.5	28,500	3.8
Construction	20	3.3	18,000	2.4
Mining and Quarrying	11	1.8	9,500	1.3
TOTAL	600	100.0	750,000	100.0

2.23 No specially favoured position is held regarding overseas trade with any country. Adequate outlets have been found for a normal proportion of exports and these suffice to finance imports without large foreign aid or loans. Foreign trade (gross value of imports, offset by gross value of exports) is projected to be at a level of about 25% of GDP and has been maintained substantially in balance in recent years.

2.24 Thus, in YEAR 0 exports will be valued at about $150 millions. The pattern of origin of exports is projected to be approximately as Table 2.

2.25 These values include (a) primary products cost; (b) Value Added in processing; (c) Value Added in merchanting, storage and transportation. In the case of crude products of agriculture and forestry and mining (b) and (c) together may account for half of the f.o.b. total. In the case of manufactures based on local raw materials (b) and (c) together may account for 75% of their f.o.b. total, thus the allocation of net production for export may be as shown in Table 3.

	Crude Products	Manufactures
Agriculture	$50 m	$10 m
Mining	$ 5 m	nil
Manufacturing	nil	$20 m
Storage and Transport	$5 m	$1 m
Trade	$50 m	$9 m
Total	$110 m	$40 m

2.26 Imports during YEAR 0 valued at about $150 millions, c.i.f., generate "Valued Added" in the sectors handling and consuming them. The allocation pattern of this Value Added is roughly as Table 4.

	C.I.F.	VALUE ADDED GENERATED IN:
	Value	Agr	Mfg	Transport	Trade
Agriculture (agrochemicals)	$8 m	$8 m	-	$0.8 m	$0.8 m
Industry (raw materials)
Industry (tools and equipment)	$35 m $17 m	- -	$12 m $6 m	$1.7 m $0.8 m	- $0.8 m
Transport (fuels)	$7 m $11 m	- -	- -	$0.7 m $4.0 m	$0.7 m $1.1 m
Transport (equipment)
Consumer goods	$72 m	-	-	$0.7 m	$7.2 m
Totals	$150 m	$8 m	$18 m	$8.7 m	$10.6 m
		Total $45.3 m

2.27 The total of $45.3 m comprises labour costs, taxes and profits which would not have arisen in the absence of these imports.

2.28 From Table 1, the pattern of average productivity of labour (i.e. Value Added per person engaged) in the various sectors of the economy during YEAR 0 can be calculated. From estimates of the contributions of labour to Value Added, relative average earnings can then be derived.

	(1) % contribution of labour in VA	(2) Total return to labour	(3) Average earnings per worker	(4) Total return to capital	(5) Sectoral productivity of labour $/worker/yr
Agriculture	85	£157.0 m	$403	$28.0 m	475
Services, Trade and Govt	77	$161.8 m	£898	$48.2 m	1,165
Manufactures (including Handicrafts)	66.6	$60.6 m	$810	$30.4 m	1,215
Miscellaneous	66.6	$33.3 m	$680	$16.7 m	1,020
Transport, Storage and Communications	77	$24.5 m	$892	$7.6 m	1,160
Construction	77	$15.4 m	$855	$4.6 m	1,110
Mining	77	$8.5 m	$892	$2.5 m	1,160
Totals	77	$462.0 m	$616	$138.0 m	800

2.29 The total of column 2 of Table 5 is the total of final consumption spending in the country. Some of this is diverted by taxation from private consumer spending to government consumer and investment spending, together with some of the total of column 4.

2.30 The total value of sales (total Gross Product) is higher than the total of column 2 since the cost of raw materials and services must be added whenever goods are sold. If final consumption is to be in balance with production, the difference must equal the transfer of goods (raw materials, intermediates and capital goods) and services, between sectors. Since total consumption spending (final products plus intermediates and services, in both public and private sectors) is 87% of GDP or $522 m, then inter-sector transfers of the Value Added component in such goods and services must be $60 m.

2.31 The detailed descriptions given above which define the starting point of YEAR 0, indicate that we are dealing with a very "average" country with no outstanding intrinsic advantages which could be manipulated to provide faster-than-average growth, nor disadvantages which would have to be neutralised by diversion of development efforts. Thus, the conclusions we may reach as to policies needed for accelerated growth and to obstacles which will have to be overcome will also be "average".

2.32 Our basic target is to be a doubling of the economic activity of the country in three years. This will be measured by the parameter of "per capita Gross Domestic Product" customarily reported in the national accounts.

2.33 Attainment of this basic target is intended to be the initial stage of a continuing course of development extending over some fifty years, during which the Gap between our country’s economy and the existing industrialised countries will be substantially closed. This implies a possible limitation on our basic target: that after the three years the country shall still be in a condition to continue making rapid economic growth.

2.34 We shall not at this point assume and subsidiary and possibly conflicting targets related to conditions other than the economy as a whole, such as an "equitable" distribution of economic benefits either between sectors of the economy or between regions of the country or between groupings of the people, however defined.

2.35 We shall not at this stage make any assumption regarding the best methods of carrying on an activity or the ownership of productive resources, such as: privately financed manufacturing; commercial activities or government; small or large scale commerce, agriculture or industry; domestic or foreign financing; centralised versus local administration of government.

2.36 We shall not a priori assume that immediate expansion of certain activities is "essential", e.g. power supplies, roads, technical and higher education; import substitution manufacturing; urbanisation; population control.

Crude products of:	Agriculture and Forestry Mining	$100 m f.o.b. $10 m f.o.b.
Processed products:	Manufactures	$40 m f.o.b.